March 2014 Port Bureau News

Port Bureau MARCH 2014

Greater Houston Port Bureau

News

Classification Societies

Q&A with James Watson, ABS

The Role of Class Societies and Local Company Profiles

Retired RADM and New President/COO of ABS

Ranking the Ports

The U.S.-Flag Merchant Fleet

Analysis of 2013 Waterborne Foreign Trade

Insight into the Effects of the Merchant Marine Act of 1920

www.txgulf.org

Port Bureau 3%

3%

News

6

4%

10

22

% OF TOTAL U.S. PORT TRADE (METRIC TONS), 2013

All Others 48%

Houston, TX 12% New Orleans, LA 8%

Los Angeles, CA 6%

Morgan City, LA 2%

Corpus Christi, TX 3% Long Beach, CA 4%

Newark, NJ 4%

Gramercy, LA 4%

Norfolk-Newport News, VA 5%

Port Arthur, TX 4%

3 Captain’s Corner

10 Shipping with

22 Commerce Club

4 Port Watch

The vital role Classification Societies play in the shipping industry

24 The Jones Act Fleet

The Perfect Job

In with the Cold, out with the Old

6 Ranking the Ports

Analysis of U.S. Waterborne Trade Publisher/President CAPT Bill Diehl, USCG (Ret.), P.E. Editor Christine Schlenker Copy Editor Judith Schultz Art Director Christine Schlenker For information about the Port Bureau:

Phone: (713) 678-4300 Email: info@txgulf.org

Class

19 Spotlight

RADM James Watson (Ret.), ABS

Writers Dave Cooley Matt Logan Christine Schlenker Judith Schultz Patrick Seeba Cover Photo Lloyd’s Register Photographer Patrick Seeba

Port Bureau Staff Jeannie Angeli Cristina Gomez Janette Molina Al Cusick Printing Company DiPuma Printing and Promotional Products www.dipuma.com

For information about the Port Bureau News stories or advertising:

Email: editor@txgulf.org

2 | March 2014 www.txgulf.org

February 2014: Capt. Mike Morris, Houston Pilots U.S.-Flagged Vessels of the Merchant Marine

31 HCBFFA Update A Publication of the Greater Houston Port Bureau The Port Bureau News magazine is a monthly publication of the Greater Houston Port Bureau, a member-driven nonprofit dedicated to promoting the maritime community, providing vessel movement information and offering members premier networking and advertising opportunities to drive business.

The magazine is distributed to over 6,500 professionals in the Houston maritime community via U.S. mail and email. Advertising is available for members.

Captain's Corner The Perfect Job

We had just pulled into Kodiak, Alaska on a Coast Guard high endurance cutter in the spring of 1984. I was to transfer off the ship and be reassigned to shore duty in Seattle, but my orders had not arrived. I called the assignment officer, and he told me that they had changed my orders to New Orleans. All I had put on my dream sheet (assignment request form) was I would like to be a marine inspector in any major port in the United States, so I was fine with it.

However, he then told me… well, actually you are being assigned to New Iberia. OK, I thought, that must be a suburb.

But after learning it was a town 130 miles from New Orleans on the western edge of the Atchafalaya Basin-- the largest swamp in the United States-- I called him back and said no thanks.

In the beginning I didn’t have a full grasp of what I was doing, but I loved it. Most of my jobs were oil field related: crew boats, offshore supply vessels, and barges with an occasional larger vessel at one of the shipyards. Every day the boats were different, the port engineers and crew were different, and the jobs entailed me figuring out a new piece of gear or where the procedure was adequate. Sadly, I memorized the regulations and tried for the first year to apply them as black and white safety standards, but I was missing the important stuff while focusing in on the trivial.

A couple of times a week, I would cross paths with the classification surveyors and enjoyed picking their brains on He asked me to call the supervisor down there and talk inspection issues. The surveyors were older, seasoned port to him first before I turned him down. So I called LT Rob engineers that knew their stuff. They had experience and Buckles, a mustang officer (prior enlisted), and he told me were much better at focusing on the important stuff while that it was the best job in the Coast Guard. He said: “We blowing off the trivial—I learned a lot from them. So in don’t wear uniforms, have supervision, or use computers.” I reading about them for this magazine, I recalled my fond asked what would I be doing, and he replied crawling around memories of working alongside them and learning the trade. on ships all day—it’s fun and you’ll never have a boring day.

They could not keep up with me on the road, but they far I called the assignment officer back and said I would take the surpassed me in the shipyards. The days of the black Suzuki job. are gone, and staff meetings are now on Monday mornings; however, I still carry with me the valuable lessons received My days as an inspector were truly fun. My typical day from under the surveyors’ tutelage. started out in the office with coffee and shooting a game of pool with Rob and the other inspector, Chief Warrant I hope you’ll enjoy learning about our Classification SoOfficer Roy Runyan, and then we would go our separate cieties—they perform a key safety role in our industry. They ways. We would each do three to four jobs per day. Since have a rich history, and we all benefit from their research and we only had one government vehicle, I was allowed to use development. Their dedication to “safe ships and clean seas” my own and put in for mileage. I bought a black 550 Suzuki keeps us steering in the right direction. ò motorcycle and cruised all over Southern Louisiana visiting the shipyards and docks. In the afternoons you would sometimes find me under an overpass while a thunder storm rolled by, but I made up for that lost time by never traveling at the speed limit. On Friday afternoons, we would have our staff meeting at a to-be-named trailer bar tucked somewhere back in the bayou. It was the perfect job.

Greater Houston Port Bureau | 3

© Patrick Seeba

PORT WATCH In with the Cold, out with the Old Tom Marian, Buffalo Marine Service The parade of polar vortices that has introduced the Texan coast to a real winter has not only chilled the air but has apparently produced a bit of sluggishness in the marine transportation arena. Whether that stems from cooler water temperatures that produced more sustained fog as the warmer gulf air pushes back the remnants of cold fronts or frozen demand affiliated with a dearth of rock salt beyond the borders of Texas, the arrival numbers were mostly off. To start, January is typically a “building” month which suffers from the winter fog. This year was no exception as over 65 hours of fog-induced shutdowns took place on the Houston Ship Channel. It is of note that two significant periods of 27 and 16 hours of fog were part of that number, thereby creating aggravated congestion offshore. Peering through the winter mist reveals that the final numbers for the month were down statewide by 4.6% - albeit tow movements were off by only 1%.

Despite the overall decrease, there were several ports that began the new year in a better position than the recently retired 2013. Galveston, in particular, enjoyed a stellar 25% monthly gain as Jan-

uary of ‘14 eclipsed ‘13’s January by almost 18%. While Port Freeport recorded a mere 1.5% monthly increase, it enjoyed one of its best Januarys in years with a 16% rise over last year’s. Corpus Christi also experienced its best January of the decade as it shattered last year’s by more than 18% in conjunction with a 4% monthly gain. The final port in the monthly positive column was Brownsville with a 5% rise; however, this was a tad be-

Texas Ports Deepdraft Vessel Arrivals Jan. 2014 Year-to-Date Percent Change

4 | March 2014 www.txgulf.org

low last January by one vessel or 4.5%.

With all of the gains noted above, where were the losses? Sabine took the number one position with a 16.7% monthly drop.

Given its very strong performance in December, this should not come as any surprise. Yet, it was still 1% below the start of 2013. Texas City did not fare much better as it saw 14% fewer vessels for the month which translated to a 10.6% drop on a yearto-date basis. Mind you, it should not come as any surprise that both of these refinerycentric ports were down given the drop in inbound tankers loaded with foreign crude.

Port of Houston Deepdraft Vessel Arrivals

Jan. 2014 vs. Jan. 2013 250 200 150 100

Jan. 2014 (Total: 653) Jan. 2013 (Total: 670)

50 0

By way of comparison, the Port of Houston was down more than 10% for the month in tankers or a loss of nearly 6.5% as compared against the previous January. This certainly was not the most dramatic decrease percentage-wise compared to the other categories of vessels, but 25 fewer tankers equates to nearly the entire monthly difference in terms of vessel arrivals. Houston’s 4% loss for the month was also comprised of a 16% decline in chemical tankers which began the year 18.5% off of last year’s pace. Not surprisingly, given its nexus to the petrochemical portfolio, LPG movements were also down by 4% for the month and 2% against last January.

Finally, offshore barges – which also play a sizeable role in the movement of petrochemical feedstocks - fell by over 17% for the month and more than 27% on a yearto-date basis.

Given the rather weak vessel arrival numbers in the energy sector, why were Houston’s monthly numbers only off by 4%? Thankfully, there were some sizeable gains in many of the remaining categories. For starters, cars remained hot as the contents of two more car carriers filled the Port’s vast vehicle tarmacs. The cruise season is in full swing as five cruise ships moored at the Bayport cruise ship terminal – one more than in December; there were none in the previous January. Bulkers and general cargo vessels enjoyed a healthy January with 14% and 6.5% increase respectively, yielding positive year-to-date numbers for the bulk carriers of 49% general cargo put up identical arrival numbers as January ’13. Finally, container vessels had a very respectable month, tallying a 10% gain which represented a 6% rise over last year. Apparently, the chill in the air did little to

dampen the flow of goods to and from the nation’s number one export port.

Yet, the gift of a frigid winter to the bulk of the country did impact production cycles somewhat.

Moreover, the flow of commerce from the Intracoastal Waterway to the northern reaches of the western rivers was stymied by old man winter to some degree. Thus, there was some negative aggravation to the normal start-of-the-year maritime commerce cycle. Nevertheless, the good news is that it reflects nothing more than an abbreviated pause from a positive trend line that should continue to build through the first quarter of 2014. Will the persistent polar air masses through the remainder of the winter further curb the potential optimism of 2014? Not likely, and at least on the Texas Gulf Coast, residents will appreciate the fact that there is nothing better than a hard freeze to kill off all of those mosquitoes! ò

Greater Houston Port Bureau | 5

Ranking the Ports

Š LOUIS VEST

Analysis of U.S. Waterborne Trade

Dave Cooley, GHPB

Over the last ten years the value of total U.S. waterborne foreign trade (imports plus exports) rose from $800 billion in 2003 to over $1.7 trillion in 2013; more than a 100% increase. During the same time period, the market share of waterborne foreign trade rose from 40% of the value of total foreign trade in 2003 to 47% in 2011. The waterborne foreign trade portion of total U.S. foreign trade then dropped slightly over the next two years to 46% in 2012 and then to 45% in 2013.

The profile of the foreign trade of the U.S. generally follows the level of economic activity. This is reflected by the 22% drop in total U.S. foreign trade during 2009 as a result of the impact of the Great Recession which was followed by tepid economic growth during 2012 U.S. Foreign Trade Balance Value (USD) vs. Waterborne Tonnage $0

Billions USD

-$100

2003

2004

2005

2006

2007

2008

2009

2010

and 2013. This has resulted in limited growth in foreign trade over the last two years as well.

The primary contributor to the increase in the value of waterborne foreign trade was a dynamic rise in waterborne exports, whose market share increased by 9%, from 28% in 2003 to 37% in 2013. In absolute dollar terms, the value of waterborne exports in 2003 were $205 billon (28% of total U.S. Exports), which rose to just under $600 billion by 2013 (37% of total U.S. Exports). The change in value of the U.S. export stream in 2013 increased almost 300% when compared to 2003.

On the import side of the equation, the market share of the value of waterborne foreign imports increased by 3% over the ten-year period, from 48% to 51% or from $605 billion to $1.1 trillion. The change in the absolute value of U.S. imports from 2003 to 2013 was an increase of almost a 100%.

2011

2012

2013

0

-100

-$200

-200

-$300

-300

-$400

-400

-$500

-500

-$600

-600

-$700 -$800

-$900

Trade Balance Vessel Tonnage 6 | March 2014 www.txgulf.org

-700 -800

-900

Millions Metric Tons

Value Of Waterborne And Total Trade

The foreign trade aspect of the U.S. economy has grown significantly over the last 50 years. While total trade has grown, so has the trade deficit.

Although continuous and somewhat benign during most of this time, the U.S. trade deficit rose from $100 billion in 1997 to a high of $762 billion in 2006 before tapering off to its current

level around $500 billion. It has fluctuated around this level over the last four years, suggesting that the U.S. is importing a higher quantity of finished goods when compared to exports.

Tonnage

While values (U.S. dollars) tell one story, waterborne tonnage (metric tons) provides another interesting insight into the direction of the U.S. balance of foreign trade. From a viewpoint of waterborne tonnage, imports have been decreasing, exports have been increasing, and the net waterborne foreign trade balance, in terms of tonnage, has therefore been significantly decreasing.

the U.S. ranges from 57% in 2003 to 52% in 2013 - the next highest commodity category is cereals at 4.8%. Oil and coal drive the waterborne trade of the U.S. In terms of tonnage, the total waterborne foreign trade in energy has averaged 728 million metric tons from 2003-2013. The recent trend has been a threeyear decline in energy related total waterborne foreign trade, declining 40 million metric tons each year from

During the ten year review period (2003-2013), waterborne imports peaked in 2006 at 1 billion metric tons and then declined to 674 million metric tons in 2013. Waterborne exports rose from 330 million metric tons in 2003 to 583 million metric tons in 2013, a 76% increase over the ten-year period.

Also in terms of tonnage, the waterborne foreign trade deficit increased from 550 million metric tons in 2003 to 640 million metric tons in 2005. From this point forward, the waterborne tonnage trade deficit then decreased every year and in 2013 the waterborne tonnage trade deficit was 91 million metric tons or just 14% of the waterborne tonnage trade deficit in 2005. This decrease in the waterborne tonnage trade deficit was a reduction of about 280% during the last eight years.

Energy Drives Trade

The primary driver of U.S. waterborne foreign trade tonnage (imports plus exports) is energy, primarily crude oil imports and refined product and coal exports. The market share of the energy component of the total waterborne foreign trade of Greater Houston Port Bureau | 7

736 million metric tons in 2010 to 655 million metric tons in 2013 as the U.S. continues to develop additional indigenous supplies of crude oil through various enhanced recovery techniques (shale and tight sands).

On the import side, crude oil imports by tonnage decreased from about 50% of total U.S. waterborne imports to 48% in 2011, to 45% in 2012, and 41% in 2013, a drop from 425 million metric tons in 2010 to 276 million metric tons in 2013. This decrease in crude oil imports of 150 million metric tons matches an increase in U.S. domestic oil production predominantly from shale oil and other tight sand formations of about 150 million metric tons or about 3 million barrels per day.

Similarly, imports of both refined petroleum products and LPGs also declined. Refined petroleum products declined from an average of 116 million metric tons to around 100 million metric tons over the last three years. LPGs also declined from an average of 17 million metric tons to 8 million metric tons in 2011, 5 million metric tons in 2012, and 4 million metric tons in 2013.

In the export market, the market share for both coal and refined petroleum products increased rather dramatically. Coal exports increased from 11% of total waterborne foreign exports in 2003 to over 17% by 2013 and refined petroleum products increased market share from 15% in 2003 to 25% of total waterborne foreign exports in 2013. Tonnage related to the waterborne foreign export of these products grew from 37 million

metric tons in 2003 to 100 million metric tons in 2013 for refined petroleum products and from 51 million metric tons in 2003 to 146 million metric tons in 2013 for coal.

Port Ranking – 2013

Moving from the global aspect of total U.S. trade and its waterborne component to the individual ports that comprise these aggregate totals, the top ten ports in terms of both vessel value (U.S. dollars) and vessel tonnage are the same for 2013 as for 2012; albeit in a somewhat different order.

With regard to vessel value, the port of Los Angeles remains first in both years. The large volume of import container traffic delivering finished goods combining with exports of a high volume of raw materials and high value-added parts and machinery result in a value for total trade of $283 billion in 2012 and $285 billon in 2013. These values represent essentially 16% of total U.S. trade for each year. The second port in terms of vessel value was the Houston Port with $176 billon total trade in 2012 falling to $168 billion in 2013.

Houston’s market share was 9.9% in 2012 and fell 0.4% to 9.6% in 2013.

In terms of vessel tonnage, the Houston Port was first in both years handling 147 million metric tons in each year for essentially a 9% market share. The driver for Houston was its large import-export activity in both oil and petrochemicals. Second and third positions are New Orleans with 97 million metric tons 3% 4% 3% of waterborne trade in each year and Los Angeles % OF TOTAL U.S. PORT TRADE (METRIC TONS), 2013 reporting 66 million metric tons in 2012 and 69 million metric tons in 2013 for a market share of 7.5% and 5% respectively.

All Others 48%

Houston, TX 12% New Orleans, LA 8%

Los Angeles, CA 6%

Morgan City, LA 2%

Corpus Christi, TX 3% Long Beach, CA 4%

Newark, NJ 4%

Norfolk-Newport News, VA Port Arthur, 5% TX Gramercy, LA 4% 4%

8 | March 2014 www.txgulf.org

The driver of waterborne foreign trade for the vast majority of the top 10 ports is energy – imports of crude oil and refined products (usually refinery feedstock or gasoline blendstock) and the exports of finished refined petroleum products and, in the case of Norfolk-Newport News, exports of coal.

Energy trade held the top market share for waterborne foreign imports in nine of the top 10 ports and seven of the top 10 ports for waterborne foreign exports.

Import Trade Drivers

Export Trade Drivers

Houston, TX New Orleans, LA Los Angeles, CA

70,374,592 28,242,717 49,862,517

TOTAL % FOR THE TOP FIVE IMPORTS 89% 85% 48%

Norfolk-Newport News, VA

9,080,819

27%

5%

Norfolk-Newport News, VA

Port Arthur, TX Gramercy, LA Newark, NJ Long Beach, CA Corpus Christi, TX Morgan City, LA

40,529,272 19,173,515 43,942,735 17,001,904 24,488,861 29,270,664

99% 93% 57% 64% 98% 100%

98% 32% 46% 40% 78% 100%

Port Arthur, TX Gramercy, LA Newark, NJ Long Beach, CA Corpus Christi, TX Morgan City, LA

IMPORTS

TOTAL IMPORTS METRIC TONS

Oil; Coal; Electricity 68% 57% 25%

EXPORTS Houston, TX New Orleans, LA Los Angeles, CA

TOTAL EXPORTS - METRIC TONS 77,471,809 68,957,860 19,257,154

TOTAL % FOR THE TOP FIVE EXPORTS 89% 92% 57%

Oil; Coal; Electricity 63% 39% *

57,599,251 15,137,435 35,096,752 6,001,260 27,409,648 14,581,640 399,630

84% 98% 99% 81% 62% 100% 70%

78% 86% 45% 28% 28% 60% 12%

*Oil, coal, electricity not in top 5 imports/exports

As the energy market in the U.S. transitions from a very large energy importer to a moderate energy importer and a growing energy exporter, the ports of Houston, New Orleans, and Los Angeles (the top three) will continue their prominence. The rise, since 2003, of the ports of Port Arthur and Norfolk-Newport News as oil and

coal exporters respectively, hearken a new era in international trade and could bode well for reducing the overall trade deficit. ò

Editor’s Note: All data is from the U.S. Department of Commerce Census Bureau or the Bureau of Economic Analysis.

Greater Houston Port Bureau | 9

Shipping with Class The vital role Classification Societies play in the shipping industry

Vessel inspection. Photo provided by Lloyd’s Register.

Matt Logan, GHPB In the 18th century a man sits at the back of Edward Lloyd’s Coffee House in London. He signs his name at the bottom of a document, guaranteeing a grain shipment scheduled to set sail the following day. In exchange for his signature he will receive a portion of the profits the grain will fetch; this of course being the case ONLY if the cargo is delivered safely. It suddenly dawns on him that he has no way of knowing (other than exterior appearance) how the ship transporting this grain was constructed, with what materials, or how well it has been maintained. Thus, he has no idea what the odds are that this ship can transport the grain safely to its destination and whether he will lose or make money.

This is, as the legend goes, how the concept of classifying vessels based on their quality was born. Today this work is carried out by Classification Societies.

Although not normally portrayed as the most glamorous of industries, ship classification has come a long way from the back of a coffee house and is a vital part of the maritime industry. Today over 90,000

ships traversing the planet have undergone some sort of classification. Post eighteenth century, as the shipping industry grew and evolved, so did classification societies. Soon many countries had their own classification society: Lloyd’s Register in the UK, Det Norske Veritas (DNV) in Norway, Germanischer Lloyd (GL) in Germany (DNV and GL have since merged), Indian Register of Shipping (IRClass) in India, and American Bureau of Shipping (ABS) in the United States, just to name a few. The International Association of Classification Societies (IACS) was established in 1968, and today is composed of the world’s largest 12 classification societies.

IACS works closely with the International Maritime Organization (IMO) to develop international standards for ships of all kinds (containers, tankers, bulk carriers, etc.) through conferences among IACS members. It is then up to each country to ratify and enact these standards for ships that operate under the country’s flag.

10 | March 2014 www.txgulf.org

By sailing under a particular country’s flag, the Classification societies are headquartered in a parship’s owner or operator agrees to abide by the regulaticular country, but most have offices in many countries tions set forth by that country. Years ago it was comall over the world. Local branches often provide servicmon for a ship to fly under a particular flag because the es that assist governments in determining compliance country offered relaxed standards. However, thanks to to particular flag state standards through formal delthe current work of the IMO, the adoption of interegation as a recognized organization of that flag state. national standards by most countries, and the reliance Several classification societies with operations in the on IACS societies, ship owners United States may assist the U.S. rarely choose a particular flag Coast Guard in assuring all ships state because of lax requirethat enter and depart our ports “...

90% of the world’s cargo ments. Today Panama is the are compliant with international most popular flag country for carrying tonnage is covered standards. ships.

If a ship does not meet the

by some form of an IACS

Currently, 90% of the standards adopted by the port state classification design. ” world’s cargo carrying tonnage it is calling on, the ship is found is covered by some form of an to be in violation of a Port State IACS classification design.

Control regime, which has three IACS’s procedures ensure that categories: deficiency, intervenits members will not undermine or undercut each other tion, and detainment. In most cases, the ship’s captain when it comes to safety and quality standards. IACS would be notified of the violations and required actions, members will share history and procedures of a vessel and he or she would be responsible for communicating if the ship owner decides to switch to another IACS the violation to the ship’s owner. Deficiency is the first member class society. and least severe category. Here a ship’s captain is simply

Opportunity.

On a global scale.

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Greater Houston Port Bureau | 11

asked in writing to fix the problem before the next time they return to a U.S. port. The second category, Intervention, is used when a violation requires attention but does not pose imminent danger to the ship or crew.

Here the captain is instructed to fix the problem before the ship leaves port, and implementation of the repair is usually on the honor system. The last and most severe category is Detainment. Here the problem requires immediate attention, and the ship is not allowed to set sail until the problem has been fixed and re-inspected.

Most major countries around the world go by the Port State Control Code or a similar code.

In moving toward the future, classification societies are trying to take a more proactive approach to classifying vessels. With rising fuel costs and more attention being paid to environmental impact, classification societies are looking at procedures and technologies that will improve efficiency and lead to a smaller environmental footprint. Last year saw the start of enforcement of requirements set forth in the Maritime Labor Convention (MLC), which was held in 2006.

The MLC set out requirements for all types of ships

that ensure decent living and working conditions for mariners that operate the ships. The MLC also enacts policies to ensure that ships cannot get around the requirements of the MLC by changing flags.

Classification has come a long way from the back room of a coffee house. Classification societies today help make our ships more efficient, our waters cleaner, and keep our mariners healthier than ever before. With rapidly expanding technology no one knows what the shipping industry of the future will look like, but we can be sure that our classification societies will help keep it safe, efficient, and clean.

The Greater Houston Port Bureau would like to extend a thank you to the following individuals and companies for information pertaining to this article: • Rebecca Moran and Chris Desmond with Lloyd’s Register • Justin McAdams with DNV GL • Rob Whitney with ABS • Anil Devli with IRClass

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12 | March 2014 www.txgulf.org

A Look at Local Classification Societies Lloyd’s Register

Lloyd’s Register employee at work. Photo provided by Lloyd’s Register. of services, LR has invested approximately £100 million in “Global Technology Centers” to develop safe and efficient technology that is both advanced and commercially viable. The two centers, located in Southampton, UK and Singapore, are a collaboration between industry and academia whose innovations will play a vital role in the immediate and long-term future of shipping and energy.

Lloyd’s Register (LR) is recognized as the very first classification society. It was set up in 1760 to survey merchant ships and “classify” them according to their condition. In its more than 250 years of existence, LR has grown to one of the largest classification societies in the world, and now offers many other services. LR’s main focus is to improve safety, quality, and performance in the areas of Marine (encompassing classification), Transportation, Energy, and Management Systems.

A unique aspect of LR, is that its ownership structure is actually set-up as a charitable trust. “Lloyd’s Register Group Limited” is the operating entity which is under the parent “Lloyd’s Register Foundation”, a charitable organization. All profits are either reinvested in Lloyd’s Register Group operating companies, or distributed by the Lloyd’s Register Foundations. The Lloyd’s Register Foundations distribute the funds toward education and technology to advance numerous industries, as well as other humanitarian causes.

To maintain its position as a leading global provider

For more information on Lloyd’s Register, contact Rebecca Moran, Rebecca.Moran@lr.org or visit www. lr.org.

DNV GL

DNV GL is the product of a merge between the fourth and fifth largest classification societies in the world. The result is an organization that classifies more waterborne tonnage than any other society, has a combined experience of over 300 years, operates in over 100 countries, and employs over 16,000 people around the globe. By tonnage, DNV GL is ranked first or second in every single vessel class. DNV GL is also proud to hire more Americans and hold more U.S. assets than any other classification society.

Along with being a worldwide classification leader, DNV GL also provides services to the oil and gas industry, renewables, business assurance certifications, Greater Houston Port Bureau | 13

and software. Justin McAdams, Americas Maritime Advisory Director of Business Development describes DNV GL as “able to cover a vessel from concept to de-commission”. DNV GL’s capabilities go as far as making it a world-leader in Business Assurance, providing ISO Certifications for diverse industries such as Healthcare and Food and Beverage.

Always on the cutting edge of technology, DNV GL is the leading innovator for LNG as ship fuel technology. DNV GL recently was awarded both the Matson Aloha-Class Container Vessels and the Crowley Maritime Container/Ro-Ro vessel contracts,

both classes fueled by LNG. These vessels were awarded to DNV GL due to the society’s dominance in LNG fuel technology.

DNV GL is a non-governmental entity headquartered in Norway, but with the Americas region office in the Houston area. For more info on DNV GL, contact Justin McAdams, Justin.mcadams@ dnvgl.com or visit www.dnvgl.com.

ABS

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Founded in 1862, ABS is an international classification society committed to promoting the safety of life and property and protecting the natural environment. What began as a small office in New York City has grown to a 5,000 person organization in nearly 70 countries around the world. Today, more than 16% of the world’s oceangoing fleet is classed by ABS and the society acts as a recognized organization on behalf of more than 100 flag states.

ABS is also the largest classification society in the world for providing classification services to the offshore energy industry, providing classification services for 75% of the mobile offshore drilling units in operation and 43% of the floating production units. ABS is a global leader in classification for maritime shipping, with a particular focus on providing innovative solutions to meet the operational and regulatory challenges facing owners and operators.

ABS Global Headquarters is based in Houston, TX, and it is the only member of the International Association of Classification Societies to be based in the United States.

The company has a long history of serving the greater Houston area,

14 | March 2014 www.txgulf.org

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B

having established a presence at Galveston and Port Arthur as early as 1903. In addition to hosting the corporate functions of ABS, Houston also hosts the central technology development function of the organization with more than 100 professionals assisting with research and standards development.

Tank diagram of the “M/V Houston� classed by ABS. Source: www.usslp.com.

ABS, and its affilito support safe, reliable and high-performance assets ated companies, offers a number and operations. ABS Quality Evaluations (ABS QE), of services beyond traditional classification. The ABS an ABS Group company, serves customers worldwide Operational and Environmental Performance team with management system certifications. Finally, Safetec, provides services related to asset optimization, energy efficiency, and environmental performance. ABS Nauti- an ABS Group company, is a leading provider of risk management services. cal Systems provides industry-leading fleet manageFor more information on ABS, contact Rob Whitment software solutions. ABS Group, an affiliated comney, rwhitney@eagle.org or visit www.eagle.org. pany to ABS, provides a range of technical solutions

BARGING AHEAD ever so politely.

16 | March 2014 www.txgulf.org

Buffalo Marine Service, Inc.

www.BuffaloMarine.com

Greater Houston Port Bureau | 17

IRClass Indian Register of Shipping (IRClass) was established in March 1975, with the active support and cooperation of the Indian Shipping constituency, as well as the Ministry of Shipping, Government of India, which support it continues to enjoy today. IRClass is a financially and operationally independent organization and has been so constituted, as to be free of any vested financial interests, thereby ensuring functional autonomy at all times.

IRClass was one of the youngest societies to become an Associate of the International Association of Classification Societies (IACS) in December 1991, and in May 2000, became the first ever IACS Associate to be recognized by the International Underwriting Association (IUA), under the Institute Classification Clause. In June 2010, IRClass achieved the coveted status of full member of IACS and is presently recognized by more than 20 Flag Administrations, including India, Panama,

Liberia and Marshall Islands.

IRClass’s distinguishing features are a willingness to learn from its customers, its ability to provide high quality technological solutions and bringing a long track record of expertise to everything it does. Apart from classification, IRClass offers various other services for the industrial sector which include Technical Inspection & Certification, Quality Certifications and Training across a wide range of Quality Management Systems, and as a part of its Marine Advisory Group it offers various consultancy services which include Condition Assessment Program, Noise Prediction Analysis, Infrared Thermography, and Condition Monitoring, just to name a few. Currently, IRClass operates 13 offices in 11 countries, spanning three continents.

For more information on IRClass, please visit www. irclass.org.ò

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Q&A with James Watson

Retired RADM and President/COO of ABS Christine Schlenker, GHPB The Port Bureau was provided with the opportunity to ask RADM Watson about his decorated Coast Guard career and subsequent leadership in the public and private sectors. Read on to learn more about what shaped Watson’s career and how he dealt with some of the most challenging maritime issues of this generation.

RADM Watson is the featured speaker at the Commerce Club Luncheon on Thursday, April 10, 2014.

What influenced you to join the Coast Guard and to study engineering?

Growing up the maritime industry was of interest to me. I had an uncle who served in the US Coast Guard and was a graduate of the U.S. Coast Guard Academy, so I gained some exposure to the service. Once at the academy, I developed an interest in engineering and pursued that field of study.

After I entered Active Duty and had the opportunity to sail on a cutter early in my career, I developed an interest in the regulatory side of the Coast Guard.

What was one of your most memorable assignments early in your career? What led you to pursue marine safety/hazardous materials as your field?

It was around 1982-83, the time of the Ocean Ranger and Marine Electric incidents; Marine Electric was a U.S.-flagged coal ship which was transporting coal to New England. During a record storm surge, water rushed into a broken hatch cover and the ship went down; it just took a nosedive and the whole thing sank. The Ocean Ranger was a semi-submersible that sank during drilling operations in Canada. Both had a tragic number of casualties, and I was asked to do the technical part of the investigations.

It was then that I realized marine safety was something I could focus on to really make a difference. I had already been to sea on the Coast Guard cutter, so I could either go to graduate school to study marine safety, or return to sea and continue in engineering. I

chose the first option.

At the time, the Coast Guard cutter missions were largely focused on drug interdiction. I compared what could be accomplished and felt that in my career I could make a bigger impact helping the Coast Guard on the safety front. Some 35 years later, I think that was right. The marine safety function of the Coast Guard has seen tremendous success since those tragedies, and I am proud of the small role I played.

As Commanding Officer of the Marine Safety Office of Miami during 9/11, what kind of security challenges (real or perceived) did you face?

We had to make the changes that would allow us to continue to have a cruise industry. Just like with the aviation industry, the whole system just stopped. So we had to create a security infrastructure before we could start it up again. Miami is ground zero for the cruise industry. All of the corporate headquarters are there.

The number of cruise ports in Miami and Port Everglades equals what’s in the rest of the country combined. So we had to create a security system as quickly as possible, one that was aligned to what was going on everywhere else.

How did your previous assignments prepare you for being the Federal On Scene Coordinator for Deepwater Horizon?

I had been involved in a lot of oil spills; nothing on that scale. But I had worked in some big oil spills in Seattle, in Savannah and more when I was in Southern California after that. In many ways my career path prepared me for this very challenge, at least as much as one can prepare for an incident of that magnitude.

Greater Houston Port Bureau | 19

kept happening.

It was a real challenge, because I am not a petroleum engineer. But I know the basic processes, and I think I was able to motivate the BSEE engineers, who do know how to prevent incidents, to do their jobs a little bit better.

I also hope I motivated the industry to improve its safety culture, not just by encouraging companies to not hide things from the regulator, but also by encouraging them to obtain third-party certification -- effectively adding a layer of independent technical oversight -As BSEE Director, Watson (seated, right) signs a MOA with from organizations such as ABS. The industry goes the USCG RADM Servidio (seated, left) regulating mobile off- extra mile now to get things reviewed.

Upon accepting the role of President/COO at ABS Amerishore drilling units. Photo taken June 4, 2013 by BSEE. cas, you described it as “the perfect job.” Can you explain Do you see a positive effect from improved safety practices what made it the perfect job for you? and regulations in the aftermath of Deepwater Horizon?

ABS is a results-driven organization that is dediWhat do you feel was your biggest accomplishment as Dicated to supporting the type of technical standards and rector of the Bureau of safety and Environmental Enforceinnovation that continuously support improvements in ment (BSEE)? safety and operational performance. So, culturally, that Once I finished being ‘ground zero’ for Deepwater was something I could identify with. Operationally, I Horizon, my focus returned to prevention, which is do a lot of the same things here that I did in the marine when I joined the BSEE team. We really made some and safety program of the Coast Guard. The engineerpositive improvements. First of all we greatly improved ing, surveys and inspections are very similar, as is the the spill-contingency plans. We worked on prevention reaction to any incidents that may occur. In future, I and then readiness, in case there was another incident. think there will be more and more delegation to the It takes a while to make a significant improvement in class societies. accident prevention, because it involves redesigning I remember when I was an exchange officer to ABS components such as blowout-preventers, improving in 1989. I had the opportunity to meet Admiral Mike how wells are built and changing the safety culture of Benkert (a chief architect of the Coast Guard’s marine people working offshore. That takes time to measure safety program). He had retired from the Coast Guard and I had a few sleepless nights when I was the Direcand was at ABS talking to the president and chairman. tor of the Bureau, particularly when smaller scale events That really made an impression on me. I thought, if he is spending his days at ABS instead of the Coast Guard, then this is an important organization. I never forgot that. I also never wanted to forget the Coast Guard, but when I got the opportunity to come to ABS, I realized that was a special sign.

What future improvements do you plan on for ABS? Do you see any challenges ahead?

I think there is tremendous opportunity at present for growth in the Americas and across the other regions where ABS is present. Everything we hear is that offshore will continue to grow at a very brisk pace. We’ve got our eye on those opportunities and, at the corporate level, we are working very closely with the offshore 20 | March 2014 www.txgulf.org

team. The offshore growth is also generating new marine opportunities for offshore support vessels (OSV), anchor handling ships, and dive and supply boats to support offshore operations.

We also have a number of projects related to the Jones Act and U.S.-flagged fleet converting to LNG for fuel. This includes many vessel types, so we have to be prepared to marry our knowledge of gas-fueled ships with our specific experience in areas such as OSV, containerships, and ferries, just to name a few.

The potential for LNG exports from the U.S. is also opening many new opportunities.

Finally, I think we need to be prepared for how the expansion of the Panama Canal has the potential to shift trade routes and impact upon our service delivery on the survey side. And we are also keeping our eye on the Arctic region from an offshore operations standpoint, as well as the potential to technically support vessels seeking to take advantage of the Northern Sea

Watson and his wife Anne surrounded by their children Danny, Emily, Mike and Elizabeth.

Route.

Can you tell us a few notes about your family?

My wife, who is an occupational therapist, is really excited about coming to Houston. We have already bought a house near downtown, by Rice University. ò

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Feb. 2014 Commerce Club

With Capt. Mike Morris, Houston Pilots Judith Schultz, GHPB SAFETY, EFFICIENCY HELP HOUSTON PILOTS LEAD THE WAY IN NAVIGATION “Safety and efficiency are the theme of all we do,” said Capt. Mike Morris, Presiding Officer of the Houston Pilots, as he introduced his presentation, “Leading The Way In Navigation”, at the Greater Houston Port Bureau’s Commerce Club Luncheon on February 13. Citing skill, continual training and education, and state-of-the-art technology as the platform to their success, Morris described a wide range of undertakings that keep the Houston Pilots at a 99.9% “without incident” safety rate.

Scenarios are played out on a simulator to evaluate best methods for use in changing environments, such as new docks. “Sling shot” style maneuvers to accommodate the massive 13,800 TEU containerships forecasted to arrive at Houston are modeled on a lake as part of pilot training. The Houston Pilots were the first in the U.S. to embrace Raven Revolve, a rate of turn sensor and automatic identification system (AIS) interface device for ship navigation. The Above: Capt. Morris takes the stage. Pilots are also exploring a military-grade, infrared camera system as a possible solution to moving vessels safely in fog conditions. Such a system could potentially offer the Pilots a tool to see one mile ahead in fog. The Pilots plan to expand their footprint in Galveston with the purchase of a travel lift.

Since one foot of decrease in draft can translate into a $218 million in annual economic impact, Morris also urged keeping dredging a top priority.

“We feel lucky to partner with such an innovative team,” said Morris, as he acknowledged the support of Houston’s maritime community represented at the luncheon. Attendees also viewed the premier of the Houston Pilots’ new educational video as a precursor to Morris’ remarks. The video is now available at the Pilots’ website at www.houston-pilots.com.

The next Commerce Club Luncheon will feature Joe Bob Perkins, CEO of Targa Resources, on March 13 at Brady’s Landing. ò

22 | March 2014 www.txgulf.org

Above Left: Pat Studdert, Buffalo Marine and Port Commission Chairman Janiece Longoria Above Center: Capt. Jeff Kindle, Nordic Tankers and Capt. Rich Russell, AET Inc.

Above Right: Bernt Netland, Intercontinental Terminals Company and David Clark, Targa Resources Below Left: Record attendance at the Commerce Club.

Facing: Admiring the view from Brady’s Landing.

Commerce Club Sponsors: Premier Table Sponsor:

Greater Houston Port Bureau | 23

Survey of the Jones Act Fleet

Š ROY LUCK

U.S.-Flagged Vessels of the Merchant Marine

Dave Cooley, GHPB

The barrage of ice and snow storms across the North East recently put New Jersey into the spotlight.

Facing depleted road salt supplies, New Jersey officials attempted to bring in an emergency load from Maine on the Marshall Islands-flagged bulk carrier Anastasia S. They requested a Jones Act waiver from the U.S. Department of Homeland Security to use a foreign-flagged vessel to transport goods between U.S. ports. DHS denied the waiver request on grounds that national security was not at stake and that there was a U.S.-flagged vessel available to transport the salt.

The Merchant Marine Act of 1920, which contains the Jones Act, was enacted almost a century ago to protect the jobs of U.S. merchant mariners and to promote national defense. Critics say the law is anti-competitive and drives up costs; proponents believe it essential to national security. So what is the Jones Act and how has it shaped the U.S. maritime industry?

enacting cabotage laws has occurred from the earliest days of our country’s history. In 1789, Congress imposed added duties on goods transported by foreign vessels, while the Navigation Acts of 1817 barred foreign vessels from engaging in domestic commerce. In 1886, Congress extended cabotage laws to passenger vessels, and in 1905 Congress retained U.S. build requirements for domestic shipping.

The most comprehensive and overarching cabotage legislation, however, is the Merchant Marine Act of 1920, which provides for the promotion and maintenance of the American merchant marine and regulates maritime commerce not only in U.S. waters, but also

History of the U.S.-Flag Merchant Fleet The U.S.-flag merchant fleet operates under various laws and regulations that are the foundation of U.S. Maritime Policy and designed to provide both economic and national security benefits to the nation. These laws and regulations are of two broad types, viz., cabotage laws supporting U.S. coastwise trade and cargo preference laws supporting the foreign trade of the U.S. The Merriam Webster Dictionary defines cabotage as the trade or transport in coastal waters between two points within a country. Limiting or excluding outside participants in the U.S. coastwise waterborne trade by 24 | March 2014 www.txgulf.org

Port of Houston Authority

Houston: America’s Distribution Center www.portof houston.com/map

U.S.-FLAG MERCHANT FLEET NON-JONES ACT ELIGIBLE

General Cargo, 14

U.S.-FLAG MERCHANT FLEET JONES ACT ELIGIBLE VESSELS

General Cargo, Dry Bulk, 3 7

Dry Bulk, 3

Ro-Ro, 10

Container, 24

Container, 45 Ro-Ro, 22

Tanker, 5

between U.S. ports. Specifically, Section 27, also known as the Jones Act, requires that all goods transported by water between ports located within the U.S. be carried aboard U.S.-flag merchant ships that are constructed in the U.S., owned by U.S. citizens, documented in the U.S., and crewed by U.S. citizens. Ships plying these

Tanker, 44

trades are classified as Jones Act ships.

Supplementing cabotage legislation is cargo preference legislation, which provides a preference for transporting ocean borne cargo moving in the international trade of the U.S. and also to be carried in U.S.-flag ships. U.S.-flag vessels plying these trades are owned

Greater Houston Port Bureau | 25

by U.S. citizens, documented in the U.S., and crewed

by U.S. citizens, but the ship does not have to be constructed in the U.S. and are referred to as Non-Jones Act ships.

Two acts of Congress are prominent in the preference arena – the Military Cargo Preference Act of 1904 and the Cargo Preference Act of 1954. The Military Cargo Preference Act of 1904 requires all items procured for or owned by U.S. Military Departments and Defense Agencies be carried exclusively on U.S.-flag merchant ships. The Cargo Preference Act of 1954 requires at least 50% of the gross tonnage of all U.S. government-impelled cargo moving in international trade be transported on privately owned U.S.-flag commercial vessels. Government-impelled cargo is defined as cargo that is moving either as a direct result of the U.S. government's involvement or indirectly due to financial sponsorship of a federal program or under a guarantee provided through the federal government.

These two categories – Cabotage and Cargo Preference – define the segregation of the U.S.-flag merchant fleet. A U.S.-flagged ship is considered either Jones Act eligible or Non-Jones Act eligible, depending on the nature of the trade in which it is engaged. As of December 2013, 177 vessels comprised the U.S.-flag fleet and were evenly divided with 88 ships Jones Act eligible and 89 ships Non-Jones Act eligible. In terms of deadweight, 4.2 million metric tons deadweight is classified as Jones Act eligible with 3.6 million metric tons deadweight is classified as Non-Jones Act eligible.

Composition of the Fleet

The deep draft U.S.-flag merchant fleet is engaged in the coastwise trade of the United States (trade occurring between various U.S. ports) as well as various aspects of the international trade of the U.S. The merchant marine currently consists of 177 vessels with a capacity of 7.8 million metric tons deadweight.

The composition of the U.S. merchant fleet ranges in size from a vessel with a capacity of just over 1,000 metric tons deadweight to a vessel with a capacity of just under 200,000 metric tons deadweight. Approximately 75% of the fleet’s carrying capacity is 55,000 metric tons deadweight or less, which reflects the maximum water depth of the majority of the ports in the U.S. Dissecting the fleet into the vessel types presents a clearer picture of the trades in which each vessel type is engaged. The most pronounced difference between the vessel types utilized in the Jones Act trade versus NonJones Act trade is evidenced by the type of cargo carried. Jones Act ships predominantly carry crude oil and petroleum products between various U.S. ports, while Non-Jones Act ships predominantly transport manufactured goods, machinery, parts, and various other supplies aboard container ships and ro-ros in the international trade of the U.S. Assessing the different types of ships employed, the deep draft U.S.-flag merchant marine is composed of container ships, dry bulk carriers, general purpose ships, roll on-roll off carriers, and tankers. The capacity of each ship category is designed to accommodate the particular trade, port configuration, and cargos, whether coastwise or the foreign U.S.-FLAG MERCHANT FLEET trade of the U.S. VESSEL OPERATORS-NUMBER OF VESSELS Container Ships - The fleet currently JONES ACT ELIGIBLE has 69 container ships ranging in size Alaska Tanker Co., 4 from just over 8,000 metric tons Polar Tankers, 5 deadweight to just under 85,000 Other Owners, 28 Overseas Shipholding Group, 12 metric tons deadweight. Generally, container ships up to 40,000 metric tons deadweight are utilized in the Jones Act trade, Matson Navigation while ships over 40,000 metric Co. Inc., 13 tons deadweight are utilized in USCS Chemical the foreign trade of the U.S. carChartering, 4 rying preference cargos.

Chevron Shipping, 4 Dry Bulk and General Cargo – The Crowley Petroleum Horizon Lines LLC, 13 Seariver Maritime, 3 Service, 4 fleet includes 27 dry bulk and general 26 | March 2014 www.txgulf.org

cargo carriers and is split between the coastwise trade (10 ships) and the foreign trade of the U.S. (17 ships).

The general cargo ships usually are below 20,000 metric tons deadweight while the dry bulk carriers generally range between 20,000 metric tons deadweight and 40,000 metric tons deadweight.

Roll On-Roll Off Carriers – The current fleet has 32 roro carriers split between the Jones Act trade (10 ships) that are between 12,000 and 30,000 metric tons deadweight and the foreign trade of the U.S. (22 ships) with ship sizes ranging between 13,000 and 49,000 metric tons deadweight. The preference cargo trade includes several vessels on charter to the Military Sealift Command.

Tankers – The tankers category of the U.S.-flag fleet has ships in the 20,000 to 55,000 metric tons deadweight category that carry primarily petroleum products and chemicals and ships in the 90,000 to 200,000 metric tons deadweight category transporting Alaskan North Slope Crude Oil to ports on the West Coast.

Fleet Ownership As of December 17, 2013, there were 43 operators of U.S.-flag merchant vessels. Individual fleets range

from several operators with just one ship at one end of the spectrum to two operators with 13 ships and one operator with 12 ships at the other end. In terms of deadweight there are three operators who manage over 500,000 metric tons deadweight and two operators who manage between 300,000 and 400,000 metric tons deadweight. As a result, the vast majority of the activity involving the U.S.-flag merchant fleet is accomplished by the larger operators.

The Jones Act eligible ships are predominantly oil tankers that include both crude carriers and product carriers. The crude oil tankers carry Alaskan North Slope Crude Oil (125,000 SDWT to 195,000 SDWT vessels) from Valdez Alaska to ports on the U.S. West Coast or Hawaii. The product carriers (20,000 SDWT to 50,000 SDWT) delivering refined products from the major refining centers located in Houston or New Orleans to ports in Florida and other ports located along the East Coast. Ships plying these oil trades are predominantly owned by Alaska Tanker Company (on charter to BP), Polar Tankers (Conoco-Phillips), Seariver Maritime (ExxonMobil), Chevron Shipping, Overseas Shipholding (OSG), and Crowley Petroleum Services.

Greater Houston Port Bureau | 27

The Jones Act eligible container ships, ro-ro, bulkers, and general cargo ships move goods between the U.S. mainland (contiguous 48 states) and Puerto Rico, Hawaii, and Alaska. Ships engaged in these trades are predominantly owned by Horizon Lines and Matson Navigation.

In the Non-Jones Act eligible arena, these vessels are moving goods from the U.S. to overseas destinations generally under cargo preference arrangements. Examples could include cargo belonging to the U.S. military, overseas shipment of U.S. agricultural exports, cargo manufactured in the U.S., but financed by a loan guaranteed by the U.S. Export-Import Bank, or agricultural cargos delivered worldwide under U.S. aid programs. The ships utilized to transport these cargos are predominantly container ships, ro-ros, and bulkers. The primary players in the container ships trade are Maersk, APL, and Hapag-Lloyd, while in the ro-ro category the dominant participant is American Roll-On Roll-Off, with one or two other ships owned by Maersk, NYK Line, OSG, and

Ferrell Lines along with several other independent owners of one ship each. The dry bulk ships and general purpose ships are owned by Liberty Maritime, Intermarine, Maersk, Sealift, and various other independent companies.

Evolution of the Fleet The U.S.-flag merchant marine fleet has declined over the last 50-plus years from 1,059 ships to 177 ships as of December 2013. While the number of ships declined throughout the period, the most pronounced drop in the number of ships was between 1968 and 1974. The number of deep draft U.S.-flag merchant ships declined from 968 ships to 573 ships. However, the number of ships is not the entire story. In 1973, the deadweight capacity of U.S.-flagged tonnage began a dramatic increase, from 13.7 million metric tons rising to 21.6 million metric tons in 1982 – an increase of about 50%.

This increase in deadweight capacity, without the corresponding increase in the number of ships, was the result

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The Odfjell Group is a leading participant in the global market of seaborne transportation and storage of chemicals and other specialty bulk liquids. The Odfjell Tankers fleet of about 90 ships, trades globally and regionally. The Odfjell tank terminal division of 12 partially owned tank terminals is in a network with 12 other tank terminals partly owned by related parties. The terminals are all strategically located around the world, and with Odfjell Group headquarters in Bergen, Norway, the Company has more than 20 offices world wide.Odfjell has about 3,500 employees and annual gross revenue of about $1.2 billion.

28 | March 2014 www.txgulf.org

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of the onset of oil production from Alaska that was required to be carried in large U.S.-flag tankers from Alaska to destinations along the West and Gulf Coasts as well as Hawaii. Even though the tankers constructed during this period to carry the Alaskan North Slope oil production had a carrying capacity four to six times the size of the vessels being retired from the fleet, the number of U.S.-flag merchant vessels continued to decline; albeit at a slower rate. At December 2013, the U.S.-flag merchant fleet stood at 177 vessels with a capacity of 7.8 million metric tons deadweight.

During recent history, another decline in the merchant marine occurred; although far less significant.

From January 2000 through today, the U.S.-flag merchant fleet declined from 270 ships with deadweight capacity of 12.3 million metric tons to 186 vessels with a capacity of 7.9 million metric tons deadweight at January 2013; a drop of 85 ships with a deadweight capacity of 4.4 million metric tons.

The differences between the number and types of ships and the related deadweight capacity that existed as of January 2000 as compared to the same components of the fleet as of January 2013 are displayed by Tables 1 and 2. The vast majority of this decline in U.S.-flag ships was in the tanker category, which declined by 68 ships or a net decline of 3.5 million metric tons deadweight and represents 75% of the total reduction in the U.S.-flag merchant fleet.

U.S.-Flag Merchant Fleet - 2000 and 2013 Number of Ships Year ConDry Gen.

Tanker Ro-Ro tainer Bulk Cargo 2000 81 117 39 11 22 2013 75 49 34 6 22 Change -6 -68 -5 -5 0

This net decline of the tanker fleet during this period reflects the reduction to the fleet as a result of scrapping and retirements, less any additions to the fleet.

There are two primary factors that contributed to the decline in the U.S.-flag tanker fleet. The first factor reflects the retirement of single hull Jones Act tankers as required by the Oil Pollution Act of 1990 (OPA-90).

The second factor is the reduction in U.S.-flag tankers as a result of the decline in Alaska North Slope crude oil production.

OPA-90 legislation required all tankers carrying oil in bulk and operating in waters subject to the

jurisdiction of the U.S. on or after January 1, 2015 to be constructed with a double hull in order to minimize potential oil pollution as a result of either a collision or an allision. Ships that do not meet this requirement are phased out over time on a schedule based on age. Between 2000 and 2013, OPA-90 phase-outs totaled 91 tank vessels comprising approximately six million metric tons deadweight: 53 product carriers and 38 crude oil carriers. These were the tankers that were built during the 1973-1982 period.

Also during the 2000 to 2013 period, Alaskan North Slope (ANS) crude oil production declined from 942 MBD to 515 MBD, a drop of 427 MBD or 45%. This declining oil production profile resulted in about six fewer crude oil tankers necessary to deliver ANS Crude Oil; 15 tankers required in the year 2000 as compared to nine tankers in 2013. This calculation is based on today’s delivery requirement utilizing an average tanker size of 150,000 SDWT, ANS oil production at around 500 MBD, and vessel speed of 15 knots resulting in an average voyage time of 18 days round-trip.

While the U.S. merchant marine has continually declined since post World War II, the industry’s response to OPA-90 and the general desire to modernize, the current U.S.-flag merchant fleet is relatively young, with 45% of the ships being constructed during the last 10 years and 80% of the ships being constructed during the last 20 years. Generally, the newest vessels are the container ships and the tankers with the remaining categories-- dry bulk, general cargo, and ro-ro ships -being somewhat older.

Conclusion All in all, the U.S.-flag merchant fleet reliably serves both the coastwise trade of the U.S. as well as carrying preference cargos all over the world. Additionally, a number of ships support U.S. military operations worldwide by safely carrying military hardware, goods, and supplies where ever needed. The U.S. merchant marine delivers! ò Editor’s Note: All fleet data is from the Maritime Administration as of December 17, 2013.

30 | March 2014 www.txgulf.org

For more information, contact Dave Cooley at dcooley@txgulf.org or (713) 670-1268.

Update from Houston Customhouse Brokers & Freight Forwarders Association Paulie Nichols, HCBFFA History and Membership Houston Customhouse Brokers and Freight Forwarders Association (HCBFFA) has been instrumental in providing leadership to international trade service companies since 1982. The HCBFFA represents more than 75,000 importers and exporters engaged in business through the third largest seaport and one of the largest international gateways in the United States - Houston, Texas.

Our regular and associate members consist of professionals and experts from all aspects of the international trade industry. We have customhouse brokers, freight forwarders, indirect air carriers, third party service providers, law firms, importers, exporters, etc.

Membership in HCBFFA is a must for businesses that, in any way serve, the needs of the international trade community. HCBFFA provides a forum for the exchanging of ideas and staying informed on pertinent issues and technologies that affect your business.

Main Activities

Monthly luncheon meetings, HAZMAT seminars and port tours are just some of the ways we can offer a variety of relevant educational opportunities for our membership. Quarterly customs committee meetings

Front: Lori Mullins, Kathy Murray, Judy Piercy, Leah Ellis. Back: Jeannie Angeli, Paulie Nichols, Julie Moore, John Heimsath, Jaynette Kettler, CJ Wick, Tricia Green with CBP management keep the lines of communications open to solve issues that affect the trade community.

We are active with the NCBFAA and consistently send several members to the annual Government Affairs Conference in Washington. HCBFFA continues to stay abreast of issues on the national level and disseminates that information to our local membership.ò

The next membership luncheon is March 26 and will feature Naomi Labonte speaking about AES filings. Visit hcbffa.org for more information.

Greater Houston Port Bureau | 31

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Greater Houston Port Bureau www.txgulf.org 111 East Loop North Houston, TX 77029 T. +713-678-4300 F. +713-678-4839

The 85th Annual Maritime Dinner Honoring Ned Holmes

Saturday, August 16, 2014 at 5:30 p.m. |Bayou City Event Center | 9401 Knight Road, Houston, Texas For registration and sponsorship information: (713) 678-4300 or ghpbdinner@txgulf.org

Queen of the Fleet

Admiral

Charles Flournoy

Commodore Amegy Bank Blades International Ceres Gulf Frost Bank

Houston Fuel Oil Houston Mooring Manchester Terminal Moran Gulf Shipping

Shamrock Marine Suderman & Young Towing Vopak Watco Co. Greens Port

Captain Briggs & Veselka Co. Cooper/T. Smith Danners East Houston RMC/Central Healthcare Services

Equipment Depot Gulf Stream Marine HDR JPMorgan Chase Mare Liberum

Norton Lilly Odfjell USA Ports America Port of Galveston Port of Texas City

Rickmers-Linie Shrader Engineering Targa University of Houston WGMA