nov2010 news

Port Bureau News November 2010

www.txgulf.org

What’re Wrong with These Pictures?

Bilge Management & MARPOL

Spotlight on Don Welch Managing Partner—Midpoint Partners, LLC

Mission Our mission is to foster economic growth and regional cooperation across a diverse interest of public and private stakeholders that rely upon or benefit from the commercial synergy of the greater Houston port community

Vision To be knowledgeable of all aspects of the port so that we can provide our members information and assistance to grow their businesses.

Port Bureau Staff Bill Diehl

Services

Jeannie Angeli To our valued members, we provide:

Al Cusick

 Real-Time and Historical Vessel Traffic Information for Houston, and the Ports of Texas

Cristina Gomez

 Expertise, Consulting, and Assistance in Maritime Affairs

Janette Molina

 Business Relationships and Networking Opportunities in the Houston Port Community

Patrick Seeba John Smith

Port Bureau News

Board of Directors

Contents/Port Bureau Mission/Staff/Board of Directors

1

St Joseph Medical Center

2

Captain’s Corner

3

2010 Captain’s Cup Golf Tournament

4

Bilge Management & Inspection_

___________

5-7

Port Watch

8

Case Studies in MARPOL Violations

9-10

2010 Breakbulk Americas Conference

11

Spotlight on Don Welch—Midpoint Partners

12

October Commerce Club Photos

13

HarborLights Vessel Tracking Program

14

1

TWIC Card Replacement Update

Back Cover

*Tom Marian—Chairman *Dennis Hansell—1st Vice Chair. *Mike Drieu—2nd Vice Chair. *John Taylor—Secretary /Treas. *Robert H. Blades *Alec Dreyer *Charles H. Flournoy *Thomas C. Pace *Capt. John G. Peterlin III *Richard Russell *Steve Stewart *Nathan Wesely Jim Black Ken Burnett Jan Crittenden Celeste Harris Jason Hayley Kevin Hickey Guy W. Hitt Charlie Jenkins Shareen Larmond Kathy Murray Jerry Nagel Vinny Pilegge Nolan Richardson Lloyd Schwing Earl Smith Tim Studdert Lawrence Waldron Armando Waterland Don Welch

Captain’s Corner

“Protect our Environment and our Marine Lives” In December, 2009, an engineer on the M/V Iorana passed a note to a Customs

and Border Patrol (CBP) officer, informing them of an illegal discharge of oily water from the bilge tank. The Coast Guard later interviewed the engineer, who detailed how it was done and requested governmental assistance – you can read the entire letter on page 9 of the newsletter. As you’ll read, the shipping company was fined $4 million dollars with the four whistleblowers dividing up $500,000.

I was recently in India, speaking with the Masters and Chief Engineers of Executive Ship Management (a member company of the Port Bureau) about MARPOL compliance. They were holding their annual 3 day officers’ seminar at their beautiful training facility in Lonavla, India, just north of Mumbai, focusing on ship source pollution, bilge management techniques, and potential legal retributions. It was a great experience for me to visit India and spend time with these international mariners that so frequently call on our port.

In this newsletter you’ll read a basic overview of some of the MARPOL topics we discussed and see three cases that highlight the penalties incurred from committing a crime and then attempting to cover it up. Even though less than 1% of all MARPOL cases investigated elevate to a criminal nature, when they do they have a sizable impact on the company. As I explained to the mariners, environmental management must become part of your corporate culture; if you lie about an incident, coerce others into lying about an incident, or cover up evidence, you will be held liable with the potential for criminal prosecution.

In the letter the engineer on the M/V Iorana wrote, he begged the inspectors to “protect our environment and our marine lives.” Take that with a grain of salt if you’d like, given the amount of money he made off the report, but the point is valid: we have an inherent duty to protect our environment. Do it because of the imposing fine that looms on the horizon, do it because of how tarnished your public reputation can be after a $4 million dollar lawsuit, or do it because it’s the right thing to do, but, whatever the reasoning behind it, we must all take responsibility for the

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stewardship of the waters we do business on. –Bill Diehl, GHPB

2010 Captain’s Cup Aaron Oil Accutrans

Emerson

Moran Gulf Shipping

EmKay Marine Services, LLC Port Terminal Railroad Assn.

Alexander/Ryan Marine

Frost National Bank

Port of Texas City

Alliant

Garner Environmental

Rickmers Linie (Americas)

Amegy Bank

Gulf Winds International

Rio Marine, Inc.

Baumann Marine Service

HDR

SAVAGE Marine

Bell Ryniker & Latourneau

Hines Furlong Line, Inc.

Sneed Shipyard

Blessey Marine Services

Houston Fuel Oil Terminal

Southwest Ocean

Bludworth Marine

Houston Mooring Company

Southwest Shipyard

Briggs & Veselka Company

Houston Pilots

Suderman & Young Towing

Buffalo Marine Service

HUMANA Inc.

Team Services

CLM Towing, LLC

J2S Services

Texas Mooring, Inc.

Coating Systems & Supply

John Bludworth Shipyard

Trinity Marine Products, Inc.

Cummins

Kirby Inland Marine, LP

Vopak Terminals

Danner’s Inc.

Marine Compliance

Wells Fargo

ECHO Marine, LTD

Marine Healthcare Services

Wholesale Electric

Thank you to all our Sponsors & Participants

Bilge Management

Keeping Your Engine Room Clean

What do the regulations say?

What is MARPOL? MARPOL, or the International Convention for the Prevention of Pollution from Ships 73/78 publishes a set of regulations to address marine pollution on the high seas. The international accords address dumping, oil pollution, and represent 169 countries, including over 98% of the world’s vessel shipping tonnage.

MARPOL annexes address six areas of focus including: I. Oil II. Noxious Liquid Substances Carried in Bulk III. Harmful Substances Carried in Packaged Form IV. Sewage V. Garbage VI. Air Pollution

For all oil tankers and any other vessel over 400 GRT, discharge of oil from machinery spaces is PROHIBITED except when the following conditions are met: 1) Ship must be proceeding en route 2) The oil content of discharged effluent must be less than 15 parts per million 3) The ship must have, in operation, an oil discharge monitor & control system, oily water separating or filtering equipment 4) Bilge water cannot be mixed with oil cargo residue or cargo pump room bilges

MARPOL is a series of international agreements which bind the member countries to enforce agreed-upon standards. In the United States, the MARPOL agreements are codified into the Federal Water Pollution Control Act, the Oil Pollution Act, the Comprehensive Environmental Response Compensation and Liability Act, and the Act to Prevent Pollution from Ships. The US Coast Guard, with the right to inspect and examine vessels upon the high seas for the purpose of suppressing violations of US law, is tasked with boarding vessels to ensure compliance with US laws and regulations. Because the costs of sludge and oil disposal is high and oily water separators and incinerators have a tendency to be difficult and costly to maintain, inspectors realize there is a temptation for vessel owner/operators to cut corners and discharge their waste at sea.

What Happens During an Inspection?

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The Coast Guard marine inspection team generally begins their inspection by going to talk to the Master of each vessel. The inspecting officer then takes an initial look at the vessel’s documentation such as their certificates, deck log, and equipment logs. The inspection then moves into the engine room, where the inspector will usually ask to run the equipment such as the vessel’s oily water separator

or incinerator.

During an inspection, the inspecting officer pays attention to the first impressions he gets of a vessel, the attitudes of on-board personnel, vessel equipment and any inconsistencies that can be found. The Master and Mates are professionals, so the inspector expects and assesses their knowledge of the ship’s condition and equipment. Appraising the condition of machinery, the inspector will carefully watch the ship’s crew when running equipment to make sure the engineering team is proficient in following procedure and safety requirements. The inspection team also will take account of spares and machine parts on board to see if they are consistent with the vessel’s reported equipment usage.

Common problems during an inspection have to do with inconsistencies between vessel written records and the observed state of equipment. For example, if records indicate that the incinerator has been in constant operation during a particular voyage, however there are no machine spares on board, and no record of alarms or equipment failures, the inspector will begin to look further into the pattern of fuel usage, accumulated oil records, and discharge reports.

But How Would Inspectors Ever Know?

The rate of fuel consumption versus oil/sludge creation can be mathematically modeled. In the same manner, the rate of burning/separation and discharge can be calculated and tracked. After calculating fuel usage and sludge buildup, an inspector can analyze the records visually on a graph and have a visual record of inconsistencies. This is another clue that spurs the inspecting officer to take a closer look at the engine room, machinery, and question the crew more thoroughly.

What If I don’t Comply?

When an inspector finds a discrepancy and begins an investigation, the Coast Guard has several avenues to address the grievance: Notice of Violation: A notice of violation, also known as an NOV or Ticket, and operates much like a moving violation in a motor vehicle written out by traffic police. There are instructions that include the penalty assessed and the procedure for appeal.

Class I/II & Judicial Civil Penalties: Civil penalties that can be assessed come with (Continued on page 7)

a graduated scale of maximum penalties and are generally measured by a dollar amount per barrel of oil or reportable quantity of a hazardous substance.

Criminal Prosecution: When engaging in criminal prosecution, the Coast Guard gathers as admissible evidence for prosecution, maintains a chain of custody of all relevant material, and attempts to prove beyond a shadow of a doubt that a crime has occurred. When this happens, the company is subject to large fines, and those persons responsible can be subject to prison sentences. After criminal prosecution, the company is often subject to a lengthy probationary period which involves constant auditing and oversight over the company’s practices and policies.

The Coast Guard does not reach out punitively to discipline the hard working men and women of the sea.

Rather, enforcement measures taken by the government are there to prevent egregious violations of US law and to safeguard mariners. There are provisions in the law that reward operators who have problems and report them and then work to correct the systemic problems that allowed them to occur in the first place. The government and regulators work to ensure that these destructive crimes against the environment are dealt with for if left unchecked, they would threaten future generations, not only of mariners, but of nations and the world. –Patrick Seeba, GHPB

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Port Watch Tom Marian—Buffalo Marine Service Three Quarters Down—Not Too Hot, Not Too Cold September’s vessel arrival numbers continued the regrouping trend that seems to embody regional maritime commerce in 2010. Houston experienced its second-highest month for the year in terms of vessel arrivals with a very small increase of less than 1% over the previous month. Yet, this was still noteworthy since September’s 30 days is a day shy of August. While there were only two other Texas ports that experienced vessel arrival gains from August to September (i.e., Sabine up 13% and Corpus Christi with a 8% increase), all of these ports – with the exception of Freeport – are well above 2009’s numbers.

It is interesting to note that Sabine’s September arrivals which largely consists of tank vessels was contrary to a decrease in tank vessel calls in the Ports of Houston, Freeport and Texas City. Overall, the tank vessel calls appear to balance out lower demand against firmer pricing that is most likely tied to the weakening dollar. Another worthy bright spot in the numbers is the fact that Sabine put up its strongest numbers for the year and Corpus Christi had its second strongest month.

Closer to home, the Port of Houston’s break bulk numbers were down 14% over the last month but saw a gain of 12% on the bulk carrier side. Steel, chemicals and containers were all very positive as each category matched or exceeded last month’s performance with chemical tank vessels leading the charge. The fact that there appears to be more than base inventory replenishment on the chemical products side of the ledger lends credence to the notion that a recovery is at hand albeit modest in nature.

Thus, as the final quarter of the year unfolds, no big surprises appear to be in store as consumers slowly re-enter the market place in preparation for the holiday season. –Tom Marian, Buffalo Marine Service

Violating MARPOL Three Case Studies in Violation & Prosecution Though many companies are taking specific, forward-thinking measures to ensure compliance with US & International laws, there are still organizations that take the chance that they won’t get caught. Furthermore, vessel owners, masters, and engineers that violate the law sometimes take their efforts a step farther and attempt to cover up their indiscretions.

Though opinions differ on the egregiousness of environmental violations, the crimes of obstruction of justice, coercion, and destruction of evidence are simply not tolerated by judges and juries. Increasingly, the ability to bring criminal prosecutions against vessel masters and engineers responsible for discharges is raising the stakes for violating the law.

Case One: The M/V Iorana In January 2010, Customs & Border Protection inspectors in Baltimore boarded the M/V Iorana where they were passed a note asking inspectors to “protect our environment and our marine lives”. The note led inspectors to inspect the vessel’s oily water separator which was discovered to have used a 103 foot bypass hose to route oily discharge through the vessel’s boiler blow-down system and pump sludge overboard. After a crew member’s cellphone camera video revealed details of the bypass, the vessel owners released this joint statement: Approximately 23 cubic meters of oil contaminated sludge and bilge waste (approximately 6,000 gallons) were dumped overboard in December 2009 during the voyage from Gibraltar to Baltimore using the 103-foot bypass hose.

The flanges where the bypass hose was connected were repainted before arriving in port in order to cover up tool marks caused when the bypass hose was connected and disconnected. The bypass was used at night, and plastic bags filled with oil soaked rags used to clean the bilge tank, which was contaminated with sludge and cleaned with diesel fuel, were dumped overboard at night. Additional episodes of illegal discharges took place after the ship's first voyage in June 2009 and continued through the middle of December 2009. … Senior ship officers made false statements to the Coast Guard, crew members were told to lie to the Coast Guard, and evidence of illegal dumping was destroyed.

The company, Irika Shipping, SA was fined $4 million of which $500,000 was distributed to the four whistleblowing crew members. The company was also sentenced to serve a five year probation which includes a detailed compliance and auditing program and oversight by court appointed inspectors.

Case Two: Overseas Shipping Group “There should be no tolerance for those who deliberately despoil the environment” noted Judge Reginald Lindsay as he pronounced a record-setting $37 million dollar penalty against Overseas Shippinng Group (OSG) for criminal violations of the Clean Water Act, Oil Pollution Act, and the Act to Prevent Pollution from Ships as well conspiracy and obstruction of justice.

Between 2001-2003, OSG deliberately concealed illegal discharges of sludge and oily waste by falsifying their oil record books and hiding the equipment used for their transgressions. During the three year investigation, OSG continued to commit criminal infractions on six different vessels. An example of the infractions from the Justice Department’s report: “OSG made illegal releases of oily waste from approxi-

mately August 2001 to October 2003 from the M/T Uranus into waters off the coast of New England, in close proximity to Maine and Massachusetts, including Mt. Desert Island and the island of Nantucket. Discharges were made from the M/T Uranus through a long flexible hose trailed overboard at night, then through a hard bypass pipe that the ship’s fitter was forced to make, and at a later point in time, by flushing an oil detecting sensor with fresh water. In another case, OSG violated the Clean Water Act by knowingly discharging approximately 2,640 gallons of oily waste and sludge from the M/T Neptune off the coast of North Carolina.”

The case was assisted by crew members including an engineer from the M/T Overseas Shirley who testified that the ship’s chief engineer habitually discharged sludge in excess of 40,000 gallons to sea. Also testifying were crew members from the M/T Ania, M/T Alcesmar, M/T Overseas Portland, and M/T Pacific Sapphire. In all, over 12 OSG tankers were found to have committed criminal environmental violations, and the fine plus probationary period is the largest fine issued to a shipper to date for environmental violations.

Case Three: M/V Cygnus When the chief engineer and second engineer of the M/V Cygnus, a roll-on roll-off car carrier found to be discharging contaminated oily water and sludge into the ocean, they were both sentenced to prison terms, followed by deportation. US officials found a flexible hose used to bypass the vessel’s oily water separator and fresh paint on the overboard valve where the crew had attempted to cover up the evidence of their discharge. When asked by inspectors if the bypass hose was used for illegal discharge, Duk Jo Jeong, the chief engineer replied that no discharge had occurred, that all of the accumulated sludge had been burned off in the vessel’s incinerator. During the trial, Jeong admitted that this had been a false report and that all of the waste oil had been discharged into the ocean.

Growing Trends The number of cases for environmental violations is increasing. More noticeably, other countries are prosecuting violations of local laws that echo MARPOL agreements. Venezuela, the UK, Pakistan, Thailand, France, Australia, Canada and Denmark are just a sample of the nations which have become increasingly aggressive in going after polluters. Several states, including Germany, the UK, and the Netherlands have been publically active in pursuing satellite surveillance programs that allow regulators to watch vessels pollute on the high seas. In 2002, a member of Boyang Marine’s corporate board was prosecuted on the grounds that he had knowledge of the violations. In the same prosecution, the Master of a Boyang vessel was sentenced to six months in prison. As enforcement strategies tighten and penalties increase, vessel owners and operators are under increasing pressure to ensure their own compliance—lest they be held responsible for and subject to civil and criminal penalties. –Patrick Seeba, GHPB

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GHPB Staff use HarborLights to show the scope and diversity of cargo and traffic in the Houston Port Region.

With over 3,800 attendees and 265 exhibitors, the 21st Annual Breakbulk Transportation Conference & Exhibition held at the George R. Brown Convention Center was a resounding success. Planned in Houston for the first time, the 2010 Breakbulk Conference’s exhibitors included Port Bureau members American Shipping and Chartering, Bertling Logistics, Ceres, Chipolbrok, Clipper, Gulf Stream Marine, Intermarine, Morris Export Services, the Port of Brownsville, the Port of Galveston, the Port of Houston Authority, Ports America, Richardson Stevedoring & Logistics, Rickmers-Linie, and SSA Marine.

During the two-and-a-half day event, attendees heard speakers such as David Hammerle from Bechtel, and Robert Drew from Tata Steel International as well as panel discussions about the role of freight forwarders in logistics management, the outlook for heavy-lift/ project cargo, capital investment in South America, and evolving contract strategies. Side sessions and impromptu meetings also sprang up around the exhibit hall and conference facility.

Gulf Stream Marine demonstrates their

breakbulk capabilities and expertise As a transportation hub of both sea and air traffic, the Houston conference offered companies the opportunity to easily bring employees from around the world and the wide spectrum and background of attending organizations was striking.

Not only did the 2010 conference boast a record number of attendees, but the tone and tenor of the week was set by a businesslike environment. Starting with boat tours of the Houston Ship Channel aboard the M/V Sam Houston, a business run, golf tournament, and opening reception, sponsors such as the Port of Houston Authority also insured that interested customers were able to see and sample the Houston area industry and atmosphere. With steady traffic through the exhibition halls on both days, professional networking and socialization was balanced with discussions business discussions and plans to move forward as an industry to meet future challenges.

Chipolbrok representatives prepare for the exposition

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Spotlight on Don Welch

Managing Partner—Midpoint Partners, LLP

“It all comes down to developing your idea. After that it takes patience, persistence and perseverance.” Born in Okmulgee, OK, an hour south of Tulsa and an hour southwest of the tank farms of Cushing, Don Welch has oil in his blood. His grandfather was a driller in Pennsylvania, and his greatgrandfather worked on teams moving oilfield equipment at the beginning of the last century.

In his early teens Don moved to Alabama where he began his studies at the University of Alabama. After a few years, Don had to leave his economics classwork to support his family. He began working for Phillips Pipeline Company loading trucks and railcars with gas and diesel at their Birmingham facility.

From Alabama, Don moved to Tampa where he worked as a clerk, then moved on to Arlington, TX. In 1977, Don found himself in Houston. As the Pasadena terminal superintendent for Phillips, Don learned the Houston pipeline system by listening to old timers detailing various connections and choke points. Today, he knows the complete labyrinth of pipelines in Houston as well as a taxi driver would know a city map. “If you’re not in the pipeline business, you may not realize that there are almost as many pipelines in the Houston area as there are roads”, notes Don. In 1992, Don was transferred to St. Louis as a terminal superintendent, but three years later, he resigned that position to come back to Houston where he worked as the Vice President — Operations for Oiltanking Houston.

In 2001, Don began full time consulting, working to streamline terminal operations and use efficiency studies to improve customers’ processes. During this time, he got involved with Coastal Caverns, a partnership that developed salt domes in the Spindletop area in East Texas for use as underground storage facilities for liquid hydrocarbons.

Then in 2005 Don founded Midpoint Partners, LLC. and brought in Stephen Senter and Blake Trahan, associates from Don’s prior positions. Their company works to help its partners and clients capture new business, advise on operations, and develop long-term strategies and business plans. With their track record of success from companies such as Oiltanking, Magellan, Vopak, Phillips, and Chevron/Unocal, Midpoint Partners is focused on using their knowledge of the petroleum and pipeline facilities along the gulf coast to focus on safe and profitable transportation logistics.

Midpoint Partners specializes in developing green field terminal and pipeline assets that create value while maintaining high standards of performance and safety as well as acquiring interests and managing underutilized assets that will be transformed into earnings contributors. With access to capital and decades of experience, Midpoint Partners manages assets by improving their marketing, business development, and operating plans to meet the needs of refining, marketing, and trading customers.

Don and his wife Germaine have been married for 29 years are proud of their eight children and twelve grandchildren. In addition to his work at Midpoint Partners, Don is active in the Greater Houston Port Bureau, where he served as Chairman of the Board from 2001 to 2006. After stepping down as Chairman of the Board, Don has remained active as a board member, and when he finds the time, enjoys travelling and playing a round or two of golf.

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Do You Have a Damaged TWIC Card?

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