MarEx 17 by Maritime Executive Magazine

THE MARITIME EXECUTIVE

Special Edition

B O U R B O N

Pacific Maritime Institute (PMI)’s Workboat Mate Program MARAD’s New Administrator Sean T. Connaughton U.S. Coast Guard’s New Credentialing Process

Jacques de

BOURBON is an international leader in providing marine Zhejiang Shipyards in China will be powered by three of the recently released Cummins QSKV-60DM 1825 kW generators. The vessels’ diesel-electric propulsion combines conventional stand-alone shipboard systems such as power management, motors, thrusters, auxiliary generators and batteries. The environmentally friendly diesel electric propulsion uses less fuel than conventional direct drive systems and produces far less pollution.

SPECIAL EDITION JANUARY 2007

services for the offshore oil industry. Each PSV vessel from the

Chateauvieux

Chairman, President & CEO,

Bourbon

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New Construction of Aluminum Vessels Semi-submersible

Passenger Vessels

Sailing Catamaran

Power Catamaran

Fast-Crewboat

8 Acre Facility, with 1 Acre Under Roof

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SEATRADE CRUISE SHIPPING CONVENTION

Midship Marine Inc., is a ship building yard specializing in the construction and design of aluminum water craft ranging from 25 feet to 200 feet. We have special expertise in the building of a wide range of seaworthy vessels including: passenger, power catamarans, sailing catamarans, semi-submersibles and crew and supply vessels. We build to customer specifications and offer several standard hull and deck arrangements. We also build custom configurations according to the buyers own design.

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Midship Marine, Inc. P.O. Box 125 Harvey, LA 70058 Tel. (504) 341-4359 / Fax: (504) 340-8997 email: midboats@aol.com web: www.midshipmarine.net

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Tony Munoz Editor-in-Chief tonymunoz@maritime-executive.com

Joseph A. Keefe Managing Editor jkeefe@maritime-executive.com

Evan Naylor Art Director evan@maritime-executive.com

John J. Oâ&#x20AC;&#x2122;Connell, Jr. Senior Copy Editor harvardjo@maritime-executive.com

Brett Keil Senior Vice President Sales & Marketing bkeil@maritime-executive.com

Elizabeth Cash Sales Administrator Elizabeth@maritime-executive.com

editorial: Corporate Stewardship

eXecutive achievement

washington insider by Joseph Keefe

pacific maritime institute (pmi)â&#x20AC;&#x2122;s workboat mate 500/1600 tons program: Puts Officer Candidates on the Fast Track

case study: bourbon

eXecutive interview: Jacques de chateauvieuX Chairman, President & CEO, Bourbon by Joseph Keefe

servicing the mariner of the new millenium: The U.S. Coast Guard Revamps the Credentialing Process

environmental risk management: What to do When the Government is at the Gate

by Joseph Keefe by Tony Munoz

Marex MarexMarexMarex

Special Edition

cONTeNTS by Joseph Keefe

by Timothy C. Cronin & Matthew J. Nasuti

Jason Monge-Sandoz Circulation Manager Jason@maritime-executive.com

Published by TM Marketing Group, LLC The Maritime Executive, LLC (ISSN 1096-2751) 3200 S. Andrews Avenue, Ste. 207 Fort Lauderdale, FL 33316 Telephone: (866) 884 9034

MarEx 17 011007.indd 1

1/12/07 11:23:19 AM

Tony Munoz Editor-in-Chief tonymunoz@maritime-executive.com

Joseph A. Keefe Managing Editor jkeefe@maritime-executive.com

Evan Naylor Art Director evan@maritime-executive.com

John J. O’Connell, Jr. Senior Copy Editor harvardjo@maritime-executive.com

Brett Keil Senior Vice President Sales & Marketing bkeil@maritime-executive.com

Elizabeth Cash Sales Administrator Elizabeth@maritime-executive.com

EDITORIAL: Corporate Stewardship

EXECUTIVE ACHIEVEMENT

WASHINGTON INSIDER by Joseph Keefe

PACIFIC MARITIME INSTITUTE (PMI)’S WORKBOAT MATE 500/1600 TONS PROGRAM: Puts Officer Candidates on the Fast Track

CASE STUDY: BOURBON

EXECUTIVE INTERVIEW: JACQUES DE CHATEAUVIEUX Chairman, President & CEO, Bourbon by Joseph Keefe

SERVICING THE MARINER OF THE NEW MILLENIUM: The U.S. Coast Guard Revamps the Credentialing Process

ENVIRONMENTAL RISK MANAGEMENT: What to do When the Government is at the Gate

by Joseph Keefe by Tony Munoz

MAREX MAREXMAREXMAREX

Special Edition

CONTENTS by Joseph Keefe

by Timothy C. Cronin & Matthew J. Nasuti

Jason Monge-Sandoz Circulation Manager Jason@maritime-executive.com

Published by TM Marketing Group, LLC The Maritime Executive, LLC (ISSN 1096-2751) 3200 S. Andrews Avenue, Ste. 207 Fort Lauderdale, FL 33316 Telephone: (866) 884 9034

MarEx 17 011007.indd 1

1/12/07 11:23:19 AM

Marex

EDITORIAL Corporate Stewardship

Joseph Keefe Managing Editor

More and more, there will be little room for out-of-date equipment, undertrained people and non-responsible managers. Therefore, this will increasingly be the key to being successful. â&#x20AC;&#x201C;Jacques de Chateauvieux

it's a phrase that means different things to different people. The 1984 edition of Websterâ&#x20AC;&#x2122;s Dictionary on my desk defines â&#x20AC;&#x153;stewardshipâ&#x20AC;? as â&#x20AC;&#x153;the responsibility to manage life and property with proper regard to the rights of others.â&#x20AC;? In the corporate world, it can also mean doing the right thing without regard to its impact on the bottom line. In the realm of all things â&#x20AC;&#x153;maritime,â&#x20AC;? it means much more than that. Corporate stewardship IS an executive matter. Those ideas and the policies which eventually propagate outward have to come from the top down, not the other way around. Some companies learn this lesson the hard way; still others make certain that their stewardship is manifested in everything that they do on a daily basis. Certainly there is at least one oil major that has recently taken this concept to heart, but only after 18 months of difficulties, which brought home the reality that stewardship isnâ&#x20AC;&#x2122;t just a â&#x20AC;&#x153;buzzwordâ&#x20AC;? anymore â&#x20AC;&#x201C; itâ&#x20AC;&#x2122;s a necessary part of doing business. For some maritime companies, the concept of doing the right thing, every time and as a matter of official policy, not only serves them well in the media but also in their bottom line. Probably the best example of this way of doing business can be found at Teekay Shipping, the enormously successful tank vessel operator. For years, Teekayâ&#x20AC;&#x2122;s ships and crews have set the standard worldwide for the safe, efficient and environmentally correct transport of ocean goods. As a mariner and marine consultant in a former life, Iâ&#x20AC;&#x2122;ve seen that reality many times, close up and personal, in an industrial environment. And I challenge any one of our readers to dispute it. As you read through this, our Special Edition of The Maritime Executive, youâ&#x20AC;&#x2122;ll recognize more than one instance of maritime firms exercising their corporate stewardship â&#x20AC;&#x201C; and in a variety of ways. Maybe it takes the form of investing in cadet billets for the purpose of transforming the way an entire industry trains, recruits and retains marine professionals. Or it could mean the top-to-bottom safety management of the most modern fleet of OSV vessels anywhere in the world today. Out in the U.S. Gulf of Mexico, this monthâ&#x20AC;&#x2122;s last-minute vote of the lame duck House of Representatives has breathed new hope into the possibility of significant new sources of energy for the United States. The vote of confidence expressed by the last gasp from the outgoing 109th Congress, now reconciled with the Senateâ&#x20AC;&#x2122;s version of the drilling package, will eventually be rewarded with the most environmentally safe industrial operation ever attempted, anywhere and at any time in history. The proposed drilling in the Arctic National Wildlife Refuge (ANWR) awaits a similar leap of faith from Congress. The economic welfare and national security of America hang literally in the balance. Whatever form it takes, and for whatever reason it was done, corporate stewardship also means a healthier bottom line. No, running a â&#x20AC;&#x153;greenâ&#x20AC;? company wonâ&#x20AC;&#x2122;t prevent failure in the case of bad business decisions or in the face of adverse market conditions, but it will eliminate a needless variable from your business model. Going forward, our maritime industries â&#x20AC;&#x201C; both here and abroad â&#x20AC;&#x201C; need to do more than simply meet and comply with the labyrinth of regulations spanning the IMO, the U.S. Coast Guard and a host of other smaller, but no less important, players. No one knows when or if the next maritime or energy disaster will occur. How we prevent, prepare for and respond to that challenge will make all the difference. Managing Editor Joseph Keefe can be contacted at jkeefe@maritime-executive.com with comments, input and questions on this editorial, or any other piece in this magazine. MarEx welcomes and encourages your participation in our editorial content. MarEx

> Distribution

of The Maritime Executive:

Markets Served:

15% Naval architects, lawyers, consultants, and insurers

The Maritime Executive

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58%

Other

7ESTERN %UROPE

East Coast

2% 26%

Pacific

29%

5% 2%

Government

Domestic Circulation:

#ANADIAN

Ship owners, operators, managers, charterers, and brokers

!SIA

13%

Marine equipment manufacturers

International Circulation:

Shipbuilders and repairers

3CANDINAVIA

3OUTH #ENTRAL !MERICA

%ASTERN %UROPE /THER !FRICA !USTRALIA

-ISC )SLAND .ATIONS

28% Gulf Coast

15% Midwest

1/12/07 11:23:19 AM

exeCutiVeachieveMeNT

norMan Y. Mineta eLeCted to horiZon Lines board

horizon Lines, inc. announced in late December that its Board of Directors had voted to elect former u.S. Secretary of Transportation Norman Y. Mineta to the Board. his appointment is effective January 1, 2007. Mineta will fill the vacancy created by the resignation of admiral James holloway (uSNretired) from the horizon Lines board. holloway had served on the horizon Lines board since July of 2004. Mr. Mineta is currently vice chairman of hill & Knowlton, a global communications consultancy firm. Prior to that, mineta’s impressive resume includes 20 years of service in the u.S. house of representatives and cabinet service under the last two united States presidents. Mr. Mineta was not only the longest serving Secretary of Transportation in the history of that cabinet post, but also served as u.S. Secretary of commerce under President Bill clinton. Prior to joining the clinton administration, he was vice president of Lockheed Martin. horizon Lines, LLc is the nation’s leading Jones act container shipping and integrated logistics company, operating 16 u.S.-flag vessels on routes linking the continental united States with alaska, hawaii, Guam, and Puerto rico.

MtLa weLCoMes John JaMian as new affiLiate MeMber

Maritime Transport & Logistics advisors (MTLa) has announced the addition of Mr. John Jamian, former acting Maritime

administrator for the u.S. Department of Transportation’s Maritime administration, to its select group of affiliate Members. currently serving as president of the Seaway Great Lakes Trade association, Mr. Jamian is a partner in Jamian Fahmy, LLc, based in Washington, D.c. and Michigan, and has extensive experience in international transportation, trade development, and the maritime industry. Most recently, Mr. Jamian served in the Bush administration as the acting Maritime administrator and Deputy administrator for the u.S. Department of Transportation’s Maritime administration. his responsibilities included promoting the environmentally sound integration of marine transportation with other modes of transportation, and with other ocean, coastal, and Great Lakes uses. he was instrumental in creating the cabinet Level committee on Marine Transportation and served as a member of the Presidents National Presidential Security Directive (NSPD) in creating our national maritime security initiative. Mr. Jamian oversaw the daily operations of the Maritime administration, its 900 employees, and 276 ship assets under MaraD purveyance. he also co-managed the Maritime Security Program with the u.S. Transportation command the Department of Defense. MTLa is a diversified maritime consulting group based in Ft. Lauderdale, Florida, with a highly select network of professional affiliate consultants located primarily throughout the united States, with several additional MTLa affiliates in Sweden and the united Kingdom.

Mr. Morten arntZen naMed ConneCtiCut MaritiMe assoCiation 2007 CoMModore

Mr. Morten arntzen, President & ceO of Overseas Shipholding Group, inc. (OSG), has been named this week as the connecticut Maritime association

(cMa) commodore for the year 2007. Mr. arntzen follows a long succession of influential maritime industry leaders as commodore. The award will be presented to Mr. arntzen on March 21, 2007 at the Gala Dinner marking the conclusion of the annual connecticut Maritime association conference and trade exposition. The award is given each year to a person in the international maritime industry who has contributed to the growth and development of the industry. Mr. arntzen has been involved in the global shipping industry since 1979 and was appointed President and chief executive Officer of Overseas Shipholding Group, inc. in January 2004. Before joining OSG, he was chief executive Officer of american Marine advisors, inc. (aMa), a u.S.-based merchant banking firm specializing in maritime industry merger and acquisition advisory work and corporate restructuring for a global client base. Prior to his work at aMa, he ran the Global Transportation Group for chase Manhattan Bank (chase), which held a $5 billion shipping portfolio. chase pioneered the introduction of shipping companies to the high yield market and under Mr. arntzen, was the largest arranger of shipping loans in the world. Mr. arntzen held the same position at chemical Bank before it merged with chase. Mr. arntzen set up and ran the Global Shipping Group for Manufacturers hanover Trust company. Mr. arntzen is a Board member of The Seamen’s church institute of New York and New Jersey and is active with the american Bureau of Shipping and the american Maritime association. Mr. arntzen is Presiding Director of chiquita Brands international, inc., where he is chairman of the Nominating and Governance committee and a member of the audit committee. he holds a bachelor of arts degree from Ohio Wesleyan university and a master of international affairs degree from columbia university. he has been an OSG Board member since 2004. Mr. Torben G. Jensen will present the 2007 commodore award to Mr. arntzen at the March 21 Dinner at the Westin hotel in Stamford, connecticut.

Marex

exeCutiVe aChieVeMent

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Marex

washington insider

washington insider By Joseph A. Keefe, Managing Editor When Marex caught up with newly confirmed Maritime administrator Sean T. connaughton in mid-November, he had recently returned from a whirlwind tour of america’s maritime infrastructure, and the midterm elections had only just taken place. The results of November’s elections promise to set Washington on its ear when the 110th congress arrives to take power in January. With the legislative branches now in the hands of the Democrats, the New Year could bring new meaning to the word “gridlock.” MaraD’s administrator had actually been in place for almost ten weeks when we visited his offices. he had clearly hit the ground running and never looked back. Notwithstanding the coming turmoil on the hill, connaughton told Marex that there was much to be accomplished in a short period of time. in contrast to the legislative branch, the stars and planets finally appear to be aligned at the Department of Transportation to allow for real progress on many fronts. With the coming of a new administration, he also knows that he’ll probably be replaced in January of 2009. connaughton is optimistic about where the u.S. maritime industry is and where it is going. “i think this is a unique time for the industry. The industry overall is extremely strong. When one looks at employment and the demand for marine services, it hasn’t been this strong for a long time. if anything, we’re starting to see a labor shortage as industry expands, especially in the coastwise trades and inland rivers.” additionally, he pointed to the pressure on the domestic maritime industry exerted by the continued deployment of our armed forces overseas. 4

“ we haVe to be foCusing on how we get aCCess to CapitaL to heLp aMeriCan CoMpanies inVest in our shipping, operations and ManageMent.” While recognizing the traditional role of MaraD as the organization whose mission is to improve and strengthen the u.S. marine transportation system, connaughton also says that the role of meeting the economic and security needs of the nation will involve a more global approach, now and in the future. More to the point, connaughton said, “i will say that it’s becoming difficult to ascertain what is american and what is not. More and more, shipping and logistics companies are multinational, and you are seeing that in who is investing in transportation and who is actually operating and managing the ships.” Because of this, connaughton explained, americans are going to have to be much more flexible in how we judge and promote an american presence in the maritime industry. The recent controversy over the capitalization of rigdon Marine’s boatbuilding program in the u.S. Gulf was “a good example of that,” he said. Beyond this, he said, “We have to be focusing on how we get access to capital to help american companies invest in our shipping, operations and management.” When asked to describe the biggest issue facing MaraD and the u.S. maritime industry in general, connaughton said that foreign trade is expected to almost double in the next 15 years. Trying to facilitate efficient transportation for this expansion will be MaraD’s

biggest challenge. he went on to say that there are perhaps 10 u.S. ports which are becoming the primary gateways for commerce. Most, if not all, of them are located in major urban areas, experiencing what connaughton describes as “enormous congestion, urban encroachment and environmental issues.” Furthermore, said connaughton, “a major crisis is coming. So the top issue for the Maritime administration is to focus on planning and attracting investment into ports, rails, pipeline and road infrastructure. it’s intermodal – yes, but much more than that. When people talk about intermodal, they think containers. We’re talking about a much broader definition of intermodal. it can mean marine to highway, or marine to pipeline.” MaraD, he says, is poised to carve out a leadership position in the business of spanning the waterfront and interfacing with all of the other modes of transportation. First and foremost, however, connaughton says that MaraD will be reorganized to address four (really five) basic areas, as follows:

transportation faCiLitation:

MaraD to focus on port areas, including the “shortsea shipping component.”

CoMpLianCe:

Focusing on safety, security and environmental protection – inside and outside the government. Fostering good environmental policy and ensuring compliance.

nationaL seCuritY:

ready reserve Fleets / Maritime Security Program / Sealift capabilities. institutionalization (Standardization) of MaraD.

resourCes:

Standardizing emergency response (reaD: Katrina) by involving and making MaraD assets available as part of established contingency plans in times of natural, man made or civil disasters.

traditionaL Marad roLes:

MaraD to focus more on how to make programs work better in as many aspects of industry as possible, not neces-

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sarily dwelling exclusively on numbers of u.S. flag ships, but focusing on the american presence in the ownership, management and manning of ships. While connaughton was clearly passionate about all of his “hot button” issues, his attention to cataloguing MaraD physical assets and capabilities for use in time of crisis was particularly notable. “hurricane Katrina opened many people’s eyes to the capabilities of MaraD. We helped open the port of New Orleans.” indeed, maritime academy training ships were dispatched and used as operations and housing centers. after hurricane rita blew through the port of Beaumont, Tx, ambulances, fire trucks and other emergency vehicles rolled off MaraD ships after being sheltered there during a storm, which brought devastating winds of more than 120 mph. connaughton sees no reason why MaraD, in the future, cannot be part of the standardized response to any number of crises. With regard to facilitation of transportation infrastructure, the new Maritime administrator firmly believes that “shortsea shipping” will be a key part of that effort. in the near future, though, the maritime industry will learn to refer to this concept under a new name. The new acronym, as yet undecided by MaraD, will have to be, in connaughton’s words, “more reflective of what this is. We are going to be changing the whole focus of this program.” Before any of that can happen, says connaughton, MaraD needs to get a better handle on what is already occurring. “We need to focus on where it is already occurring, why it is successful and what we can do to build on it.” There are successes out there. connaughton points to the Bridgeport – Port Jefferson Ferry, where the state of connecticut trumpets the removal of more than 900,000 trucks from the roadways last year alone. This type of effort, he says, has to be better documented in order to show that the concept is working and then to foster additional growth in this way. There are those in industry who have said that MaraD does not do enough to promote “shortsea shipping” – or whatever it is called down the road

Maritime administrator sean t. Connaughton

“…we’re starting to see a Labor shortage as industrY expands, espeCiaLLY in the Coastwise trades and inLand riVers.” additionaLLY, he pointed to the pressure on the doMestiC MaritiMe industrY exerted bY the Continued depLoYMent of our arMed forCes oVerseas.” – but connaughton says that many such initiatives have been funded and money is being spent by DOT. When pressed for examples, he cited the Federal Transit administration’s funding of a $56 million project for ferry operations. The Federal highway administration has also paid for a study on the proposed container service between Bridgeport, cT and the port of New York. he also hopes to use funds from these very same sources, after demonstrating definitive reductions of vehicles and / or people from the highways, and then direct that money to new initiatives. investment in “shortsea shipping” can work, says connaughton, but a direct correlation between reduction in road traffic and that investment has to be very clear. “The key to all of this is shippers themselves,” he says, “Once they buy in and provide that minimum volume, then it really makes the case for the concept.” By using the gateway ports that he alluded to earlier, connaughton says that the international liner vessels can

call at fewer big ports, while shippers can find ways to move that cargo inland using a smaller marine asset – perhaps a tug-and-barge unit. connaughton calls this the “hub and spoke” concept. as the gateway ports grow – and they will, says connaughton – the need to facilitate transportation infrastructure around them will become more and more critical. Like his predecessor, Bill Schubert, connaughton is faced with the seemingly never-ending migraine headache of disposing of a rapidly decaying Defense reserve Fleet. More than 100 obsolete vessels, scattered amongst three fleets in Beaumont, Tx; Suisan Bay, ca; and hampton roads, va, languish awaiting their ultimate fate of the scrap yard or perhaps as an artificial reef. One congressional deadline has already been missed, but connaughton insists “MaraD is making tremendous progress. Our funding has been consistent with what we’ve gotten in the past.” recent positive developments include the rising price of steel, which makes scrapping more attractive. MaraD even made some money on a couple of recent disposal operations. But the lack of domestic recycling capacity and the ever-changing environmental regulations have not been helpful. Still, MaraD last year disposed of more vessels and in a quicker fashion than originally anticipated. The reefing option also appears to have gained some traction recently with three vessels either sunk or sent to the shipyard for preparation for final disposition. When William G. Schubert left the administrator’s Office in February of 2005, MaraD found itself under temporary, acting guidance from Deputy administrators John Jamian and, subsequently, Julie a. Nelson. in the middle of all that, the nomination of a different individual was derailed in the political fire storm caused by the fallout from the DP World controversy. While connaughton may not have been the President’s first choice to lead the Maritime administration, it is quickly becoming clear that MaraD is in capable hands. connaughton also knows his way around Washington. The word “politician” has become a dirty

Marex

washington insider

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washington insider

the new MaritiMe adMinistrator proMises to be aggressiVe in bringing Marad’s expertise to the haLLs of goVernMent and their assets into pLaY when the tiMe is right…there wiLL be the usuaL Marad duties to attend to: titLe xi, the MaritiMe seCuritY prograM, Cargo preferenCe, Jones aCt issues, Mariner reCruitMent & retention, & a host of others. word in some circles, but for the first time in recent memory MaraD has an administrator who can combine a deep maritime background with the political savvy to get things done. all of that bodes well for the domestic maritime community. connaughton also expressed great enthusiasm about the prospect of working with the new Transportation Secretary, Mary e. Peters. his Senate confirmation preceded hers by only a few weeks, and almost all of the Department of Transportation “modes” have new administrators. Transportation Secretary Peters, already well known for her savvy in the world of highway infrastructure, should be a good match for connaughton as he goes about the task of trying to reduce road

congestion while pushing “shortsea” initiatives. For her part, connaughton says, “She’s made it clear that she’s going to be looking to the individual modes and the administrators to be taking an active role in transportation policy.” if Peters is looking to reduce traffic on the highway system that she’s spent much of the last twenty years to create, then connaughton may just be the best guy to get the job done. The new Maritime administrator promises to be aggressive in bringing MaraD’s expertise to the halls of government and their assets into play when the time is right. along the way, there will be the usual MaraD duties to attend to: Title xi, the Maritime

DEMAND THE BEST. MARITIME TEAK DECK CAULK MADE FOR THE TOUGHEST CONDITIONS.

Security Program, cargo Preference, Jones act issues, Mariner recruitment and retention, and a host of others. if the stars and planets are finally aligned at DOT and MaraD to allow great things to happen, it is also true that the window of opportunity will be a narrow one. January 2009 is approaching fast in the rearview mirror. No one needs to tell a seasoned mariner like Sean connaughton that the heavens tend to move rather quickly as the world turns. in fact, that may be the only “constant” that he can rely on as the job of reshaping MaraD goes forward. and yes, the clock is officially running. MarEx

MARITIME

TEAK DECK CAULK

The Professional’s Favorite.

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MARITIME TRAINING

Pacific Maritime Instituteâ&#x20AC;&#x2122;s Workboat Mate (500/1,600 Tons) Program Puts Officer Candidates on the Fast Track Partnering With Industry, PMI Provides the Solution to Recruitment & Retention Problems By

Joseph Keefe

The Maritime Executive

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marex

MARITIME TRAINING

As the Pacific Maritime Institute (PMI) goes about its daily business of training and catering to a wide range of mariners, the maritime companies who send their personnel to PMI all seem to have a common complaint. Their dissatisfaction has absolutely nothing to do with the quality of instruction being provided by the premier professional maritime training facility on the U.S. West Coast. Instead, the universal – and very serious, according to most offshore supply, salvage and towing firms – problem facing today’s employer of maritime professionals is the recruitment and retention of quality officers and ratings. The Maritime Executive

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MARITIME TRAINING

Beyond Bellyaching: Defining the Problem The United States Coast Guard regularly tracks the numbers and demographics of the credentialed U.S. mariner pool. According to figures published by the Coast Guard’s National Maritime Center in October of 2006, the total population of credentialed mariners stands at almost 210,000. That’s up a whopping 8.7%, or 16,800 mariners, since 2001. STCW-qualified mariners increased at an even

faster rate, almost doubling the certification numbers in 2001, the last year when STCW was not a mandatory requirement to go to sea. Despite all of the seemingly good news, offshore companies, tug and tow operators and a host of other firms involved in the 500 to 1,600-ton vessel markets are experiencing marked difficulties in attracting and keeping quality officers. This is because the full array of talent which comprises the 500 / 1,600-ton Mate and Master component of credentialed mariners is just 5% of the total population, and the numbers are shrinking. Last year alone, 215 Mates and Masters disappeared from the employment picture with seven of the eight 500 / 1,600-ton license classifications showing losses or remaining essentially static. The only license classification to show gains was the 1,600-ton Masters’ group, and this was largely a function of unlimited tonnage Mates sitting for the extra endorsement. PMI says that they are here to service the maritime industry – the offshore and towing industry, in particular. Gregg Trunnell, Director of PMI, doesn’t need to read statistics to tell him what he’s known for a long time: the hawse pipe option for the upwardly mobile mariner is virtually gone. Uniquely positioned to get firsthand feedback from his clients, Trunnell also has his finger on the pulse of his target market. Together with Captain John Scragg, PMI’s Training Director, Trunnell has listened to the calls for a viable solution to what is now a full-blown manning crisis in the tug, salvage and offshore markets. What they’ve developed in response is the most innovative and collaborative officer training program to be introduced in 10

What they’ve developed in response is the most innovative and collaborative officer training program to be introduced in this country in more than a century.

this country in more than a century.

Introducing the Solution: Innovative Ideas Millions of dollars have been spent to ensure that PMI’s brand new, two-year Workboat Mate Program has the best possible equipment and course curriculum. The multi-million dollar, interactive, 330-degree Full Mission Tugboat Simulator is an important part of the new curriculum, but only one of many unique components of this new and exciting training vehicle. Trunnell says, “None of this is possible without the support of our clients. This is a partnership – and perhaps this is the most important part of what sets PMI’s Mate Program apart from all the others. Partnership, collaboration, call it what you want: It adds up to a happier seaman and a happier employer.” PMI’s industry collaboration debuted in June of 2006 with a class of seven cadets and marine operators Dunlap Towing, Seacoast Towing, Sause Brothers and Western Towboat. The second class, now increased to 18 cadets, is set to kick off in January with other industry players joining in, notably Foss Maritime, Crowley, Sirius Maritime and Harley Marine Services. PMI will be running another twoyear program in May 2007 for Edison Chouest Offshore (ECO). ECO is relying on PMI to recruit, train and provide 19 workboat mates in 2009. Some of the ECO billets provided to PMI will also be used to “fast track” certain of their entry-level mariners into the wheelhouse. The cadets, coming from all over the country, stay with the same company for the full two-year program. The work platforms are as varied as the students themselves. Some work on West

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MARITIME TRAINING

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MARITIME TRAINING

Coast to Hawaii runs or perhaps from the West Coast to Alaska, usually involving barge and tow or OSV operations. PMI’s partner / sponsor companies are deeply concerned about recruiting and retaining qualified and motivated talent. It’s a serious issue, and they are serious about addressing it. The program represents a viable alternative for prospective students who do not have the resources or time to attend a four-year academy. By focusing on “what it takes to be a good mate,” PMI students become fully qualified and licensed 500 / 1,600-ton Mates in two years.

PMI’s Workboat Students: Cadets and Officer Candidates John Scragg says that the initial idea of the program was to attract individuals who were motivated and wanted to go to sea. Unlike the traditional four-year programs, PMI isn’t interested in the 17- or 18-year olds who make up the bulk of the maritime academies’ freshman classes. Gregg Trunnell says, “A good percentage of these kids don’t necessarily know what they want right out of high school, and we are not looking for people to ‘find themselves’ on a workboat. Additionally, they can’t get their license before the age of 21, so the minimum starting age of this program is 19.” PMI is targeting three groups for the program: secondcareer persons, the dislocated worker and retired military. There’s also the younger cadet – not just out of high school, but a couple of years down the line, more mature, somewhat sure of where they want to go. PMI’s officer candidates don’t necessarily want a degree; in fact, some already have one. All were prepared to pay the $27,000 to go to school for two years while their company sponsors pay only a cadet stipend of $845 per month for their participation on board. In this way, the PMI Mates Program is unique to the tug and workboat industry: companies sponsor “cadets” in an effort to train and retain good talent. Retention and brand loyalty will hopefully be the key down the road. After firmly defining PMI’s goal of recruiting a diverse, mature student body that is first and foremost focused on going to sea, MarEx asked: who are PMI’s students? As it turns out, the demographics of the first class are as varied as their commitment to starting and continuing a career at sea is strong. They include a history teacher, movie cameraman / editor, tugboat shipyard worker, son of a port captain, son of an owner of a tugboat company and the son of a marine pilot. In essence, none has any formal or significant seaborne training. PMI is taking all of them from ground zero – just like, for example, the maritime academies – with a key difference: PMI focuses on a different demographic than what the academies target. The philosophy at PMI is that anyone serious enough to spend two years in the program is probably serious about going to sea. If they are serious about both components, then there’s a good chance they’ll stay at sea for a while. Companies need good people, good people who want to stay. 12

While there is a commitment to hiring these people at the end of the program, PMI doesn’t make any promises to the people who apply or enter the Mates Program. Instead, this unique curriculum fosters a familiarity between the sponsor company and the cadet. The company, which has been involved in training a cadet on one or more of its vessels for two years, is probably going to want to keep him or her around once they get their ticket. On the other hand, both have the option to say good-bye. That being said, all of the West Coast company partners have agreed to repay the majority of tuition at the end of the program. For every year that a graduate works for the company, the company will reimburse one-third of the tuition. This is just one more incentive that the PMI Program Advisory Committee (comprised of the companies taking PMI cadets) has put in place to focus on retention.

Solve the Problem: Benchmark the Solution The Workboat Mates training curriculum is primarily Captain John Scragg’s labor of love. Scragg comes from the British regimen, where the cadets spend a great deal of time at sea prior to earning their first license. They also focus more on the maritime aspect of learning and less on academics. In the British system, a cadet will spend two years at sea during a four-year period, whereas the typical U.S. mariner can spend as little as six months during that fouryear time span. A large component of Scragg’s life and professional experience is directly reflected in how the Mates course is run. It differs in many ways from that taught at U.S. maritime academies – and the differences are intentional. To be fair, says Scragg, “While a good deal of how we do things here incorporates much of the British system of training, we looked at programs from around the world, as well as here in the United States, and incorporated the best of all of them.” The two-year program involves time at PMI and time spent working onboard vessels. It’s a full-time program, whether the students are in class or at sea, with a total of at least 360 days clocked onboard the vessel and six months of actual class instruction time. Curriculum is necessarily tied to U.S. Coast Guard requirements, but the program exceeds USCG training standards in many aspects. John Scragg says, “The initial planning process included quite a bit of back-and-forth discussion during the formulation stages of curriculum development. It wouldn’t be fair to say that this is the first program of its kind in the country, but it may very well be the first to get companies excited about a real recruitment option.” It is important to first define the differences between PMI’s approach to officer training and that of other schools. Back in 1980, for example, the Massachusetts Maritime Academy offered just two majors: deck and engine. A graduate came away with a Bachelor’s degree and sat for a

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MARITIME TRAINING

Companies need good people, good people who want to stay. Third Mate or Third Engineer license. Hopefully, the graduates went to sea – at least, that was their focus. Since then, Mass. Maritime and, indeed, all of the other academies had to change in order to survive. As the seagoing billets went away, there needed to be other training specialties, which have the marine component but not necessarily the license component. These fine academies have also gotten much more focused on academics, which really isn’t what the PMI program is all about. PMI’s Workboat Mate Program is a focused trade program. According to PMI’s own course syllabus, the program is specifically designed for the entry-level person interested in becoming an officer. It is comprised of 25 weeks of classroom / simulation training and a minimum of 52 weeks of onboard training, which will be documented in a ‘Training Record Book.’ Segmented into four distinct phases of instruction, each consisting of time at sea and classroom learning, the program culminates with a supervised license preparation seminar followed by exams given by the U.S. Coast Guard.

The Curriculum: Front-End Loaded = Back-End Dividends Phase 1 of the Workboat Mate (500/1,600 Tons) Program involves two weeks of indoctrination, during which the new officer candidates come in to talk about watchstanding, how the program works, and what’s expected on the boat. The sponsor-company representatives also come in at this time to discuss their policies, safety, etc. Says John Scragg, “We want them, first and foremost, to be safe. And, really, what will a history teacher know about safety on his first day at sea? Not much.” The initial, Phase 1 safety orientation is evolving every day. During the first week of the January 2007 program, for instance, Western Towboat and Crowley Maritime Services are going to provide harbor tugs for a day of orientation on the water.

Sea Phase 1 closely follows the PMI Phase 1. Cadets will need eight weeks of sea time during this phase, and PMI gives them about 12 weeks to get that done. In theory, there’s time for a break as well. The cadets will take their sea record and training book with them, through which they’ll need to demonstrate seamanship, steering the boat, securing cargo, standing a watch, etc. All of this needs to be signed off while at sea. Every sea phase reinforces what was learned in the classroom. There is company feedback on each cadet. There’s even a formal name for it: the Program Advisory Committee. Specific tasks, such as taking on fresh water, for example, are also targeted. The training book contains a module, which matches up to every single one of these tasks and then serves as an assessment tool as well. The initial eight-week sea phase also has another purpose. Deliberately front-end loaded, it helps identify those who may not like going to sea. Maybe an individual gets really seasick, or they decide that “this just isn’t for me.” The opportunity to figure this out, early in the program before a large financial outlay has been made, is critical. From the sponsor-tug company’s point of view, this also occurs before the real investment in an individual through a designated billet has been made. This is the probationary phase, where PMI and its sponsors are looking at washing The Maritime Executive 13

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out unsuitable candidates. Gregg Trunnell points to Kirby Inland Marine’s training models and says, “We very much like the Kirby model, whereby they have approximately 30% retention from their students in the program and 90% retention from the graduates.” Trunnell went on to say, “Everything we are doing is based on retention strategies.” In September, PMI’s first class of Workboat Mate cadets returned from their first taste of sea. Scragg says, “We don’t expect that everyone who starts this program will finish it. But we do want to identify early on who is well suited for a career at sea and, if they are not, then they can move on and we can get another individual into an available slot.” He adds that they’ll get most of their money back if it’s not for them. Perhaps the most important reason for the timing of the initial sea phase involves PMI’s maritime partners, the employers. For their part, the sponsor companies are trying to identify people within their own firms – at sea – who are the best suited to train the cadets during the seagoing mode. Perhaps Gregg Trunnell puts it best when he says, “We’ve all been on ships where the guy above you had absolutely no interest in bringing you along through the ranks. This program at least aims to be different in that regard. A ship can be an unfriendly place and these are, relatively speaking, small boats. Finding a good match for the cadet is an important part of the program.”

The Key Linchpin: Guiding and Assisting the Candidate It is a fact that STCW requirements, implemented at the beginning of this decade, changed significantly how an AB could hope or aspire to become a Mate. Before that, it could be done by achieving the applicable sea time, taking the necessary radar training and passing the Coast Guard exams. Today, a total of twenty weeks of specific course work is required, including firefighting, flashing light, GMDSS, etc., costing as much as $18,000. All of this and more, of course, is included within the PMI Mates course. If, however, an established AB already possesses the necessary sea time, then all he or she would need is the STCW training and passing of the test. In this case, the PMI Mate class might not be the best option, and PMI therefore offers a twenty-week program for these individuals. On the other hand, for those who haven’t gotten their 14

cadets who stay with their sponsor companies after finishing the program will have their training loan paid off over a three-tofive year period. start already, the PMI program is not only a fast-track solution to a career at sea, it’s also a verifiable bargain in terms of both time and cost. With PMI, it’s a two-year program in which the candidate is fostered and guided through the documentation process. On your own, the road to a license could take five years or more, navigating what can be a very difficult paper shuffle. As the option of trying to become an officer through the hawse pipe route becomes increasingly more difficult, PMI has sought ways to enhance the appeal of its nascent training program and methods. While all of this is not without cost, John Scragg points out that “We started off with the idea that individuals would pay, and we still like that idea because it shows commitment.” He went on to explain that PMI has a loan program available through a Sallie Mae company and portions of PMI’s program are also approved for the GI Bill. As noted earlier, sponsor companies have introduced a program whereby cadets who stay with their sponsor companies after finishing the program will have their training loan paid off over a three-to-five year period. Edison Chouest is even paying wages and creating billets for PMI trainees. “It’s a great incentive,” adds Scragg. Not everyone who applies to the program will be accepted. There are still interviews to be taken and merchant mariner documents to be obtained, drug tests and physicals to be passed. Each candidate will need a Z-Card (MMD), which requires a drug test and a background investigation, as well as a current passport and high school diploma or GED equivalent. The interview process includes a meeting with Greg Trunnell and an interview with the company which will sponsor their cadet billet.

On the Horizon: More Innovation to Come? The possibilities for PMI and the program are endless. For example, two or more classes in various stages of completion could be scheduled for the school – one at sea and the other ashore. But John Scragg says that this type of scheduling has its limitations because of the cyclical nature of the tug and workboat businesses and the small circle of companies currently involved in the program. In theory, though, if the demand were there, the scheduling of multiple classes, each staggered to coordinate alternating sea and class phases, could be done.

The Maritime Executive

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US NAVY (LCS) USN LITTORAL COMBAT SHIP

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At this point, Scragg and his partner Gregg Trunnell say that they have a cadet for every slot available and more banging on the door. PMI’s next class starts in January 2007 with 18 cadets enrolled and scheduled to participate. The only limits on this innovative and exciting program are the number of sponsoring companies willing to put a cadet on board. Gregg Trunnell takes it a step further when he says, “The future of this program will hinge on our ability to demonstrate to the workboat industry that this program is a viable source of quality mariners. If we do this right – and we are – then there is no reason that a new graduating class of qualified and competent workboat officers can’t enter and remain within the industry every six months.” Meanwhile, PMI’s parent and partner training facility on the East Coast is building its own Full Mission Tug Simulator. The Maritime Institute of Technology and Graduate Studies (MITAGS) will very soon emulate the new training program that PMI already has in place. It is an exciting time at both institutions. The two-year, $27,000 (at 2007 tuition prices) program will eventually lead to jobs which pay as much at $102,000 annually, as Master of a 1600-ton work platform. Although there was no consultation with the U.S. Maritime Administration on this cutting-edge training scheme, the Workboat Mate Program fits in well with MARAD’s desire to foster mariner retention and availability. There will be more innovations to come from PMI. Still in the development stage, but very much on the minds of Captains John Scragg and Gregg Trunnell, is the possibility of starting up a three-year program to turn out Unlimited Third Mates. The program would be done in conjunction with another maritime training academy, Seattle Maritime Academy (SMA), combining PMI’s Two Year Program with SMA’s one year “deck technology” component. The Coast Guard, according to Scragg, has said that this would be favorably regarded, depending on the makeup of the course curriculum. Taking a license route which spans just three years instead of the four needed at the traditional academies may be an attractive alternative for those not necessarily interested in a four-year degree – or, in other words, the non-traditional student. The question to be answered is whether there is really a need for this product. The other academies already crank out hundreds of Third Mates each 16

year. Scragg says, “The advantage of this program is that it gives students options along the way. A particular individual might choose to stop after getting his AB’s ticket and decide to sail for a while. Then he or she could return at a later time to complete the program. MSC and / or NOAA could very well be PMI’s best future customer.”

The Culture of Change

The final component of the PMI Mates Program involves changing E the mindsets of the crewing managers at the offshore logistics, towing and salvage companies. Everyone A knows that the process of taking the guy out of the bayou, putting him on the boat and bringing him up in the system from roustabout to mate R to captain is a long, arduous task. During that period, the typical seaman will switch companies three or S four times, motivated by pay and work conditions. In actual practice, then, it translates into repeating the process over and over again, sometimes with no back-end payout for these firms. As a new generation of sophisticated equipment starts to be introduced to the industry, so too must a new way of recruiting, training and retaining mariners. Achieving brand loyalty from mariners who traditionally have little or none must become a priority. Already the quality and character of the so-called brown water or lower tonnage mariner has improved greatly in the past decade. STCW has had a lot to do with that – and PMI’s Mates Program could be the next building block to bring this part of the marine industry into parity with deep-sea mariners – and perhaps even exceed that standard. As PMI has already shown, it is possible to do this in a cost-effective manner, allowing less-affluent candidates to aspire to a wheelhouse view of life at sea and to work at jobs and companies they love. PMI aims to change a lot more than the way the workboat officer is trained. Trunnell points to the U.S. trucking industry, where a workforce of 3.1 million drivers experiences as much as 140% turnover. Workboat employers can no longer afford to lose their seasoned mariners on a similar scale. Through PMI’s Workboat Mate Program, Trunnell says, “We have an opportunity to change the culture of the tug and barge and brown water officer.” As their innovative officer training program gets underway, there’s little reason to doubt and every reason to believe him. MarEx

The Maritime Executive

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RIGDON MARINE: THINKING FORWARD INTO THE NEXT GENERATION OF OFFSHORE MARINE SERVICES.

Rigdon Marine’s next-generation platform support vessels have ignited a technological revolution in the offshore marine industry. The GPA 640 hulls are streamlined for speed and are proven to be more fuel efficient than comparably-sized vessels. The space saving diesel-electric propulsion system provides additional capacity to transport essential cargoes to/from offshore facilities. Every vessel is equipped with an advanced dynamic-positioning system (ABS Class DP-2) for operational redundancy. When the next-generation vessel is available today, why consider anything less?

)

4HINKING &ORWARD HOUSTON: 815 Walker Street, Suite 750, Houston, TX 77002 ST ROSE: 100 James Drive, Suite 250, St Rose, LA 70087 SALES: (713) 236-9100 OPERATIONS: (504) 472-5376 WEBSITE: www.rigdonmarine.com

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MarexMarexMarex

Case studY: bourbon

THE MARITIME EXECUTIVE

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bourbon

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rbon

Case studY:

as the petroLeuM industrY expands its search for oil and gas on every continent on the planet, they are faced with the ever-changing geopolitical and geo-economic landscape. operating within the scope of social, cultural, economic and geological factors, oil companies are now required to provide lots of money for diplomacy, infrastructure building, environmental compliance and remediation, transportation, and investment in extraction technologies. however, in a volatile world of conflicts and wars, and governments nationalizing natural resources, the “prize” pendulum has forever swung in favor of fossil fuels. well, at least within our lifetimes.

t is said that the world is running out of fossil fuels and, yet, the demand for crude oil will continue to grow from 85 million barrels per day in 2004 to 98 million barrels per day in 2015 to 118 million barrels per day in 2030. While, 43 percent of the current growth consumption comes from India and China, it is projected that worldwide oil production will have to be increase by 38 percent to meet demand by 2030. Moreover, it is acknowledged that OPEC will account for only 14.6 million barrels per day (12%) of the required increase, while non-OPEC countries will account for 88 percent of the remaining production demand. The stark reality is; while the West is bogged down maintaining stability in the Middle East, its true economic life-line lies outside the region. And, both sources of oil and gas will be essential for a well-balanced geo-economic existence. When you think that a few hurricanes in the Gulf of Mexico or a month-long conflict in West Africa can create a major oil crisis sending oil prices scorching to new and extraordinary heights. It doesn’t take a Nobel Prize Laureate in Economics to understand oil prices fluctuate on the willingness of oil-rich nations’ to expand production capacity. For the United States, which consumes 25 percent of global production and imports over 60 percent of its annual oil consumption, its Gross National Product (GNP) will continue to run at huge deficits and its standard of living will continue to plummet due to its demand for fossils fuels. And, the same can be said about the European Union, which delivers only 4 percent of global production to world markets while consuming 19 percent of total oil production. THE MARITIME EXECUTIVE 19

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Case studY: bourbon

As China and India are expected to experience a combined economic growth of 5.5 percent per year from 2003 to 2030, the highest growth rate in the world, rest assured that there will no longer be surpluses in global oil supplies. Furthermore, energy analysts have estimated that worldwide proven reserves are most likely 15 percent less than are officially being stated. Inevitably, this means that it will not take a cataclysmic event to generate economic heartburn and chaos on the world energy markets and at the gas pumps. In October of 2006, Matthew Simmons, Chairman of Simmons and Company International stated that “global oil production may have peaked in late 2005.” And, Chevron has determined, “oil production is in decline in 33 of the largest 48 oil producing countries.” In a world that consumes over 30 billion barrels of oil each year, while discovering only eight billion barrels of new reserves annually, it is a historic place in time where the rubber hits the road for alternative fuels, offshore exploration, sophisticated drilling technologies, the opening of coastal

drilling off the U.S., and for the next generation of energy support companies.

where the rubber hits the road Jacques de Chateauvieux, Chairman and Chief Executive Officer of BOURBON, decided a few years ago to move his company’s fortunes from sugar manufacturing, agribusiness, and shopping malls to becoming a purely marine operator, with an emphasis in the offshore energy support markets. This was a very bold move considering his company had only entered the marine industry in 1992. But, the Frenchman had already scrutinized the offshore oil and gas exploration analysis that predicted in the short term, robust activity in the deep and ultra-deep offshore waters. He also had the occasion to meet Larry Rigdon, a well-known American offshore executive, who had architecturally developed a next-generation offshore support vessel, which could possibly revolutionize the capital asset of the industry. In late 2002, de Chateauvieux and Rigdon met in Paris

in the “2003-2007 strategiC inVestMent pLan,” he (de Chateauvieux) proJeCted Cash fLow reQuireMents for gLobaLiZation and detaiLed an aggressiVe VesseL buiLding pLan with eMphasis in the offshore seCtor. the foundation of the inVestMent pL an was based on sound finanCiaL inforMation that the MaJor oiL CoMpanies were shifting spending froM share buYbaCKs to expLoration and deVeLopMent. 20

THE MARITIME EXECUTIVE

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EPD the Worldwide Leader in Power/ Control Systems is the Electrical Systems Integrator for Bourbon Offshore Vessels

Equipment: • AC and DC Variable Speed Drives • AC and DC Motors • Motor Control Centers • Distribution Switchgear • Generator Controls • Harmonic Filters • Power Factor Correction Equipment • Transformers • Automated Systems utilizing PLC’s • Other controls.

EPD Asia Ltd. new facility in Yangzhou, China opening early 2007.

Electronic Power Design, Inc. is an Electrical Systems Integrator with 20 years of extensive experience in marine, drilling, propulsion and power/control systems. We provide value-added electrical equipment and services to a variety of industries worldwide with emphasis on total power system integration/automation. CE

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HOUSTON, TEXAS 77011

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FAX (713) 923-1194

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MarexMarexMarex

Case studY: bourbon

and signed a financial agreement that would forever change vessel designs and technologies for the offshore support industry. For Rigdon, the agreement was the culmination of an entrepreneurial manifesto becoming reality, and for the bold Frenchman, the new vessel design was a next-generation technology that could anchor his global enterprise. In 1998, Groupe Bourbon, as the company was known at the time, became a public company traded on the Secondary Market of the Paris Stock Exchange. As early as 2000, the company was beginning to realize significant revenues from its offshore support sector. In early 2001, the company signed a significant contract with ESSO Exploration Angola, the international division of Exxon Mobil in West Africa. For de Chateauvieux, the contract was a sea-change that would forever change his organization’s core-business structure and destiny. While, the offshore revenues increased sharply (44.3 percent) in the first year of the West African contract, the Columbia University educated de Chateauvieux, who 22

had become chairman of the company at just 29 years old, took notice and sharpened his pencil. By the end of 2002, the company’s consolidated turnover (revenues) had increased by 10.3 percent, with the offshore division accounting for 38 percent of the total. To globalize Groupe Bourbon as a premiere player in the offshore industry, de Chateauvieux knew that his master plan would require partnerships that would strategically position the company worldwide. First, the company partnered with Sonangol, the national Angolan oil company. Then, it acquired 51 percent of Island Offshore II, and 25 percent of Havila Supply A.S.A, which were both Norwegian firms that ultimately moved the French into the North Sea. The two acquisitions put the French CEO in touch with Ulstein, a well-known Norwegian ship builder. Ulstein had designed a strange and odd looking vessel called the “X-Bow.” After a thorough naval architectural analysis, de Chateauvieux bought in on the X-Bow concept and decided to invest in a few copies. Besides, owning a few

THE MARITIME EXECUTIVE

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'0! $ESIGNING THE .EXT 'ENERATION .AVAL !RCHITECTURAL $ESIGN #ONSTRUCTION OF .EXT 'ENERATION 0LATFORM 3UPPORT 6ESSELS 4(% '0! 3%2)%3 OF DIESEL ELECTRIC DYNAMIC POSITIONING 036S ARE PROVIDING CUSTOMERS WITH THE CAPABILITY TO TRANSPORT MORE PAY LOAD CARGOES WHILE SAVING FUEL COST )NNOVATIVE CONSTRUCTIBILITY SOLUTIONS HAVE ALSO ENSURED THAT THE DESIGNS CAN BE BUILT MORE COST EFFECTIVELY THAN COMPETING DESIGNS 4HE '0! VESSELS WORK FOR SOME OF THE LARGEST ENERGY COMPANIES THROUGHOUT !SIA 7EST !FRICA 3OUTH !MERICA -EXICO AND THE 5 3 'ULF OF -EXICO %IGHTEEN '0! 036S ARE BEING DELIVERED BY THE :HEJIANG 3HIPYARD IN #HINA FOR "/52"/. /FFSHORE 4HE S ARE METER DWT DIESEL ELECTRIC $0 CERTIl ED VESSELS THAT ARE CAPABLE OF CARRYING CUBIC METERS OF BULK MATERIAL AND CUBIC METERS OF LIQUID MUD IN SELF CLEANING OVAL TANKS

4EN '0! 036S WERE DELIVERED BY "ENDER 3HIPYARDS IN -OBILE !LABAMA FOR 2IGDON -ARINE 4HE S ARE METER DWT DIESEL ELECTRIC $0 CERTIl ED VESSELS THAT ARE CAPABLE OF CARRYING CUBIC METERS OF BULK MATERIAL AND CUBIC METERS OF LIQUID MUD IN SELF CLEANING OVAL TANKS

4EN '0! 036S ARE BEING DELIVERED BY "OLLINGER 3HIPYARDS IN ,OCKPORT ,OUISIANA FOR 2IGDON -ARINE 4HE S ARE METER DWT DIESEL ELECTRIC $0 CERTIl ED VESSELS THAT ARE CAPABLE OF CARRYING CUBIC METERS OF BULK MATERIAL AND CUBIC METERS OF LIQUID MUD IN SELF CLEANING OVAL TANKS

4EN '0! - 036S ARE BEING DELIVERED BY $AYANG 3HIPYARDS IN #HINA FOR "/52"/. /FFSHORE 4HE -S ARE METER DWT DIESEL ELECTRIC $0 CERTIl ED VESSELS THAT ARE CAPABLE OF CARRYING CUBIC METERS OF BULK MATERIAL AND CUBIC METERS OF LIQUID MUD IN SELF CLEANING OVAL TANKS

4WENTY 3IX '0! !(43 ARE BEING DELIVERED BY $AYANG 3HIPYARDS IN #HINA FOR "/52"/. /FFSHORE 4HE S ARE METER MT BOLLARD PULL DWT DIESEL ELECTRIC $0 CERTIl ED VESSELS THAT ARE CAPABLE OF CARRYING CUBIC METERS OF BULK MATERIAL AND CUBIC METERS OF LIQUID MUD IN SELF CLEANING OVAL TANKS 'UIDO 0ERLA AND !SSOCIATES )NC WAS FOUNDED IN AND IS RECOGNIZED WORLDWIDE AS A LEADING .AVAL !RCHITECT )N '0! OPENED A SATELLITE OFl CE IN 3HANGHAI TO HELP SUPPORT ITS EXPANDING BUSINESS

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$ESIGNING THE .EXT 'ENERATION 'UIDO 0ERLA !SSOCIATES &IFTH !VENUE 3UITE 3EATTLE 7ASHINGTON 4ELEPHONE 768

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'UIDO 0ERLA !SSOCIATES 3HANGHAI "EIJING 7 2D 3UITE 3HANGHAI 02# 4ELEPHONE 4ELEPHONE

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MarexMarexMarex

Case studY: bourbon

copies of the X-Bow could not hurt the company’s media persona. In fact, embracing the media would allow the French CEO to clarify the company’s business investment policies and strategic marketing plans. While, Groupe Bourbon began shifting its business activities from a “true business conglomerate” into a pure marine services provider, de Chateauvieux knew that a more definitive business plan was required for his anxious, but supportive stockholders. In the “2003-2007 Strategic Investment Plan,” he projected cash flow requirements for globalization, and detailed an aggressive vessel building plan with emphasis in the offshore sector. The foundation of the ‘Investment Plan’ was based on sound financial information that the major oil companies were shifting spending from share buyback to exploration and development. He also provided a complete analysis of the major players in offshore support industry, most of which operated first-generation, traditional platform support vessels (PSV), while only a few were building new vessels. With shareholders committed to the plan, de Chateauvieux started an aggressive investment of 1080 million Euros ($1.4 billion) in next-generation offshore vessels. Quickly, Groupe Bourbon would position itself as the number two offshore vessel operator in the world.

bourbon - horiZon 2010 inVestMent pLan As the 2003-2007 investment programs aggressively moved forward, de Chateauvieux soon realized the plan was ahead of its schedule in terms of revenue and fleet growth. He shifted gears in to second part of his plan and reorganized the company, starting with renaming the holding company as “BOURBON,” and then re-classified it in the “oil services” sector of the Euronext, and listed it on Eurolist Paris, Compartment A, included in the SBF 120 and the Dow Jones Stoxx 600 Indices. He divested the company from sugar manufacturing, agribusiness, and shopping malls, and directed the liquidity into a self-financed building program, which earmarked $1.7 billion for 182 new next-generation vessels, including crew boats. In February 2006, de Chateauvieux revised the 20032007 Strategic Investment Plan, and announced the company’s new “Horizon 2010” plan, which included 160 vessels for the offshore division, 16 tugs for the towage and salvage division, and six bulk carriers for the bulk shipping division. He proclaimed “Horizon 2010” as a “pure marine” financial scheme, which projected 12 percent annual growth across the board, with the offshore division providing 20 percent of the revenues. He was basing the company’s future on the oil industry’s offshore 2005 prediction that the current 6 percent deepwater oil production would increase to 16 percent worldwide by 2010. In a bold move, Frenchman had put all his “eggs in one basket,” and set out to establish a offshore conglomerate built on new technologies, partnerships and, most importantly, unwavering tenacity. 24

he surrounded hiMseLf with innoVators LiKe LarrY rigdon, guido perLa and John JaniK, Ceo of eLeCtroniC power design, inC. and president of epd asia group, Ltd., whose dieseLeLeCtriC and dYnaMiC-positioningCLass ii ships were deCreasing Costs and inCreasing produCtiVitY in the guLf of MexiCo bY utiLiZing innoVatiVe eLeCtriC power sYsteMs integrated into the design off the entire VesseL froM ConCept to CoMpLetion. the new ConCepts iMpLeMented substantiaLLY reduCed Costs whiLe inCreasing paYLoads. As de Chateauvieux stood on the precipice of global expansion, he understood that in order for his company to succeed in the mature offshore support industry, he would need to redefine the industry through next generation vessel technologies and with an extraordinary culture of highly trained shipboard personnel. He surrounded himself with innovators like Larry Rigdon, Guido Perla and John Janik, CEO of Electronic Power Design, Inc. and President of EPD Asia Group, Ltd., whose diesel-electric and Dynamic-Positioning-Class II ships were decreasing costs and increasing productivity in the Gulf of Mexico by utilizing innovative electric power systems that are integrated into the design off the entire vessel from concept to completion. The new concepts implemented substantially reduced costs while increasing payloads. And, certainly, Ulstein Shipbuilding, whose “Bourbon Orca” X-Bow vessel had won honors throughout Europe and was named Vessel of the Year” at the Shipbuilding, Machinery, and Marine Technology Conference in Hamburg, Germany in 2006. However, the French CEO acknowledged that his organization could not grow and succeed unless the most important element of his Horizon 2010 plan was in place; the human factor. For de Chateauvieux it was not enough to hire the most experienced mariners to run the company’s offshore fleets. Because, he knew that not all the media hype in the world could earn him new, essential contracts. It would take a new type of organization for the mature offshore marketplace; a company whose culture exuded knowledge, experience, training, and safety, along with a fleet of next-generation vessels. So, he invested in two major training centers and two highly advanced training simulators in Marseille and the Philippines to train all of his bridge personnel. He has also negotiated with EPD Asia Group, Ltd. to train his crews on full scale, in-house, fully operational diesel-electric power electronic systems at EPD’s new manufacturing and testing facility being built in Yangzhou, China, which is near Shanghai, due to be complete in May of 2007. This idea to train his engineers and electricians on full scale systems in the new facility, which is ideally located close to the shipyards building Bourbon’s vessels, insures that uninterrupted training and

THE MARITIME EXECUTIVE

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bourbon

MpsV athena psV topaz

psV hermes

salvage abeille Liberte

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Case studY: bourbon

testing can be performed without disturbance or unnecessary delays in the shipbuilding process; another key factor for his aggressive plans. He established safety contracts with each employee, whereby each person signed a commitment to safety letter, which demands they learn operational procedures and abide by strict safety policies. Jacques de Chateauvieux says it best about himself and his company: “Being partly committed is not worth being committed at all. Our commitment has been and will remain all or nothing.” And, true to form, he has invested his personal wealth in the company’s stock, and his personal fortune rides on this total commitment to excel in “purely marine” endeavors. For the oil industry that pushes deeper and deeper into offshore waters in search of the next major discovery, it will demand huge investments in equipment and personnel from the companies supporting these new ventures. Over the last sixty years, BOURBON has succeeded in every business it has owned and managed. Today, Jacques de Chateauvieux has strategically positioned the company to meet the challenges of the deep water oil industry, because he was clear on the concept that this is where the rubber hits the road tomorrow’s success. MarEx

THE MARITIME EXECUTIVE

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REVOLUTIONARY MULTI APPLICATION CARGO SOLUTION

PG-MACS® Based on the patented DC cargo handling system, PG Marine Group – Ing Per Gjerdrum AS has successfully closed another innovative development project.

Together with Bourbon Offshore, Ulstein Design and FlowSafe, PG has developed a revolutionary cargo-handling concept for offshore supply vessels. The aim of the project was to develop a new solution for combination tanks (liquid and dry-bulk) without using conventional pressure tanks;

Mission Accomplished!

Features: - No dedicated dry-bulk pressure vessels! - Drill Cuttings transported below deck: safe and relieve deck-space for other cargo! - Extremely flexible tank-configuration! - Block coefficient dramatically improved: loss of cargo space due to Clean Class eliminated! - Discharge of dry bulk down to batches of 4m3 enabled! - 100% continuous dry-bulk discharge! - ORO NOFO 2005+ conform! - Integrated MACS-tanks = yard supply – special tanks avoided! - All Dry & Liquid Cargo handling over one LCC, fully IAS-integrated!

PG Marine Group – Ing Per Gjerdrum AS www.pgmarinegroup.com pg-pumps@pergjerdrum.no Tlph.: +47 66 77 56 00

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â&#x20AC;&#x153;

Some things have to be done globally. Training and communications are good examples of this. Most importantly, you have to select

THE MARITIME EXECUTIVE

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”

the right managers and empower them to do the job. If you give them the duty and not the power, then they will fail. It’s all common sense.

Executive Interview with

Jacques de Chateauvieux Chairman, President & CEO of BOURBON

in oCtober, Marex caught up with perhaps the world’s busiest maritime executive on his planned trip to New York City. Our interview with Jacques de Chateauvieux, Chairman, President, and CEO of BOURBON, provides our readers with a unique insight into this global maritime powerhouse, including where it has come from and where it plans to be by the end of the decade. Herein is our candid and informative conversation with one of the world’s most provocative executives.

THE MARITIME EXECUTIVE 29

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MarexMarexMarex

exeCutiVe interView

“

In December of 1991 we had the opportunity to buy into a marine services operation in the south of France; 50 percent at ﬁrst, and then 100 percent. It became the marine services branch of BOURBON… In October of 1998 we became a public company through an IPO, and we then had to face the scrutiny of the public market. MarEx: Please provide us with an historical overview of Groupe Bourbon and how it evolved into the new entity, BOURBON. What is your background, and what is a typical day like for you at BOURBON? JdC: BOURBON started in the Indian Ocean in the middle of nowhere, on a small island as a corporation after World War II. We were a gathering of families that refined sugarcane. After World War II, the families joined forces to rebuild the industry on our island, and it was then that we established a company that unified our assets into a corporation, originally called Groupe Bourbon. The former chairman and my father were instrumental in creating this corporation engaged in bringing raw sugar to French refiners, who were satisfying the needs of Europe. The sugarcane created value for the shareholders. When the chairman was 75 years old and my father was 65, they decided they would retire, and I was picked at twenty-eight years of age to become the new chairman. Between 1948 and today, our company has had only two chairmen. During the period from 1979 to 1989, we restructured the organization by closing small sugar factories and investing in improvements in our remaining refinery to reduce costs and better cope with the economics of sugar in Europe at that time. By 1989 it was clear that if we didn’t diversify away from sugar, the company would have severe problems and would eventually go bankrupt. Consequently, we decided to enter the retail business on Reunion Island. We then expanded the business to another nearby island and eventually into Vietnam. In Vietnam we pioneered the retail and modern shopping mall industry. MarEx: When did the company expand into Vietnam? JdC: We started in Vietnam in 1995 and built the very first large shopping mall, called the “Hypermarket.” The shopping mall concept was very new to them at that time. It was so successful that we built a few more malls. These malls became quite a large operation, and they remain so today. Previous to this we had concluded that limiting our company’s asset base to the Indian Ocean could be detrimental, so we began looking outside the island for businesses we could run and establish on a broader financial and geographic basis. In December of 1991 we had the opportunity to buy into a marine services operation in the south of France; 50 percent at first, and then 100 percent. It became the marine services branch of BOURBON. Additionally, we 30

”

invested in other marine businesses, which allowed us to gain entry into the offshore support industry in Africa and the dry bulk transport business. We also purchased a large French tug and salvage company. By 1996, the conglomerate of BOURBON consisted of food and sugar-related activities, retail shopping malls, and marine services. In October of 1998 we became a public company through an IPO, and we then had to face the scrutiny of the public market. Predictably, the market didn’t like the conglomerate, meaning investors were not really interested in the corporate structure of the businesses of BOURBON. This forced us to re-examine our portfolio, and it became clear that there was no future for value creation in sugar. Consequently, in 2001 we sold our sugar business, which left us with a niche retail business in the Indian Ocean and Vietnam and a growing offshore marine services company with increasing activities. We immediately understood that we could not successfully fund the two businesses. So we had to make a choice and pick one, which would allow us to build it as large and efficiently as we could. In order to do that, we had to sell one of the businesses. We had the opportunity to sell the retail business to a large international French retail group over time, and with that money we were able to fund a very large vessel building program for our chosen marine operations business. It was then that BOURBON began emerging in the offshore industry as a major player. Of course, it took a few years for our company to transform itself into what we are today. This was a major undertaking, selling businesses and putting all our eggs in one basket. However, we understood the opportunity. It was a monumental task to build customer confidence in our organization, but we knew we could do it. In terms of my management style, I am not an oppressive executive who manages every detail of the company. Our managers at BOURBON are very much responsible for managing their individual businesses. They know what has to be done, and we have given them the means and the power to do it. I rely on them to manage their day-to-day businesses, which means that I am not signing the service contracts, I am not signing the checks, and I don’t have to meet with the unions. All of this is handled by the managers. My primary business activity is to ensure we have the right business strategy and that we’re responsive to market changes, industry trends and available opportunities. One

THE MARITIME EXECUTIVE

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“

MarexMarexMarex

exeCutiVe interView

I think that being a shareholder myself creates conﬁdence. I started buying shares of BOURBON in 1980; and all the shares I own now, I bought. A CEO that has bought his own shares instills stability in the management system.

”

of my key responsibilities is to secure financing, which means I deal with the banks to obtain the capital required to grow and expand. I do, however, make myself available to meet with my managers to discuss their concerns. While they are fully responsible for managing their businesses, I feel they will always need my counsel concerning growing the business. MarEx: Well, making the leap into the marine services market has helped the financial stability of the company and built investor confidence in its strategic direction. What has helped to shape the dynamics of your recent success? JdC: I think that being a shareholder myself creates confidence. I started buying shares of BOURBON in 1980; and all the shares I own now, I bought. A CEO that has bought his own shares instills stability in the management system. It also makes the decision-making process very weighted because I am not only managing a business, I’m also managing my wealth. MarEx: Our readers want to know a little more about the recent bold move to expand the Offshore Division. The timing appears to be very good. What was the basis for the decision to substantially invest in next-generation offshore support vessels and strategically place BOURBON ahead of the curve? JdC: In 2001 we were mainly working for the French super majors Total and Elf in Africa. We were very successful in servicing these companies. Then a tender from Exxon became available in Angola. We competed for it and we won it. It was a large contract to become the exclusive provider of marine services to Exxon in Angola for Block 15. It didn’t take long for us to realize that the world’s largest oil company and leader in offshore oil and gas exploration had now recognized BOURBON as a reliable organization worthy of their business. We now viewed the offshore services market in a different light. It gave us great pride to be identified as a premier provider of offshore support services. Consequently, we began analyzing the global marketplace and split the offshore market into segments. We already knew the shallow water markets were mature, but it became evident that the deepwater market was beginning to emerge. The oil companies were starting to invest heavily in the deepwater. More importantly, the offshore

support industry had not yet begun spending money on vessels to service the deepwater. We saw this segment of the market as still being on the starting line. We completed an analysis that projected the deepwater segment would grow by at least 15 percent per year in the foreseeable future. We felt empowered by the confidence that Exxon and Total had bestowed on us, and everyone in management felt that we should move forward and build the vessels that would get the contracts. MarEx: So it appears that the Exxon Angola contract was the line of demarcation from being a regional operator to becoming a globally recognized offshore company? JdC: Yes, but in 2004 the offshore markets were in a slight downturn. Most of our competitors stopped building vessels, especially the Norwegians. However, BOURBON did not. We believed in the growth forecasts that we had thoroughly analyzed. So when the market started coming back in 2005, we had a lot of vessels being built and entering the market. Suddenly, the majors such as Shell and BP began sending BOURBON tenders, and we began winning those tenders. It also became apparent to us that we could not rely on Africa as our primary market. As we looked around the world at the various markets, we decided that if we were going to globalize, we would need to grow by developing partnerships with local companies. In Brazil we purchased 50 percent of Delba Maritima Navegação S/A. In Norway we purchased 100 percent of another operator. We also partnered with Sonangol, the national oil company of Angola, which owns 49 percent of our BOURBON Angolan subsidiary, Sonasurf. We have local investors in Nigeria, THE MARITIME EXECUTIVE 31

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MarexMarexMarex

exeCutiVe interView

“

…but in 2004 the offshore markets were in a slight downturn. Most of our competitors stopped building vessels, especially the Norwegians. However, BOURBON did not. We believed in the growth forecasts that we had thoroughly analyzed.

”

where operating vessels in territorial waters is the equivalent of the Jones Act in the United States. Partnering with local companies provided us with a safe way to expand globally. MarEx: Obviously, BOURBON is a well-run company because of past successes in sugar refining, retail malls, and vessel operations. But why was the maritime business chosen over the other two? JdC: There are two reasons for that decision. Before I took the job as CEO of BOURBON, I was a consultant at the Boston Consulting Group, which was a very well-respected consulting group. I learned that when you trust a financial endeavor, you give it a 100-percent chance to succeed. If you give anything less, then it’s obvious that you don’t trust what you are doing. If you know what you’re doing, then do it and trust it. MarEx: Let’s come back to the U.S. markets. Do you have any plans to expand in the Western Hemisphere? JdC: Access to the U.S. Gulf of Mexico is limited to Jones Act operators, and BOURBON cannot operate in American territorial waters. This is why we invested in Rigdon Marine within the legal limits of the law. Larry Rigdon provided us with a platform support vessel design that is innovative and cost-efficient. U.S. customers want secondgeneration dynamic positioning (DP-2), and diesel electric vessels that are environmentally friendly and fuel efficient. They also want larger vessels to drill in the deep and ultradeep waters. Recently, there have been big discoveries in the U.S. Gulf of Mexico, and buying shares in Rigdon Marine has been a very good investment for us. We watched the U.S. markets embrace the Rigdon 5000-class vessels, and we are watching the building of the Rigdon 4000-class, nextgeneration fleet, which has influenced our building program. Many of the innovations by Rigdon Marine, such as making DP-2 standard equipment, are driving vessel requirements elsewhere. Furthermore, there is significant activity on the Mexican side of the Gulf. Creating a new subsidiary, Naviera Bourbon Tamaulipas, we started a corporation in Mexico with a local partner. We have six vessels in this partnership and want to expand it in line with Pemex’s effort to increase the safety requirements for vessels operating in their region of the Gulf of Mexico. I would think that having a uniform safety standard throughout the Gulf is important for all the countries that border on it. The Gulf of Mexico is basically a pond; and if there is oil spillage, 32

the fact is no one knows where it might end up. There is a shared responsibility by all the countries and companies operating there. I believe the oil companies and drilling companies want safety before anything else, and a nextgeneration vessel is a much safer proposition than saving $500 a day on a traditional older vessel. This shared responsibility is really important to the industry and has to be on the frontline of contracting methodology. MarEx: Safety is one of the driving forces in BOURBON’s Horizon 2010 program, but I am sure that safety and high quality standards are maintained throughout your fleet. Please explain this demand for safety and crew composition in your international fleet. JdC: Yes, the safety philosophy of BOURBON relates to the next-generation vessels currently being offered to our customers. These vessels are innovative and cost-efficient and are built with dynamic positioning systems, diesel electric propulsion, and safety features designed for crew members. We therefore need to ensure that all of our officers and crews are qualified to run these vessels. To achieve this, we are going through a training program for all of our officers. These are BOURBON-standards people. We rely mainly on DP training centers and new bridge simulators. A Norwegian company has developed bridge anchor handling simulators for our company. We asked them to design two additional training centers for us. One is being built in the south of France for a BOURBON Offshore Training Center in partnership with the National Merchant Navy School of Marseilles, and we are also working with a marine school in the Philippines. We will have to hire 3,000 employees by 2010. A large part of them will be recruited from the European countries, as well as from the Americas and Asia. Some of them are already qualified officers, but we want to train them to the all-option, BOURBON operational standard, so they are capable of meeting the requirements of the “Be Safe” BOURBON campaign. MarEx: Can you talk about what the safety and environmental trends will be for the marine industry generally and what this means for BOURBON? JdC: The world is becoming more complicated. The expectations of companies that buy boat services and those who desire higher standards of boats operating in the ocean environment are under more scrutiny. The probable cost of something going wrong has no relation to the economic cost of what you’re actually doing. The cost to a customer can be very big in the event of a disaster

THE MARITIME EXECUTIVE

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MarEx 17 011007.indd 33

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MarexMarexMarex

exeCutiVe interView

“

I believe the oil companies and drilling companies want safety before anything else, and a next-generation vessel is a much safer proposition than saving $500 a day on a traditional older vessel. when compared with paying more for better vessels, for example. There will be a lot of pressure on the efficiency and reliability of the operators. More and more, there will be little room for out-of-date equipment, under-trained people and non-responsible managers. Therefore, this will increasingly be the key to being successful. On the other hand, it will also close the entry door to newcomers. The industry will be become stronger as a result. There are those that see this as a threat, but at BOURBON we see it as an opportunity. MarEx: So what you are saying is that environmental regulations can be costly, and meeting the vessel equipment standards of the industry is not conducive to start-up operations, right? JdC: Yes, unless you really make a true partnership with regional companies, and this was the case with Rigdon Marine. We made it happen. So making the American dream possible again – it’s still possible, but maybe in a different way. MarEx: So using your partnership model, Rigdon Marine is a manifestation of this philosophy? JdC: Yes, Rigdon Marine and BOURBON have a “true partnership” model. There are three characteristics of this model. First of all, you share business and operational know-how. To some degree you must also share ownership of the assets. We purchased the legal limit in Rigdon Marine, due to U.S. regulations. And you share the key positions. This is a true partnership that allows for new entrepreneurs. That is my belief. MarEx: A good analogy to your “something going wrong” cost might very well be the Alaskan pipeline situation. Arguably, U.S. legislators were very close to approving new drilling in Alaska, but the ill-will from the corroded pipelines has likely set back potential Arctic National Wildlife Refuge (ANWR) drilling for at least three years. JdC: Yes, the media has a strong effect on attitudes and public sentiment. Media brings reality to people’s homes. MarEx: You talked about BOURBON being a small company, but your company operates globally. What infrastructure have you established to manage all the offices, personnel, contracts, and assets globally – especially when something goes wrong? JdC: While many say this, the truth is that local issues need to be dealt with on the local level. This is why the responsibility or empowerment must be with the local managers. It’s the proper level for local affairs. You cannot say this person is responsible to make decisions and not empower him to deal with local issues. Good common sense also says that a number of things should be dealt 34

”

with at the global level. For example, it is a fact that we have 92 vessels under construction. Where are those vessels going to be deployed and who is going to decide that? It cannot be by the local person. He can express his needs; he can be very enthusiastic about his potential market, but somebody at the global level has to decide how to deploy our assets. How do you maintain long-term relationships with all your large and demanding customers? If Shell is looking for a boat in Indonesia and Amerada Hess is looking for one in New Guinea, and you only have one – how do you decide? This has to be taken care of globally. Some things have to be done globally. Training and communications are good examples of this. Most importantly, you have to select the right managers and empower them to do the job. If you give them the duty and not the power, then they will fail. It’s all common sense. MarEx: From a global petroleum perspective, how do you see things? New discoveries are declining. Perhaps 1.5 new barrels are discovered for every 10 that the world consumes. How do you see the future for oil and gas? JdC: When you look at oil today, you see the share of large multinational oil companies being reduced to the advantage of the local national monopolies. This is because oil-rich nations want more – they want to have a stake in what is happening to their natural resources, which makes a lot of sense. But on the other side, with perhaps the exception of Petrobras, those multinational oil companies are the ones with the money and the interest in doing research and development. On one side you have assets that are limited, but to uncover those assets you need somebody to come and develop them. On the other side, if you sell your asset now, you won’t have that asset anymore because it’s not renewable. Therefore, the higher the price of oil, the better it is for those countries that have the oil. I don’t see why oil-rich countries and companies would give up their reserves for $30 a barrel when they have seen $70 per barrel. It is for this reason that I see oil prices going up. It’s like during the war – when supplies get really tight, people look for new ways to get things done. People will explore in different ways, explore in places that they haven’t been before, and eventually develop new solutions. So I think that price is going to drive the changes. MarEx: Do you see opportunities in the new nationalized oil nations? For example, would you go in and ask to partner with the country’s leader? You did it in Angola. Are there more opportunities out there towards this trend of “nationalization of assets?”

THE MARITIME EXECUTIVE

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MarexMarexMarex

exeCutiVe interView

“

We have learned…to listen to each other, to consider each other’s feelings, and to treat everyone as an equal and worthy of respect. Though we are different, we can share what we do have in common. When we talk to potential partners … people feel that.

JdC: Yes, and Angola is a good example. We partnered with Sonangol so that the country would have a share in the value added by exploration. Initially, they were clever enough to ask for help on the technical end of things, but lately they have taken responsibility for the shallow water field in Block 3. Gradually, they are learning and building themselves into a more integrated operator, much like Petrobras is today. We come in as a first step. We are probably one the first steps that they can partner with and thereby share in the value-added activity of what is happening in their country. They will probably move on to a more sophisticated activity like actual offshore deepwater drilling, but this will take some time. So we are a good entry point for them to do that. We are proactive in building a strong relationship with Angola. Think about it: Twenty years from now, when Sonangol takes a larger share of activities in their country, they’ll look back and say that they were able to do so partly because of BOURBON. They’ll look at it as one small thing, but it will speak to their heart. MarEx: What’s the next hot spot for exploration? JdC: I think India is going to be open to international operators, whereas China is just hiding their reserves. India is a big country and they want to grow their standard of living. Although the Chinese say they don’t have any reserves, one day you will see that they do. Those reserves, when they are released, will have a much higher value than what is being sold on the market today. The developing countries are also much less efficient with the same barrel of oil than the developed countries. This continues to put pressure on how they grow their standard of living. Eventually, these efficiencies will come. MarEx: Talk about the differences in partnering with the oil majors as opposed to the big countries with national oil companies? JdC: Well, in the case of Sonangol, Total told us, “Why don’t you go partner with them on this because it will be good for them to be part of the picture.” So we said, that’s 36

a good idea and, in truth, Total was probably behind the scenes saying, “These are good guys to work with. Take a share in their business because they are going to bring a lot of good to you.” The oil companies understand the same thing, and they are very happy to see companies like ours come in and partner with the locals – the national oil companies. It’s a way for them – through us – to do something for the country. That way all parties are benefiting from increased oil production. MarEx: You operate in a lot of unstable places. How do you deal with wars and strife when they come? How do they affect your financial and operational positions, and how do you deal with it? JdC: In a war like the twenty-year war in Angola, the oil business goes on. The work is offshore, and everybody needs the product. Crew changes are made offshore or elsewhere. The more you are seen as a local company, the less likely it is that your operations will be disrupted – but it can happen to anybody. And while it is sometimes difficult to do business in places like Nigeria, it also serves as a barrier to the competition coming in. One thing I would like to mention is that I come from this small Island – Reunion Island. The first people to come to this empty island were French, but then many people came from different areas – Asians, Africans, Indians, and so on. And what is very unique in this island is that all these ethnic people get along very well. They have a lot of respect for one another, in the schools and in life. This is very specific to this island in comparison to what is happening elsewhere on other islands. We have learned from living there, and we take it with us when we leave. We tried to put this in BOURBON as a reference – to listen to each other, to consider each other’s feelings, and to treat everyone as an equal and worthy of respect. Though we are different, we can share what we do have in common. When we talk to potential partners and go into different countries, people feel that. When I went to Vietnam, I told them that we were on the same side of the table as they are, compared to the French. We had both been invaded by “foreigners.” They understand that we are alike, so we can partner. You have to be professional, but solidarity means something. MarEx: Who knows, if the new oil finds announced in Mexico are real and Chevron’s discovery pans out, BOURBON and Rigdon boats could be waving to one another in the offshore deepwater Gulf of Mexico. JdC: Perhaps. (Jacques de Chateauvieux smiles.)

”

MarEx

THE MARITIME EXECUTIVE

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”

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Marex

Manning

Servicing the Mariner of the New Millennium

Joseph Keefe

The U.S. Coast Guard Revamps the Credentialing Process for the Growing and Changing Demographics of the U.S. Merchant Mariner going to sea has never been so difficult or complicated. The reasons why are pretty self-evident, once you take a look at all that has transpired in the world of marine commerce over the last thirty-five years. Surprisingly, and in an age where growing numbers of shipping companies – both deep-sea and brown water – complain about the lack of qualified mariners and the issue of retention of good ones, the total available pool of credentialed U.S. mariners is actually growing at a substantial clip. But as Bill Chubb, Chief of the U.S. Coast Guard’s Mariner Records Branch, will tell you, “The raw statistics do not tell the whole story.”

The MariTiMe execuTive

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as 2007 begins, it is easy to look back on all the

done. Today’s documented U.S. mariner pool is depicted in Table B. changes in mariner credentialing requirements that have Over the past two years, the Coast Guard has published occurred since the end of the Vietnam War. On the grand detailed data on the size and demographics of the U.S. scale of things, these variables arguably add up to a cumumariner pool in Proceedings, the Coast Guard Journal of lative disruptive event, which rivals the invention of the Safety & Security at Sea. Another tabulation is planned Internet or putting a man on the moon. Despite all of for 2006. The U.S. Maritime Administration, in coordinathis, the Coast Guard says that the number of credentialed tion with the DOT’s Bureau of Transportation Statistics, mariners continues to grow in the face of a rapidly shrinking domestic deep-sea fleet. As we look for clues why, the fleet numtabLe a – u.s. fLag oCeangoing, deep draft, seLf-propeLLed tonnage 1 bers are a good place to start: Since MarEx last visited the tiMe period / era totaL ships totaL tanK VesseLs makeup and numbers associated WW ii 644 260 with the U.S. flagged merchant KOrea 1,268 455 fleet, the fleet has dwindled, as vieTNaM 952 279 expected, by more than twenty POST-vieTNaM 578 288 percent. The domestic tanker fleet has fared no better, primar1997 302 145 ily because of the ravages of OPA 2002 257 92 90 phase-out dates. As MarEx 2002 (all vessels – commercial / rrF / MSc) 479 134 goes to press with this issue, 2006 197 75 another 19 U.S. hulls are looking 2006 (all vessels – commercial / rrF / MSc) 360 * ** at drop-dead dates, all looming within the next six years. There 1 Statistics on current fleet numbers from iaW, MaraD and other industry data. is good news: According to one commercial consulting database (ColtonCompany.com), as many tabLe b – doCuMented u.s. Mariner pooL as of 10/6/2006* as 26 new tankers could be built in the next ten years. Despite all totaL stCw ContinuitY the new shipbuilding activity, Mariners QuaLified CredentiaL though, mariners can look for the TOTaL POPuLaTiON 209,800 49,900 4,690 domestic fleet to erode further. OceaN-GOiNG creDeNTiaLS 105,000 41,400 Replacement of current assets, even under ideal conditions, will MMD ONLY 65,900 15,900 not equate to a one-to-one ratio. LiceNSe ONLY 102,100 5,800 Ships are getting larger and more BOTh 39,100 25,500 efficient; hence the replacement uNLiMiTeD DecK LiceNSeS 9,200 7,100 910 of deadweight capacity will not uNLiMiTeD eNG LiceNSeS 11,500 8,800 900 necessarily equate to more hulls QuaLiFieD DecK raTiNG 22,200 15,300 150 in the future. Just four years ago, MarEx QuaLiFieD eNG raTiNG 5,300 4,100 40 (www.maritime-executive.com/ (*) Figures courtesy of u.S. coast Guard NMc; William chubb, chief Mariner, records Branch. the_blame_game) provided analysis as to the makeup and size of conducted two mariner surveys in calendar years 2001 the U.S. merchant mariner population in the face of growand 2002. Since then, however, no further formal data ing alarm about possible manpower shortages. So far the gathering has been done. MARAD officials told MarEx in crisis hasn’t developed, but there are clear trends that warNovember that they were gearing up for another statistical rant closer scrutiny. According to U.S. Coast Guard data, the size of the U.S. credentialed mariner pool has increased survey but that any new efforts would not necessarily take the form of past efforts. As MarEx went to press, MARAD by almost 17,000 mariners, or 8.7%, over the course of was just beginning to provide details of their new Mariner the last five years. In addition, the quality of this data has Outreach program. improved measurably since we last attempted to benchWhile the increased mariner numbers are encouragmark the composition and direction of American mariners, and the Coast Guard has worked very hard to get that ing, analysis of the raw data provides real basis for concern

Marex

Manning

The MariTiMe execuTive 3

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Marex

Manning

tabLe C – Mariner trends august ‘01

as of 10/6/2006

totaLs – aLL differences

stCw differences

TOTaL

WiTh STcW

TOTaL

WiTh STcW

Gain / Loss

PcT.

Gain / Loss

PcT.

TOTaL POPuLaTiON

193,000

28,442

209,800

49,900

16,800

8.70%

21,458

75%

DeeP-Sea creDeNTiaLS

104,000

26,095

105,000

41,400

1000

0.96%

15305

59%

MMD ONLY

73,000

65,900

15,900

-7100

-9.73%

15900

LiceNSe ONLY

85,000

102,100

5,800

17100

20.12%

5800

BOTh

35,000

39,100

25,500

4100

11.71%

uNLiMiTeD DecK LiceNSeS

8,721

4,506

9,200

7,100

479

5.49%

2594

58%

uNLiMiTeD eNG LiceNSeS

9,680

1820

18.80%

4,843

11,500

8,800

3957

82%

QuaLiFieD DecK rTG.

8,545

22,200

15,300

6755

79%

QuaLiFieD eNG rTG.

2,586

5,300

4,100

1514

59%

(*) current coast Guard data as compared to data compiled from combined MaraD and uScG sources in 2002.

that the U.S. deep-sea manpower pool might be headed in the wrong direction. At a minimum, the demographics of the current mariner pool are ample proof that the type of credentialed mariner in the employment pool has changed significantly. Table C shows simple mariner trends in the United States dating back to August of 2001. Despite healthy gains in numbers of total mariners, the statistics also show that the qualified mariner pool for deep-sea service is contracting at an alarming rate. Indeed, Unlimited License mariners increased by 2,229 individuals; STCW-qualified, deep- sea mariners soared by 6,551; but those actually qualified (READ: STCW-certified) to step onto a U.S. merchant vessel declined by 2,501 mariners. This is because in August of 2001, STCW certification was not yet a requirement for U.S. mariners. Today, its (STCW’s) insertion into the mariner pool has grave implications because the remainder of licensed mariners in the credentialed pool have renewed their tickets for “continuity purposes” only. The tracking of “continuity” licenses has only just begun, but within the next five-year cycle of license renewals it is expected that this number will soar. Effectively, these individuals have decided that the added time and expense of maintaining a fully compliant license is too onerous a burden. The cost of STCW compliance can add up to as much as $17,000. Notwithstanding the overall increase of credentialed U.S. mariners, the bleeding has not yet stopped from the unlimited credential pool. Probably the only thing that does not trigger a “manning” crisis at this time is the similar, but steady, erosion in the number of deep-sea U.S. flag merchant vessels. In the past 35 years, it can be argued that there have been five disruptive events in the domestic maritime employment theatre that have profoundly affected the 40

available mariner pool. These events include: ■ The end of the Vietnam War and the marked decline of U.S. flagged assets; ■ The ending of the “lifetime” document, introduction of renewable credentials; ■ The Exxon Valdez grounding & passage / implementation of OPA 90; ■ Introduction of STCW qualifications to seagoing requirements; ■ 9/11 security enhancements and coming changes to security requirements. Each of these five variables has led to a decline in the availability of qualified merchant mariners and some, like STCW and 9/11, are still exerting enormous pressure on the workforce. Unspoken in all of this has been the steady decline in buying power of the average mariner. What used to be a high-paying Second Mate’s job at $55,000 per year in 1982 dollars is arguably much less attractive at $75,000 in today’s world. Heading off to sea for more than six months per year for entry-level officer pay, which more than doubled that received by shoreside peers, was well worth the hardship in the mid-1980s. The same can no longer be said to be true in the new millennium. But all of this may pale in comparison to what could happen if the Coast Guard cannot pull off the most far-reaching overhaul of its credentialing process ever attempted by anyone, anywhere.

Mariner CredentiaLs: far-reaChing Changes / CLear goaLs / unCertain outCoMe Working closely with the General Services Administration (GSA), the U.S. Coast Guard is on track to move the National Maritime Center (NMC) to far-flung Martinsburg, WV. Currently domiciled in Arlington, VA, a stone’s

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part of centralizing operations at throw from Coast Guard headMartinsburg. The Coast Guard plan quarters, the NMC oversees the calls for keeping all of the current 17 Regional Exam Centers (REC), RECs open for business. REC perwhich in turn issue credentials, test sonnel would remain the primary and generally cater to the nation’s point of contact for the mariner almost 210,000 mariners. Aside from customer with the goal of ensurthe fact that Senator Robert Byrd (Ding that the credential applications, WV) wants it there, the Coast Guard when they are sent to Martinsburg, insists that there are compelling reaare in compliance with Coast Guard sons to begin the centralization of requirements. Captain Kranking says the mariner credentialing process the Coast Guard will benchmark this in West Virginia as soon as possible. efficiency record and, at those RECs Captain Frank Kranking, Mariner where performance is less than satisLicensing and Documentation Profactory, changes will be made. gram Coordinator at the National In West Virginia, the Coast Guard Maritime Center, says that the move intends to efficiently organize the to West Virginia has three primary NMC into specialty shops, each objectives. Simply put, he says, “The designed to achieve time and cost move involves security, efficiency savings at a particular job. The most and consistency.” He adds that the frequently mentioned task expected move could be completed as early as andy hammond executive director of the boston pilots association. to reap big dividends in this way is August of next year. the use of the merchant mariner Kranking explains that, over time, document (MMD) machines. These complex machines are new regulations and laws have made the licensing and creused, on average, six times a day in each of the 17 RECs. dentialing process more difficult, both for mariners and The daily, 100+ transactions which prompt generation the Coast Guard personnel / contractors who service these of an MMD are each unique, and there are any number customers. For too many years, this effort was carried out of people who use the machines daily, some less compeusing the Coast Guard’s proud mantra of “doing more tently than others. The WV “credential production team” is with less.” Now, says Kranking, “Funding matches the task expected to eventually produce a more standardized prodat hand.” Taking it a step further, Kranking added, “The uct in less time and in a more cost-effective manner. program has the next highest priority in the Coast Guard Initially, this fast track, aggressive program hopes to today, second only to Deepwater. We have the funding and centralize processes using older, established techniques. the support from Congress to get this done.” “Eventually, the introduction of new technologies should The new effort to centralize the mariner documentation yield significant advantages,” says Kranking. He points to process and move it to a new location will not come withthe coming reality of a “help desk” call center, manned out a cost. Kranking says that the NMC would have had to by his “marine information team.” The 25-member team move soon in any event, so some of those costs were not will operate on an extended hours schedule, attempting to unexpected. The human costs associated with the move deflect fears that the personal touch of the local REC will are not yet clear, but Kranking admitted that (based on be lost in the new regime. data derived from similar moves in the mid-nineties) there would be a loss of experience and expertise at NMC and that perhaps only 30% of the current staff was expected to outside LooKing in: a Mariner and usCg doCumake the move to West Virginia. Mentation expert weighs in Some critics call the expected attrition rate dangerously Andy Hammond is the Executive Director of the Boston high in the face of what is being characterized as sweeping Pilots Association. In a former life and until just recently, changes at every level of NMC. Kranking responds by sayhe was the Chief of the Boston, MA REC, where he worked ing that the focus of NMC will change from being mainly for almost eight years. Hammond is also a licensed maria management or policy-oriented force to one which ner with more than a few years spent as a customer of the largely handles credentialing operations. As such, the shift very same system he helped to administer. He’s not all that in personnel and numbers is expected. Beyond this, he says comfortable with the direction in which the Coast Guard that the NMC headcount will increase from perhaps 90 is headed as it tries to reform a credentialing system that today to as many as 260 employees once the Martinsburg some say is broken and most knowledgeable observers facility is up and running. (including Hammond) agree needs to be overhauled to Capturing operational efficiencies may be the easiest meet growing customer demands and a regulatory environ-

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Hammond speaks from a position of knowledge and experience. He also says that this isn’t the first time that the Coast Guard has proposed sweeping overhauls of the documentation and credentialing process… The current effort has the advantage of occurring after 9/11, and the need for tighter, more secure controls on any government credential made this plan easier to sell.

ment which could bring the process to a virtual standstill. Hammond is in a unique position to comment on the plans to move and centralize operations at the Coast Guard NMC. Away from the process for just a couple of months, he’s not shackled by the constraints of parroting the party line, but also speaks from a position of knowledge and experience. He also says that this isn’t the first time that the Coast Guard has proposed sweeping overhauls of the documentation and credentialing process. Two previous attempts were, in his words, “Poorly planned and designed. Coast Guard senior leadership declined to fund them.” The current effort has the advantage of occurring after 9/11, and the need for tighter, more secure controls on any government credential made this plan easier to sell. Beyond that, Hammond says that Kranking is a good choice to guide the restructuring. As Chief of the Boston REC, Hammond was the main representative of, and reported to, the local OCMI in Boston. His replacement will report in the very near future directly to the NMC in Martinsburg. Hammond, however, is less concerned with whom the REC Chief reports to than what kind of authority he or she will have in the new hierarchy. Hammond told MarEx in November, “While the Coast Guard must streamline the process of issuing credentials, removing the authority from 17 field offices to one location will not ensure the same level of customer service.” While he also conceded that not all RECs are the same and there is a need for greater consistency, he stressed that “taking the authority away from those presently performing that function will not resolve the issue.” Hammond also stressed that mariners are not vessels. When the Coast Guard centralized the vessel documentation function in the early 1990s, the process yielded some good efficiencies. He says that the current NMC command cites that example in its study to centralize the licensing program, but also warns that documenting a vessel is not as complex or as specific as certifying a mariner’s competency for the numerous and varied types of credentials that can be issued. Beyond this reality, he says, “17 RECs equals 17 ways of doing business. It’s only natural that when you have 17 different offices with 17 different regional issues and local CG control, you will have vast differences with respect to the mariners and the CG personnel who manage 4

the MLD program.” Currently, the 17 REC Chiefs work for 17 different Sector Commanders. To Andy Hammond’s way of thinking, NMC is the program manager and, through the normal chain of command, it could implement strong and clear guidance on best practices. David Kranking disagrees. He says that firm technical and document standards have been in place for a long time, yielding mixed results and less than consistent performance from the individual RECs. Rather than lose the personal, one-to-one customer contact that Andy Hammond feels will soon be a thing of the past, Kranking maintains that “The individual RECs will now be free to focus on customer service, while operations and production will be centralized in West Virginia.” Kranking is firm in his belief that this will build quality on the front end of the process. In the end, Kranking and Hammond certainly agree on one thing: The system needs to be improved. Centralization may be the key to getting some parts of the equation into place, but it is here that their points of view diverge. As an experienced Coast Guard professional, Hammond has firm opinions on how to accomplish the common goal, and he laid out a multifaceted plan to accomplish just that: Note: MarEx has inserted USCG responses to some of these proposals, marked by an asterisk (*). ■ iso 9001-2000: The IMO requires each Party to institute a QSS for its “certification” program. The Coast Guard has chosen ISO 9001-2000 as the system standard which the MLD program is to achieve. The key to ISO 9001-2000 compliance is clear and concise guidance from management, which states it is on board AND ready to ensure that everyone involved in the process follows the standard. Require ALL Senior Inspectors of Personnel to be certified as lead ISO 9001-2000 auditors and incorporate the ISO 9001-2000 standard across the MLD program and the REC’s. ■ aMending titLe 46 usC as needed: Follow up with 46 CFR parts 10, 12 and 13 to incorporate the STCW-95 amendments and simplify the license structure. Don’t use the “it takes forever to change a regulation” excuse! ■ train the reC personneL: Establish a standard / national training program to educate REC personnel about the maritime industry

The MariTiMe execuTive

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One credential is enough: the decision process in place locally. (*) The Coast Guard already make it so and change the envisions such a plan, augmented by law to allow it. Too many the electronic filing / archiving of all files. Kranking also says that resources (time / energy / mariner on-line paying of user fees is coming, funding) go into issuing as is the ability of each mariner to his or her records and applicamore than one credential view tion status through the Coast Guard’s to many mariners. Cut- “Homeport” Web site. ting it down to one will forM foLLowing funCtion reduce the workload and – the perfeCt anaLogY: better or worse, the Coast Guard the backlog. Establish an For is well on its way toward impleon-line application pro- menting the planned centralization of the MLD command structure. cess and review procesome aspects of the produre…keep the decision While gram were inevitable, other parts, the removal of local REC process in place locally. including authority, remain controversial.

and to efficiently operate the REC. This would include not just learning the regulations but how to process applications. Standardize the service each mariner receives at ALL 17 RECs. Hammond worries that a mariner who might not be physically fit (or with other questionable issues) might slip under the radar of the system because his / her paperwork is in order. Conversely, he says that a mariner who is in full compliance might not make the grade because he or she doesn’t look good on paper from 1,500 miles away. one CredentiaL is enough: Make it so and change the law to allow it. Too many resources (time / energy / funding) go into issuing more than one credential to many mariners. Cutting it down to one will reduce the workload and the backlog. (*) Frank Kranking envisions a time in the very near future when the mariner will be down to just one Merchant Mariner Credential (MMC), combining the current need for a license, MMD and STCW credentials. The proposed TWIC card would be a separate component, making two cards necessary. Timing and exact specifics of the TWIC credential are still uncertain, but Kranking says that the first issuance of the combined MMC would start about 18 months after the final TWIC rule comes into effect. prioritiZe who needs a CredentiaL: Establish a “standard” process time for professional mariners as opposed to non-commercial individuals. A professional mariner would be defined as any individual who needs the credential as a condition of employment and can document same. Non-professionals would be all others who hold a credential but don’t need it for employment. This would equate to better service for sea-going and brown water mariners who make a living on the water. estabLish the nMC “striKe teaM”: The team would travel to each REC twice annually for a three-day minimum audit, followed by corrective and training exercises. (*) Kranking says that local RECs will be benchmarked on documentation preparation performance by a “Quality Assurance Team” from West Virginia. teChnoLogY: Establish an on-line application process and review procedure. Allow REC Chiefs to access on-line records from individual RECs, based on standard protocol, but keep

Current events, however, have a way of dictating actual practice. Take the Puerto Rico documentation scandal of recent memory, for example. It was ADM James Loy, former Commandant of the Coast Guard, who said, “For every important task, form will always follow function.” There’s no reason to believe this mammoth effort will be any different. Frank Kranking uses the example of the New Orleans REC as a perfect illustration of the need for centralized services and how they can benefit the mariner – and his employer. As originally planned, REC New Orleans would have been one of the last RECs incorporated into the centralization plan, but the life-changing event known as Katrina changed all that. REC New Orleans was and remains one of the busiest of the 17 RECs, handling as much as 15% of U.S. Coast Guard mariner documentation traffic. The eventual shape of the biggest new initiative on the plate of the multi-missioned Coast Guard is yet to come. Andy Hammond hopes that there is room at the table for some of his ideas. And why not? The former Chief of Boston’s REC is now a customer again. He’s also a maritime executive. Today, U.S. Coast Guard personnel located in West Virginia are handling virtually all of the documentation applications from REC New Orleans. In this case, the tragic and almost complete destruction of infrastructure in New Orleans created the need for an efficient and remote function elsewhere. This is important not only to the mariners themselves but also to a myriad of maritime firms trying to recruit marine professionals and retain the ones they have for the foreseeable future. So far, so good.

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Environmental Risk Management

What To Do When The Government Is At The Gate Written by

Timothy C. Cronin & Matthew J. Nasuti

Timothy C. Cronin and Matthew J. Nasuti are partners in the San Francisco law firm of Cronin & Nasuti. Mr. Cronin recently co-authored an article entitled Defending Environmental Crimes. Mr. Nasuti worked with the Air Force Contract Law Center, served as Deputy City Attorney in Los Angeles.

MAGINE ONE OR MORE of the following scenarios: 1) Federal, state, and local agency inspectors arrive at the front gate of your facility with a search warrant. They have received a tip from a disgruntled former employee who claims that the company is violating certain regulations and they want to search the facility. 2) There is an industrial accident at your facility and one or more persons is injured. Within minutes of notifying the appropriate emergency response units, federal, state, and local agency investigators arrive to gather facts and interview individuals who have witnessed the accident. 3) Your company has observed the letter of the law in obtaining all necessary permits for its dredging project. Three months into the project, the United States Environmental Protection Agency brings it to a halt claiming that you are in violation of your permits. 4) Your company has arranged for transportation of hazardous cargo. Due to no fault of the company there is an accident which causes the cargo to spill. Federal, state, and local authorities undertake an investigation. 5) Subpoenas are issued by federal, state, and local agencies ordering you and your fellow corporate officers to provide the agencies with company and/or personal documents relating to the events set forth in one of the above scenarios. 6) Without warning or readily discernible reason, your company receives an administrative agency request for the production of documents.

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if so, this article will be of help

to you and your company in preparing to effectively interface with federal, state, and local agencies that criminally, civilly, and administratively enforce laws. The purpose of this article is three-fold: (1) provide an overview of several federal and state civil, criminal, and administrative environmental law enforcement schemes; (2) discuss potential company and individual corporate liability; and (3) offer practical tips on how to avoid becoming a target of enforcement and what to do should a company and/or officer become a target.

contaminants. Under this Act, EPA regulates multi-county areas under a broad state implementation plan and specific stationary and mobile sources of emissions under its permitting program. The Act also mandates the phase-out of ozone-depleting substances. Civil penalties may be imposed for violation of the Act. federaL haZardous MateriaLs transportation Law: The Federal Hazardous Materials Transportation Law (“Federal Hazmat Law”) establishes requirements for the use of shipping papers, markings, labels, placards, and approved packaging for hazardous materials, as well as training, security planning, and recordkeeping for the transportation of hazardous materials, including radioactive cargo. Civil penalties may be imposed for violation of the Federal Hazmat Law.

THE PURPOSE OF THIS ARTICLE IS THREE-FOLD: (1) PROVIDE AN OVERVIEW OF SEVERAL FEDERAL AND STATE CIVIL, CRIMINAL, AND ADMINISTRATIVE ENVIRONMENTAL LAW ENFORCEMENT SCHEMES; (2) DISCUSS POTENTIAL COMPANY AND INDIVIDUAL CORPORATE LIABILITY; AND (3) OFFER PRACTICAL TIPS ON HOW TO AVOID BECOMING A TARGET OF ENFORCEMENT AND WHAT TO DO SHOULD A COMPANY AND/ OR OFFICER BECOME A TARGET.

i. what is an enVironMentaL offense? At its most fundamental level, an environmental offense is an act or omission in violation of a law relating to the environment, punishable by civil penalty, fine, imprisonment or both. With the onset of the “protect the environment at all costs” mentality, both the federal and state legislatures have enacted comprehensive environmental laws designed to effectively combat environmental offenses. Enforcement of these laws often results in federal, state, and local agencies proceeding civilly, criminally, and/or administratively against violators. It must be emphasized that those who must comply with these laws are presumed to know and understand the universe of statutes and regulations. This is a difficult task in that the statutes and regulations are often vague or susceptible to inconsistent interpretations. For example, the United States Environmental Protection Agency considers silver to be toxic, a hazardous substance, and potentially a hazardous waste despite the fact that silver is valuable in fighting disease. A brief overview of some of the “bread and butter” civil, criminal, and administrative statutory schemes under which federal, state, and local government agencies prosecute environmental wrongs follows. a. federaL CiViL statutes

CLean water aCt / riVers & harbors aCt (aka refuse aCt):

These Acts are the primary federal statutes that penalize unauthorized discharges or releases of oil, debris, refuse, contaminants and toxic materials into navigable waterways. The Clean Water Act also penalizes certain discharges in the Exclusive Economic Zone and contains provisions that regulate and authorize certain discharges through a permitting process. Civil penalties may be imposed for violation of these Acts. CLean air aCt: The Clean Air Act regulates the release of a designated list of hazardous and toxic air pollutants and

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b. federaL CriMinaL statutes The above listed environmental statutes, in addition to other environmental statutes, contain criminal enforcement provisions. For example: CerCLa: Under CERCLA, failure to notify or report releases of hazardous substances allows for fines of up to $250,000 for individuals ($500,000 for organizations) and/or imprisonment for up to three years (five years for a second offense). rCra: RCRA provides for criminal penalties for the knowing violation of any of its provisions. Fines up to $50,000 per day of violation may be imposed, imprisonment of up to five years, or both. Violations involving the knowing endangerment of another could result in a fine of up to $1 million, imprisonment for up to 15 years, or both. tsCa: TSCA also provides criminal sanctions for knowing or willful violations of its provisions. Fines range up to $25,000 per day and imprisonment of up to one year, or both. CLean water aCt: Knowing violations of this statute result in fines ranging up to $50,000 for each day of violation and imprisonment for up to three years. These penalties double for the second offense, and substantially higher penalties (up to $1 million in fines per violation, and up to 15 years imprisonment) are available for violations that involve knowing endangerment. riVers & harbors aCt (aka refuse aCt): Penalties for knowing violations range up to $25,000 per day of violation and up to one year in prison. CLean air aCt: Penalties for knowing violations range up to $250,000 per violation for an individual ($500,000 per violation for an organization) and imprisonment for up to five years. As under RCRA and the Clean Water Act, substantially THE MARITIME EXECUTIVE 47

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higher penalties are available for violations that involve the knowing endangerment of another. federaL haZMat Law: Criminal penalties under the Federal Hazmat Law apply to “reckless” and “willful” violations as well as “knowing” violations. The maximum penalties for an individual are up to $250,000 in fines and/or five years in prison. If a hazardous materials offense results in death or bodily injury of a person, the maximum prison term is ten years. For corporations, the maximum fine is $500,000 per violation.

CALIFORNIA’S HEALTH & SAFETY CODE…PROVIDES FOR A MYRIAD OF OFFENSES SUBJECT TO CIVIL FINES AND/OR PENALTIES. FOR EXAMPLE, THE CODE IMPOSES A CIVIL PENALTY FOR INTENTIONALLY OR NEGLIGENTLY MAKING FALSE STATEMENTS ON APPLICATIONS, REPORTS, LABELS, MANIFESTS, AND PERMITS REQUIRED TO BE KEPT UNDER THE STATE’S HAZARDOUS WASTE CONTROL ACT, AND INTENTIONALLY AND NEGLIGENTLY DISPOSES OR CAUSES THE DISPOSAL OF EXTREMELY HAZARDOUS WASTE. VIOLATORS ARE SUBJECT TO A CIVIL PENALTY OF UP TO $25,000 FOR EACH DAY OF VIOLATION.

C. state CiViL statutes A company must be familiar with the particular laws of the state or states in which it does business. It is virtually impossible to examine the laws of all states within the space allocated for this article. An examination of California’s environmental statutes, however, whose progressive laws often serve as templates for states legislatures of other jurisdictions drafting environmental regulations, provides a representative flavor for the substance of such laws. California’s Health & Safety Code, as is the case with many state laws, provides for a myriad of offenses subject to civil fines and/or penalties. For example, the Code imposes a civil penalty for intentionally or negligently making false statements on applications, reports, labels, manifests, and permits required to be kept under the state’s Hazardous Waste Control Act, or intentionally and negligently disposes or causes the disposal of extremely hazardous waste. Violators are subject to a civil penalty of up to $25,000 for each day of violation. d. state CriMinaL statutes Perhaps the most lethal arrows in the government’s prosecutorial quiver are individual state’s criminal environmental laws. While federal criminal statutes provide prosecution, in practice, the bulk of prosecutions are accomplished under the auspices of state law. Like its civil counterpart, California’s criminal environmental statutory framework serves as a representative sample of most state criminal environmental laws. General examples of California’s environmental crimes include the unlawful release of pollutants into the air (Health & Safety Code section 42300 et seq.), into the water (Fish & Game Code section 5650), or onto the land (Health & Safety Code section 25100 et seq.). One who fails to report a hazardous waste release or threatened release, moreover, also violates the law even if innocent of causing the release. Health & Safety 48

Code Section 25507. Not withstanding the availability of these general environmental crimes, prosecuting unlawful transportation, treatment, storage, and disposal of hazardous waste still remains the bread and butter of environmental prosecutors. In California, as in most jurisdictions, each of these offenses is a general intent crime. That is, knowledge of unlawfulness is not required, merely knowledge of facts bring the act or omission within the provisions of the law. In other words, one may be committing a crime without even knowing it. Violations may result in substantial fines and imprisonment.

e. federaL/state adMinistratiVe reMedies A very effective resource that both the federal and state agencies possess is the use of administrative remedies to enforce environmental laws. It is virtually impossible for a facility to comply with all environmental laws. Federal and state agencies, although they will not admit it, know this. Yet some failures to comply are more egregious than others. For those instances where full blown civil and/or criminal proceedings, at least at the outset, cannot be justified, federal and state agencies will often proceed administratively. The most common toll utilized by these entities is to issue what are known as Notices of Violation (“NOV’s”) and/or Reports of Violation (“ROV’s) to a suspected violator. Issuance of NOV’s and ROV’s allow the agencies to monitor a company’s compliance with environmental laws while providing the facility with an opportunity to correct any problems. There is always an opportunity, of course, to challenge the issuance of the NOV or ROV via an administrative hearing. Companies must be cautioned, however, that issuance of a NOV or ROV is often the first step toward a much broader investigation geared to civil and/or criminal proceedings. It must be emphasized that the universe of statutes and regulations is immense and difficult to understand. More importantly, perhaps, is the almost impossible task of complying with these statutes and regulations. The government is well aware of this fact. As such, the government, pursuant to authority delegated under each of the foregoing laws, has the power to shut down any facility that is deemed to be a chronic violator of the particular law or is engaging in activities that pose a substantial and imminent threat of harm to the public. Companies must be aware of this potential course of action by government authorities and obvious implications on the

THE MARITIME EXECUTIVE

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This led to civil proceedings being instituted by the Environmental Protection Agency for cleanup of hazardous waste. The San Francisco District Attorney’s Office filed felony charges against the company and an employee alleging disposal of hazardous waste. The District Attorney additionally filed a parallel civil proceeding seeking recovery fines for the alleged disposals. Inquiry was made into the labor and accounting practices of the company. In another case, there was an industrial accident at a plating shop and an employee died. The District Attorney filed manslaughter and reckless handling of hazardous waste charges against the owner of the shop. Further investigation led the District Attorney to file a subsequent complaint against the owner for tax fraud, grand theft, and conspiracy. Federal and State OSHA issued multiple NOV’s. The Immigration and Naturalization Service alleged the use of illegal labor. The building department alleged numerous building code violations. The Environmental Protection Agency shut down the Continued on page 52

IT MUST BE EMPHASIZED THAT THE UNIVERSE OF STATUTES AND REGULATIONS IS IMMENSE AND DIFFICULT TO UNDERSTAND. MORE IMPORTANTLY, PERHAPS, IS THE ALMOST IMPOSSIBLE TASK OF COMPLYING WITH THESE STATUTES AND REGULATIONS. THE GOVERNMENT IS WELL AWARE OF THIS FACT. …THE GOVERNMENT …HAS THE POWER TO SHUT DOWN ANY FACILITY THAT IS DEEMED TO BE A CHRONIC VIOLATOR OF THE PARTICULAR LAW OR IS ENGAGING IN ACTIVITIES THAT POSE A THREAT OF HARM TO THE PUBLIC.

ii. the Joint tasK forCe approaCh to enVironMentaL enforCeMent For enforcement purposes, environmental offenses traditionally have been neatly categorized into either civil, criminal, or administrative actions. Now, buoyed by a public climate and political correctness of protecting the environment at all costs, federal, state, and local authorities are aggressively targeting corporations and their officers and employees, even “mom and pop” businesses, for criminal, civil, and administrative proceedings. Given the inherent crossover between these proceedings, multiple federal, state, and local agencies working in conjunction as a joint task force is quickly becoming the vehicle of choice to environmental enforcement. In California, for example, this joint task force interaction has surfaced in many instances. First, federal and state NOV’s alleging violation of hazardous waste disposal laws were issued to the master lessor of Hunter’s Point Naval Shipyard.

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or her government position. With facility. The State Compensation the reduced threat of lawsuits, an Insurance Fund asserted violation AN ENVIRONMENTAL REGULAemployee, in theory, may more effiof the worker’s compensation laws. TOR, TYPICALLY, BELIEVES HE discharge the duties of his Parenthetically, as if this were not OR SHE IS ON A HOLY CRUSADE ciently or her position. While significant enough, toxic tort, workers compenTO PROTECT THE PLANET. WITH legal inroads have been made into sation, and wrongful death actions eroding qualified immunity, it still were also filed against the owner by THE POWER OF THE GOVERNremains the sword and shield of additional individuals. MENT AND JUSTNESS OF HIS governmental environPurely environmental statutes and CAUSE BACKING HIM, THE REG- individual mental crusaders. regulations may be only the tip of ULATOR EITHER READILY DISthe iceberg in terms of enforcement MISSES OR CHOOSES TO IGNORE iii. the responsibLe Corpoactions. More traditional civil and criminal allegations often find their rate offiCe doCtrine HIS LACK OF “REAL WORLD” way into the government’s case. For As a general rule, corporate directors, AND TECHNICAL EXPERIENCE Example, environmental violators and officers are exempt from personTO ATTAIN EQUITABLE RESOLUoften face allegations of conspiracy, al liability for claims, civil, criminal, TION OF CASES. HE OFTEN HAS and administrative, arising out of the making false statements, fraud, etc. with separate government agencies acts of the corporation that he or she A FINANCIAL INTEREST IN THE responsible for prosecuting the pardid not authorize. Corporate direcOUTCOME… ticular offense. tors and officers must be aware, howA company should never underestimate an environmental ever, that the current trend is to find such liability provided crusader’s ability to over plead his or her case. After all, his that certain factual findings are made. or her actions are undertaken in the course of protecting the environment. a. CiViL LiabiLitY All of this begs the question, “How and why are these Almost all federal and state environmental statutes impose agencies able to get away with such conduct?” The answer liability on “persons.” Courts have interpreted “person” to lies somewhere between understanding who the particular include directors or officers under essentially two theories. government regulator is and the immunity they enjoy in their Liability may be imposed under a director or officer notwithposition as government officials. standing the corporate structure based on (1) the director or officer’s active participation in unlawful activities and/or An environmental regulator, typically, believes he or she is (2) the director or officer’s failure to control or prevent the on a holy crusade to protect the planet. They are often zealous in this goal and all targets are perceived as the enemy. With the wrongful conduct. Courts examine several factors to determine whether or power of the government and justness of his cause backing him, the regulator either readily dismisses or chooses to ignore not a director or officer’s participation is sufficient to impose his lack of “real world” and technical experience to attain equi- individual liability. For example, in the context of a claim of unlawful disposal, a court looks at actual participation in the table resolution of cases. He often has a financial interest in wrongful act, participation in the company’s waste disposal the outcome of the case. Laws in many states provide for porpractices demonstrating how and where waste should be tions of fines and penalties collected to be directly allocated disposed, participation in negotiations for the disposal site to the particular entity collecting such fines. He has limited for company produced wastes and participation in the manofficial legal authority. However, in practicality, courts defer to agement and/or arranging for the disposal of the hazardous his actions in the name of health and safety. He often has no waste. The common denominator among all these factors is compunction about issuing press releases labeling a company that the greater the personal involvement, the more likely it is a polluter. Such labels can be damaging to business and goodthat a court will find the corporate director or officer personwill, promoting lawsuits by a misinformed public. ally liable. What allows the government to enjoy such broad discretion? Government employees enjoy what is called qualified Additionally, courts look to the following factors to deterimmunity. Qualified immunity is a concept that, to a large mine whether a director or officer’s control or failure to predegree, insulates a government employee from transgressions vent unlawful conduct is sufficient to impose personal liability. made with the course and scope of his or her employment. These factors include, having responsibility for the facility Unless the government employee’s conduct is particularly at which the violation occurred and supervising it, personal egregious, the employee is not subject to a lawsuit for daminvolvement in operation and decision making processes at ages resulting from his acts. He is simply not accountable. the facility where the violation occurred or if control of the The theory behind qualified immunity is that government offending activity is in the individuals direct line of responsiofficials must not be impeded in discharging the duties of his bility and this capacity to control is coupled with some act or 52

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failure to act. Control is the key. The more control or objective responsibility a director or officer has for the wrongful conduct, the more likely for individual personal liability to be imposed. While these are separate tests, often there is considerable overlap between the personal participation and control inquiries. Civil liability may be imposed individually upon a corporate director or officer under either theory or a combination of both.

porate director or officer, however, is difficult. Federal and state courts alike are split, however, on how much knowledge by the corporate director or officer is necessary to impute individual criminal liability or make them criminally responsible for the acts of the actor. The genesis of the responsible corporate officer doctrine is United States v. Dotterweich and United States v. Park. These cases stand for the general proposition that despite a corporate officer’s lack of actual knowledge and participation in a criminal offense, a responsible corporate officer may be held criminally liable if he or she shares in furtherance of the transaction which the law outlaws or is under an affirmative duty to seek out and remedy violations and subsequently fails to do so. The strictness of the application of the responsible corporate officer doctrine in an environmental context has varied from case to case. On one extreme, at least one court has strictly applied the responsible corporate officer doctrine and found an officer guilty of filing a false wastewater discharge report Continued on page 54

OFTEN THE INITIAL FACT GATHERING TOOL UTILIZED BY THE GOVERNMENT IN PREPARING FOR CRIMINAL, CIVIL, OR ADMINISTRATIVE PROCEEDINGS IS INFORMAL INQUIRIES THROUGH EMPLOYEE INTERVIEW OR REQUESTS FOR DOCUMENTS. GIVEN THAT IT IS LIKELY THESE INQUIRES WILL LEAD TO SOME GOVERNMENTAL ACTION, IT IS A GOOD IDEA TO UTILIZE LEGAL AND TECHNICAL PERSONNEL TO DISSEMINATE THE INFORMATION THAT THE GOVERNMENT SEEKS.

b. CriMinaL LiabiLitY All major federal and state environmental statutes contain provisions for criminal penalties that are triggered by “knowing” violations of their provisions as opposed to simply negligent violations. For example, knowingly transporting listed hazardous waste to an unpermitted facility and knowingly disposing of hazardous waste. Prosecutors encounter little trouble in establishing this knowing element against the particular individual taking the specific action resulting in the violations. Satisfying this element against an individual cor-

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although he had no direct knowledge that his facility was unlawfully discharging pollutants into navigable waters. At the other extreme, many cases have held that the responsible corporate officer must know or should have known that his conduct was in violation of a particular environmental statute for criminal liability to attach. The important concept to glean from the foregoing is that corporate directors and officers are simply not insulated from civil and/or criminal liability by virtue of the corporate entity. Actual or constructive knowledge of the company’s unlawful practices may be sufficient to impute individual criminal liability upon a director or officer.

…A CIVIL OR CRIMINAL ENVIRONMENTAL PROCEEDING IS INITIATED WHEN THE GOVERNMENTAL AGENCY FILES A DOCUMENT ALLEGING WRONGDOING…THE ADVERSARIAL PROCESS ACTUALLY BEGINS WHEN AN AGENCY UNDERTAKES AN INVESTIGATION OF A PARTICULAR COMPANY. IT IS, THEREFORE, CRITICAL TO RISK MANAGEMENT THAT A COMPANY GIVE NO REASON FOR A PARTICULAR GOVERNMENT AGENCY TO COMMENCE AN INVESTIGATION IN THE FIRST PLACE. “AN OUNCE OF PREVENTION IS WORTH A POUND OF CURE”

iV. praCtiCaL tips Managing potential criminal, civil, and/or administrative environmental risk falls into essentially two categories: (1) preventing one’s company or self from becoming a target of the government; and (2) the necessary steps to be taken in response, should a company and/or individual become a target.

1. preVention Technically, a civil or criminal environmental proceeding is initiated when the governmental agency files a document alleging wrongdoing, whether by indictment, complaint, NOV, etc. But the adversarial process actually begins when an agency undertakes an investigation of a particular company. It is, therefore, critical to risk management that a company give no reason for a particular government agency to commence an investigation in the first place. Moreover, what often appears to be just a simple civil compliance problem often blows up into a joint task force prosecution as discussed above. In this regard, the proverbial “an ounce of prevention is worth a pound of cure” cannot be overstated. Whether or not and to what extent a company should perform a comprehensive audit of its environmental program must be determined on a case-by-case basis. Although audits are useful for assessing a company’s compliance with environmental laws and regulations, they provide valuable fodder for government agencies prosecuting a company. Often an audit may reveal dispositive evidence of a company’s noncompliance with environmental laws and management’s knowledge thereof. Undoubtedly, government officials will seek production of audits via subpoena. Simply stated, a company must weigh the pros and cons of conducting audits with an eye towards these considerations. 54

If an audit is appropriate, it requires a detailed analysis of the company’s procedures and structure. Some of the assessment topics must include: ■ Environmental Policy Statement: Does the company have an adequate written corporate environmental policy statement? ■ Environmental Organization: Does the company have a formal environmental structure organized in a manner to meet the company’s environmental goals? ■ Environmental Compliance Program: Does the company have a comprehensive compliance program for each environmental regulation applicable to the company’s operations? ■ Pollution Prevention Program: Does a company program exist for minimizing the release of hazardous materials or substances into the air,

water, and soil? ■ Waste Minimization Program: Does a company program

exist for minimizing the generation and disposal or wastes? ■ Off-Site Waste Disposal Manage-ment Program: Does a

company program exist for minimizing the liabilities associated with off-site disposal of wastes? ■ “Superfund” Management: Does a company program exist for minimizing the potential liabilities associated with involvement in federal or state “Superfund” sites? ■ Employee Training: Does the company have a formal environmental training program for employees? ■ Contingency Planning: Does the company have a contingency planning or response program for environmental emergencies? ■ Environmental Public Relations Program: Does the company have an environmental public relations program specifically focusing on environmental issues? ■ Risk Financing and Insurance: Does a company program exist for transferring some of the potential fiscal risks associated with environmental issues to outside parties such as insurers? ■ Record Keeping and Retention Policy: Does a company record keeping and retention policy exist that serves its environmental goals? ■ Expert Procurement Program: Does the company have a program for obtaining the services of technical and legal experts as needed and to maximize the value received from such experts when assistance is required? Be advised that this is not an exhaustive list of issues that must be examined to minimize or prevent a company from becoming a target of government action. A company’s close

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the informal inquiry of today may be the joint task force prosecution of tomorrow. There may be confidentiality provisions, legal and otherwise, that may allow a company or individual to refuse to disclose the information sought. While a company does not want to foster an adversarial relationship with the government unnecessarily, it must be kept in mind that it is the government’s job to prosecute environmental offenses and that informal, seemingly innocent inquiries, are often the first step in this process. As such, it is imperative at the earliest stages possible, to limit via all procedures available, what and how much information is disclosed to the government.

THE SERVICE OF A WARRANT IS OFTEN THE FIRST OFFICIAL NOTICE THAT A COMPANY AND/ OR INDIVIDUAL RECEIVES INDICATING THEY ARE THE TARGET OF AN INVESTIGATION. IT IS ALSO THE FIRST OFFICIAL OPPORTUNITY THAT AN INDIVIDUAL OR COMPANY HAS TO AFFECT THE OUTCOME OF THE INVESTIGATION…

2. response Once a company becomes the target of governmental action, via informal inquiry or a more formal procedure like service of a search warrant or subpoena duces tecum, a company must have cogent response polices and procedures in place that will thwart or minimize the government’s investigation. The following are some tips on how to deal with the tools most commonly used by the government in the early stages of civil, criminal, and administrative actions. a. inforMaL inQuires Often the initial fact gathering tool utilized by the government in preparing for criminal, civil, or administrative proceedings is informal inquiries through employee interview or requests for documents. Given that it is likely these inquires will lead to some governmental action, it is a good idea to utilize legal and technical personnel to disseminate the information that the government seeks. Remember,

b. searCh warrants There is no mistaking that the adversarial process begins in earnest with the service of a search warrant by the government. The service of a warrant is often the first official notice that a company and/or individual receives indicating they are the target of an investigation. It is also the first official opportunity that an individual or company has to affect the outcome of the investigation via assertion of a full panoply of constitutional rights. A brief discussion of THE MARITIME EXECUTIVE 55

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the type of searches that may be conducted and responses thereto is instructive.

obtain CopY of warrant The search may be conducted under a traditional criminal or administrative warrant or under a statute that authorizes warrantless searches. The type of warrant depends on how much information the government has obtained prior to the search. Each type of warrant requires a different legal showing to be valid. Regardless, upon service of the warrant, the government will often seek samples of wastes and documents identifying the wastes, the waste process used, the target’s knowledge of the hazardous nature of the waste or practice used along with the names of knowledgeable employees who could be questioned later. Always request a copy of the warrant.

do not Consent to the searCh It is essential that a company deny the authorities the material they wish to seize or at least limit the effectiveness of the search. Without being unnecessarily adversarial, the government must be informed that the company or individual does not consent to the search. This preserves the assertion of certain constitutional rights that may vitiate the validity of the search and assist in the suppression of any evidence obtained pursuant thereto. Notwithstanding, the government will still conduct the search. A warrant does not require anyone, employees or otherwise, to talk to authorities. It does not require anyone to say where anything that the authorities is seeking is located. The key is to make it clear that the search is being conducted without the consent of the target and not to assist in ways the target does not have to. Monitor searCh without interfering It is important to monitor the process of the search without interfering. If samples are being taken, the company should try to have employees familiar with sampling procedures shadow the sampling team. Splits of samples taken should be requested and care should be taken to follow proper procedures to ensure the evidentiary integrity of the splits. Notes should be taken on such matters as places searched, files opened, and samples seized. These steps will lay the groundwork for later attacks on the government’s evidence. eMpLoYee Considerations Once the initial search is completed, the authorities will either conduct further searches or begin interviewing employees. These interviews create the single greatest danger of producing 56

a “smoking gun”. A company must keep as firm a grip on the interview process as possible, while keeping in mind that counsel for the company cannot usually represent employees without an express waiver of co nflict of interest. Legal counsel must be enlisted early in the interview process to obtain necessary conflict waivers and preserve unity of interest between the company and its employees. Otherwise, companies with the means should provide attorneys to employees needing representation. Employees likely to be interviewed should be informed that employees as well as employers are charged and that they will have a right not to talk. Employees should be sent home. If the employer has agreed, employees should be told that they will be provided an attorney at the employer’s expense. The company must be careful not to order employees not to talk to the authorities or threatened with adverse consequences if they cooperate. Every person interviewed should be debriefed. Once counsel has enough factual knowledge of the case, he or she can decide upon strategy.

…THE MARITIME INDUSTRY NECESSARILY OCCUPIES A HIGH PROFILE POSITION WITH RESPECT TO GOVERNMENT ACTION. COMPANIES MUST BE COGNIZANT THAT DUE SOLELY TO THEIR POSITION WITHIN THE INDUSTRY IT IS NOT ONLY POSSIBLE, BUT LIKELY THAT THEY WILL BECOME THE TARGET OF SOME GOVERNMENTAL ACTION, WHETHER CIVIL, CRIMINAL, OR ADMINISTRATIVE.

3. subpoenas It is also quite possible that the first notice a company has of an investigation will be service of a subpoena duces tecum on the company’s custodian of records. A subpoena duces tecum is a request for disclosure of documents. In environmental cases, the government usually seeks documents reflecting the company’s treatment, handling, storage, and disposal practices relating to certain substances. While it is often difficult to oppose production of documents in their entirety, such disclosures can be limited on confidentiality, trade secret, protective order, constitutional, and other procedural bases. Counsel should be contacted immediately upon service of the subpoena so he or she can initiate the groundwork for limiting compliance and heading off further inquiries. By virtue of its day-to-day involvement with a myriad of environmental issues, the maritime industry necessarily occupies a high profile position with respect to government action. Companies must be cognizant that due solely to their position within the industry it is not only possible, but likely that they will become the target of some governmental action, whether civil, criminal, or administrative. Managing environmental risk can reduce the chances that your company may become a target. Even in light of these reduced chances, however, companies are best advised to have a plan in place for what to do when the government is at the gate. By following some suggestions contained in this article, companies will become prepared in dealing with not only the scenarios discussed herein, but other unforeseeable events as well. MarEx

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EDITORIAL CORPORATE STEWARDSHIP

JOSEPH KEEFE Managing Editor

IT'S A PHRASE that means different things to different people. The 1984 edition of Websterâ&#x20AC;&#x2122;s Dictionary on my desk defines â&#x20AC;&#x153;stewardshipâ&#x20AC;? as â&#x20AC;&#x153;the responsibility to manage life and property with proper regard to the rights of others.â&#x20AC;? In the corporate world, it can also mean doing the right thing without regard to its impact on the bottom line. In the realm of all things â&#x20AC;&#x153;maritime,â&#x20AC;? it means much more than that. Corporate stewardship IS an executive matter. Those ideas and the policies which eventually propagate outward have to come from the top down, not the other way around. Some companies learn this lesson the hard way; still others make certain that their stewardship is manifested in everything that they do on a daily basis. Certainly there is at least one oil major that has recently taken this concept to heart, but only after 18 months of difficulties, which brought home the reality that stewardship isnâ&#x20AC;&#x2122;t just a â&#x20AC;&#x153;buzzwordâ&#x20AC;? anymore â&#x20AC;&#x201C; itâ&#x20AC;&#x2122;s a necessary part of doing business. For some maritime companies, the concept of doing the right thing, every time and as a matter of official policy, not only serves them well in the media but also in their bottom line. Probably the best example of this way of doing business can be found at Teekay Shipping, the enormously successful tank vessel operator. For years, Teekayâ&#x20AC;&#x2122;s ships and crews have set the standard worldwide for the safe, efficient and environmentally correct transport of ocean goods. As a mariner and marine consultant in a former life, Iâ&#x20AC;&#x2122;ve seen that reality many times, close up and personal, in an industrial environment. And I challenge any one of our readers to dispute it. As you read through this, our Special Edition of The Maritime Executive, youâ&#x20AC;&#x2122;ll recognize more than one instance of maritime firms exercising their corporate stewardship â&#x20AC;&#x201C; and in a variety of ways. Maybe it takes the form of investing in cadet billets for the purpose of transforming the way an entire industry trains, recruits and retains marine professionals. Or it could mean the top-to-bottom safety management of the most modern fleet of OSV vessels anywhere in the world today. Out in the U.S. Gulf of Mexico, this monthâ&#x20AC;&#x2122;s last-minute vote of the lame duck House of Representatives has breathed new hope into the possibility of significant new sources of energy for the United States. The vote of confidence expressed by the last gasp from the outgoing 109th Congress, now reconciled with the Senateâ&#x20AC;&#x2122;s version of the drilling package, will eventually be rewarded with the most environmentally safe industrial operation ever attempted, anywhere and at any time in history. The proposed drilling in the Arctic National Wildlife Refuge (ANWR) awaits a similar leap of faith from Congress. The economic welfare and national security of America hang literally in the balance. Whatever form it takes, and for whatever reason it was done, corporate stewardship also means a healthier bottom line. No, running a â&#x20AC;&#x153;greenâ&#x20AC;? company wonâ&#x20AC;&#x2122;t prevent failure in the case of bad business decisions or in the face of adverse market conditions, but it will eliminate a needless variable from your business model. Going forward, our maritime industries â&#x20AC;&#x201C; both here and abroad â&#x20AC;&#x201C; need to do more than simply meet and comply with the labyrinth of regulations spanning the IMO, the U.S. Coast Guard and a host of other smaller, but no less important, players. No one knows when or if the next maritime or energy disaster will occur. How we prevent, prepare for and respond to that challenge will make all the difference. MANAGING EDITOR JOSEPH KEEFE can be contacted at jkeefe@maritime-executive.com with comments, input and questions on this editorial, or any other piece in this magazine. MarEx welcomes and encourages your participation in our editorial content. MarEx

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1/12/07 11:23:19 AM

EXECUTIVEACHIEVEMENT

NORMAN Y. MINETA ELECTED TO HORIZON LINES BOARD

Horizon Lines, Inc. announced in late December that its Board of Directors had voted to elect former U.S. Secretary of Transportation Norman Y. Mineta to the Board. His appointment is effective January 1, 2007. Mineta will fill the vacancy created by the resignation of Admiral James Holloway (USNRetired) from the Horizon Lines board. Holloway had served on the horizon Lines board since July of 2004. Mr. Mineta is currently Vice Chairman of Hill & Knowlton, a global communications consultancy firm. Prior to that, mineta’s impressive resume includes 20 years of service in the U.S. House of Representatives and cabinet service under the last two United States presidents. Mr. Mineta was not only the longest serving Secretary of Transportation in the history of that cabinet post, but also served as U.S. Secretary of Commerce under President Bill Clinton. Prior to joining the Clinton Administration, he was vice president of Lockheed Martin. Horizon Lines, LLC is the nation’s leading Jones Act container shipping and integrated logistics company, operating 16 U.S.-flag vessels on routes linking the continental United States with Alaska, Hawaii, Guam, and Puerto Rico.

MTLA WELCOMES JOHN JAMIAN AS NEW AFFILIATE MEMBER

Maritime Transport & Logistics Advisors (MTLA) has announced the addition of Mr. John Jamian, former Acting Maritime

Administrator for the U.S. Department of Transportation’s Maritime Administration, to its select group of Affiliate Members. Currently serving as president of the Seaway Great Lakes Trade Association, Mr. Jamian is a partner in Jamian Fahmy, LLC, based in Washington, D.C. and Michigan, and has extensive experience in international transportation, trade development, and the maritime industry. Most recently, Mr. Jamian served in the Bush Administration as the Acting Maritime Administrator and Deputy Administrator for the U.S. Department of Transportation’s Maritime Administration. His responsibilities included promoting the environmentally sound integration of marine transportation with other modes of transportation, and with other ocean, coastal, and Great Lakes uses. He was instrumental in creating the Cabinet Level Committee on Marine Transportation and served as a member of the Presidents National Presidential Security Directive (NSPD) in creating our national maritime security initiative. Mr. Jamian oversaw the daily operations of the Maritime Administration, its 900 employees, and 276 ship assets under MARAD purveyance. He also co-managed the Maritime Security Program with the U.S. Transportation Command the Department of Defense. MTLA is a diversified maritime consulting group based in Ft. Lauderdale, Florida, with a highly select network of professional affiliate consultants located primarily throughout the United States, with several additional MTLA affiliates in Sweden and the United Kingdom.

MR. MORTEN ARNTZEN NAMED CONNECTICUT MARITIME ASSOCIATION 2007 COMMODORE

Mr. Morten Arntzen, President & CEO of Overseas Shipholding Group, Inc. (OSG), has been named this week as the Connecticut Maritime Association

(CMA) Commodore for the year 2007. Mr. Arntzen follows a long succession of influential maritime industry leaders as Commodore. The Award will be presented to Mr. Arntzen on March 21, 2007 at the Gala Dinner marking the conclusion of the annual Connecticut Maritime Association conference and trade exposition. The Award is given each year to a person in the international maritime industry who has contributed to the growth and development of the industry. Mr. Arntzen has been involved in the global shipping industry since 1979 and was appointed President and Chief Executive Officer of Overseas Shipholding Group, Inc. in January 2004. Before joining OSG, he was Chief Executive Officer of American Marine Advisors, Inc. (AMA), a U.S.-based merchant banking firm specializing in maritime industry merger and acquisition advisory work and corporate restructuring for a global client base. Prior to his work at AMA, he ran the Global Transportation Group for Chase Manhattan Bank (Chase), which held a $5 billion shipping portfolio. Chase pioneered the introduction of shipping companies to the high yield market and under Mr. Arntzen, was the largest arranger of shipping loans in the world. Mr. Arntzen held the same position at Chemical Bank before it merged with Chase. Mr. Arntzen set up and ran the Global Shipping Group for Manufacturers Hanover Trust Company. Mr. Arntzen is a Board member of The Seamen’s Church Institute of New York and New Jersey and is active with the American Bureau of Shipping and the American Maritime Association. Mr. Arntzen is Presiding Director of Chiquita Brands International, Inc., where he is Chairman of the Nominating and Governance Committee and a member of the Audit Committee. He holds a bachelor of arts degree from Ohio Wesleyan University and a master of international affairs degree from Columbia University. He has been an OSG Board member since 2004. Mr. Torben G. Jensen will present the 2007 Commodore Award to Mr. Arntzen at the March 21 Dinner at the Westin Hotel in Stamford, Connecticut.

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WASHINGTON INSIDER

WASHINGTON INSIDER By Joseph A. Keefe, Managing Editor When MarEx caught up with newly confirmed Maritime Administrator Sean T. Connaughton in mid-November, he had recently returned from a whirlwind tour of America’s maritime infrastructure, and the midterm elections had only just taken place. The results of November’s elections promise to set Washington on its ear when the 110th Congress arrives to take power in January. With the legislative branches now in the hands of the Democrats, the New Year could bring new meaning to the word “gridlock.” MARAD’s Administrator had actually been in place for almost ten weeks when we visited his offices. He had clearly hit the ground running and never looked back. Notwithstanding the coming turmoil on the Hill, Connaughton told MarEx that there was much to be accomplished in a short period of time. In contrast to the legislative branch, the stars and planets finally appear to be aligned at the Department of Transportation to allow for real progress on many fronts. With the coming of a new administration, he also knows that he’ll probably be replaced in January of 2009. Connaughton is optimistic about where the U.S. maritime industry is and where it is going. “I think this is a unique time for the industry. The industry overall is extremely strong. When one looks at employment and the demand for marine services, it hasn’t been this strong for a long time. If anything, we’re starting to see a labor shortage as industry expands, especially in the coastwise trades and inland rivers.” Additionally, he pointed to the pressure on the domestic maritime industry exerted by the continued deployment of our armed forces overseas. 4

“ WE HAVE TO BE FOCUSING ON HOW WE GET ACCESS TO CAPITAL TO HELP AMERICAN COMPANIES INVEST IN OUR SHIPPING, OPERATIONS AND MANAGEMENT.” While recognizing the traditional role of MARAD as the organization whose mission is to improve and strengthen the U.S. marine transportation system, Connaughton also says that the role of meeting the economic and security needs of the nation will involve a more global approach, now and in the future. More to the point, Connaughton said, “I will say that it’s becoming difficult to ascertain what is American and what is not. More and more, shipping and logistics companies are multinational, and you are seeing that in who is investing in transportation and who is actually operating and managing the ships.” Because of this, Connaughton explained, Americans are going to have to be much more flexible in how we judge and promote an American presence in the maritime industry. The recent controversy over the capitalization of Rigdon Marine’s boatbuilding program in the U.S. Gulf was “a good example of that,” he said. Beyond this, he said, “We have to be focusing on how we get access to capital to help American companies invest in our shipping, operations and management.” When asked to describe the biggest issue facing MARAD and the U.S. maritime industry in general, Connaughton said that foreign trade is expected to almost double in the next 15 years. Trying to facilitate efficient transportation for this expansion will be MARAD’s

biggest challenge. He went on to say that there are perhaps 10 U.S. ports which are becoming the primary gateways for commerce. Most, if not all, of them are located in major urban areas, experiencing what Connaughton describes as “enormous congestion, urban encroachment and environmental issues.” Furthermore, said Connaughton, “A major crisis is coming. So the top issue for the Maritime Administration is to focus on planning and attracting investment into ports, rails, pipeline and road infrastructure. It’s intermodal – yes, but much more than that. When people talk about intermodal, they think containers. We’re talking about a much broader definition of intermodal. It can mean marine to highway, or marine to pipeline.” MARAD, he says, is poised to carve out a leadership position in the business of spanning the waterfront and interfacing with all of the other modes of transportation. First and foremost, however, Connaughton says that MARAD will be reorganized to address four (really five) basic areas, as follows:

TRANSPORTATION FACILITATION:

MARAD to focus on port areas, including the “shortsea shipping component.”

COMPLIANCE:

Focusing on safety, security and environmental protection – inside and outside the government. Fostering good environmental policy and ensuring compliance.

NATIONAL SECURITY:

Ready Reserve Fleets / Maritime Security Program / Sealift Capabilities. Institutionalization (Standardization) of MARAD.

RESOURCES:

Standardizing emergency response (READ: Katrina) by involving and making MARAD assets available as part of established contingency plans in times of natural, man made or civil disasters.

TRADITIONAL MARAD ROLES:

MARAD to focus more on how to make programs work better in as many aspects of industry as possible, not neces-

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sarily dwelling exclusively on numbers of U.S. flag ships, but focusing on the American presence in the ownership, management and manning of ships. While Connaughton was clearly passionate about all of his “hot button” issues, his attention to cataloguing MARAD physical assets and capabilities for use in time of crisis was particularly notable. “Hurricane Katrina opened many people’s eyes to the capabilities of MARAD. We helped open the port of New Orleans.” Indeed, maritime academy training ships were dispatched and used as operations and housing centers. After Hurricane Rita blew through the port of Beaumont, TX, ambulances, fire trucks and other emergency vehicles rolled off MARAD ships after being sheltered there during a storm, which brought devastating winds of more than 120 mph. Connaughton sees no reason why MARAD, in the future, cannot be part of the standardized response to any number of crises. With regard to facilitation of transportation infrastructure, the new Maritime Administrator firmly believes that “shortsea shipping” will be a key part of that effort. In the near future, though, the maritime industry will learn to refer to this concept under a new name. The new acronym, as yet undecided by MARAD, will have to be, in Connaughton’s words, “more reflective of what this is. We are going to be changing the whole focus of this program.” Before any of that can happen, says Connaughton, MARAD needs to get a better handle on what is already occurring. “We need to focus on where it is already occurring, why it is successful and what we can do to build on it.” There are successes out there. Connaughton points to the Bridgeport – Port Jefferson Ferry, where the state of Connecticut trumpets the removal of more than 900,000 trucks from the roadways last year alone. This type of effort, he says, has to be better documented in order to show that the concept is working and then to foster additional growth in this way. There are those in industry who have said that MARAD does not do enough to promote “shortsea shipping” – or whatever it is called down the road

Maritime Administrator Sean T. Connaughton

“…WE’RE STARTING TO SEE A LABOR SHORTAGE AS INDUSTRY EXPANDS, ESPECIALLY IN THE COASTWISE TRADES AND INLAND RIVERS.” ADDITIONALLY, HE POINTED TO THE PRESSURE ON THE DOMESTIC MARITIME INDUSTRY EXERTED BY THE CONTINUED DEPLOYMENT OF OUR ARMED FORCES OVERSEAS.” – but Connaughton says that many such initiatives have been funded and money is being spent by DOT. When pressed for examples, he cited the Federal Transit Administration’s funding of a $56 million project for ferry operations. The Federal Highway Administration has also paid for a study on the proposed container service between Bridgeport, CT and the port of New York. He also hopes to use funds from these very same sources, after demonstrating definitive reductions of vehicles and / or people from the highways, and then direct that money to new initiatives. Investment in “shortsea shipping” can work, says Connaughton, but a direct correlation between reduction in road traffic and that investment has to be very clear. “The key to all of this is shippers themselves,” he says, “Once they buy in and provide that minimum volume, then it really makes the case for the concept.” By using the gateway ports that he alluded to earlier, Connaughton says that the international liner vessels can

call at fewer big ports, while shippers can find ways to move that cargo inland using a smaller marine asset – perhaps a tug-and-barge unit. Connaughton calls this the “hub and spoke” concept. As the gateway ports grow – and they will, says Connaughton – the need to facilitate transportation infrastructure around them will become more and more critical. Like his predecessor, Bill Schubert, Connaughton is faced with the seemingly never-ending migraine headache of disposing of a rapidly decaying Defense Reserve Fleet. More than 100 obsolete vessels, scattered amongst three fleets in Beaumont, TX; Suisan Bay, CA; and Hampton Roads, VA, languish awaiting their ultimate fate of the scrap yard or perhaps as an artificial reef. One Congressional deadline has already been missed, but Connaughton insists “MARAD is making tremendous progress. Our funding has been consistent with what we’ve gotten in the past.” Recent positive developments include the rising price of steel, which makes scrapping more attractive. MARAD even made some money on a couple of recent disposal operations. But the lack of domestic recycling capacity and the ever-changing environmental regulations have not been helpful. Still, MARAD last year disposed of more vessels and in a quicker fashion than originally anticipated. The reefing option also appears to have gained some traction recently with three vessels either sunk or sent to the shipyard for preparation for final disposition. When William G. Schubert left the Administrator’s Office in February of 2005, MARAD found itself under temporary, acting guidance from Deputy Administrators John Jamian and, subsequently, Julie A. Nelson. In the middle of all that, the nomination of a different individual was derailed in the political fire storm caused by the fallout from the DP World controversy. While Connaughton may not have been the President’s first choice to lead the Maritime Administration, it is quickly becoming clear that MARAD is in capable hands. Connaughton also knows his way around Washington. The word “politician” has become a dirty

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WASHINGTON INSIDER

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THE NEW MARITIME ADMINISTRATOR PROMISES TO BE AGGRESSIVE IN BRINGING MARAD’S EXPERTISE TO THE HALLS OF GOVERNMENT AND THEIR ASSETS INTO PLAY WHEN THE TIME IS RIGHT…THERE WILL BE THE USUAL MARAD DUTIES TO ATTEND TO: TITLE XI, THE MARITIME SECURITY PROGRAM, CARGO PREFERENCE, JONES ACT ISSUES, MARINER RECRUITMENT & RETENTION, & A HOST OF OTHERS. word in some circles, but for the first time in recent memory MARAD has an Administrator who can combine a deep maritime background with the political savvy to get things done. All of that bodes well for the domestic maritime community. Connaughton also expressed great enthusiasm about the prospect of working with the new Transportation Secretary, Mary E. Peters. His Senate confirmation preceded hers by only a few weeks, and almost all of the Department of Transportation “modes” have new administrators. Transportation Secretary Peters, already well known for her savvy in the world of highway infrastructure, should be a good match for Connaughton as he goes about the task of trying to reduce road

congestion while pushing “shortsea” initiatives. For her part, Connaughton says, “She’s made it clear that she’s going to be looking to the individual modes and the administrators to be taking an active role in transportation policy.” If Peters is looking to reduce traffic on the highway system that she’s spent much of the last twenty years to create, then Connaughton may just be the best guy to get the job done. The new Maritime Administrator promises to be aggressive in bringing MARAD’s expertise to the halls of government and their assets into play when the time is right. Along the way, there will be the usual MARAD duties to attend to: Title XI, the Maritime

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Security Program, Cargo Preference, Jones Act issues, Mariner Recruitment and Retention, and a host of others. If the stars and planets are finally aligned at DOT and MARAD to allow great things to happen, it is also true that the window of opportunity will be a narrow one. January 2009 is approaching fast in the rearview mirror. No one needs to tell a seasoned mariner like Sean Connaughton that the heavens tend to move rather quickly as the world turns. In fact, that may be the only “constant” that he can rely on as the job of reshaping MARAD goes forward. And yes, the clock is officially running. MarEx

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PACIFIC MARITIME INSTITUTE’S WORKBOAT MATE (500/1,600 TONS) PROGRAM PUTS OFFICER CANDIDATES ON THE FAST TRACK Partnering With Industry, PMI Provides the Solution to Recruitment & Retention Problems By

Joseph Keefe

THE MARITIME EXECUTIVE

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MARITIME TRAINING

AS THE PACIFIC MARITIME INSTITUTE (PMI) GOES ABOUT ITS DAILY BUSINESS OF TRAINING AND CATERING TO A WIDE RANGE OF MARINERS, THE MARITIME COMPANIES WHO SEND THEIR PERSONNEL TO PMI ALL SEEM TO HAVE A COMMON COMPLAINT. THEIR DISSATISFACTION HAS ABSOLUTELY NOTHING TO DO WITH THE QUALITY OF INSTRUCTION BEING PROVIDED BY THE PREMIER PROFESSIONAL MARITIME TRAINING FACILITY ON THE U.S. WEST COAST. INSTEAD, THE UNIVERSAL – AND VERY SERIOUS, ACCORDING TO MOST OFFSHORE SUPPLY, SALVAGE AND TOWING FIRMS – PROBLEM FACING TODAY’S EMPLOYER OF MARITIME PROFESSIONALS IS THE RECRUITMENT AND RETENTION OF QUALITY OFFICERS AND RATINGS. THE MARITIME EXECUTIVE 9

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BEYOND BELLYACHING: DEFINING THE PROBLEM The United States Coast Guard regularly tracks the numbers and demographics of the credentialed U.S. mariner pool. According to figures published by the Coast Guard’s National Maritime Center in October of 2006, the total population of credentialed mariners stands at almost 210,000. That’s up a whopping 8.7%, or 16,800 mariners, since 2001. STCW-qualified mariners increased at an even

WHAT THEY’VE DEVELOPED IN RESPONSE IS THE MOST INNOVATIVE AND COLLABORATIVE OFFICER TRAINING PROGRAM TO BE INTRODUCED IN THIS COUNTRY IN MORE THAN A CENTURY.

this country in more than a century.

INTRODUCING THE SOLUTION: INNOVATIVE IDEAS Millions of dollars have been spent to ensure that PMI’s brand new, two-year Workboat Mate Program has the best possible equipment and course curriculum. The multi-million dollar, interactive, 330-degree Full Mission Tugboat Simulator is an important part of the new curriculum, but only one of many unique components of this new and exciting training vehicle. Trunnell says, “None of this is possible without the support of our clients. This is a partnership – and perhaps this is the most important part of what sets PMI’s Mate Program apart from all the others. Partnership, collaboration, call it what you want: It adds up to a happier seaman and a happier employer.” PMI’s industry collaboration debuted in June of 2006 with a class of seven cadets and marine operators Dunlap Towing, Seacoast Towing, Sause Brothers and Western Towboat. The second class, now increased to 18 cadets, is set to kick off in January with other industry players joining in, notably Foss Maritime, Crowley, Sirius Maritime and Harley Marine Services. PMI will be running another twoyear program in May 2007 for Edison Chouest Offshore (ECO). ECO is relying on PMI to recruit, train and provide 19 workboat mates in 2009. Some of the ECO billets provided to PMI will also be used to “fast track” certain of their entry-level mariners into the wheelhouse. The cadets, coming from all over the country, stay with the same company for the full two-year program. The work platforms are as varied as the students themselves. Some work on West

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PMI’S WORKBOAT STUDENTS: CADETS AND OFFICER CANDIDATES John Scragg says that the initial idea of the program was to attract individuals who were motivated and wanted to go to sea. Unlike the traditional four-year programs, PMI isn’t interested in the 17- or 18-year olds who make up the bulk of the maritime academies’ freshman classes. Gregg Trunnell says, “A good percentage of these kids don’t necessarily know what they want right out of high school, and we are not looking for people to ‘find themselves’ on a workboat. Additionally, they can’t get their license before the age of 21, so the minimum starting age of this program is 19.” PMI is targeting three groups for the program: secondcareer persons, the dislocated worker and retired military. There’s also the younger cadet – not just out of high school, but a couple of years down the line, more mature, somewhat sure of where they want to go. PMI’s officer candidates don’t necessarily want a degree; in fact, some already have one. All were prepared to pay the $27,000 to go to school for two years while their company sponsors pay only a cadet stipend of $845 per month for their participation on board. In this way, the PMI Mates Program is unique to the tug and workboat industry: companies sponsor “cadets” in an effort to train and retain good talent. Retention and brand loyalty will hopefully be the key down the road. After firmly defining PMI’s goal of recruiting a diverse, mature student body that is first and foremost focused on going to sea, MarEx asked: who are PMI’s students? As it turns out, the demographics of the first class are as varied as their commitment to starting and continuing a career at sea is strong. They include a history teacher, movie cameraman / editor, tugboat shipyard worker, son of a port captain, son of an owner of a tugboat company and the son of a marine pilot. In essence, none has any formal or significant seaborne training. PMI is taking all of them from ground zero – just like, for example, the maritime academies – with a key difference: PMI focuses on a different demographic than what the academies target. The philosophy at PMI is that anyone serious enough to spend two years in the program is probably serious about going to sea. If they are serious about both components, then there’s a good chance they’ll stay at sea for a while. Companies need good people, good people who want to stay. 12

SOLVE THE PROBLEM: BENCHMARK THE SOLUTION The Workboat Mates training curriculum is primarily Captain John Scragg’s labor of love. Scragg comes from the British regimen, where the cadets spend a great deal of time at sea prior to earning their first license. They also focus more on the maritime aspect of learning and less on academics. In the British system, a cadet will spend two years at sea during a four-year period, whereas the typical U.S. mariner can spend as little as six months during that fouryear time span. A large component of Scragg’s life and professional experience is directly reflected in how the Mates course is run. It differs in many ways from that taught at U.S. maritime academies – and the differences are intentional. To be fair, says Scragg, “While a good deal of how we do things here incorporates much of the British system of training, we looked at programs from around the world, as well as here in the United States, and incorporated the best of all of them.” The two-year program involves time at PMI and time spent working onboard vessels. It’s a full-time program, whether the students are in class or at sea, with a total of at least 360 days clocked onboard the vessel and six months of actual class instruction time. Curriculum is necessarily tied to U.S. Coast Guard requirements, but the program exceeds USCG training standards in many aspects. John Scragg says, “The initial planning process included quite a bit of back-and-forth discussion during the formulation stages of curriculum development. It wouldn’t be fair to say that this is the first program of its kind in the country, but it may very well be the first to get companies excited about a real recruitment option.” It is important to first define the differences between PMI’s approach to officer training and that of other schools. Back in 1980, for example, the Massachusetts Maritime Academy offered just two majors: deck and engine. A graduate came away with a Bachelor’s degree and sat for a

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MARITIME TRAINING

COMPANIES NEED GOOD PEOPLE, GOOD PEOPLE WHO WANT TO STAY. Third Mate or Third Engineer license. Hopefully, the graduates went to sea – at least, that was their focus. Since then, Mass. Maritime and, indeed, all of the other academies had to change in order to survive. As the seagoing billets went away, there needed to be other training specialties, which have the marine component but not necessarily the license component. These fine academies have also gotten much more focused on academics, which really isn’t what the PMI program is all about. PMI’s Workboat Mate Program is a focused trade program. According to PMI’s own course syllabus, the program is specifically designed for the entry-level person interested in becoming an officer. It is comprised of 25 weeks of classroom / simulation training and a minimum of 52 weeks of onboard training, which will be documented in a ‘Training Record Book.’ Segmented into four distinct phases of instruction, each consisting of time at sea and classroom learning, the program culminates with a supervised license preparation seminar followed by exams given by the U.S. Coast Guard.

THE CURRICULUM: FRONT-END LOADED = BACK-END DIVIDENDS Phase 1 of the Workboat Mate (500/1,600 Tons) Program involves two weeks of indoctrination, during which the new officer candidates come in to talk about watchstanding, how the program works, and what’s expected on the boat. The sponsor-company representatives also come in at this time to discuss their policies, safety, etc. Says John Scragg, “We want them, first and foremost, to be safe. And, really, what will a history teacher know about safety on his first day at sea? Not much.” The initial, Phase 1 safety orientation is evolving every day. During the first week of the January 2007 program, for instance, Western Towboat and Crowley Maritime Services are going to provide harbor tugs for a day of orientation on the water.

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MARITIME TRAINING

THE KEY LINCHPIN: GUIDING AND ASSISTING THE CANDIDATE It is a fact that STCW requirements, implemented at the beginning of this decade, changed significantly how an AB could hope or aspire to become a Mate. Before that, it could be done by achieving the applicable sea time, taking the necessary radar training and passing the Coast Guard exams. Today, a total of twenty weeks of specific course work is required, including firefighting, flashing light, GMDSS, etc., costing as much as $18,000. All of this and more, of course, is included within the PMI Mates course. If, however, an established AB already possesses the necessary sea time, then all he or she would need is the STCW training and passing of the test. In this case, the PMI Mate class might not be the best option, and PMI therefore offers a twenty-week program for these individuals. On the other hand, for those who haven’t gotten their 14

CADETS WHO STAY WITH THEIR SPONSOR COMPANIES AFTER FINISHING THE PROGRAM WILL HAVE THEIR TRAINING LOAN PAID OFF OVER A THREE-TOFIVE YEAR PERIOD. start already, the PMI program is not only a fast-track solution to a career at sea, it’s also a verifiable bargain in terms of both time and cost. With PMI, it’s a two-year program in which the candidate is fostered and guided through the documentation process. On your own, the road to a license could take five years or more, navigating what can be a very difficult paper shuffle. As the option of trying to become an officer through the hawse pipe route becomes increasingly more difficult, PMI has sought ways to enhance the appeal of its nascent training program and methods. While all of this is not without cost, John Scragg points out that “We started off with the idea that individuals would pay, and we still like that idea because it shows commitment.” He went on to explain that PMI has a loan program available through a Sallie Mae company and portions of PMI’s program are also approved for the GI Bill. As noted earlier, sponsor companies have introduced a program whereby cadets who stay with their sponsor companies after finishing the program will have their training loan paid off over a three-to-five year period. Edison Chouest is even paying wages and creating billets for PMI trainees. “It’s a great incentive,” adds Scragg. Not everyone who applies to the program will be accepted. There are still interviews to be taken and merchant mariner documents to be obtained, drug tests and physicals to be passed. Each candidate will need a Z-Card (MMD), which requires a drug test and a background investigation, as well as a current passport and high school diploma or GED equivalent. The interview process includes a meeting with Greg Trunnell and an interview with the company which will sponsor their cadet billet.

ON THE HORIZON: MORE INNOVATION TO COME? The possibilities for PMI and the program are endless. For example, two or more classes in various stages of completion could be scheduled for the school – one at sea and the other ashore. But John Scragg says that this type of scheduling has its limitations because of the cyclical nature of the tug and workboat businesses and the small circle of companies currently involved in the program. In theory, though, if the demand were there, the scheduling of multiple classes, each staggered to coordinate alternating sea and class phases, could be done.

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MARITIME TRAINING

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RIGDON MARINE: THINKING FORWARD INTO THE NEXT GENERATION OF OFFSHORE MARINE SERVICES.

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CASE STUDY:

AS THE PETROLEUM INDUSTRY EXPANDS its search for oil and gas on every continent on the planet, they are faced with the ever-changing geopolitical and geo-economic landscape. Operating within the scope of social, cultural, economic and geological factors, oil companies are now required to provide lots of money for diplomacy, infrastructure building, environmental compliance and remediation, transportation, and investment in extraction technologies. However, in a volatile world of conflicts and wars, and governments nationalizing natural resources, the “prize” pendulum has forever swung in favor of fossil fuels. Well, at least within our lifetimes.

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CASE STUDY: BOURBON

drilling off the U.S., and for the next generation of energy support companies.

WHERE THE RUBBER HITS THE ROAD Jacques de Chateauvieux, Chairman and Chief Executive Officer of BOURBON, decided a few years ago to move his company’s fortunes from sugar manufacturing, agribusiness, and shopping malls to becoming a purely marine operator, with an emphasis in the offshore energy support markets. This was a very bold move considering his company had only entered the marine industry in 1992. But, the Frenchman had already scrutinized the offshore oil and gas exploration analysis that predicted in the short term, robust activity in the deep and ultra-deep offshore waters. He also had the occasion to meet Larry Rigdon, a well-known American offshore executive, who had architecturally developed a next-generation offshore support vessel, which could possibly revolutionize the capital asset of the industry. In late 2002, de Chateauvieux and Rigdon met in Paris

IN THE “2003-2007 STRATEGIC INVESTMENT PLAN,” HE (de Chateauvieux) PROJECTED CASH FLOW REQUIREMENTS FOR GLOBALIZATION AND DETAILED AN AGGRESSIVE VESSEL BUILDING PLAN WITH EMPHASIS IN THE OFFSHORE SECTOR. THE FOUNDATION OF THE INVESTMENT PL AN WAS BASED ON SOUND FINANCIAL INFORMATION THAT THE MAJOR OIL COMPANIES WERE SHIFTING SPENDING FROM SHARE BUYBACKS TO EXPLORATION AND DEVELOPMENT. 20

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CASE STUDY: BOURBON

BOURBON - HORIZON 2010 INVESTMENT PLAN As the 2003-2007 investment programs aggressively moved forward, de Chateauvieux soon realized the plan was ahead of its schedule in terms of revenue and fleet growth. He shifted gears in to second part of his plan and reorganized the company, starting with renaming the holding company as “BOURBON,” and then re-classified it in the “oil services” sector of the Euronext, and listed it on Eurolist Paris, Compartment A, included in the SBF 120 and the Dow Jones Stoxx 600 Indices. He divested the company from sugar manufacturing, agribusiness, and shopping malls, and directed the liquidity into a self-financed building program, which earmarked $1.7 billion for 182 new next-generation vessels, including crew boats. In February 2006, de Chateauvieux revised the 20032007 Strategic Investment Plan, and announced the company’s new “Horizon 2010” plan, which included 160 vessels for the offshore division, 16 tugs for the towage and salvage division, and six bulk carriers for the bulk shipping division. He proclaimed “Horizon 2010” as a “pure marine” financial scheme, which projected 12 percent annual growth across the board, with the offshore division providing 20 percent of the revenues. He was basing the company’s future on the oil industry’s offshore 2005 prediction that the current 6 percent deepwater oil production would increase to 16 percent worldwide by 2010. In a bold move, Frenchman had put all his “eggs in one basket,” and set out to establish a offshore conglomerate built on new technologies, partnerships and, most importantly, unwavering tenacity. 24

HE SURROUNDED HIMSELF WITH INNOVATORS LIKE LARRY RIGDON, GUIDO PERLA AND JOHN JANIK, CEO OF ELECTRONIC POWER DESIGN, INC. AND PRESIDENT OF EPD ASIA GROUP, LTD., WHOSE DIESELELECTRIC AND DYNAMIC-POSITIONINGCLASS II SHIPS WERE DECREASING COSTS AND INCREASING PRODUCTIVITY IN THE GULF OF MEXICO BY UTILIZING INNOVATIVE ELECTRIC POWER SYSTEMS INTEGRATED INTO THE DESIGN OFF THE ENTIRE VESSEL FROM CONCEPT TO COMPLETION. THE NEW CONCEPTS IMPLEMENTED SUBSTANTIALLY REDUCED COSTS WHILE INCREASING PAYLOADS. As de Chateauvieux stood on the precipice of global expansion, he understood that in order for his company to succeed in the mature offshore support industry, he would need to redefine the industry through next generation vessel technologies and with an extraordinary culture of highly trained shipboard personnel. He surrounded himself with innovators like Larry Rigdon, Guido Perla and John Janik, CEO of Electronic Power Design, Inc. and President of EPD Asia Group, Ltd., whose diesel-electric and Dynamic-Positioning-Class II ships were decreasing costs and increasing productivity in the Gulf of Mexico by utilizing innovative electric power systems that are integrated into the design off the entire vessel from concept to completion. The new concepts implemented substantially reduced costs while increasing payloads. And, certainly, Ulstein Shipbuilding, whose “Bourbon Orca” X-Bow vessel had won honors throughout Europe and was named Vessel of the Year” at the Shipbuilding, Machinery, and Marine Technology Conference in Hamburg, Germany in 2006. However, the French CEO acknowledged that his organization could not grow and succeed unless the most important element of his Horizon 2010 plan was in place; the human factor. For de Chateauvieux it was not enough to hire the most experienced mariners to run the company’s offshore fleets. Because, he knew that not all the media hype in the world could earn him new, essential contracts. It would take a new type of organization for the mature offshore marketplace; a company whose culture exuded knowledge, experience, training, and safety, along with a fleet of next-generation vessels. So, he invested in two major training centers and two highly advanced training simulators in Marseille and the Philippines to train all of his bridge personnel. He has also negotiated with EPD Asia Group, Ltd. to train his crews on full scale, in-house, fully operational diesel-electric power electronic systems at EPD’s new manufacturing and testing facility being built in Yangzhou, China, which is near Shanghai, due to be complete in May of 2007. This idea to train his engineers and electricians on full scale systems in the new facility, which is ideally located close to the shipyards building Bourbon’s vessels, insures that uninterrupted training and

THE MARITIME EXECUTIVE

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MAREXMAREXMAREX

BOURBON

MPSV Athena PSV Topaz

PSV Hermes

Salvage Abeille Liberte

THE MARITIME EXECUTIVE 25

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MAREXMAREXMAREX

CASE STUDY: BOURBON

THE MARITIME EXECUTIVE

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Some things have to be done globally. Training and communications are good examples of this. Most importantly, you have to select

THE MARITIME EXECUTIVE

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”

the right managers and empower them to do the job. If you give them the duty and not the power, then they will fail. It’s all common sense.

Executive Interview with

Jacques de Chateauvieux Chairman, President & CEO of BOURBON

IN OCTOBER, MAREX caught up with perhaps the world’s busiest maritime executive on his planned trip to New York City. Our interview with Jacques de Chateauvieux, Chairman, President, and CEO of BOURBON, provides our readers with a unique insight into this global maritime powerhouse, including where it has come from and where it plans to be by the end of the decade. Herein is our candid and informative conversation with one of the world’s most provocative executives.

THE MARITIME EXECUTIVE 29

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MAREXMAREXMAREX

EXECUTIVE INTERVIEW

“

In December of 1991 we had the opportunity to buy into a marine services operation in the south of France; 50 percent at first, and then 100 percent. It became the marine services branch of BOURBON… In October of 1998 we became a public company through an IPO, and we then had to face the scrutiny of the public market. MarEx: Please provide us with an historical overview of Groupe Bourbon and how it evolved into the new entity, BOURBON. What is your background, and what is a typical day like for you at BOURBON? JdC: BOURBON started in the Indian Ocean in the middle of nowhere, on a small island as a corporation after World War II. We were a gathering of families that refined sugarcane. After World War II, the families joined forces to rebuild the industry on our island, and it was then that we established a company that unified our assets into a corporation, originally called Groupe Bourbon. The former chairman and my father were instrumental in creating this corporation engaged in bringing raw sugar to French refiners, who were satisfying the needs of Europe. The sugarcane created value for the shareholders. When the chairman was 75 years old and my father was 65, they decided they would retire, and I was picked at twenty-eight years of age to become the new chairman. Between 1948 and today, our company has had only two chairmen. During the period from 1979 to 1989, we restructured the organization by closing small sugar factories and investing in improvements in our remaining refinery to reduce costs and better cope with the economics of sugar in Europe at that time. By 1989 it was clear that if we didn’t diversify away from sugar, the company would have severe problems and would eventually go bankrupt. Consequently, we decided to enter the retail business on Reunion Island. We then expanded the business to another nearby island and eventually into Vietnam. In Vietnam we pioneered the retail and modern shopping mall industry. MarEx: When did the company expand into Vietnam? JdC: We started in Vietnam in 1995 and built the very first large shopping mall, called the “Hypermarket.” The shopping mall concept was very new to them at that time. It was so successful that we built a few more malls. These malls became quite a large operation, and they remain so today. Previous to this we had concluded that limiting our company’s asset base to the Indian Ocean could be detrimental, so we began looking outside the island for businesses we could run and establish on a broader financial and geographic basis. In December of 1991 we had the opportunity to buy into a marine services operation in the south of France; 50 percent at first, and then 100 percent. It became the marine services branch of BOURBON. Additionally, we 30

”

THE MARITIME EXECUTIVE

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“

MAREXMAREXMAREX

EXECUTIVE INTERVIEW

I think that being a shareholder myself creates confidence. I started buying shares of BOURBON in 1980; and all the shares I own now, I bought. A CEO that has bought his own shares instills stability in the management system.

”

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MAREXMAREXMAREX

EXECUTIVE INTERVIEW

“

”

THE MARITIME EXECUTIVE

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PMI

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MAREXMAREXMAREX

EXECUTIVE INTERVIEW

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THE MARITIME EXECUTIVE

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Seabulk Towing: Providing Service Excellence Through Safety

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MAREXMAREXMAREX

EXECUTIVE INTERVIEW

“

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THE MARITIME EXECUTIVE

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MAREX

MANNING

Servicing the Mariner of the New Millennium

Joseph Keefe

The U.S. Coast Guard Revamps the Credentialing Process for the Growing and Changing Demographics of the U.S. Merchant Mariner GOING TO SEA has never been so difficult or complicated. The reasons why are pretty self-evident, once you take a look at all that has transpired in the world of marine commerce over the last thirty-five years. Surprisingly, and in an age where growing numbers of shipping companies – both deep-sea and brown water – complain about the lack of qualified mariners and the issue of retention of good ones, the total available pool of credentialed U.S. mariners is actually growing at a substantial clip. But as Bill Chubb, Chief of the U.S. Coast Guard’s Mariner Records Branch, will tell you, “The raw statistics do not tell the whole story.”

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AS 2007 BEGINS, it is easy to look back on all the

done. Today’s documented U.S. mariner pool is depicted in Table B. changes in mariner credentialing requirements that have Over the past two years, the Coast Guard has published occurred since the end of the Vietnam War. On the grand detailed data on the size and demographics of the U.S. scale of things, these variables arguably add up to a cumumariner pool in Proceedings, the Coast Guard Journal of lative disruptive event, which rivals the invention of the Safety & Security at Sea. Another tabulation is planned Internet or putting a man on the moon. Despite all of for 2006. The U.S. Maritime Administration, in coordinathis, the Coast Guard says that the number of credentialed tion with the DOT’s Bureau of Transportation Statistics, mariners continues to grow in the face of a rapidly shrinking domestic deep-sea fleet. As we look for clues why, the fleet numTABLE A – U.S. FLAG OCEANGOING, DEEP DRAFT, SELF-PROPELLED TONNAGE 1 bers are a good place to start: Since MarEx last visited the TIME PERIOD / ERA TOTAL SHIPS TOTAL TANK VESSELS makeup and numbers associated WW II 644 260 with the U.S. flagged merchant KOREA 1,268 455 fleet, the fleet has dwindled, as VIETNAM 952 279 expected, by more than twenty POST-VIETNAM 578 288 percent. The domestic tanker fleet has fared no better, primar1997 302 145 ily because of the ravages of OPA 2002 257 92 90 phase-out dates. As MarEx 2002 (All vessels – Commercial / RRF / MSC) 479 134 goes to press with this issue, 2006 197 75 another 19 U.S. hulls are looking 2006 (All vessels – Commercial / RRF / MSC) 360 * ** at drop-dead dates, all looming within the next six years. There 1 Statistics on current fleet numbers from IAW, MARAD and other industry data. is good news: According to one commercial consulting database (ColtonCompany.com), as many TABLE B – DOCUMENTED U.S. MARINER POOL as of 10/6/2006* as 26 new tankers could be built in the next ten years. Despite all TOTAL STCW CONTINUITY the new shipbuilding activity, MARINERS QUALIFIED CREDENTIAL though, mariners can look for the TOTAL POPULATION 209,800 49,900 4,690 domestic fleet to erode further. OCEAN-GOING CREDENTIALS 105,000 41,400 Replacement of current assets, even under ideal conditions, will MMD ONLY 65,900 15,900 not equate to a one-to-one ratio. LICENSE ONLY 102,100 5,800 Ships are getting larger and more BOTH 39,100 25,500 efficient; hence the replacement UNLIMITED DECK LICENSES 9,200 7,100 910 of deadweight capacity will not UNLIMITED ENG LICENSES 11,500 8,800 900 necessarily equate to more hulls QUALIFIED DECK RATING 22,200 15,300 150 in the future. Just four years ago, MarEx QUALIFIED ENG RATING 5,300 4,100 40 (www.maritime-executive.com/ (*) Figures courtesy of U.S. Coast Guard NMC; William Chubb, Chief Mariner, Records Branch. the_blame_game) provided analysis as to the makeup and size of conducted two mariner surveys in calendar years 2001 the U.S. merchant mariner population in the face of growand 2002. Since then, however, no further formal data ing alarm about possible manpower shortages. So far the gathering has been done. MARAD officials told MarEx in crisis hasn’t developed, but there are clear trends that warNovember that they were gearing up for another statistical rant closer scrutiny. According to U.S. Coast Guard data, the size of the U.S. credentialed mariner pool has increased survey but that any new efforts would not necessarily take the form of past efforts. As MarEx went to press, MARAD by almost 17,000 mariners, or 8.7%, over the course of was just beginning to provide details of their new Mariner the last five years. In addition, the quality of this data has Outreach program. improved measurably since we last attempted to benchWhile the increased mariner numbers are encouragmark the composition and direction of American mariners, and the Coast Guard has worked very hard to get that ing, analysis of the raw data provides real basis for concern

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MANNING

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MANNING

TABLE C – MARINER TRENDS August ‘01

AS OF 10/6/2006

TOTALS – ALL Differences

STCW Differences

TOTAL

WITH STCW

TOTAL

WITH STCW

Gain / Loss

PCT.

Gain / Loss

PCT.

TOTAL POPULATION

193,000

28,442

209,800

49,900

16,800

8.70%

21,458

75%

26,095

59%

DEEP-SEA CREDENTIALS

104,000

105,000

41,400

1000

0.96%

15305

MMD ONLY

73,000

65,900

15,900

-7100

-9.73%

15900

LICENSE ONLY

85,000

102,100

5,800

17100

20.12%

5800

BOTH

35,000

39,100

25,500

4100

11.71%

UNLIMITED DECK LICENSES

8,721

4,506

9,200

7,100

479

5.49%

UNLIMITED ENG LICENSES

9,680

1820

18.80%

2594

58%

4,843

11,500

8,800

3957

82%

QUALIFIED DECK RTG.

8,545

22,200

15,300

6755

79%

QUALIFIED ENG RTG.

2,586

5,300

4,100

1514

59%

(*) Current Coast Guard data as compared to data compiled from combined MARAD and USCG sources in 2002.

MARINER CREDENTIALS: FAR-REACHING CHANGES / CLEAR GOALS / UNCERTAIN OUTCOME Working closely with the General Services Administration (GSA), the U.S. Coast Guard is on track to move the National Maritime Center (NMC) to far-flung Martinsburg, WV. Currently domiciled in Arlington, VA, a stone’s

THE MARITIME EXECUTIVE

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part of centralizing operations at throw from Coast Guard headMartinsburg. The Coast Guard plan quarters, the NMC oversees the calls for keeping all of the current 17 Regional Exam Centers (REC), RECs open for business. REC perwhich in turn issue credentials, test sonnel would remain the primary and generally cater to the nation’s point of contact for the mariner almost 210,000 mariners. Aside from customer with the goal of ensurthe fact that Senator Robert Byrd (Ding that the credential applications, WV) wants it there, the Coast Guard when they are sent to Martinsburg, insists that there are compelling reaare in compliance with Coast Guard sons to begin the centralization of requirements. Captain Kranking says the mariner credentialing process the Coast Guard will benchmark this in West Virginia as soon as possible. efficiency record and, at those RECs Captain Frank Kranking, Mariner where performance is less than satisLicensing and Documentation Profactory, changes will be made. gram Coordinator at the National In West Virginia, the Coast Guard Maritime Center, says that the move intends to efficiently organize the to West Virginia has three primary NMC into specialty shops, each objectives. Simply put, he says, “The designed to achieve time and cost move involves security, efficiency savings at a particular job. The most and consistency.” He adds that the frequently mentioned task expected move could be completed as early as Andy Hammond Executive Director of the Boston Pilots Association. to reap big dividends in this way is August of next year. the use of the merchant mariner Kranking explains that, over time, document (MMD) machines. These complex machines are new regulations and laws have made the licensing and creused, on average, six times a day in each of the 17 RECs. dentialing process more difficult, both for mariners and The daily, 100+ transactions which prompt generation the Coast Guard personnel / contractors who service these of an MMD are each unique, and there are any number customers. For too many years, this effort was carried out of people who use the machines daily, some less compeusing the Coast Guard’s proud mantra of “doing more tently than others. The WV “credential production team” is with less.” Now, says Kranking, “Funding matches the task expected to eventually produce a more standardized prodat hand.” Taking it a step further, Kranking added, “The uct in less time and in a more cost-effective manner. program has the next highest priority in the Coast Guard Initially, this fast track, aggressive program hopes to today, second only to Deepwater. We have the funding and centralize processes using older, established techniques. the support from Congress to get this done.” “Eventually, the introduction of new technologies should The new effort to centralize the mariner documentation yield significant advantages,” says Kranking. He points to process and move it to a new location will not come withthe coming reality of a “help desk” call center, manned out a cost. Kranking says that the NMC would have had to by his “marine information team.” The 25-member team move soon in any event, so some of those costs were not will operate on an extended hours schedule, attempting to unexpected. The human costs associated with the move deflect fears that the personal touch of the local REC will are not yet clear, but Kranking admitted that (based on be lost in the new regime. data derived from similar moves in the mid-nineties) there would be a loss of experience and expertise at NMC and that perhaps only 30% of the current staff was expected to OUTSIDE LOOKING IN: A MARINER AND USCG DOCUmake the move to West Virginia. MENTATION EXPERT WEIGHS IN Some critics call the expected attrition rate dangerously Andy Hammond is the Executive Director of the Boston high in the face of what is being characterized as sweeping Pilots Association. In a former life and until just recently, changes at every level of NMC. Kranking responds by sayhe was the Chief of the Boston, MA REC, where he worked ing that the focus of NMC will change from being mainly for almost eight years. Hammond is also a licensed maria management or policy-oriented force to one which ner with more than a few years spent as a customer of the largely handles credentialing operations. As such, the shift very same system he helped to administer. He’s not all that in personnel and numbers is expected. Beyond this, he says comfortable with the direction in which the Coast Guard that the NMC headcount will increase from perhaps 90 is headed as it tries to reform a credentialing system that today to as many as 260 employees once the Martinsburg some say is broken and most knowledgeable observers facility is up and running. (including Hammond) agree needs to be overhauled to Capturing operational efficiencies may be the easiest meet growing customer demands and a regulatory environ-

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MANNING

the MLD program.” Currently, the 17 REC Chiefs work for 17 different Sector Commanders. To Andy Hammond’s way of thinking, NMC is the program manager and, through the normal chain of command, it could implement strong and clear guidance on best practices. David Kranking disagrees. He says that firm technical and document standards have been in place for a long time, yielding mixed results and less than consistent performance from the individual RECs. Rather than lose the personal, one-to-one customer contact that Andy Hammond feels will soon be a thing of the past, Kranking maintains that “The individual RECs will now be free to focus on customer service, while operations and production will be centralized in West Virginia.” Kranking is firm in his belief that this will build quality on the front end of the process. In the end, Kranking and Hammond certainly agree on one thing: The system needs to be improved. Centralization may be the key to getting some parts of the equation into place, but it is here that their points of view diverge. As an experienced Coast Guard professional, Hammond has firm opinions on how to accomplish the common goal, and he laid out a multifaceted plan to accomplish just that: Note: MarEx has inserted USCG responses to some of these proposals, marked by an asterisk (*). ■ ISO 9001-2000: The IMO requires each Party to institute a QSS for its “certification” program. The Coast Guard has chosen ISO 9001-2000 as the system standard which the MLD program is to achieve. The key to ISO 9001-2000 compliance is clear and concise guidance from management, which states it is on board AND ready to ensure that everyone involved in the process follows the standard. Require ALL Senior Inspectors of Personnel to be certified as lead ISO 9001-2000 auditors and incorporate the ISO 9001-2000 standard across the MLD program and the REC’s. ■ AMENDING TITLE 46 USC AS NEEDED: Follow up with 46 CFR parts 10, 12 and 13 to incorporate the STCW-95 amendments and simplify the license structure. Don’t use the “it takes forever to change a regulation” excuse! ■ TRAIN THE REC PERSONNEL: Establish a standard / national training program to educate REC personnel about the maritime industry

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58553 Intershield300 fp(bled)

19/9/06

12:09

Page 1

www.international-marine.com

, International and Intershield are trademarks of or are licensed to Akzo Nobel

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MANNING

■

One credential is enough: the decision process in place locally. (*) The Coast Guard already make it so and change the envisions such a plan, augmented by law to allow it. Too many the electronic filing / archiving of all files. Kranking also says that resources (time / energy / mariner on-line paying of user fees is coming, funding) go into issuing as is the ability of each mariner to his or her records and applicamore than one credential view tion status through the Coast Guard’s to many mariners. Cut- “Homeport” Web site. ting it down to one will FORM FOLLOWING FUNCTION reduce the workload and – THE PERFECT ANALOGY: better or worse, the Coast Guard the backlog. Establish an For is well on its way toward impleon-line application pro- menting the planned centralization of the MLD command structure. cess and review procesome aspects of the produre…keep the decision While gram were inevitable, other parts, the removal of local REC process in place locally. including authority, remain controversial.

and to efficiently operate the REC. This would include not just learning the regulations but how to process applications. Standardize the service each mariner receives at ALL 17 RECs. Hammond worries that a mariner who might not be physically fit (or with other questionable issues) might slip under the radar of the system because his / her paperwork is in order. Conversely, he says that a mariner who is in full compliance might not make the grade because he or she doesn’t look good on paper from 1,500 miles away. ONE CREDENTIAL IS ENOUGH: Make it so and change the law to allow it. Too many resources (time / energy / funding) go into issuing more than one credential to many mariners. Cutting it down to one will reduce the workload and the backlog. (*) Frank Kranking envisions a time in the very near future when the mariner will be down to just one Merchant Mariner Credential (MMC), combining the current need for a license, MMD and STCW credentials. The proposed TWIC card would be a separate component, making two cards necessary. Timing and exact specifics of the TWIC credential are still uncertain, but Kranking says that the first issuance of the combined MMC would start about 18 months after the final TWIC rule comes into effect. PRIORITIZE WHO NEEDS A CREDENTIAL: Establish a “standard” process time for professional mariners as opposed to non-commercial individuals. A professional mariner would be defined as any individual who needs the credential as a condition of employment and can document same. Non-professionals would be all others who hold a credential but don’t need it for employment. This would equate to better service for sea-going and brown water mariners who make a living on the water. ESTABLISH THE NMC “STRIKE TEAM”: The team would travel to each REC twice annually for a three-day minimum audit, followed by corrective and training exercises. (*) Kranking says that local RECs will be benchmarked on documentation preparation performance by a “Quality Assurance Team” from West Virginia. TECHNOLOGY: Establish an on-line application process and review procedure. Allow REC Chiefs to access on-line records from individual RECs, based on standard protocol, but keep

MarEx

THE MARITIME EXECUTIVE

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Untitle

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MarEx 17 011007.indd 45 Untitled-3 1

1/12/07 1/12/07 11:24:56 9:59:59 AM

Environmental Risk Management

What To Do When The Government Is At The Gate Written by

Timothy C. Cronin & Matthew J. Nasuti

THE MARITIME EXECUTIVE

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IF SO, THIS article will be of help

contaminants. Under this Act, EPA regulates multi-county areas under a broad state implementation plan and specific stationary and mobile sources of emissions under its permitting program. The Act also mandates the phase-out of ozone-depleting substances. Civil penalties may be imposed for violation of the Act. FEDERAL HAZARDOUS MATERIALS TRANSPORTATION LAW: The Federal Hazardous Materials Transportation Law (“Federal Hazmat Law”) establishes requirements for the use of shipping papers, markings, labels, placards, and approved packaging for hazardous materials, as well as training, security planning, and recordkeeping for the transportation of hazardous materials, including radioactive cargo. Civil penalties may be imposed for violation of the Federal Hazmat Law.

I. WHAT IS AN ENVIRONMENTAL OFFENSE? At its most fundamental level, an environmental offense is an act or omission in violation of a law relating to the environment, punishable by civil penalty, fine, imprisonment or both. With the onset of the “protect the environment at all costs” mentality, both the federal and state legislatures have enacted comprehensive environmental laws designed to effectively combat environmental offenses. Enforcement of these laws often results in federal, state, and local agencies proceeding civilly, criminally, and/or administratively against violators. It must be emphasized that those who must comply with these laws are presumed to know and understand the universe of statutes and regulations. This is a difficult task in that the statutes and regulations are often vague or susceptible to inconsistent interpretations. For example, the United States Environmental Protection Agency considers silver to be toxic, a hazardous substance, and potentially a hazardous waste despite the fact that silver is valuable in fighting disease. A brief overview of some of the “bread and butter” civil, criminal, and administrative statutory schemes under which federal, state, and local government agencies prosecute environmental wrongs follows. A. FEDERAL CIVIL STATUTES

CLEAN WATER ACT / RIVERS & HARBORS ACT (aka REFUSE ACT):

These Acts are the primary federal statutes that penalize unauthorized discharges or releases of oil, debris, refuse, contaminants and toxic materials into navigable waterways. The Clean Water Act also penalizes certain discharges in the Exclusive Economic Zone and contains provisions that regulate and authorize certain discharges through a permitting process. Civil penalties may be imposed for violation of these Acts. CLEAN AIR ACT: The Clean Air Act regulates the release of a designated list of hazardous and toxic air pollutants and

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RISK MANAGEMENT

B. FEDERAL CRIMINAL STATUTES The above listed environmental statutes, in addition to other environmental statutes, contain criminal enforcement provisions. For example: CERCLA: Under CERCLA, failure to notify or report releases of hazardous substances allows for fines of up to $250,000 for individuals ($500,000 for organizations) and/or imprisonment for up to three years (five years for a second offense). RCRA: RCRA provides for criminal penalties for the knowing violation of any of its provisions. Fines up to $50,000 per day of violation may be imposed, imprisonment of up to five years, or both. Violations involving the knowing endangerment of another could result in a fine of up to $1 million, imprisonment for up to 15 years, or both. TSCA: TSCA also provides criminal sanctions for knowing or willful violations of its provisions. Fines range up to $25,000 per day and imprisonment of up to one year, or both. CLEAN WATER ACT: Knowing violations of this statute result in fines ranging up to $50,000 for each day of violation and imprisonment for up to three years. These penalties double for the second offense, and substantially higher penalties (up to $1 million in fines per violation, and up to 15 years imprisonment) are available for violations that involve knowing endangerment. RIVERS & HARBORS ACT (aka REFUSE ACT): Penalties for knowing violations range up to $25,000 per day of violation and up to one year in prison. CLEAN AIR ACT: Penalties for knowing violations range up to $250,000 per violation for an individual ($500,000 per violation for an organization) and imprisonment for up to five years. As under RCRA and the Clean Water Act, substantially THE MARITIME EXECUTIVE 47

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higher penalties are available for violations that involve the knowing endangerment of another. FEDERAL HAZMAT LAW: Criminal penalties under the Federal Hazmat Law apply to “reckless” and “willful” violations as well as “knowing” violations. The maximum penalties for an individual are up to $250,000 in fines and/or five years in prison. If a hazardous materials offense results in death or bodily injury of a person, the maximum prison term is ten years. For corporations, the maximum fine is $500,000 per violation.

C. STATE CIVIL STATUTES A company must be familiar with the particular laws of the state or states in which it does business. It is virtually impossible to examine the laws of all states within the space allocated for this article. An examination of California’s environmental statutes, however, whose progressive laws often serve as templates for states legislatures of other jurisdictions drafting environmental regulations, provides a representative flavor for the substance of such laws. California’s Health & Safety Code, as is the case with many state laws, provides for a myriad of offenses subject to civil fines and/or penalties. For example, the Code imposes a civil penalty for intentionally or negligently making false statements on applications, reports, labels, manifests, and permits required to be kept under the state’s Hazardous Waste Control Act, or intentionally and negligently disposes or causes the disposal of extremely hazardous waste. Violators are subject to a civil penalty of up to $25,000 for each day of violation. D. STATE CRIMINAL STATUTES Perhaps the most lethal arrows in the government’s prosecutorial quiver are individual state’s criminal environmental laws. While federal criminal statutes provide prosecution, in practice, the bulk of prosecutions are accomplished under the auspices of state law. Like its civil counterpart, California’s criminal environmental statutory framework serves as a representative sample of most state criminal environmental laws. General examples of California’s environmental crimes include the unlawful release of pollutants into the air (Health & Safety Code section 42300 et seq.), into the water (Fish & Game Code section 5650), or onto the land (Health & Safety Code section 25100 et seq.). One who fails to report a hazardous waste release or threatened release, moreover, also violates the law even if innocent of causing the release. Health & Safety 48

E. FEDERAL/STATE ADMINISTRATIVE REMEDIES A very effective resource that both the federal and state agencies possess is the use of administrative remedies to enforce environmental laws. It is virtually impossible for a facility to comply with all environmental laws. Federal and state agencies, although they will not admit it, know this. Yet some failures to comply are more egregious than others. For those instances where full blown civil and/or criminal proceedings, at least at the outset, cannot be justified, federal and state agencies will often proceed administratively. The most common toll utilized by these entities is to issue what are known as Notices of Violation (“NOV’s”) and/or Reports of Violation (“ROV’s) to a suspected violator. Issuance of NOV’s and ROV’s allow the agencies to monitor a company’s compliance with environmental laws while providing the facility with an opportunity to correct any problems. There is always an opportunity, of course, to challenge the issuance of the NOV or ROV via an administrative hearing. Companies must be cautioned, however, that issuance of a NOV or ROV is often the first step toward a much broader investigation geared to civil and/or criminal proceedings. It must be emphasized that the universe of statutes and regulations is immense and difficult to understand. More importantly, perhaps, is the almost impossible task of complying with these statutes and regulations. The government is well aware of this fact. As such, the government, pursuant to authority delegated under each of the foregoing laws, has the power to shut down any facility that is deemed to be a chronic violator of the particular law or is engaging in activities that pose a substantial and imminent threat of harm to the public. Companies must be aware of this potential course of action by government authorities and obvious implications on the

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II. THE JOINT TASK FORCE APPROACH TO ENVIRONMENTAL ENFORCEMENT For enforcement purposes, environmental offenses traditionally have been neatly categorized into either civil, criminal, or administrative actions. Now, buoyed by a public climate and political correctness of protecting the environment at all costs, federal, state, and local authorities are aggressively targeting corporations and their officers and employees, even “mom and pop” businesses, for criminal, civil, and administrative proceedings. Given the inherent crossover between these proceedings, multiple federal, state, and local agencies working in conjunction as a joint task force is quickly becoming the vehicle of choice to environmental enforcement. In California, for example, this joint task force interaction has surfaced in many instances. First, federal and state NOV’s alleging violation of hazardous waste disposal laws were issued to the master lessor of Hunter’s Point Naval Shipyard.

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or her government position. With facility. The State Compensation the reduced threat of lawsuits, an Insurance Fund asserted violation AN ENVIRONMENTAL REGULAemployee, in theory, may more effiof the worker’s compensation laws. TOR, TYPICALLY, BELIEVES HE discharge the duties of his Parenthetically, as if this were not OR SHE IS ON A HOLY CRUSADE ciently or her position. While significant enough, toxic tort, workers compenTO PROTECT THE PLANET. WITH legal inroads have been made into sation, and wrongful death actions eroding qualified immunity, it still were also filed against the owner by THE POWER OF THE GOVERNremains the sword and shield of additional individuals. MENT AND JUSTNESS OF HIS governmental environPurely environmental statutes and CAUSE BACKING HIM, THE REG- individual mental crusaders. regulations may be only the tip of ULATOR EITHER READILY DISthe iceberg in terms of enforcement MISSES OR CHOOSES TO IGNORE III. THE RESPONSIBLE CORPOactions. More traditional civil and criminal allegations often find their RATE OFFICE DOCTRINE HIS LACK OF “REAL WORLD” way into the government’s case. For As a general rule, corporate directors, AND TECHNICAL EXPERIENCE Example, environmental violators and officers are exempt from personTO ATTAIN EQUITABLE RESOLUoften face allegations of conspiracy, al liability for claims, civil, criminal, TION OF CASES. HE OFTEN HAS and administrative, arising out of the making false statements, fraud, etc. with separate government agencies acts of the corporation that he or she A FINANCIAL INTEREST IN THE responsible for prosecuting the pardid not authorize. Corporate direcOUTCOME… ticular offense. tors and officers must be aware, howA company should never underestimate an environmental ever, that the current trend is to find such liability provided crusader’s ability to over plead his or her case. After all, his that certain factual findings are made. or her actions are undertaken in the course of protecting the environment. A. CIVIL LIABILITY All of this begs the question, “How and why are these Almost all federal and state environmental statutes impose agencies able to get away with such conduct?” The answer liability on “persons.” Courts have interpreted “person” to lies somewhere between understanding who the particular include directors or officers under essentially two theories. government regulator is and the immunity they enjoy in their Liability may be imposed under a director or officer notwithposition as government officials. standing the corporate structure based on (1) the director or officer’s active participation in unlawful activities and/or An environmental regulator, typically, believes he or she is (2) the director or officer’s failure to control or prevent the on a holy crusade to protect the planet. They are often zealous in this goal and all targets are perceived as the enemy. With the wrongful conduct. Courts examine several factors to determine whether or power of the government and justness of his cause backing him, the regulator either readily dismisses or chooses to ignore not a director or officer’s participation is sufficient to impose his lack of “real world” and technical experience to attain equi- individual liability. For example, in the context of a claim of unlawful disposal, a court looks at actual participation in the table resolution of cases. He often has a financial interest in wrongful act, participation in the company’s waste disposal the outcome of the case. Laws in many states provide for porpractices demonstrating how and where waste should be tions of fines and penalties collected to be directly allocated disposed, participation in negotiations for the disposal site to the particular entity collecting such fines. He has limited for company produced wastes and participation in the manofficial legal authority. However, in practicality, courts defer to agement and/or arranging for the disposal of the hazardous his actions in the name of health and safety. He often has no waste. The common denominator among all these factors is compunction about issuing press releases labeling a company that the greater the personal involvement, the more likely it is a polluter. Such labels can be damaging to business and goodthat a court will find the corporate director or officer personwill, promoting lawsuits by a misinformed public. ally liable. What allows the government to enjoy such broad discretion? Government employees enjoy what is called qualified Additionally, courts look to the following factors to deterimmunity. Qualified immunity is a concept that, to a large mine whether a director or officer’s control or failure to predegree, insulates a government employee from transgressions vent unlawful conduct is sufficient to impose personal liability. made with the course and scope of his or her employment. These factors include, having responsibility for the facility Unless the government employee’s conduct is particularly at which the violation occurred and supervising it, personal egregious, the employee is not subject to a lawsuit for daminvolvement in operation and decision making processes at ages resulting from his acts. He is simply not accountable. the facility where the violation occurred or if control of the The theory behind qualified immunity is that government offending activity is in the individuals direct line of responsiofficials must not be impeded in discharging the duties of his bility and this capacity to control is coupled with some act or 52

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B. CRIMINAL LIABILITY All major federal and state environmental statutes contain provisions for criminal penalties that are triggered by “knowing” violations of their provisions as opposed to simply negligent violations. For example, knowingly transporting listed hazardous waste to an unpermitted facility and knowingly disposing of hazardous waste. Prosecutors encounter little trouble in establishing this knowing element against the particular individual taking the specific action resulting in the violations. Satisfying this element against an individual cor-

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IV. PRACTICAL TIPS Managing potential criminal, civil, and/or administrative environmental risk falls into essentially two categories: (1) preventing one’s company or self from becoming a target of the government; and (2) the necessary steps to be taken in response, should a company and/or individual become a target.

1. PREVENTION Technically, a civil or criminal environmental proceeding is initiated when the governmental agency files a document alleging wrongdoing, whether by indictment, complaint, NOV, etc. But the adversarial process actually begins when an agency undertakes an investigation of a particular company. It is, therefore, critical to risk management that a company give no reason for a particular government agency to commence an investigation in the first place. Moreover, what often appears to be just a simple civil compliance problem often blows up into a joint task force prosecution as discussed above. In this regard, the proverbial “an ounce of prevention is worth a pound of cure” cannot be overstated. Whether or not and to what extent a company should perform a comprehensive audit of its environmental program must be determined on a case-by-case basis. Although audits are useful for assessing a company’s compliance with environmental laws and regulations, they provide valuable fodder for government agencies prosecuting a company. Often an audit may reveal dispositive evidence of a company’s noncompliance with environmental laws and management’s knowledge thereof. Undoubtedly, government officials will seek production of audits via subpoena. Simply stated, a company must weigh the pros and cons of conducting audits with an eye towards these considerations. 54

water, and soil? ■ Waste Minimization Program: Does a company program

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2. RESPONSE Once a company becomes the target of governmental action, via informal inquiry or a more formal procedure like service of a search warrant or subpoena duces tecum, a company must have cogent response polices and procedures in place that will thwart or minimize the government’s investigation. The following are some tips on how to deal with the tools most commonly used by the government in the early stages of civil, criminal, and administrative actions. A. INFORMAL INQUIRES Often the initial fact gathering tool utilized by the government in preparing for criminal, civil, or administrative proceedings is informal inquiries through employee interview or requests for documents. Given that it is likely these inquires will lead to some governmental action, it is a good idea to utilize legal and technical personnel to disseminate the information that the government seeks. Remember,

B. SEARCH WARRANTS There is no mistaking that the adversarial process begins in earnest with the service of a search warrant by the government. The service of a warrant is often the first official notice that a company and/or individual receives indicating they are the target of an investigation. It is also the first official opportunity that an individual or company has to affect the outcome of the investigation via assertion of a full panoply of constitutional rights. A brief discussion of THE MARITIME EXECUTIVE 55

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the type of searches that may be conducted and responses thereto is instructive.

OBTAIN COPY OF WARRANT The search may be conducted under a traditional criminal or administrative warrant or under a statute that authorizes warrantless searches. The type of warrant depends on how much information the government has obtained prior to the search. Each type of warrant requires a different legal showing to be valid. Regardless, upon service of the warrant, the government will often seek samples of wastes and documents identifying the wastes, the waste process used, the target’s knowledge of the hazardous nature of the waste or practice used along with the names of knowledgeable employees who could be questioned later. Always request a copy of the warrant.

DO NOT CONSENT TO THE SEARCH It is essential that a company deny the authorities the material they wish to seize or at least limit the effectiveness of the search. Without being unnecessarily adversarial, the government must be informed that the company or individual does not consent to the search. This preserves the assertion of certain constitutional rights that may vitiate the validity of the search and assist in the suppression of any evidence obtained pursuant thereto. Notwithstanding, the government will still conduct the search. A warrant does not require anyone, employees or otherwise, to talk to authorities. It does not require anyone to say where anything that the authorities is seeking is located. The key is to make it clear that the search is being conducted without the consent of the target and not to assist in ways the target does not have to. MONITOR SEARCH WITHOUT INTERFERING It is important to monitor the process of the search without interfering. If samples are being taken, the company should try to have employees familiar with sampling procedures shadow the sampling team. Splits of samples taken should be requested and care should be taken to follow proper procedures to ensure the evidentiary integrity of the splits. Notes should be taken on such matters as places searched, files opened, and samples seized. These steps will lay the groundwork for later attacks on the government’s evidence. EMPLOYEE CONSIDERATIONS Once the initial search is completed, the authorities will either conduct further searches or begin interviewing employees. These interviews create the single greatest danger of producing 56

3. SUBPOENAS It is also quite possible that the first notice a company has of an investigation will be service of a subpoena duces tecum on the company’s custodian of records. A subpoena duces tecum is a request for disclosure of documents. In environmental cases, the government usually seeks documents reflecting the company’s treatment, handling, storage, and disposal practices relating to certain substances. While it is often difficult to oppose production of documents in their entirety, such disclosures can be limited on confidentiality, trade secret, protective order, constitutional, and other procedural bases. Counsel should be contacted immediately upon service of the subpoena so he or she can initiate the groundwork for limiting compliance and heading off further inquiries. By virtue of its day-to-day involvement with a myriad of environmental issues, the maritime industry necessarily occupies a high profile position with respect to government action. Companies must be cognizant that due solely to their position within the industry it is not only possible, but likely that they will become the target of some governmental action, whether civil, criminal, or administrative. Managing environmental risk can reduce the chances that your company may become a target. Even in light of these reduced chances, however, companies are best advised to have a plan in place for what to do when the government is at the gate. By following some suggestions contained in this article, companies will become prepared in dealing with not only the scenarios discussed herein, but other unforeseeable events as well. MarEx

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