September 2007
SEACOR Environmental Services Local Service | Global Strength
(From Left) Tim Perkins, CEO, The O’Brien’s Group
Ran Blank, CEO & President, SEACOR Environmental Services Inc. Neil Challis, President, SES International Ltd. Steve Candito, President, National Response Corporation
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contents 09.07
113 Bulkhead cleanup with NRC
Case Study :: SES
20
A look into the workings and history of SEACOR Environmental Services
6
Editorial On the Edge of the World by Tony Munoz
MarEx: Off the Clock Off the Clock But Still Plugged In
40
by Joseph Keefe
by marex staff
Executive Interview
28
8
Washington Insider
Ran Blank, Chairman, President and CEO of SEACOR Environmental Services
Reviving the “Bureau of Marine Inspection and Navigation”
by marex staff
by Larry kiern
14
The Jones Act Goes Global
45
The Jones Act Goes Global: Or Does It? by David w. Brill, esq.
A Crisis Management Paradox
Disaster Response
Big Oil, the Environmentalists, and a Crisis Management Paradox
Leadership in Time of Crisis
47
by michael canic and brett reagan
by tony munoz
Protection Against Pollution Beyond the Soiled Beach by Marex Staff
54
Leading the Way Ballast Water Management
36
by joseph keefe
Marine Stack Emissions
49
Trailer Bridge’s Unique Marine Freight System Reduces Pollution by joseph keefe
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editorial staff
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editor in chief Tony Munoz tonymunoz@maritime-executive.com managing editor Joseph A. Keefe jkeefe@maritime-executive.com senior copy editor John J. O’Connell, Jr. harvardjo@maritime-executive.com copy editor Valerie K. Leichtman vleichtman@maritime-executive.com senior vice president sales & marketing Brett Keil bkeil@maritime-executive.com art director Daniel Bastien dbastien@maritime-executive.com graphic designer/MarEx internet services Rich Grable rich@maritime-executive.com internet services manager Ryan Faerman ryan@maritime-executive.com sales administrator Elizabeth Cash elizabeth@maritime-executive.com published by TM Marketing Group, LLC
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The Maritime Executive, LLC (ISSN 1096-2751) 3200 S. Andrews Avenue, Ste. 101 Fort Lauderdale, FL 33316 Telephone: (866) 884-9034 www.maritime-executive.com For subscriptions please visit www.maritime-executive.com.
editorial
On the Edge of the World
A
tony munoz
Editor-in-Chief
Distribution of The Maritime Executive: Markets Served: Shipbuilders & repairers
15% Naval architects, lawyers, consultants, and insurers
58%
Ship owners, operators, managers, charterers, and brokers
13% 7%
Marine equipment manufacturers
5% 2%
Government
Other
International Circulation: Canada
19% 36% Asia
Western Europe
16% 14% Scandinavia
7%
5% 3% Eastern Europe Other (Africa, Australia, Misc. Island Nations)
South & Central America
Editor-in-chief Tony munoz
Domestic Circulation: Other East Coast
2%
West Coast
26%
28%
29%
15%
Gulf Coast
n ‘Inconvenient Truth’ warned that global warming would have severe impacts on weather patterns throughout the world. While contrarians challenged Al Gore about his “weak science” and “delusional prophesies,” the summer of 2007 has brought the worst floods in 100 years to the U.S. heartland, as well as record heat waves and tornadoes. Greece and Sicily are on fire after record heat dry-brushed vegetation, and Europe, Russia and Turkey are witnessing abnormal temperatures over 110 degrees Fahrenheit. A tidal wave, due to a magnitude-8 earthquake, wiped out the Peruvian fishing fleet; Hurricane Dean plowed into the Yucatan Peninsula as a ferocious Category 5 storm; Japan used a record 3.42 billion kilowatts in one day as temperatures soared 40 degrees above normal; 1,700 Indians, Nepalis and Bangladeshis have been killed by flooding, which also left hundreds of thousands marooned and homeless; and over four million fled their homes after flooding in China. All of this took place in just August. I can’t wait to see what’s in store during the upcoming fall and winter! In 2006, an International Energy Agency (IEA) study predicted carbon dioxide (greenhouse gases) would more than double by 2050 and that developing nations would be responsible for more than 70 percent of the increase. By 2010, China will overtake the U.S. and Europe as the world’s largest emitter of CO2. The McKinsey Global Institute projects that from 2003 to 2020 the number of vehicles in China will rise from 26 million to 120 million, average residential floor space will increase by 50 percent and energy demand will grow 4.4 percent annually. But the IEA also pointed out that emissions could be cut by using solar, wind and nuclear energies, more fuel-efficient cars and appliances, and by building energy-efficient buildings. If we did all these things, we might even reduce 2050 emissions to a level slightly exceeding those in 2003. Today the world uses 85 million barrels of oil per day, and it is projected by 2030 the world will consume 118 million barrels per day. This means from 2007 to 2015 production will need to be increased by 13 million barrels per day and from 2015 to 2030 by another 20 million barrels per day. While the West contends with Islamic extremists and religious fundamentalist attitudes, the Middle East controls 56 percent (and OPEC 65 percent) of the world’s proven reserves. Additionally, since 2000, Iran, the centerpiece of the Evil Axis, increased its proven reserves by 52 percent or 46.6 billion barrels. In 1973, the U.S. imported 35 percent of its energy consumption; in 2006, it imported over 60 percent. Without imports, the U.S. would exhaust its oil reserves in three years. The ‘73 Arab Oil Embargo forewarned the West about the instability of foreign oil, but little has been done to develop substantial alternative energy sources. During the ‘60s and ‘70s, Middle Eastern countries nationalized Western oil assets. Today, Big Oil (Exxon Mobil, BP, Royal Dutch/Shell, Chevron and Total) account for only 15 percent of global production, with 60 percent of their production coming from aging basins that generate 50 percent less oil than in their prime. Furthermore, from 2000 to 2006, the extraction cost in these basins has risen over 42 percent. In a world of shrinking hydrocarbon sources, the oil majors face major challenges in politically unstable areas like Angola, Nigeria and Russia and in technically challenging regions such as the Arctic and Asia-Pacific. Matthew Simmons, an energy investment banker, said that oil should be around $182 per barrel because it is way too cheap now. While scandals like the 23 percent reduction in reserves by Royal Dutch Shell threaten the security of energy supplies, governments need to audit stated oil reserves to ensure economic stability. Dr. Colin Campbell, former executive vice president of Total-Fina, offered that a great many of the major oil fields are increasingly old and inefficient, and if the real figures about reserves were to be released to the public there would be panic on the stock markets. Mother Nature didn’t negotiate with New Orleans, and she will not negotiate with Western energy lifestyles. There are consequences for all of our actions, and we are at a crossroads of global warming and energy consumption. If you think my MarEx comments are empty ramblings, I beg to differ.
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washington insider
washington insider
Reviving the “Bureau of Marine Inspection and Navigation”
By Larry Kiern, Winston & Strawn LLP
A
s the dog days of summer beset Washington, D.C., one recalls that a respected media commentator’s take on the increased activity of our modern national government is that it can be attributed to the widespread installation of air-conditioning in the nation’s capitol, which allowed government to become a year-round venture. So as visions of summer vacation come to mind to others, I’m reminded that the sounds of the capitol’s air conditioners lurching on and off provide a metaphor for the fits and starts of our national government, including legislative and policy matters affecting marine safety and the environment.
Congress Proposes Reviving the “Bureau of Marine Inspection and Navigation” Chairman Jim Oberstar (D – MN) of the House Committee on Transportation and Infrastructure has sparked a controversy this summer by proposing the creation of a new civilian agency within the U.S. Department of Transportation which would perform the marine safety function of the U.S. Coast Guard. The model for the new agency is the former Bureau of Marine Inspection and Navigation of the Department of Commerce, which performed this function in the 1930s and whose functions were transferred to the Coast Guard after World War II. While legislation has not yet been introduced in Congress, proposed legislation has been circulated and on August 2, 2007, a hearing was held. Chairman Oberstar announced at that hearing that the Coast Guard Authorization Act pending before the House (and which contains provisions desired by the Coast Guard) would not move forward until the matter is resolved.
the maritime executive
Media reports of the proposal, including analysis and reader feedback as seen on The Maritime Executive’s e-newsletter, garnered the attention of many in the Coast Guard and the regulated maritime community and quickly produced vigorous debate between those who support the idea and those opposed. The proposal provided a forum for critics and supporters of the Coast Guard to vent their frustrations. But beyond the normal level of complaints against a regulating agency, critics from the regulated community leveled serious charges. Critics argued that post-9/11 the Coast Guard has focused on port security to a fault, thereby diverting resources and neglecting the marine safety function. In doing so, they argue the service has become even more militaristic and law enforcement-oriented in its posture and interaction with the regulated community. One witness testified before Congress that today’s Coast Guard took the form of “guns and boots” on the waterfront. They contrast this new posture with the period of the 1980s and early 1990s when the service was actively encouraged by a succession of administrations from both political parties to “facilitate commerce.” During that era, the service prided itself on the partnerships it formed throughout the regulated community and the steps it took to reform maritime regulation. Critics lamented the passage of those days when the Coast Guard motto was “honor the mariner.” Today’s Coast Guard was described as a “stranger” rather than a partner. Critics also argue that the few Coast Guard personnel left to address marine safety simply no longer have the expertise and experience to do the job. Experienced ship owners and merchant mariners lament inspections by
young, inexperienced Coast Guard personnel. One witness specifically testified that merchant mariners “resent” being inspected by Coast Guard enlisted personnel. Congressman Gene Taylor (D – MS), a former Coast Guard enlisted man, took exception to that complaint, observing that skilled marine inspectors were unnecessary for every function. Witnesses representing maritime labor unabashedly lobbied Congress for the creation of civilian marine inspector positions for their own members to fill. Is it possible that maritime labor is more interested in civil service jobs for its members than the competency of Coast Guard marine inspectors? The use of inexperienced Coast Guard personnel may satisfy OMB’s demand for budget cuts, but it results in technical errors and mistakes when applying the regulations. It also leads to less mature and confident decision-making. Critics argue that inexperienced regulators are more prone to say “no” to avoid taking risks. And as we all know, when it comes to dealing with regulators, the power to say “no” represents real power, especially when as a regulated entity one needs the regulator to say “yes” to obtain a certificate or a license to sail. Additionally, critics charge the Coast Guard has poorly performed its responsibilities for the licensing and credentialing of merchant mariners. Mariners complain about protracted delays encountered in obtaining and renewing licenses, and the agency’s implementation of the Transportation Worker Identification Credential (TWIC) program has been controversial. Additionally, the Coast Guard’s Chief Administrative Law Judge (ALJ) has been
washington insider accused by one of his own colleagues of prejudicing the entire license suspension and revocation process in favor of the agency and against mariners in the adjudication of charges filed against mariners’ licenses. At a separate hearing conducted by the House Coast Guard Subcommittee on July 31, 2006, witnesses testified that the agency failed to ensure an appearance of impartiality and that the relationship between its investigating officers and ALJs appeared too cozy. One former ALJ testified that the Chief ALJ directed her to rule in favor of the Coast Guard and another testified that she faced “intimidation” and “isolation” from the Chief ALJ before finally being forced out of the agency. While the agency broadly defended its process, the recommendations of the witnesses for reform were reasonable and would probably restore mariners’ confidence. Separating the ALJs from the Coast Guard avoids the appearance of partiality, and other procedural safeguards recommended would put little burden on the agency while restoring a sense of fairness that the process sadly lacks. The “heavy handedness” of the Chief ALJ, as testified to by two of his former judges, coupled with his practice of advocating for the agency when he should
have been an impartial judge, strongly suggests that the time has come for him to retire. Any one of these kinds of criticisms in another context might spur Congress to transfer responsibility for performing the function to another agency. Combined, these expressions of discontent by the regulated community threaten a perfect storm with the political power to blow the marine safety function and its ALJs out of the Coast Guard and back to the Department of Transportation. But this is not another context. Three major factors make this context unique and will likely lead to a resolution whereby the marine safety function, absent the ALJs, remains in the Coast Guard and is improved to respond to the complaints. First, as the Coast Guard Commandant, Admiral Thad Allen, testified at the hearing on August 2, 2007, the Coast Guard plainly needs the expertise and resources provided by its marine safety professionals to perform other missions. These personnel, especially its midto senior-grade officers, are highly educated, specially trained and very experienced professionals. They represent most of the officers in the service with meaningful knowledge, understanding and experience dealing with commercial vessels. The loss of this technical expertise
and experience would represent a severe blow to the agency’s capability to function in other important missions dealing with the regulated community, including navigational safety, port security and environmental protection. The irony of a proposal to transfer the marine safety function to another agency to improve marine safety is that it risks the unintended consequence of likely denigrating the Coast Guard’s performance of related critical missions and further exacerbating tensions between the Coast Guard and commercial maritime interests. Congress should be mindful of the legislative law of unintended consequences. Second, the Coast Guard’s leadership is taking the proposal very seriously and moving quickly to solve the problems. The Commandant realizes that the criticisms of the regulated community merit serious attention, and he promised to provide Chairman Oberstar a plan to address the problems within 60 days. For example, he understands that marine inspector competency is a serious problem and has committed to fix it. He is aware of the complaints surrounding the licensing and credentialing functions and is centralizing those functions to improve service. To his credit, he met with Chairman Oberstar shortly after
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washington insider learning of the legislative proposal and committed to addressing the problems. He has also sought the advice of respected former Coast Guard leaders of the marine safety program, including former Vice Commandant Jim Card, retired Rear Admiral Bob North and Dan Sheehan, all of whom are known for their industryfriendly perspective and have more recently been working for and advising the regulated community. They will be reaching out to the regulated community to take soundings of the industry’s concerns to propose remedies. The Coast Guard is also preparing a communications strategy to assist its officers in the field to get its message out that the marine safety function of the Coast Guard is vital to the agency. Third, at the congressional hearing on August 2, 2007, almost all the industry and labor witnesses testified that they believed that changes could be made within the Coast Guard to correct the problems without the necessity of removing the marine safety function. In other words, the witnesses representing the regulated community agreed with the Commandant that the creation of a new agency is not necessary and the Coast Guard should be given a chance to reform the program. After all, since the criticisms have arisen relatively recently and the Coast Guard has been performing the marine safety function for 60 years, the proposal to remove the function to solve the problem is a non sequitur. In the end, whether Congress transfers the marine safety function to another agency or leaves it in the Coast Guard, solving the alleged problems will take more than Coast Guard leadership and management initiatives to improve competency, centralize functions, develop a kindler-and-gentler posture and implement a communication strategy. First, Congress must not just criticize the Coast Guard. It must appropriate additional funds to increase the number of marine inspectors and other marine safety specialists and to improve the program’s education, training and professional standing. Merely authorizing more personnel and programs or earmarking funds for marine safety, to the detriment of other Coast Guard programs, will only exacerbate problems elsewhere. Notably, when asked by Congressman Gene Taylor if they would be willing to pay for the improvements they demand, none of the industry or labor witnesses volunteered to pay. Congress-
man LaTourette (R – OH), the ranking minority member of the committee, reminded Chairman Oberstar of the threat by congressional appropriators against the Coast Guard for supplying the committee with a list of unfunded needs. Thus, in the end, real and lasting solutions will largely come down to funding. One logical potential source of new funds, however, exists. Congress should mandate that funds collected in the form of fines and community service payments from those convicted of crimes related to maritime matters be appropriated to the Coast Guard to improve
landscape has been fundamentally altered by prior legislative action.
Congress Faces Ballast-Water Balkanization For the first time in years, Congress is showing serious signs of trying to amend the Nonindigenous Aquatic Nuisance Species Prevention and Control Act of 1990. Congress last took action eleven years ago by amending the 1990 act with the National Invasive Species Act of 1996. Since then, Congress has struggled to resolve the substantial differences of opinion about how best to combat, either politically or technologically, the aquatic invasive species introduced through ballast water. This process has been complicated by the absence of any serious leadership on the issue from the Bush Administration. But this year Chairman Oberstar has put his considerable influence behind the initiative and included it in the Coast Guard Authorization Act, the leading legislative vehicle for enacting maritime measures. Developments in certain key states threaten to render the existing national legislation obsolete, leaving the United States balkanized by state-specific regimes. In addition to the federal regulation of vessels arriving from abroad, California enacted ballast-water legislation and regulations and expanded ballastwater regulation to include vessels carrying ballast within the Pacific Coast region. Michigan enacted legislation to reduce the number of invasive species introduced in the Great Lakes by requiring each ocean-going vessel operating in Michigan to obtain a state permit verifying that it will not discharge ballast water in the Great Lakes. Several other states have proposed similar legislation, including Minnesota, Wisconsin and Indiana. Moreover, the decision of the United States District Court for the Northern District of California - which in March 2005 struck down the EPA’s longstanding exemption of discharges “incidental to the normal operation of a vessel” - has given the EPA only until September 2008 to promulgate National Pollution Discharge Elimination System (NPDES) permit regulations for operational discharges, including ballastwater discharges. While the EPA is appealing the decision to the Ninth Circuit Court of Appeals, this case presents a real threat to vessel operators, who may soon have to obtain
The use of inexperienced Coast Guard personnel may satisfy OMB’s demand for budget cuts, but it results in technical errors and mistakes when applying the regulations. It also leads to less mature and confident decision-making.
10 the maritime executive
marine safety and marine environmental protection. For years now we have witnessed over $200 million in fines levied against shipping companies used to fund various local environmental initiatives or simply deposited in the Treasury when they should have gone to improve the Coast Guard’s marine safety program. For example, the $37 million fine to be paid by OSG this year could be better spent to improve marine safety than to reduce the deficit and fund sundry local wildlife and environmental projects. Second, Congress should acknowledge that some of the reasons for the current tensions between the Coast Guard and the regulated community have arisen from congressional mandates over which the Coast Guard has little or no control. That is, they are inherent in the regulatory relationship and the post9/11 world. For example, since Congress enacted OPA 90, the licensing of merchant mariners has become more complicated and difficult because of the requirements for background checks that did not previously exist. Post-9/ll, the requirement for a new maritime credential – the infamous TWIC – and heightened port security boardings and inspections, along with more legal requirements, present substantial new sources of tension and conflict that will not disappear. So even with a commitment from the Coast Guard’s leadership to address the problems, success will ultimately require Bush Administration and congressional support in the form of increased appropriations and an acknowledgment by the regulated community that the legal and policy
washington insider EPA and state permits to operate in the United States. This threat has sparked intense interest among vessel operators, ranging from the largest commercial vessels to organizations representing fishing vessel operators and recreational boaters, to prompt Congress to ratify the longstanding EPA exemption. Despite the technological and political complexities of the ballast-water issue, these developments may present the best opportunity in over a decade for congressional reform. The trick will be to achieve agreement among vessel interests on the one hand and environmental interests and state regulators on the other. Compromise among those interests on this subject has proven elusive in recent years, and both sides will likely have to accept what they will see as less than a perfect solution, especially on the nettlesome issue of preemption of state regulation, for new national ballast-water legislation to be enacted.
MARPOL Annex VI and Air Emission Regulation Lurch Backward In 1997, the IMO adopted Annex VI to MARPOL to address air pollution. Annex VI established international regulations that set limits on sulfur oxide and nitrogen oxide emis-
sions from ship exhausts and prohibited deliberate emissions of ozone-depleting substances. Annex VI entered into force internationally on May 19, 2006. The Coast Guard currently enforces MARPOL on U.S.-flag and foreign-flag vessels operating in the navigable waters of the U.S. pursuant to the implementation of portions of MARPOL in the Act to Prevent Pollution from Ships (APPS). But that may soon change. The recent passage by the U.S. House of Representatives (“House”) of H.R. 802, An Act to Amend the Act to Prevent Pollution from Ships to implement MARPOL Annex VI, would grant the EPA plenary power over vessels’ air emissions and criminalize record-keeping violations relating to air emissions just like oil record book violations under MARPOL Annex I. These changes are both unnecessary and dangerous for the maritime industry. H.R. 802 would expand the EPA’s power to also include MARPOL Regulations 12, 16, 17, and 19 (ozone-depleting substances, incineration, reception facilities, platforms and drilling rigs) while also eliminating the previously proposed legislative requirement to consult with the Coast Guard. Moreover, H.R. 802 grants
Experience
the EPA far-reaching enforcement power over reception facilities, fuel quality and any matter referred by the Coast Guard. These aspects of the implementing legislation represent the investment of new and far-reaching powers in the EPA over vessels. For vessel interests currently complaining about the law enforcement posture of the Coast Guard, they may soon get to experience how another enforcement agency armed with new criminal penalties regulates vessels. H.R. 802 also reflects significant changes from the previous House version passed at the end of the 109th Congress. It would expand the jurisdictional reach of Annex VI of APPS – and its criminal sanctions – to the exclusive economic zone of the United States (“EEZ”), i.e., out to 200 miles offshore. It would empower both the Coast Guard and the EPA to designate “by order” areas “from which emissions from ships are of concern with respect to the public health, welfare, or the environment.” By contrast, the previous version of the implementing legislation passed by the House in the 109th Congress only allowed such designations “by regulation and based on the best available scientific data. . . .” This represents another substantial shift of power to the regulators and
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the maritime executive
11
washington insider removes the traditional protections afforded by the normal regulatory process. Rather than shifting regulatory responsibility for inspection and enforcement away from the Coast Guard to the EPA and criminalizing noncompliance and record-keeping deficiencies, Congress could better devote its attention to enacting provisions that will actually reduce emissions. For example, the Marine Vessel Emissions Reduction Act of 2007 (S. 1499), which Senator Boxer introduced on May 24, 2007, would actually cut pollution from ships by limiting the sulfur content of fuel used by all marine vessels within 200 miles of the United States to no more than 1,000 parts per million when they enter or leave the United States, including offshore terminals, beginning December 31, 2010. Senator Boxer claims that vessels currently burn fuel with an average sulfur content of 27,000 parts per million. The bill would allow the EPA to waive the requirement if not technically feasible, but still require use of the lowest sulfur fuel technically feasible and in no event containing more than 2,000 parts per million. The legislation would permit alternative compliance through the use of emission-control technology. By going after sulfur content in fuel first, the legislation makes sense. The legislation would also require the EPA by December 15, 2008 to promulgate new emissions standards for nitrous oxides, particulate matter, hydrocarbons and carbon monoxide for all oceangoing vessels entering or leaving the United States on or after January 1, 2012.
The new standard must require “the greatest degree of emission reduction achievable. . . .” The proposal could be improved by extending the timeline for equipment installations and mandating an express cost-benefit analysis to ensure that practical economic considerations are not ignored and the industry does not bear an unreasonable burden compared to other industries. Beyond this, the legislation has the advantage of applying to all vessels and does not discriminate against U.S.-flag vessels in the coastwise trade like the EPA’s current regulatory approach.
ronmental protection. Applying a common standard based on sulfur content in fuel in the short term, rather than a differential standard emphasizing new machinery and equipment, is the better approach for both the industry and public health.
Stay Tuned And so, despite the dog days of summer, the legislative and policy wheels of maritime safety and the environment continue to lurch along in our nation’s capitol. Sometimes they seem to be moving forward and at other times backward. The challenge for the modern maritime executive is to stay on top of these developments despite the temptation to daydream about that beach vacation. It is truer today than it has ever been that maritime leaders must ensure that Washington receives the full benefit of the industry’s views to minimize the potential harm that may arise in these important legislative and policy matters. MarEx
Congress should acknowledge that some of the reasons for the current tensions between the Coast Guard and the regulated community have arisen from congressional mandates over which the Coast Guard has little or no control.
12 the maritime executive
The EPA’s own proposed regulations of emissions from the largest marine engines (Category 3) emphasize the benefits to be achieved by pursuing a standard through the IMO because “adopting appropriate international standards would be the most efficient mechanism to control emissions from U.S. and foreign-flagged vessels.” Yet current EPA regulations adopted in 1999 actually put new U.S-flag vessels at a competitive disadvantage to their foreign-flag competitors, such as foreign-flag tankers bringing refined product from abroad, by requiring new U.S.-flag vessels to install more expensive, environmentally sophisticated engines not required on foreignflag vessels. This only serves to further undercut the economic viability of the U.S.-flag fleet without producing any significant envi-
Larry Kiern is a partner at Winston & Strawn LLP, an international law firm of 900 lawyers. His practice concentrates on maritime issues, including legislative, regulatory, and litigation matters. Before joining Winston & Strawn, he was a Captain and law specialist in the U.S. Coast Guard who served as the Legislative Counsel and Deputy Chief of the Coast Guard’s Congressional Affairs Office.
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a crisis management paradox
Big Oil
Big Oil, the Environmentalists, and a
Crisis Management Paradox By Tony Munoz
14 the maritime executive
a crisis management paradox
Big Oil
On February 18, 1968 at 3:18 p.m., a huge fireball erupted, sending a geyser of white and yellow flames fifty feet into the sky as the Atlantic Richfield Company (ARCO) struck oil on the barren plains of the Alaskan North Slope. It had been a long journey of exploration and dry wells, but on that day in 1968 the drill team knew this discovery would forever change the American oil industry. Since World War II, the federal government and American oil companies had aggressively searched for crude oil in Alaska, but none had been found until that day. In 1958, the Brooks Range and the North Slope were hotbeds of exploration and drilling. From 1963 to 1967, the oil industry spent
Bay, with its millions of barrels of oil per day, promised America independence from the Middle East. In 1969, the U.S. oil industry was filled with excitement as ARCO, Humble (now Exxon) and British Petroleum filed petitions with the Bureau of Land Management in Anchorage for the “rights of passage” to construct roads and build a pipeline system that would be known as the “Trans Alaska Pipeline System” (TAPS). However, the Alaskan natives, who had previously filed lawsuits claiming rights to the territories, along with three environmental groups, filed injunctions in federal and state courts to stop the oil companies from obtaining their construction permits.
ARCO Alaska tanker.
approximately $125 million exploring the region without significant results. In 1967, ARCO was the last oil company left exploring the Alaskan fields, and its oil strike at Prudhoe Bay No. 1 had the world abuzz. However, the magnitude of the Alaskan discovery would only really hit home when ARCO struck oil again at the Sag River State No. 1 site, just seven miles south of Prudhoe Bay. Prudhoe Bay was the world’s largest oil discovery in over 40 years. Experts calculated there could be as much as 30 to 40 billion barrels in the new fields: enough supply for at least 20 years. In the lower 48 states, almost two-thirds of the 573,000 oil wells were averaging only three to six barrels a day. Prudhoe Photo courtesy of the COMSAT Legacy Project
For the first time in American history, the stage had been set for a monumental battle between industrialists and environmentalists over domestic energy, national security and environmental protection. The debate would soon divide the nation and split the U.S. Congress. However, the newly-elected president, Richard M. Nixon, was on “Big Oil’s” side, and he had just appointed another drilling advocate, former Alaskan Governor Walter J. Hickel, to be Secretary of the Interior. During the 1960s, the American public had pressured Congress to initiate a series of environmental laws to protect natural resources from industrial waste and toxins. Environmentalists had also won a strategic and significant
victory with the enactment of the National Environmental Policy Act of 1969 (NEPA), which was signed into law by President Nixon on January 1, 1970. When the oil industry filed for North Slope construction permits, the Friends of the Earth, the Wilderness Society and the Environmental Defense Fund hired lawyers. These lawyers filed lawsuits against TAPS based upon NEPA and the Mineral Leasing Act of 1920, which restricted private businesses from acquiring a right of passage over federal lands for commercial endeavors. In 1970, environmentalism was a fresh political movement, where crowds of tee-shirted and blue-jeaned enthusiasts proclaimed their unity of vision for cleaner water, cleaner air and programs to save endangered species. Their chants stirred the consciousness of a nation, and their assembled masses demanded industrialists stop wasting and polluting the country’s natural resources. Randall Blank, a young student at Columbia and future CEO of SEACOR Environmental Services, attended the first “Earth Day” on April 22, 1970 in New York City. The first Earth Day also brought more than 20 million people to nearly 2,000 American colleges, universities and cities to protest in favor of environmental reform. When oil was discovered on the North Slope of Alaska, the TAPS consortium began reviewing its options to transport the crude from Prudhoe Bay. It considered an all-land route that would involve building a pipeline through the Canadian territories, but this idea was dropped because it required the Canadian government to provide a right of passage. Since the Alaskan oil was to be used solely by the United States, there was little chance of that happening. The federal government and TAPS considered the Prudhoe Bay to Valdez pipeline as the best option to avoid damage to the Alaskan landscape because of its shorter route. However, the TAPS marine leg gave environmental groups the most cause for concern because it required very large tankers to transport large amounts of crude oil through some of the world’s most beautiful and natural waterways. Faced with the impending reality that the marine route would be approved, the environmental lobby demanded that the tanker fleet be constructed with “double bottoms.” In 1973, the U.S. Coast Guard gave advance notice of its proposed rulemaking that all tankers built after 1976 would be required to have double hulls. There were 66 written responses, mostly from oil concerns, the maritime executive
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a crisis management paradox
Big Oil
Exxon Valdez oil spill.
which claimed that the U.S. fleet would be at a distinct disadvantage because this would increase the cost of Alaskan crude versus foreign oil on the international markets. Big Oil claimed the best way for dealing with a potential oil spill was through preventive measures, such as upgrading bridge management, upgrading navigational equipment, providing comprehensive training programs, mandating licensing for all seamen, and ongoing training of all tanker personnel. This, the companies believed, would have a far greater impact on environmental protection than the construction of double-hulled tankers.
enormous momentum. On October 16, the Organization of Petroleum Exporting Countries (OPEC) raised oil prices 70 percent and cut back production five percent. On December 22, OPEC raised crude oil prices another 130 percent to protest U.S. military assistance to Israel. On November 16, 1973, against the backdrop of the OPEC embargo, President Nixon signed the Trans-Alaska Pipeline Authorization Act. The Aleyska Pipeline Service Company was now free to build its pipeline. Never before had an industrial project come under such intense governmental and environmental scrutiny.
For the first time in American history, the stage had been set for a monumental battle between industrialists and environmentalists over domestic energy, national security and environmental protection. Additionally, after the Intergovernmental Marine Consultative Organization’s (IMCO) International Conference on Marine Pollution in 1973, which reasoned that double hulls would have little effect on marine pollution, the U.S. Coast Guard withdrew its proposal requiring mandatory double hulls. After the balance of power shifted in favor of the TAPS project, environmentalists filed their final petitions in the U.S. Court of Appeals. During this time, the eight oil companies that made up the Trans Alaska Pipeline Service disbanded the consortium because it was too convoluted and unorganized to meet the new legal challenges while simultaneously coordinating the mega-pipeline project. Instead, they formed the Alyeska Pipeline Service Company, which still offered each company representation regarding legal issues but also established a management team solely focused on building and managing the pipeline system. In 1973, with the advent of the Arab Oil Embargo, the Alyeska Pipeline project gained 16 the maritime executive
The Greatest Industrial Endeavor in History The 800-mile Prudhoe Bay to Valdez pipeline and marine terminal was the single largest privately-financed project in history. Before the legal setbacks, the pipeline could have been built for $700 million, but the delays now had the project’s estimated cost at $7 billion. The Prudhoe Bay oil field has 320,000 acres and about 130 wells that produce approximately two million barrels of crude per day. Over 50 companies participated in the pipeline’s development, and more than 20,000 men and women worked on the construction of the pipeline during peak periods. They constructed over 200 modular buildings consisting of residences, flow stations, gas injection and compressor stations, a fuel gas station and a major power plant. They built bridges, highways and airplane landing strips and laid pipe through 800 miles of some of the most rugged terrain in the world. Building the Trans Alaska Pipeline was one
of the greatest industrial projects in the modern world, and it would take three years and $7 billion to complete it. America had been held hostage once before by OPEC, and the flow of North Slope crude oil was essential to becoming economically independent. Since 1967, it had been a long, arduous journey for the oil industry, but Big Oil had overcome overwhelming political, social and environmental obstacles to gain access to the rich fields of the Arctic tundra. However, the next obstacle would forever change the American oil industry.
Requiem in Prince William Sound – the Exxon Valdez Alaskan crude oil became a reality for the United States on July 29, 1979, when the tanker ARCO Alaska sailed from Port Valdez with the first shipment of North Slope crude. In the 10 years preceding 1989, the Alyeska Pipeline Service Company transported a total of 6.83 billion barrels of crude oil shipped in 8,858 tanker loads without a major incident or accident. However, on March 24, 1989, the political landscape was permanently altered. The day before, the supertanker Exxon Valdez sat at its berth loading its eleven cargo tanks with 1,264,155 barrels, or 53,094,510 gallons, of Alaskan crude. When the giant vessel, which was 987 feet long and 166 feet wide, finished loading its cargo, its keel sat five stories below the water line. At approximately 2035 hours on March 23, tugboats pulled the tanker off its berth, and the ship began its journey to Long Beach, California. The tanker sailed through the Valdez Narrows, an established one-way vessel traffic scheme. When the ship cleared Potato Point, the bridge radioed the Coast Guard Center in Port Valdez announcing its new course of 219 degrees, indicating it was entering the Valdez Arm and Prince William Sound. On the bridge were Captain Joseph Hazelwood, 3rd Mate Gregory Cousins and Alaskan State Pilot Captain Edward Murphy. Photo courtesy of the Exxon Valdez Oil Spill Trustee Council
a crisis management paradox
Big Oil
During the spring, the Columbia Glacier shed huge icebergs that often found their way into the shipping lanes. The Exxon Valdez requested an “ice report” from the Coast Guard and was informed that an earlier ship, ARCO Juneau, had been diverted into the inbound lane due to ice flows in the area. The Coast Guard also asked to be kept apprised as the Valdez made its passage towards Naked Island, south of the glacier. At approximately 2325 hours, the ship notified Port Valdez that State Pilot Murphy had disembarked and it was “hooking up to sea speed.” Within five minutes the ship radioed the Coast Guard that there were too many
his ship had “fetched up hard aground and, apparently, we’re leaking oil and will be here for awhile.” At Bligh Reef, which was named after the notorious Captain Bligh of the HMS Bounty, who had sailed Prince William Sound more than a century before, the Exxon Valdez lay creaking and groaning in the misty dark as oil gushed profusely out of its hull and into the pristine waters of the sound. The reef’s sharp rocks had crumpled and ripped through eight of the ship’s 11 cargo tanks and three of the seven segregated ballast tanks. Of the 53,094,510 gallons of crude being transported by the ship, it is estimated that 10,100,000 gallons spilled into the sound, killing everything in their path.
A Failure to Respond When the emergency call went into the Alyeska Marine Terminal, Chuck O’Donnell, the top executive in Valdez, was asleep. He simply dispatched a subordinate and went back to bed. Additionally, the emergency response equipment supposed to be in a state of readiness lay either under the snow or in a drydock awaiting repair. When it
lated a “likely spill” would be in the 1,000 to 2,000-barrel range and that a catastrophic spill in the range of 200,000 barrels would happen only once in 241 years. Based on the Alaskan pipeline’s projected lifespan of 30 years, Alyeska felt comfortable using the 2,000 barrel scenario in its contingency plan. In fact, in January of 1989, just two months before the Valdez spill, the tanker Thompson Pass had a 1,700-barrel spill due to a crack in its hull, which fit nicely into the “likely” range. While Coast Guard, state and federal officials put the blame on Alyeska for its lack of emergency response preparedness, they were just as responsible because they had all previously approved the contingency plan. As the oil continued to wash up on the beaches, the cold water, winds, and currents turned the nearly foot-deep crude into an emulsified “chocolate mousse,” which clogged vacuum skimmers and slowed the cleanup to a virtual crawl. By the end of the third day, only 50,000 gallons had been recovered. As the oil spill flowed unimpeded throughout Prince William Sound, the authorities tried to set it on fire by throwing bags of napalm into the slick and igniting them, but the thick
Alyeska had based its “1987 Spill Response Plan” on … a “likely spill” … in the 1,000 to 2,000-barrel range and that a catastrophic spill in the range of 200,000 barrels would happen only once in 241 years. An oiled white-winged scoter struggles on the beach at Green Island.
ice floes along the western shore and that the outbound lanes were too dangerous. The bridge requested a new course heading of 200 degrees and stated it was reducing its speed to 12 knots to wind its way through the ice. The Coast Guard confirmed all these actions. Over the next five minutes the tanker went off course too far on the “port side” and was now heading 180 degrees due south. At approximately 2355 hours, the lookout advised the bridge that Bligh Reef’s buoy light was off the starboard and not the port side as it should have been. The bridge changed course to 240 degrees, but it was too late and the vessel rammed the reef at 10 knots. Captain Hazelwood, who had not been on the bridge, appeared immediately and took command. There is great dispute about his immediate actions, but during testimony it was said that he tried to move the tanker off the reef. However, at 0028 hours on March 24, 1989, Hazelwood radioed the Coast Guard that Photo courtesy of the Exxon Valdez Oil Spill Trustee Council
finally was loaded onto a response vessel 12 hours later, it was discovered that it was the wrong equipment. Instead of barrier booms to contain the spill, crews had loaded emergency pumps to transfer the oil off the tanker into smaller vessels. Precious hours were lost as the crew reloaded the barge. It would ultimately take 14 hours before the first vessel would arrive on the scene, and 35 hours before the first booms encircled the ship. Unlike an ocean spill, where the winds and currents can shift the direction of an offshore spill or break it into small patches which can minimize shoreline damage, the Exxon Valdez spill sat hemmed in by the beaches, islands and fjords, unable to escape, and it soon became a pool of death and destruction. What became evident in the overwhelming ecological disaster was Alyeska’s inadequate and unorganized emergency response plan. Alyeska had based its “1987 Spill Response Plan” on a consultant’s study, which calcu
“mousse” would not burn. In warmer climates, crude oil tends to break down very quickly because of chemical and bacterial actions, but in the frigid temperatures of Alaskan waters decomposition is inhibited. The authorities soon realized that they had a calamity on their hands; they were totally helpless in cleaning up the spill. In the days following the accident, Exxon began using a chemical dispersant named Corexit, which was manufactured by one of its divisions. This detergent-type chemical is sprayed on an oil slick by low-flying aircraft and forms a chemical link between the molecules of water and oil. The dispersant breaks the oil into small patches or balls that drop several feet into the water and are literally dispersed. However, dispersants compound the toxicity of the water, which is already polluted with crude oil substances such as benzene, toluene and xylene. In short order, this toxic cocktail kills the phytoplankton, which is food for zooplankton, which is eaten by fish and the maritime executive
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a crisis management paradox
Big Oil
other organisms that become food for marine birds and mammals and, eventually, the entire food chain becomes poisoned. Within days of the spill, the winds increased to around 30 knots and began moving the oil towards Naked, Green and Montague Islands. During the next few weeks, the oil reached Barren and Chugach Islands, over 550 miles away, and eventually fouled 1,500 miles of shoreline. It also spread to five national wildlife refuges and three national parks. After four months, the Alaskan Department of Environmental Conservation estimated that teams gathering dead animals had only processed five percent of the oiled area. A fleet of small vessels brought in more than 500,000 birds from 90 different species, 4,500 sea otters, 14 killer whales and 300 bald eagles. However, biologists estimate that the number of dead animals was more likely three times the amount found, not including salmon, herring, clams and mussels. Exxon’s contract company, Veco, owned by Bill Allen, hired approximately 10,000 laborers at $16.67 per hour plus room and board to wash down the beaches. Biologists and environmentalists protested that the boiling
concentration of wildlife, was now being polluted and poisoned by its careless caretakers. Environmentalists and the media made certain that Americans understood that the devastation could have been prevented had there been adequate governmental oversight and a proper emergency response system.
statement. We have a mess on our hands.” In 1986, Lawrence G. Rawl became Chairman of Exxon after 37 years with the company. Suspicious of the media, he strongly disliked journalists and acted accordingly. However, during the first week of the spill, he was simply following corporate counsel’s
When Frank Iarossi, the President of Exxon Shipping, did speak to the media in Valdez, he said, “The cleanup is not proceeding well. Believe me, that is an understatement. We have a mess on our hands.” A Crisis Management Fiasco
hot water sprayed by high-pressure hoses was simply washing the oil out of sight and in the process killing the microorganisms and sensitive marine ecosystem along the shores. Weeks after the beaches had been cleaned, inspectors found pools of oil under rocks and just a few inches below the sand. This remote part of the nation, with its towering snow-capped mountains, rugged coastlines, dense forest and North America’s richest 18 the maritime executive
Many corporations have faced crisis management situations under the bright spotlight of the media, but few have come to exemplify failure as Exxon did in dealing with the Exxon Valdez spill. While images of thousands of dead animals, birds and fish, and of toxic oil pollution flowing throughout Prince William Sound were being beamed around the world, the company refused to communicate with the media for more than a week. During the first days, the public outcry was pure outrage because the emergency response was nonexistent as the oil spread into a 12square-mile slick. Then bad weather struck, making containment impossible, and still there was no official word from Exxon. To most Americans, Exxon appeared indifferent to the environmental disaster, and its perceived arrogance incensed them. When Frank Iarossi, the President of Exxon Shipping, did speak to the media in Valdez, he said, “The cleanup is not proceeding well. Believe me, that is an under-
advice to avoid the media for fear that going on record could prove to be a legal liability. Finally he did go on television, watched by millions of angry Americans across the nation, and was asked about the latest plans for the cleanup. Apparently he had not read them and coolly replied, “It is not the role of a chairman of a large worldwide corporation to read every technical plan.” His arrogance was blatant, and Exxon’s catastrophe was complete. The Exxon Valdez is considered America’s greatest environmental disaster, but on a list of the world’s largest spills, the Alaskan spill only ranks thirtieth. In fact, in 1978 the Amoco Cadiz spilled 70 million gallons off the coast of France (an amount more than six times larger than the Exxon Valdez spill), and there have been 21 even larger tanker spills. When asked about the preparedness and response to the Exxon Valdez incident, Secretary of Transportation Samuel K. Skinner said on a scale of one to 10, the response was a “zero.” MarEx
Top photo courtesy of the Exxon Valdez Oil Spill Trustee Council, bottom photo courtesy of Faegre & Benson, LLP
case study :: ses
SEACOR Environmental Services a Global Company This August marked the anniversary of two milestones in the history of environmental services in the U. S.: the passing of the Oil Pollution Act of 1990 (OPA 90) and the 2005 landfall of Hurricane Katrina. Experts continue to debate whether the extent of Katrina’s wrath could have been predicted. It is, however, an unassailable fact that without the development of the oil spill response industry following OPA 90 we would have lacked the critical infrastructure to respond swiftly and efficiently to the offshore incidents caused by the storm.
case study :: ses Prior to OPA 90, the Federal Clean Water Act had provided a national contingency plan for oil spill response aimed at coordinating response and minimizing damage. Planning was based on what was thought to be the “most likely spill,” which in Alaska before 1989 was an estimated spill of 42,000 - 84,000 gallons. No one was prepared, however, for the catastrophe in the early morning of March 24, 1989. The Exxon Valdez spilled an unprec-
and a large workforce recruited to man these facilities and operate the vessels. It was taken for granted that this oil industry-sponsored program was the definitive answer to the oil spill response question, ensuring compliance with new regulations and releasing the federal government from having to create and fund a response organization. End of story. But it was only the beginning. Enter SEACOR,
edented 11 million gallons of crude oil into the pristine waters of Prince William Sound, Alaska. Congress responded by passing OPA 90: a rare case in which all members of both houses of Congress supported a bill. The Act is a comprehensive package of measures containing operational and vessel construction standards, mandated oil spill response measures and liability and compensation provisions. This new legislation took preparedness beyond the “next level” and into the stratosphere, sowing the seeds that grew into the burgeoning emergency response industry as we know it today. U.S. oil industry majors reacted to OPA 90 by banding together to form the nonprofit, consortium Marine Preservation Association (MPA). The MPA in turn funded another nonprofit, Marine Spill Response Corporation (MSRC), to act as the consortium’s Oil Spill Removal Organization (OSRO). MSRC announced a massive program to build a special purpose fleet of Oil Spill Response Vessels (OSRVs) and to purchase a substantial inventory of spill response equipment. Depots would be built along each of the U.S. coasts
the only commercial entity in those early days to challenge the MPA/MSRC model and introduce choice to the response marketplace. It’s been five years since MarEx checked in with the environmental services industry. We feel fortunate to have been able to catch up with Randall “Ran” Blank, Chairman, President and CEO, and the executive management team of SEACOR Environmental Services (SES), a subsidiary of SEACOR Holdings Inc. Here is the story behind the rise of one of the world’s premier emergency response organizations.
The Oil Industry Reacts to OPA 90: SEACOR Offers an Alternative In 1990, SEACOR was still a relatively small, but growing offshore vessel operator. SEACOR Chairman and CEO Charles Fabrikant looked at the proposed consortium model and quickly made two discerning observations – the proposed cost of this new endeavor was excessive and the response infrastructure was insufficient. Driving his assessment was the recognition that the vessels to be built by MSRC were similar to vessels operated yet underutilized in SEACOR’s fleet. Encouraged
by the prospect of increasing the productivity of its offshore fleet, SEACOR set out to find an established spill response contractor who might add its experience to SEACOR’s capital. Meanwhile, in Calverton, New York, the Miller Environmental Group, led by its founder Jim Miller and his son Mark, were assessing the opportunities they expected to arise from the implementation of OPA 90. What mystified them was the exclusion of the existing oil spill contractor community in the MSRC plans. Mark Miller, then a Board Member of the Spill Control Association of America, recalled, “I was amazed that the people who clean up oil spills every single day and who had the local knowledge to respond in the most timely manner were being cut out of the new program.” Little did SEACOR or the Millers know that their paths were about to cross. SEACOR’s search uncovered the Millers who ran a well-established family business on the east end of Long Island that had a long history of responding to marine pollution accidents in the Northeast. Mark Miller remembers, “Out of the blue, my father and I received a call to see if we might be interested in selling our business. Having never been asked that question before, we didn’t quite know how to respond, so the easiest thing to do was say ‘no’ and then ask ‘why.’ Charles went on to explain his background – prior to his career at SEACOR he had been an environmental attorney, counsel to the Environmental Protection Agency (EPA), a shipowner and barge and towboat operator, and now ran this growing offshore supply boat business. His observations on what was happening with the MSRC program struck a chord with what we were already thinking.” A meeting was arranged, and after a very long lunch, the Miller family and SEACOR agreed to explore the possibility of a joint venture. Ran Blank, then SEACOR’s Executive Vice President and CFO, was impressed with the commitment and enthusiasm that both sides brought to the collaboration. Blank remarked, “There was no shortage of good ideas and a sense that the high cost of the MPA/MSRC structure could create a market opportunity. The cloud on the horizon was not knowing the precise regulatory requirements that would emerge from OPA 90’s expansive mandate. The specific regulations would eventually follow, but that left much uncertainty during the planning phase as to what infrastructure, i.e., investment, would be required.” At this same time, the U.S. Coast Guard initiated its negotiated rulemaking process. This prothe maritime executive
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case study :: ses cess would put the meat on the broad bones of the OPA 90 legislation. The problem was that the existing commercial response industry did not have a seat at this regulatory table. This would soon change. With mounting support of its colleagues and potential clients, SEACOR’s National Response Corporation (NRC) petitioned the U.S. Coast Guard for participation and was pleased to receive a positive reaction. The U.S. Coast Guard gave NRC, and the commercial response industry it represented a fair hearing and accepted much of its practical input. Nonetheless, it seemed implausible that a commercial interest could compete against the major oil companies’ national marine response organization. Fresh off important contributions to the “reg-neg” process, momentum began to build for NRC’s services. In April of 1992, Fabrikant addressed the INTERTANKO conference in Genoa and outlined NRC’s ideas in contrast to the MPA approach. “The INTERTANKO conference was a watershed event for NRC,” Blank says. “Charles clearly connected with the audience.” This moment defined the positive sea change for NRC and became the stepping stone by which it became a serious competitor in the provision of OPA 90 compliance services. Follow-up meetings were arranged in Piraeus, Oslo, London, Stockholm and other shipowner centers. The P & I clubs were advised. Additional meetings took place with smaller independent energy and trading companies who were not only concerned about the cost of the co-op model, but also the possibility of “co-assuming” liabilities that might arise as a result of other owners having a spill. “If you build it, they will come” has become a familiar American adage, but it was exactly what would happen with NRC. In December 1992, NRC christened the converted SEACOR supply boat, the SEACOR Osprey. The Osprey was the first vessel in the U.S. with dual certification as both a supply boat and an oil spill response vessel. Charles Fabrikant’s vision was realized–an existing vessel working offshore could be outfitted for dual service as a spill responder and at considerably less cost than the vessels being built for MSRC’s navy. With this flagship and an announced commitment to invest additional capital to convert other vessels and acquire spill response gear, NRC was no longer seen as simply a fly in the MPA ointment, but a viable alternative. The following month, Phibro Energy and the Coastal Corporation agreed to further fund the start-up of NRC, lending even more credibility. 22 the maritime executive
NRC had set forth a compelling business plan. SEACOR’s vision of dual-purpose vessels would clearly offset the cost of building new, and the Millers’ idea of building a contractor network began to take shape. Rather than stockpile new equipment, NRC evaluated the existing capabilities of regional response contractors, determined what additional equipment was necessary, and then formed a logistical network to tie it all together. It would
sponsors Coastal and Phibro,” says Blank. “They appreciated our user-friendly and business-like approach and our willingness to place people and assets where they wanted them. The competition’s ‘one-size-fits-all’ environmental compliance wasn’t optimal for smaller ‘second tier’ companies; they were footing a large bill with little or no input in MPA’s business strategies or budgets in return for their investment.”
supplement rather than supplant the investment already made by the response industry. This alliance, NRC’s Independent Contractor Network (ICN), would also be tapped to supply the large number of trained response personnel needed to respond to an incident. The plan was fine-tuned as OPA 90 requirements became clearer. NRC determined that offshore utility boats were better suited for OSRV conversion and tapped into the secondhand market to acquire suitable candidates. “We recognized that you could find and recover more oil faster using an armada of smaller, more maneuverable vessels than the complicated ships being designed by MSRC,” Blank said. Another strategic development at NRC was the incorporation of “vessels of opportunity” into its regular response plans. To minimize the cost of a standby “armada,” NRC contracted barges engaged in commercial service that could be utilized for oil spill response, recovery and storage in the event of a spill. NRC also made headway with its ability to tailor its service to the marketplace. “We were gratified by the response of the international shipping community and the funding
The Early Days of NRC: Meeting Challenges and Building Confidence It wasn’t long before NRC’s mettle was tested. At six o’clock on August 10, 1993, just days before the implementation of OPA 90, two oil barges and a phosphate freighter collided at the entrance to Tampa Bay, Florida, spilling an estimated 328,000 gallons of oil. Both barge owners were NRC clients. NRC immediately responded, deploying people, on-scene logistics and equipment. “It was remarkable,” Blank said. “We were just taking delivery of our equipment when the collision took place and we redirected everything we could–fresh from the manufacturer–straight to Tampa.” In its first major response, NRC mobilized 987 people, 95,000 feet of boom, 4 temporary storage barges, 9 sets of portable barges, 24 portable vacuum transfer units, 50 boats, 4 tugs, 8 skimmers, 30 hot water pressure washers and one of its three mobile communication centers. At the height of the beach cleaning and shoreline remediation operations, 6 graders, 26 front-end loaders, 65 rolloff containers and 295 dump trucks were removing oil-contaminated sand and debris from the beaches.
case study :: ses NRC was credited with the containment, recovery, and disposal of 147,131 gallons of oil offshore, 106,500 gallons of oil/water from inshore areas, and 19,429 cubic yards of contaminated beach sand and oily debris. The response was considered a huge success. Companies took notice of NRC’s performance and interest in its services continued to grow. In January 1994, the tank barge Morris J. Berman was being towed by M/V Emily
expectations of its clients. The organization’s concept had passed the test with flying colors, and there was a surge of confidence in its abilities. Companies sitting on the fence about NRC’s program were now interested in becoming clients; before long, Sun Oil, ARCO, Hess, and CITGO defected from the MPA ranks. NRC, as a commercial provider, had proven that there was an effective alternative to the co-op model for meeting regulatory compliance.
Boom Deployment S. when it grounded off San Juan, Puerto Rico, spilling 750,000 gallons of heavy fuel oil. After mobilizing its locally-based equipment–7 skimmers, 29,000 feet of boom and two 35,000- barrel barges, as well as numerous work boats. NRC arranged for five sorties to fly in equipment from the U.S. The first three arrived within 20 hours of activation and the next two within 19 hours. These airlifts added a full range communications capability, an additional 76,000 barrels per day skimming capacity and various ancillary resources such as sorbents. A January 9, 1994 article in The New York Times quoted a U.S. Coast Guard spokesman on the Berman response: “Within hours, not days, we had the equipment and people in place to help contain this spill. This is not an easy spill cleanup, but it could have been worse.” NRC again distinguished itself by airlifting spill response equipment and people, and coordinating the event with military-like precision. Within 18 months of the implementation of OPA 90, two major oil spills had occurred, and NRC had responded in a manner that exceeded the new regulatory requirements and met the
SES: A Global Environmental Company Fast forward to 2007. SEACOR Environmental Services is now a considerably larger, multi-divisional international organization, offering a wide array of environmental services. SES had bought out NRC’s founding partners and The O’Brien’s Group was acquired as a new line of business. In 2004, a contract with the Baku-Tbilisi-Ceyhan (BTC) Pipeline put SES’ international branch on the map. Ran Blank traded his duties as SEACOR Holdings’ Executive VP and CFO and became CEO of this growing division. SEACOR Environmental Services now operates in 18 countries with over 650 employees worldwide. On average, it responds to 6 emergency events per day and conducts 500 drills and 350 vessel boardings per year. SES has come a long way since its early days as a dark horse competing for a place in the oil spill response market. How did SES get from “there” to “here”? MarEx is pleased to introduce Steve Candito, President of NRC; Tim Perkins, CEO of The O’Brien’s Group; and Neil Challis, President of
SES International to help us answer that question and learn how each group plays an integral role in the company’s overall success.
National Response Corporation: Leading the Way With Innovation NRC President Steve Candito spent his youth on the waters of Long Island’s Great South Bay, which led him to the U.S. Merchant Marine Academy at Kings Point. He graduated from Kings Point in 1980 with a Bachelor of Science degree and a U.S. Coast Guard 3rd Assistant Engineer’s license. From 1980 to 1985, he sailed as 3rd Engineer on board Exxon oil tankers–running routes along the East Coast and between the West Coast and Bay Town, Texas. While still with Exxon, Candito began to study maritime law at Hofstra University. After graduating in 1985, he joined a leading maritime law firm in New York City. In 1990 as the junior attorney working on the BT Nautilus spill response, Candito had to “step in” as the Qualified Individual (QI)/ Spill Manager. Along with his legal duties, Candito managed the critical early days of the spill until a dedicated spill manager was brought in. It was this experience that led NRC to bring Candito on board in 1993 to manage the vessel owner and P&I Club aspects of the business. Six years later Candito assumed leadership of NRC. Initially, NRC was only active on the East Coast and in the U.S. Gulf including the Caribbean. Although the company was prepared to provide coverage along the West Coast, its primary vessel client base was independent owners that rarely traded to California, Oregon, or Washington. Candito points out that neither NRC nor MSRC was originally created to meet California State requirements. West Coast coverage was essentially left to well-established regional co-ops. Growing customer interest and a later increase in California regulations set NRC on a path toward becoming the leading environmental contractor in the region. In the Pacific U. S., there were well-established oil spill response co-ops in Los Angeles, San Francisco and Seattle, but a lack of resources between. The State of California recognized this “gap” and questioned the possibility of a timely response if a vessel had a spill while transiting the remote coastline between ports. At the behest of client ARCO, NRC formed a joint venture with Crowley Maritime and devised a plan to address this concern. The plan included a SEACOR-provided dedicated Oil Spill Response Vessel the maritime executive
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case study :: ses and a Crowley-provided dedicated barge for these remote areas. Furthermore, both entities provided access to other vessels, equipment and manpower. This project was a huge success for all parties involved. The State of California received more resources overall, and ARCO was recognized as the driver behind this improved capability. “It is precisely this type of situation that is indicative of NRC’s trademark approach to customizing its service on a per-client basis,” says Blank. “Where a client like ARCO wanted emergency response coverage in places such as Astoria, Oregon, and Eureka, California, it was part of NRC’s mandate to have the flexibility to adapt and meet those needs.” In 2003, California enacted laws requiring certified OSROs to directly employ all their personnel. To satisfy these new requirements, NRC purchased Foss Environmental Services, a West Coast environmental contractor, and renamed it NRC Environmental Services (NRCES). The acquisition added several new services to NRC’s coffer, including HAZMAT response and waste management, site remediation, as well as marine and industrial services. Today, NRCES is a leading West-
Coast-based environmental contractor with five main offices up and down the coast and several satellite locations. NRCES employs 225 full-time personnel and also maintains a standby labor pool of 250 additional responders for large events. NRC’s innovative ways continue as it meets new challenges for standby booming in Washington State, shoreline protection in California and federal requirements related to salvage and dispersants. These new provisions are in addition to the compliance ser-
vices NRC provides to its over 821 clients, covering more than 5,000 various vessels and facilities. NRC has responded to more than 500 emergencies since its inception, with over 27 responses so far this year. Just as SEACOR’s innovative approach to oil spill removal gave rise to establishing one of the nation’s leading OSROs, entering the spill management market was seen as a further opportunity to offer shipping companies and facility operators additional technical assistance and streamlined regulatory compliance.
NRC Responds in the GOM: What Lurks Beneath Hurricanes Katrina and Rita left a minefield of debris in the U. S. Gulf. Even today there are a significant number of submerged objects lurking beneath the waters. On November 11, 2005, a 441-foot, double-hull tank barge struck a submerged platform, gouging a 35-foot-long by six-foot-wide hole in the barge’s starboard bow. The submerged platform had sunk during Hurricane Rita in September. The barge eventually capsized, spilling 1.3 million gallons of heavy crude. At the peak of the response, NRC had ten vessels involved in the operation, including dedicated OSRVs, non-dedicated supply vessels and dedicated and non-dedicated barges. These vessels provided a vast range of services, including salvage support to NRC’s salvage partner, Resolve Marine Group, along with dive and personnel support, emergency cargo lightering, temporary recovered oil storage, pollution response and submerged oil tracking and recovery. In addition to NRC’s resources, SEACOR Marine vessels and helicopters from SEACOR’s aviation company, Era Helicopters, were used during this response.
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case study :: ses The O’Brien’s Group: The Calm During the Storm K. Tim Perkins, CEO of The O’Brien’s Group, is a second generation oil industry veteran, having followed in his father’s footsteps. He was raised in Kansas where he unofficially began his career helping to maintain the firefighting equipment at the local refinery during the summers. Perkins officially began his career at Mobil Oil after he received his Bachelor’s Degree in Fire Protection and Safety Engineering from Oklahoma State University. He later received a Master’s Degree from the University of Southern California in Safety Management and ultimately became a Certified Safety Professional. At Mobil, he was assigned for three years to major projects in Saudi Arabia. Perkins later became the head of the corporate emergency response program at Union Oil of California (Unocal), also serving on the MPA’s Board as Unocal’s representative. While at Unocal, Perkins created a subsidiary and launched the Emergency Response Strike Team (ERST), which later acquired O’Brien Oil Pollution Service (OOPS) in 1996 to combine ERST’s strong West Coast presence with OOPS’ Gulf of Mexico and international vessel operations. Perkins came to SES when SEACOR purchased
ERST/O’Brien’s in late 1997 and later renamed it The O’Brien’s Group (TOG). OOPS was founded almost 25 years ago by Jim O’Brien, a retired U.S. Coast Guard officer with significant experience as the Commanding Officer of the U.S. Coast Guard’s Pacific Strike Team. Since its inception, OOPS has been a major player in managing spill emergencies, developing vessel response plans, emergency response related training, and designing and conducting emergency response exercises. “Jim built an internationally recognized reputation at OOPS as the industry leader in oil spill response management and technical assistance,” said Perkins “and he remains instrumental in the leadership of OOPS today.” The O’Brien’s Group is currently comprised of OOPS and Response Management Associates (RMA). RMA, a recent acquisition, was founded by Eric Politte after his tenure with Exxon. RMA provides highly technical contingency plan writing and consulting services, primarily to the downstream business units of major and mid-size oil companies. The O’Brien’s Group acquired RMA last year, maintaining Politte’s leadership, to bring these additional technical services and expertise into the family of SES companies.
“At the time of a spill or other emergency, OOPS is the calm during a storm,” Perkins says. The company provides people, resources, and experience when a disaster strikes anywhere in the world. OOPS brings order in an emergency through effective crisis management using the Incident Command System (ICS). “Our clients,” Perkins added, “are shipping companies whose customers are oil companies. These oil companies are also our clients, so there is a lot of synergy working with these entities before and during emergencies.” Perkins attributes OOPS’ success to offering flexibility to the clients and by investing in the best people in the industry. OOPS and RMA also provide their clients with consultant services for emergency prevention, preparedness, response management and security services, such as plans, training and exercises. OOPS also works with vessel operators trading in U.S. waters to reduce the risk of detainment by assisting these owners/operators in meeting federal, state and local regulations. The services include vessel contingency plan preparation, routine contingency plan maintenance, pre-boarding vessel inspections, preparation for U.S. Coast Guard Port State Inspections, ISO/ISM audit support services, CDI
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case study :: ses inspections, SOPEP preparation, OPA 90 Qualified Individual notification drills, and OPA 90 NPREP compliance and documentation. Now that SES had established itself as a leader in both emergency spill response and management in the U. S., it was only a matter of time before it expanded their coverage to the international market.
OOPS in Action: The Athos I On Friday, November 26, 2004, a tugboat operator docking the 750-foot, singlehull tanker Athos I, at CITGO’s asphalt refinery in Paulsboro, New Jersey, saw oil in the Delaware River. The U.S. Coast Guard (USCG) immediately sent divers beneath the ship and discovered two punctures (1-by-2foot and 1-by-6-foot) in the tanker’s hull. The USCG initially estimated a spill of 30,000 gallons of Venezuelan crude. After further inspection, officials gave a more accurate estimate of 265,000 gallons lost in the Delaware River. The O’Brien Oil Pollution Service was the designated QI and Spill Management Team for the Athos I event, and NRC was the vessel’s contracted oil spill removal organization. OOPS immediately responded with a Qualified Individual to the USCG office in Philadelphia. A Unified Command was formed with OOPS (representing the vessel owner), the USCG and the affected states of Delaware, New Jersey and Pennsylvania. At its peak, the OOPS Incident Command team was comprised of 200 persons and provided all planning, logistics, operations, safety and finance personnel. Using the Incident Command System, as required in the United States, OOPS developed and received approval for the Incident Action Plan containing response strategy, tactics and deployment of resources. The plan, which was updated daily, addressed all significant issues, including spill containment, vessel lightering and salvage, onwater oil recovery, submerged oil recovery, shoreline cleaning, re-opening of a nuclear power plant, waterways management, wildlife impacts and community/public relations. Resources activated and managed for the spill included up to 150 boats, 37,000 feet of boom, and 1,600 field personnel. After the vessel owner exceeded its limit of liability, OOPS continued to manage the spill until completion at the request of the USCG under OOPS’ existing Basic Ordering Agreement. 26 the maritime executive
SES International: Local Service, Global Strength Neil Challis, a graduate of Maritime Studies from the University of Wales joined SES over 12 years ago and is now president of the company’s international division. Prior to joining SES, Challis, worked in the offshore geophysical and tidal energy sectors and spent a number of years as a technical advisor with London-based International Tanker Owners Pollution Federa-
tors in the region, with bases in Abu Dhabi and Fujairah, the United Arab Emirates (UAE). The Company provides oil spill and hazardous material response, ship-to-ship transfer support, industrial services and training and consultancy services throughout the Arabian Gulf and Central Asia regions utilizing an extensive stockpile of equipment and professionally-trained personnel from some nine different countries. SESME has responded to
tion (ITOPF), an organization providing advice, expertise and assistance to ship-source pollution on a global basis. Challis gained extensive experience with ITOPF, attending major shipping incidents in Spain, Italy, Malaysia, Mexico, Yemen, the Caribbean and the U.S. Challis began his tenure at SES with a brief stint in New York before venturing east and establishing SES’ first overseas office in Thailand in support of offshore exploration and production in the region. Challis oversaw SES’ activities in Central and South East Asia and later the groundbreaking of the Caspian operations. Last year, he returned to his native England to establish the SES’ international headquarters in London. SES’ first large-scale international response took place during Operation Iraqi Freedom. SES won a contract to clean in and around damaged oil installations after retreating Iraqi soldiers destroyed and set fire to them. SES used these early operations in Iraq and Kuwait to establish a permanent presence in the Middle East known as SES Middle East (SESME). SESME has grown rapidly and today is one of the largest response contrac-
numerous oil and chemical spills in the UAE, Iraq, Kuwait, and Turkmenistan. In the midst of growing its Middle East business, SES became a major spill response provider for the Baku-Tbilisi-Ceyhan Pipeline Company (BTC) in 2004. “The BTC contract was a significant step in the development of the company as an international competitor,” says Challis. “While many earlier projects were short-term affairs, the contract with BTC was a long-term commitment that allowed us to create a strong presence in the strategically important Caspian and eastern Mediterranean region.” Winning the BTC contracts launched a project involving the recruitment and training of over 100 local personnel and the establishment of eight Tier 2 oil spill bases along the length of the 1,800 km pipeline in Azerbaijan, Georgia and Turkey. To facilitate operation of the bases in Turkey and to position itself for expanding its work in the country, SES formed a joint venture, SESMEKE, with MEKE Marine Environmental Services. Since 2004, SES has expanded its operations in the region to provide spill response to an additional pipeline, undertaken
case study :: ses pipeline repair and road construction projects, and has recently established a small response base on the Georgian Black Sea coast. While SES International has grown its oil spill response-related services. “A major initiative for us going forward,” Challis says, “is expansion into the chemical response field. Having already established our HAZMAT credentials in the Middle East, we will be expanding services to cover the eastern Medi-
terranean and Asia in the coming months. In Turkey, the administration has recently introduced new legislation addressing preparedness and response to oil and hazardous material spills and SES, through SESMEKE, is already licensed to provide compliant services to its clients in the region.” SES now services a wide range of government entities, oil and gas companies, port operators, chemical companies and shipping
SES in Lebanon: Mobilizing International Resources In July 2006, fuel tanks at Jiyeh Power Plant, located 30 km south of Beirut, were destroyed during air strikes in the Israeli-Lebanese conflict. More than 4.6 million gallons of heavy fuel oil spilled into the eastern Mediterranean Sea. An Israeli naval blockade prevented officials from surveying the damage or mounting an immediate response. Wind patterns and water currents spread the oil north, impacting two-thirds of Lebanon’s coastline. In October 2006, SES was awarded a $5 million contract by the U. S. Agency for International Development (USAID) to clean up a portion of Lebanon’s coast. The areas of work and degree of cleanup were based on criteria developed by USAID with the Lebanese Ministry of Environment. The original contract was for ten sites consisting of 72,263 square meters of shoreline. Together with local partner company, Conapro SAL, SES completed 20 sites of 110,387 square meters, staying within the originally
groups worldwide. Today, SES International has offices in Africa, Asia, Europe and the Middle East and the Caspian Sea regions.
SES: ”A Business of People” Ran Blank has been with SEACOR and its predecessor companies for nearly 24 years. He has witnessed and participated in its growth from a small leveraged buyout in 1989 to the well-capitalized and diversified multinational energy support and marine transportation services company that it is today. It’s a business mostly about owning, operating, investing in and marketing equipment. SEACOR’s environmental service segment, however, is a business of people, their ideas, their specialized expertise, their teamwork, and their talent for coming up with solutions to difficult situations, often under extremely challenging conditions. “Our people are our greatest asset,” Blank says. “We had to be smart, agile and creative to build a business against what appeared to be overwhelming odds. Having succeeded, and with our recent growth, we have the experience and expertise to help any client, anytime, anywhere. Our people have the ability to manage and mitigate all aspects of the emergency preparedness and response lifecycle while protecting the environment and our clients’ assets and reputations.” MarEx
contracted amount. Submerged oil was a major concern at a number of sites along the coastline, and SES performed over 3,000 man hours of diver operations, recovering over 400 cubic meters of oil from the ocean, including nearly 30 cubic meters of waste bags washed into the sea after being left in the surf zone by previous clean-up crews. SES trained over 220 local Lebanese workers in spill response techniques, creating an experienced response team for future spills in Lebanon and beyond. The local workforce consisted mainly of fisherman and tourism workers whose industries were decimated by the spill. A team of 15 highly experienced SES managers, supervisors and technicians from the U. S., U. K., the Middle East and South America were mobilized. Equipment was flown in from the U. A. E. and U. S. and moved overland from Turkey. SES’ 24-hour International Operations Center on Long Island, New York, provided initial logistical support to the response effort prior to the on-scene arrival of the implementation team.
Byblos Quay Walls: before
Byblos Quay Walls: after
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Randall “Ran” Blank’s career at SEACOR began in 1984 when he joined Charles Fabrikant’s Mississippi River barge company, SCF Corporation, as its Chief Financial Officer (CFO). Business prospered and soon Ran took over the presidency of the company. While pursuing new avenues of growth in the Midwest, he came across the opportunity to acquire the offshore supply boat business of NICOR, a Midwest public utility, and the beginnings of what became SEACOR were established. In 1992, SEACOR went public and Ran became its Executive Vice President and CFO. For over 20 years, he worked with Charles to expand SEACOR’s operations and was instrumental in the acquisitions and capital market transactions that made SEACOR the energy support and marine transportation services company that it is today. Recently, Ran became the Chairman, President and Chief Executive Officer of SEACOR Environmental Services Inc. (SES), one of SEACOR’s principal business units. In our interview with Ran, he fondly recalled his participation in the very first “Earth Day” as a sophomore at Columbia University in the spring of 1970. Those were heady times for student activists and Ran got caught up in the movement. After graduating from Columbia with a degree in economics, he attended Harvard where he received his MBA in 1974. Ran’s “green aspirations” were, however, to remain unrealized for much of his early career until SEACOR entered the envi 28 the maritime executive
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ronmental services business with the establishment of the National Response Corporation (NRC) in December 1991. MarEx is pleased to introduce Ran Blank to you and tell the story behind the entrepreneurship that has established SEACOR Environmental Services as an innovative industry leader in the provision of environmental, industrial and emergency response solutions. MarEx: Most people know you as a cofounder, executive vice president, and chief financial officer of SEACOR Holdings Inc. When did you take over the leadership of its environmental services group? Blank: I had general oversight of the environmental group beginning in 1997 but it was not until September 2005 that I left the corporate side of SEACOR and began exclusively leading SES. My mandate was to continue the expansion of our business and pursue growth through mergers and acquisitions. MarEx: Have you found the transition rewarding? Blank: It’s been great. The leadership required to run the environmental group is quite a departure from managing SEACOR’s asset-based business units and being responsible for maintaining SEACOR’s financial and accounting integrity in a world of everincreasing regulatory demands. What I particularly enjoy in my new role is the opportunity to inspire and motivate the over 650 men and woman who work for SES and its joint ventures. I’ve been rewarded with a talented
and enthusiastic group of experienced managers running each of my divisions and a very dedicated workforce that works tirelessly to provide real value to our customers around the world. Needless to say, the projects that we take on are important to the protection of the environment, something that I am quite passionate about. MarEx: What distinguishes you in the environmental services marketplace; what is your greatest asset? Blank: Our people. What has and continues to set us apart is our experience, the commitment of our employees and our understanding of our customers’ needs and willingness to develop solutions that best match those requirements. We particularly focus on being user-friendly and distinguish ourselves by customizing our service to meet the specific needs of our customers. We listen. At every level, our people have the credibility and instill the confidence necessary to build relationships, with our clients, companies with whom we work and the regulators that oversee our industry. All of these qualities ultimately revolve around our people and we have some of the best. Our folks come from all walks of life and they bring with them a diverse background of experience and education. Our ranks include former U.S. Coast Guard and other military officers. We have past and present Master Mariners. Others in our organization have experience with shipping companies, oil companies, all types of response contractors
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ran blank seacor environmental services and federal and state regulators. The formal education of our staff includes bachelor’s and advanced degrees in civil, chemical, electrical and mechanical engineering; environmental and life sciences, such as marine biology; safety and industrial hygiene; public health and epidemiology; and accounting, business, finance and law. The common ground created by our professional employees has served us well. Whether we are assisting our clients with the latest regulatory requirements, responding to an oil spill on behalf of our clients under the supervision of the regulators, or pursuing opportunities for further acquisitions or growth in our business, it is our highly qualified and motivated people that get the job done and set us apart. MarEx: Let’s back up a moment. As you were with SEACOR from the beginning, what led to a primarily offshore supply boat company getting involved in the business you lead today? Blank: In the early 1990s, SEACOR was a relatively small, but growing offshore vessel operator that had just gone public. With the passage of OPA 90, one of the business solutions being proposed to meet the regulations was the creation of a newly built, special purpose fleet of Oil Spill Response Vessels or OSRVs. We observed that the design of these OSRVs was based on supply vessels–assets that we already had in our fleet and which were under-utilized. Our first thought was that we could offer a similar capability at less cost by using our existing vessels rather than building new. From there we examined the market opportunity more closely and concluded that in an actual spill response the client would benefit from the flexibility and maneuverability that a greater number of smaller, less costly platforms would provide. We also recognized that, in addition to vessels and equipment, numerous trained personnel would be required during a major spill. Thus, we developed a novel model for an alliance of established environmental contractors. Both of these innovations led to a more effective and less costly OPA 90 solution. MarEx: But the odds must have been stacked against you, given the consortium being created by the oil majors?
Blank: That’s true, but being a very commercially driven enterprise and with the experience of being shipowners ourselves, we promoted our alternative business approach and quickly won a large following from the international ship owning community who traded to the U.S. Combined with the sponsorship of two independent energy and trading companies, we entered the market through the creation of a joint venture called the National Response Corporation or NRC. MarEx: What did NRC have to do to become a nationally classified Oil Spill Removal Organization or OSRO? Blank: First we had to invest in new oil spill response equipment and acquire a fleet of offshore vessels and barges suitable for conversion to oil spill response use. We then distributed this equipment throughout the U.S. to meet the U.S. Coast Guard requirements for high and low volume ports and developed our
Whether we are assisting our clients or pursuing further acquisitions or growth, it is our highly qualified people that get the job done and set us apart.
“alliance” of established environmental contractors which we called the Independent Contractor Network or ICN. The ICN would store and maintain our equipment, supplement it with its own gear, and provide a workforce should we be called upon to respond. We also developed relationships with our barge customers, who, already subject to OPA 90 requirements, gave us priority access to their equipment for temporary storage of spilled oil on a non-dedicated basis. Between what we owned and dedicated to oil spill response and what our affiliates, contractors and customers provided, we more than exceeded the regulatory requirements. This system was demonstrated to the U.S. Coast Guard and NRC was classified as a Level E Open Ocean Oil Spill Removal Organization or OSRO in 1993. MarEx: You mentioned that some of your equipment was dedicated to oil spill response, which implies that some of it is not. Can you explain this further? Blank: NRC has a total of 18 oceangoing response vessels in its fleet, thirteen of which are dedicated to oil spill response services. Furthermore, all of NRC’s skimming equipment, work platforms and different types of boom are staged with our contractors or on NRC’s vessels on a dedicated basis. Where our approach differs from the general model of our largest competitor is that some of NRC’s and our sister company SEACOR Marine’s offshore vessels, are also engaged in commercial service. We reasoned that this system was in fact a better solution given that the vessels in commercial service were likely to be closer to a possible incident than vessels tethered to a dock. Wherever we have put our equipment in commercial service we have also made arrangements to release the equipment if it is required for an actual emergency. And, of course, we have built into our logistical model a large degree of redundancy in relation to these commercially-engaged vessels to ensure our customers are always covered. MarEx: OPA 90 established a new set of criteria for emergency response. How well prepared were you to put your logistical model to the test? Blank: That’s an interesting question. As it turned out we didn’t have a lot of time to practice. Days before the implementation of the Act in August 1993, there was a major incident in Tampa the maritime executive
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Bay where three vessels collided. In this case, two of the three vessel owners were customers and NRC responded pursuant to the customers’ filed response plans. We learned immediately that our system worked, that our equipment was suitable for the cleanup and that our local contractors were capable of supplying the additional equipment and labor within the required time frames. We were instantly battle-tested and our reputation grew from there. MarEx: Over a year later, in January of 1994, there was a major incident when a barge ran aground off San Juan, Puerto Rico. What was NRC’s role in that response? Blank: Here again, NRC was the primary responder and had the opportunity to distinguish itself. After mobilizing our locally-based equipment–skimmers, booms, barges and workboats–we demonstrated an ability to react swiftly by airlifting a considerable amount of equipment and manpower from the continental U.S. In the end, NRC led the cleanup of a 750,000-gallon discharge of heavy oil, a lot of it having fouled the tourist beaches of San Juan at high season. NRC had now proven its capabilities in the two largest oil spill events post the passage of OPA 90. MarEx: What new opportunities arose on the heels of these initial successes? Blank: Our initial successes and cost-effectiveness led to an expansion of our customer base. Some of the smaller independent oil companies left their initial OSRO and entered into long-term contracts with NRC. We then expanded our coverage on the West Coast through a joint venture with another environmental services firm. Our historically loyal shipowner base solidified. Spill response activity declined, however, and we began to look for acquisitions to continue our growth. MarEx: How did SES evolve and what acquisitions did you make? Blank: In late 1997, SES added The O’Brien’s Group and its subsidiary O’Brien Oil Pollution Service or OOPS to its portfolio as a separately managed business specializing in spill management and providing Qualified Individual or QI services. What really attracted me to this company, apart from its clever sobriquet, was the quality of personnel that came aboard – Jim O’Brien was leg-
endary in the business, they were West Coastheadquartered, and they had an interesting niche in the Gulf of Mexico providing spill management services to the exploration and production industry. MarEx: OOPS is known as a premier QI and Spill Manager. How do spill management services differ from the services provided by NRC? Blank: Qualified Individual (QI)/Spill Management Team (SMT) services are quite different from the services provided by an OSRO. First, QI and SMT requirements are contained separate and apart from the OSRO rules in the OPA 90-related regulations. While the QI/SMT and OSRO must both be selected and then listed in the Vessel Response Plan (VRP) before the plan can be approved, the difference between the various roles is most apparent at the time of a spill. First, it is the QI that coordinates with the federal and state authorities and authorizes expenditures and resources on behalf of the
SES has an excellent safety record. We sell safety training; to be successful we have to practice what we teach. I’m immensely proud of our record around the world.
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vessel owner or Responsible Party. The SMT develops the spill response strategy and tactics for the specific circumstances of a spill, utilizing the approved VRP and Area Contingency Plan. From this information an Incident Action Plan (IAP) is prepared, which includes the recommended deployment of men and equipment, minimum safety requirements, communications, and other logistical support. The IAP is reviewed and approved by the federal and state authorities. It is then that the OSRO’s resources are put to work to implement the approved cleanup plan. MarEx: OPA 90 provided the national baseline for oil spill response regulations but individual states, notably California and Washington, have enacted additional laws that augment this standard. How have you adjusted in order to develop your business on the West Coast? Blank: Even though California already had more rigorous oil spill requirements than required under OPA 90, California decided several years ago to adopt even more stringent regulations. The more stringent requirements addressed a concern that resources, particularly personnel, were potentially being double-counted through the use of subcontractor relationships. To eliminate the concern, California revised its regulations to require all qualified oil spill response organizations to employ directly the personnel cited in a plan. Clearly, maintaining a staff on a purely standby basis would result in a higher cost to our customers. We also asked ourselves, even if our clients were willing to pay these additional costs, would a labor force on constant standby be the best experienced and positioned respondents to an actual event? We didn’t think so. So, we started looking for an established environmental company in California that had oil spill response capability, but also had a steady business built on non-emergency environmental work. After evaluating a number of companies, we bought Foss Environmental Services, which we renamed NRC Environmental Services (NRCES). NRCES provides a full range of environmental and industrial services, not just marine spill response; it performs longterm, land-based remediation projects and responds to both oil and hazardous material spills ashore. With NRCES we acquired a team of seasoned respond-
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ran blank seacor environmental services ers who could hone their skills and keep equipment field-ready as they worked everyday. We also believed that just as our vessels are more likely to be nearer a spill when engaged in commercial service than tied up at a dock, the same holds for personnel. More than once, NRCES personnel in the field have been ideally positioned to be first responders to an emergency event and make critical early assessments. The ability to arrive quickly and early has allowed us to mount a more effective and immediate response. Interestingly, Washington State is currently tightening its regulations, but with a different focus than California. Its new regulations are in direct reaction to a spill that occurred during a cargo transfer operation about two years ago. Under federal regulations, response resources are only required to arrive on scene within a one-to-two-hour time frame. Washington State regulators decided that the federal requirement was not sufficiently responsive; now vessels are required to be pre-boomed before a cargo transfer takes place, unless safety issues related to weather or cargo type dictate otherwise. NRCES has geared up to meet these new requirements and is doing so for many of the local refiner-
ies, terminals, bunker suppliers and tug and barge operators. MarEx: We discussed your expansion across the U. S.; let’s switch gears to the international arena. Before you established SES International in 2004, SES was hired to assist the U.S. and British armies during Operation Iraqi Freedom; what did that work entail and how were you able to operate in such dangerous conditions? Blank: In 2003, we were contracted as part of a project to restore the Iraqi oil industry and as such we were not really there to support the allied forces, rather the reconstruction of the country’s economy. We undertook multiple tasks, starting with logistical support to the U.S. Navy for oil spill equipment that was airlifted into Kuwait. We provided marine support craft to the U.S. Navy and later mobilized some of our own oil spill equipment and around 60 response personnel to the region. We made daily trips from Kuwait into Iraq as part of the cleanup in and around oil installations. At sea, we mobilized and manned an oil spill response vessel off the Iraqi coast. In those days, Iraq was a far less hostile place than it is now, especially in the south of the country where SES was active. That said, we of course were very conscious of safety
and security concerns for our people, and our trips into Iraq were always accompanied by U.S. or British military escorts. MarEx: Apart from working in war zones, safety overall must be a big issue for SES? Blank: It absolutely is; SES has an excellent safety record. We sell safety training; to be successful we have to practice what we teach. Our personnel are so practiced in actual response–whether oil or chemical spill–it’s by natural extension that we pass on that first-hand knowledge through our training. I’m immensely proud of our record around the world. NRC is currently approaching two years without a recordable lost time accident (LTA). NRCES was awarded Oregon Department of Transportation’s Trusted Carrier Status in February 2007, and our vehicles have been issued special license plates in recognition of company-wide safe driving efforts despite thousands of miles in hazardous conditions. Internationally, our Middle East office, SESME, just celebrated one year without a recordable LTA, and both our Caspian/Black Sea offices and our joint venture in Turkey, SESMEKE, are three years and counting without a recordable LTA. MarEx: Was your work in Iraq the beginning
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of your international operations? uled to go into effect in October 2007. The Remember, our motto is “local service, Blank: Not exactly. Being part of a larger law, referred to as ‘Turk OPA,” will significantglobal strength”. international company with significant foreign ly reform preparedness and response to oil and MarEx: Returning to the U. S., late in 2004, business activities, I always thought that SES hazmat spills in the country. While vessels there was a major incident in Philadelphia could follow its sister companies‘ leads and over a certain size are already required to take when the M/V Athos I hit an unidentified subexpand its services abroad. I also thought measures to prevent pollution and to minimize merged object and discharged 265,000 gallons our international customer base would benefit the extent of damage, the new legislation also of crude oil into the Delaware River. What from access to our wealth of experience and requires that ports and facilities perform a roles did SES play in this response? high standards should they have an incident risk assessment, develop response plans and Blank: Both OOPS and NRC played key roles outside the U.S. We initially established a small maintain a spill response capability. in the overall response. OOPS was the desigbase in Thailand and then used our experience With the established reputation of SESnated Qualified Individual (QI) and Spill Manin Iraq and Kuwait to establish a permanent MEKE–our joint venture with MEKE Marine agement Team (SMT) and worked closely with presence in the United Arab Emirates (UAE) Environmental Services–we are uniquely posithe federal on-scene coordinator, the various to expand our activities in the Middle East. tioned to provide compliance services in Turk- state regulators and the P&I club representWe also assisted in bringing the USS Cole ish waters. SESMEKE is already registered ing the owner and cargo interests. It was a back from Yemen after its terrorist attack; we and approved with the Turkish authorities to massive undertaking. The Incident Command provided pollution protection to the Cole durconduct risk assessment and provide response System that OOPS organized within a few ing its transit to the shipyard. Around this plans. With the implementation of Turk OPA, short hours after notification of the spill was time we took on a project for the U.S. Navy to we have a distinct advantage combining the truly impressive. remove oil from a World War II “oiler” that had strength of MEKE’s local expertise with SES’ Separately, NRC was engaged as the vessel been sunk in an atoll near Guam. Since then, overall experience and track record. owner’s OSRO and was tasked with mobilizwe have established additional bases ing two of its OSRVs, 130 smaller throughout the Caspian and Black Sea vessels, and 40,000 feet of boom as regions and the Middle East and have well as over 1,700 trained respondcurrent consulting and training activiers. With a need for 1,700 trained ties in Africa, South America and the personnel, we obviously exhausted Sakhalin Islands in Eastern Russia. Our our local contractors’ capability and projects in the Caspian region and coneventually brought in personnel from tracts on the BTC Pipeline really put our the East and Gulf Coasts as well as international operations on the map. some supervisory personnel from our MarEx: What services do you provide West Coast operation. Not since the to the BTC Pipeline? Exxon Valdez was such a large mobiBlank: In 2004 we won two major lization executed in such a short contracts to provide an overall spill period of time. response capability to the Baku-TbilisiMarEx: With the release of this Ceyhan crude oil export pipeline that issue of The Maritime Executive, the runs from the Caspian Sea in AzerbaiGulf of Mexico and Caribbean have jan, through Georgia, and then to the just experienced the passing of HurTurkish Port of Ceyhan on the Mediterricanes Dean and Felix. With parts of ranean Sea. This project required us the industry still recovering from the to establish eight strategically located 2005 storm season, tell us how Hurbases along the pipeline route. We ricanes Katrina and Rita disrupted recruited and trained a large local work your Gulf of Mexico operations and force in each country and created a joint what challenges you faced? venture in Turkey, SESMEKE, to provide Blank: Our personnel in the Gulf of additional environmental services as Mexico responded above and beyond required. Since we have been there, we the call of duty. First you have to have expanded our standby services to understand that OOPS’ response base additional pipelines and have recently in Slidell, Louisiana, was completely Our personnel in the Gulf of Mexico established a base in Batumi on the destroyed. All personnel from that responded above and beyond the call Georgian Black Sea coast. office had been relocated to HousMarEx: Didn’t Turkey recently enact ton, where they continued to service of duty. They continued to service our new maritime environmental legislaour customers in the midst of sigcustomers in the midst of significant tion? How do your BTC contract and nificant damage, dislocation, and, in the resulting joint venture position you some cases, complete loss of their damage, dislocation, and, in some to tap this new market? homes. It was truly remarkable. In cases, complete loss of their homes. Blank: Turkish Law number 5312 was the aggregate, the Minerals Manageenacted in March 2005 and is schedment Service (MMS) estimated that 32 the maritime executive
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ran blank seacor environmental services 798,000-gallons of crude and refined petroleum products were spilled in Gulf waters in the 2005 storm season and OOPS had some very visible cleanup projects to manage. OOPS was also activated by the U.S. Coast Guard under its pre-approved Basic Ordering Agreement to assist the Coast Guard with command post operations and to provide local knowledge. It continued to provide pollution monitoring and response management to its customers long after the storms passed, and even in some instances continue today. NRC was also quite active having its entire Mexico-based dedicated fleet engaged in spill response, infrastructure projects and salvage operations. NRC was also able to source a non-dedicated vessel from its network to assist in this work and in one case to back fill for its Galveston, Texas-based vessel that was responding in New Orleans. Let me explain this a bit more because it’s important. Many people may not realize that there was a chance that the oil trading and transportation companies and a somewhat overwhelmed regulatory community were seriously considering stopping oil flow into the country in the immediate aftermath of Katrina and Rita. Such a decision could have been detrimental to the
nation’s economy had it artificially restricted oil flow beyond reductions caused by the hurricanes. Its concern was that all of the dedicated spill response resources were working in New Orleans and, as a result, the standby resources required during lightering operations offshore Galveston under the OPA 90 regulations were not present. The entire nation was feeling the ripple effect of the catastrophe in the Gulf–both in their hearts and at the gas pump. Can you imagine the public outcry during this tense time if gasoline prices had risen even further or supply had simply dried up, all because the regulators shut down transfers for the lack of a standby response vessel? Or the equal public outcry if regulators moved badly needed resources actively engaged in the Gulf’s recovery to a standby status for a spill that may never occur? NRC’s ability to source an additional nondedicated vessel and make it available to our competition prevented the regulators from making a “no win” decision. In the midst of the widespread devastation, the flow of petroleum continued in the Gulf. MarEx: The storms left considerable infrastructure damage in the Gulf, causing residual incidents due to submerged debris. In late
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2005, you responded to a spill in which a double-hulled barge struck a submerged platform and later sank. What kind of effort did this response require? Blank: This event truly demonstrated the depth and breadth of SEACOR’s capability and once again proved the founding premise for the original environmental business unit. This response required a diverse arsenal of equipment, including numerous vessels, not simply a large, sole-purpose vessel. In addition to NRC’s dedicated vessels, we used non-dedicated vessels from NRC’s network and SEACOR Marine and helicopters from SEACOR’s aviation company, Era. A few days into the response, personnel from OOPS were brought in to assist with spill management. MarEx: We’ve touched a little bit on your directive to expand the business and grow through acquisitions. What have you done lately? Blank: Of course we are always evaluating opportunities to expand our business through acquiring an existing one. There is no shortage of such opportunities, but we are very disciplined in our approach – the hardest thing I tell my team we can do is be thorough in our analysis, be patient, and perhaps do nothing. While the financial aspects, of course, have
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to meet our investment criteria, we pay a lot cal response services to a number of internabulk carriers and cruise ships carry large quanof attention to the talent and expertise of the tional centers. SES has a wealth of experience tities of fuel on board and, although small compeople whom we would be acquiring. How in the U.S. in this field and we now see a develpared to the volume carried by a tanker, they would they fit into our culture? oping market for such services in the internarepresent a significant risk to the environment. Our most recent acquisition was O’Brien’s tional arena. Since our launch in the Middle Events like the M/V Kure and New Carissa purchase of Response Management Associates East, we have seen a high demand from ports really brought this issue to the forefront and (RMA) last September. RMA, based in Spring, and container lines for response to damaged with OPA 90 clearly having reduced the numTexas, has a special expertise in the developcontainerized cargos. ber of spills from tankers, Congress decided ment of highly technical Spill Prevention, ConMarEx: You mention pending regulation to enact similar legislation tailored to address trol and Counter Measure Plans for downstream regarding non-tank vessel compliance with non-tank vessels. business units of major and mid-size oil comOPA 90 regulations. What is the reasoning for MarEx: It’s now over 14 years since the panies, designed to meet EPA requirements. this new compliance? implementation of OPA 90 and the SES group RMA also offers other technical types of geoBlank: Congress passed the U.S. Coast Guard of companies has become one of the most graphic information systems and automated and Marine Transportation Act of 2004 which experienced responders in the industry. What planning software. These applications have requires vessels of a certain minimum size to lessons have you taken away from this period further expanded our suite of services to meet take oil spill prevention and response measures and how does this prepare you for the future? additional federal regulatory requirements. similar to OPA 90. The law came into force in Blank: If patience is a virtue, then so is prepaMarEx: Aside from using acquisitions to August of 2005, but it is taking some time for ration. During the 2005 hurricane season, NRC grow your business, what are your plans for the Coast Guard to issue the actual regularesponded to at least three significant events new products and services? tions. The reasoning is quite simple. Today’s and many smaller ones simultaneously. OOPS Blank: Each of our operating groups is modern ships, including large container ships, responded to 11 major and 5 minor events. Our always thinking about doing what we system was taxed, but we maintained do better or adding related services our high level of service throughout. centered on our core competencies. For We took notes on our performance and NRC, plans for new services center on began making adjustments. Although pending dispersant, salvage and nonwe have learned this lesson well, there tank vessel regulations. Once the speare a number of companies out there cific requirements of these regulations that still believe an oil spill or other are known, NRC will assist its clients emergency will never happen to them. with meeting those requirements in the As a result, they may put minimal most efficient manner possible. As we resources in place simply to meet have done in the past, we will encourregulatory requirements, but they will age and explore innovative approaches clearly not be prepared to respond and to these solutions, including pioneerget their businesses up and running ing concepts related to aircraft usage, quickly if a disaster does strike. equipment sharing and insurance that History has also taught us that we believe will give us an edge. you can never be too prepared or, in OOPS is applying its Incident Comfact, prepared enough. Our clients mand System (ICS) expertise to other put their safety in our hands because emergency responses, such as hazardwe are the best at what we do. We ous materials, blowouts, fires, etc. The know all too well that no two spills O’Brien’s Group is using the core compeare exactly alike and that the specific tencies of planning, training and exercisneeds for every emergency response ing to grow into the Homeland Security cannot be entirely anticipated. With business, such as bio-terrorism and our experience comes the ability to pandemic influenza risks for several U.S. prepare, the patience to properly states, including Louisiana, Mississippi, evaluate emergency situations and counties in New York and Texas and the the knowledge to quickly implement major cities of Houston and Los Angeles. the best solution given the circumIf patience is a virtue, then so is RMA is focused on technology improvestances. In turn, we are able to benpreparation. With our experience ments to produce second-generation efit our clients when they need to e-plans for all types of technical planning minimize environmental damage, the comes the ability to prepare, the requirements, providing online access cost of catastrophic losses and perpatience to evaluate, and the to clients so that they can use, edit and haps even protect them from crimirevise their plans. nal investigation. Our clients’ realize knowledge to implement the best Internationally, at the end of last year our ability and experience is invalusolution given the circumstances. we launched HAZMAT capability in the able to them when they need it most. MarEx Middle East as part of a rollout of chemi 34 the maritime executive
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leading the way
Ballast Water Management: Industry Leading the Way Innovation Out in Front of Regulatory Oversight According to U.S. Coast Guard (USCG) Admiral Ronald F. Silva, “The problem of invasive species is the highest priority marine environmental issue for the U.S. Coast Guard.” He adds that while the problem is certainly not confined to the Ninth District (the Great Lakes), the area – being a source of drinking water for 37 million North Americans – potentially has the most at stake in this regard. These comforting words should give hope to the maritime community at-large as it struggles with the quandary of deciding what – if any – ballast water treatment system it should install or retrofit onto its oceangoing fleets. Unfortunately, Silva spoke these words during the first quarter of 2003. More than four years later, there has been arguably little progress from the federal government on the issue of aquatic invasive species and, in the face of this perceived inaction, unilateral action on the state and local level has only worsened a growing crisis.
The Great Debate Congress last took action eleven years ago by amending the 1990 act with the National Invasive Species Act of 1996. Washington attorney Larry Kiern, our “Washington Insider,” perhaps says it best when he writes, “Since then, Congress has struggled to resolve the substantial differences of opinion about how best to combat, either politically or technologically, the aquatic invasive species introduced through ballast water.” While it debates the issue, individual states such as California and Michigan have taken matters into their own hands. Frustrated by inaction, the local measures serve to turn up the heat on the federal government to act. This year, substantive efforts to come to some sort of agreement have been made. Congressman Oberstar (DMN) has proposed tying these initiatives to the Coast Guard Authorization Act, the leading legislative vehicle for enacting maritime measures. To date, though, none of the efforts 36 the maritime executive
at the federal level has yielded fruit, and we are left with state-specific regimes which do little to combat invasive species and everything to cripple local commerce. There is more bad news for shipping interests, however. As MarEx goes to press with this edition, a federal judge dismissed a lawsuit by nine shipping companies and trade associations that had attempted to overturn the Michigan law that mandates deep-draft, oceangoing vessels to treat their ballast water. As the court ruled that Michigan’s law is constitutional, the door opened for any number of other states, some of whom were waiting to see the outcome of this particular case – Minnesota, Wisconsin and Indiana, just to name a few – to pass similar ballast water treatment laws. On the federal level, the hits just keep on coming. The 2005 decision of the United States District Court for the Northern District of California striking down the EPA’s longstanding exemption of discharges “incidental to the normal operation of a vessel” has given the EPA only until September 2008 to promulgate National Pollution Discharge Elimination System (NPDES) permit regulations for operational discharges, including ballast water discharges. And Senator Barbara Boxer’s (D-CA) recent efforts in Washington have only made EPA involvement in the mix more likely. Boxer has proposed letting the states regulate their own ballast water issues, independent of the Coast Guard, effectively eliminating it from the regulatory function and placing the matter of ballast water treatment and management under the Clean Water Act.
Progress From the Coast Guard: Slow, But Measured According to the U.S. Coast Guard’s Rich Everett, environmental protection specialist in the Coast Guard’s Environmental Standards Division, a rulemaking effort is underway at headquarters. This includes progress in defin-
By Joseph Keefe ing a ballast water management standard. A proposed list of options will be issued, says Everett, “in late summer or early fall, after which there will be a public comment period.” All of this will then be used to formulate a proposed standard, which again must go through a comment period. Everett defends the Coast Guard’s progress on the way to achieving a defined standard by saying, “We’ve come a long way in achieving a system to evaluate the diverse technologies necessary to test these ballast water systems.” With regard to the rulemaking effort, Everett says, “We don’t talk in time frames.” But he says measured progress is being achieved. He points to the Coast Guard’s Shipboard Technology Evaluation Program (STEP), which (a) helps technology developers test their systems and incentivizes ship operators to install equipment without fear that the equipment will be declared inadequate down the road when and if a standard is defined, and (b) provides the Coast Guard and the general public with high-quality information and data about how the systems work and how well they achieve the desired results. Currently, there are three applications outstanding for the STEP program, although Everett again admitted that he could give no timetable on when decisions might be made on any of them. In the end, a vessel and technology admitted to the STEP program would have the equipment that was installed on that particular vessel grandfathered for life, no matter what the ultimate standard might be. That vessel also has the option to forego mid-ocean ballast water exchange as long at it treats its ballast water with the system installed. For newbuild vessels, this program would also remove the fear of installing equipment that would later be declared unacceptable. For a vessel intending to trade in the Great Lakes and/or call at any Michigan port in the near future, the program might just be the right ticket.
leading the way Rich Everett says that the Coast Guard will move forward in trying to define a standard, regardless of what happens at the EPA or other federal agencies. In the meantime, industry is not sitting on its hands.
Industry to the Rescue The best opportunity in over a decade for congressional reform may be quickly slipping by the boards. Beyond this, the matter of coordinating any U.S. action on the matter with International Maritime Organization (IMO) efforts to standardize what constitutes adequate ballast water treatment (BWT) will be daunting. Sadly, the technology to do just that is already here. A few forward-thinking shipping companies have already had the courage to install this equipment and the early data show real promise. And more than a few manufacturers have entered the fray with their own customized and patented systems. The cost of these systems, as a general rule, can fluctuate from around $300,000 to as much as $1 million to put on board. As one ballast water treatment executive (who asked not to be identified) told MarEx recently, “It’s not the competition that keeps us awake at night – it’s the government and the regulations.” The implications are obvious: There will be plenty of business to go around, once the regulations are defined, to any number of companies with the know-how to meet those standards. As for the shipping companies, they know the day is coming and few are complaining about the cost of purchasing and installing the devices – they just want to know what that technology will entail. Just as shippers plying the Great Lakes are reluctant to install expensive ballast water treatment systems to meet what may be a fleeting local regulation, so too are the commercial vessels engaged in international trades. That having been said, MarEx took the opportunity of our annual environmental issue to look at just a few of the devices represented by this emerging technology.
Alfa Laval’s PureBallast System Alfa Laval recently introduced its “PureBallast System,” a fully-automated ballast water treatment system. This newly-released, chemical-free method further strengthens Alfa Laval’s already environmentally-friendly reputation. At a press conference held at this year’s Seatrade Cruise Shipping Convention in Miami, Alfa Laval provided details of its newest product. According to Alfa Laval, the PureBallast
system works much the same way during balboard. Even very small amounts of chemicals lasting and deballasting procedures. Water add up quickly when dealing with large balis treated by at least one Wallenius AOT last water volumes. In general, the PureBallast (Advanced Oxidation Technology) unit, Alfa system was designed to have a small footprint Laval’s patented AOT technology developed and to be easily installed and maintained. with Wallenius Water, which contains titaniIn addition, it was decided that PureBallast um dioxide catalysts that, when contacted by should be fully automated and have a lifetime light, generate hydroxyl radicals. These radicorresponding to that of the vessel. cals “break down the cell membrane of microThe finished PureBallast system is compact organisms – without the use of chemicals or and fits well in the engine room – its block the creation of harmful residuals.” After its structure allows it to be installed between short, “few milliseconds”-long life, each radithe normal ballast water system components. cal becomes a water molecule. This process Moreover, the system is simple to operate, and was described as a “from nature to nature” the treatment of water with PureBallast occurs approach by Pauli Kujala, a spokesperson for in two stages: pre-treatment and end-treatAlfa Laval at a press conference during the ment. During ballasting, water passes through Seatrade Convention on March 14. a pre-filter to remove any larger particles and PureBallast, which has met the stringent organisms. The water then continues to the IMO ballast water requirements in pilot tests AOT unit, which produces radicals that effecsupervised by Det Norske Veritas (DNV), is tively break down smaller organisms that have well underway with the year-long official approval process. Alfa Laval strengthens its portfolio of equipment for protecting marine ecosystems with this chemical-free system for removing potentially invasive species from ballast water. PureBallast, arrives well before the IMO regulations on ballast water treatment take effect in 2009. PureBallast is fully backed by Alfa Laval’s global network of service and support. Since well before 2004, when the IMO convention on ballast water was adopted, Alfa Laval and many other companies have been working to develop an IMO-compliant treatment system. At present, there are no well-established marine testing facilities to perform the full-scale, land-based tests, but the Norwegian Institute for Water Research (NIVA) is expanding its operations with four new tanks of over 200 m3. Alfa Laval, which has worked closely with NIVA on the ballast water issue, chose the Institute to perform its pilot studies. To ensure a comprehensive solution, Alfa Laval’s PureBallast System Alfa Laval set specific goals when planning the PureBallast system. “Besides being determined to meet the IMO legislation,” Kujala says, “we were Rio De Janiero, Brazil determined to do it Int’l Ship Mgmt. Co. seeks Technical Superintendent without the use of to oversee its DP1 PSVs. in Brazil. chemicals.” Avoiding chemicals was not only Min. req’d. Chief Engineer’s cert.,+ 2 yrs exp as Chief Engineer an environmental decion PSV. Exp in Brazilian ops., Spanish/Portuguese lang. preferred. sion but also a way of Good comp. pkg/ medical/retirement benefits. ensuring that nothing extra would have to be E-mail Resume to: resourcesc@gmail.com. stocked or handled on
Technical Superintendent
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leading the way passed through the filter. Sediment buildup in the ballasting tanks is avoided thanks to the pre-filter stage, and any backflushing water is returned to the ocean directly at the ballasting site. During deballasting, water again passes through the AOT unit in order to destroy any organisms that might have regrown in the tanks during the voyage. The filter, on the other hand, is bypassed, thus avoiding any filter back-flushing – eliminating the risk of contamination via the filter at the deballasting site. The whole chain is fully automated with monitoring of alarms and possibilities for both local and remote operation. While the pilot tests are convincing, shipowners and operators will be pleased to know that PureBallast has also been tested at sea. Since 2003, a full-scale prototype of PureBallast has been operating aboard a transoceanic vessel, the Wallenius car carrier M/V Don Quijote. Installed as a retrofit, the system aboard the Don Quijote has been tested not only for biological efficiency but also for automation and operating reliability. Among other things, it has shown that PureBallast does not interfere with ballasting operations and can handle both harsh conditions and varying flow. Based on the favorable results from the Don Quijote, an additional PureBallast installation was made on board the newbuild Aida in 2006. A third installation, also on board a newbuild, will be made during the course of the autumn. The comprehensive testing to be done on board these installations will help to confirm the calculated operating costs. Additionally, Alfa Laval says that six other installations are planned on newbuild tonnage originating in both China and Korea. Alfa Laval is listed on the Nordic Exchange (Nordic Large Cap) and in 2006 posted annual sales of about SEK 20 billion
(approx. 2.2 billion euros). The company has some 10,000 employees. Visit Alfa Laval at www.alfalaval.com.
Hyde Marine Ballast Water Treatment System
The Hyde Marine Ballast Water Treatment System (BWTS) offers an effective and reliable solution based on solids separation and UV irradiation. The Hyde Marine System utilizes existing ballast pumps and piping. Standard systems are available for flow rates from 100 m3/hr up to 3,000 m3/hr. The Hyde Marine BWTS is optimized for each particular vessel design and operating condition. The system includes appropriate pre-treatment to remove solids and large organisms. For smaller ballast systems and applications where high solids removal is desired, the Arkal Filter is economical and practical. The Aquionics UV destroys or inactivates biological organisms, including zooplankton, algae, bacteria and pathogens from ballast water without affecting the normal operation of the ship. Ballast water is also treated during deballasting to ensure the maximum effect. Key benefits of the Hyde Marine system, according to Tom Mackay of Hyde Marine, include low cost, simplicity, high reliability, minimum operator attention, turnkey delivery, integration into existing ballast systems, no chemicals and modular installation. In January, Hyde Marine announced the installation of its seventh full-scale BWTS aboard Royal Caribbean Cruise Lines’ Celebrity Mercury. The system was installed by the ship’s crew and had no effect on the ship’s normal operations. Hyde Marine has been involved in ballast water treatment since 2000, when the initial first-generation system was installed aboard Princess Cruise Lines’ Regal Princess. In 2001 four additional fullscale systems were installed, two on cruise ships and one each on a container ship and chemical tanker. In the spring of 2003, after the requirements were better defined, Hyde supplied an upgraded filtration and UV disinfection BWT system for the Coral Princess. This system was tested extensively both on land and aboard the Coral Princess in the fall of 2004. Hyde Marine Ballast Water Treatment System The onboard tests dem-
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onstrated the Hyde BWTS’s capability to meet the IMO BWT Convention requirements. The Mercury’s system is essentially identical to the Hyde system aboard the Coral Princess. All seven systems were commercial transactions. The newest version of the Hyde BWT System has been fully commercially available since 2003. Hyde Marine can be found on the Internet at www.hydemarine.com.
Ecochlor Ecochlor Inc., www.ecochlor.com, founded in 2001, has developed proprietary ballast water treatment systems that have been specifically designed to safely and economically eliminate the worldwide transfer of aquatic invasive species. Ecochlor is a privately-held corporation with headquarters in Acton, Massachusetts. Ecochlor’s systems provide shipowners with a cost-effective, environmentally-acceptable treatment system that will comply with all enacted and proposed standards and regulations. In-house experts and a team of strategic partners not only design and manufacture the Ecochlor™ Ballast Water Treatment System but also supply marine engineering, naval architecture, chemical treatment expertise, shipboard installation and ongoing technical and regulatory certification support. Ecochlor says that it currently provides sales, service and technical support for the system with personnel in North America, Japan, Korea, China, Greece and Sweden. Ecochlor’s treatment methodology utilizes the unique properties and benefits of chlorine dioxide, and the company received broad U.S. patent coverage in August 2004. Since that time, the company has received patents in Korea, Singapore and Australia, and other international patents are pending. Chlorine dioxide has been used safely and effectively in industrial and municipal water treatment applications for over 50 years but has never been applied to seawater or in any shipboard applications. In research underwritten by Ecochlor at the University of Rhode Island Graduate School of Oceanography, the use of chlorine dioxide was proven effective in seawater on representative groups of all target organisms. Ecochlor, furthermore, has obtained an exclusive worldwide license from Eka Chemicals, www.purate.com, for the use of its proprietary precursor chemicals and generation technology to produce chlorine dioxide. Ecochlor’s system generates a dilute solution of chlorine dioxide that is injected into the main ballast water line as ballast is loaded.
leading the way
Ecochlor’s proprietary ballast water treatment system
The process only requires a small injector into the ballast water line; no re-piping of the ballast system is necessary. The Ecochlor™ System is small (less than 7.5 m2 for a 2,500 m3/hr capacity) and can be located anywhere on the ship. It does not need to be located in the engine room where space is typically limited. The process is fully automated, and the crew will not need to make any adjustments to their ballasting procedures. Ballast can be effectively treated through gravity feed or pumping, and the dosage is automatically adjusted for slow or fast ballasting. After injection, a small chlorine dioxide residual remains in the ballast tanks to neutralize any biofilm that may be in the system. With its short half-life, the chlorine dioxide residual decays below detection limits within hours of treatment, and the treated ballast water can then be safely discharged. On July 29, 2004 the company’s first system was installed on Atlantic Container Lines, M/V Atlantic Compass, one of the world’s largest combined Container/RORO (roll-on/roll-off) ships. This ship is a Swedish-flagged vessel that carries cargo between Europe and North America. In July 2005, the company installed its second system on the bulker M/V Moku Pahu, operated by Matson Navigation, www. matson.com, that carries sugar from Hawaii to the West Coast and grain to Asia. In 2006, the
company applied to the U.S. Coast Guard for acceptance of these systems into the Shipboard Technology Evaluation Program. Acceptance into this program will provide an equivalence to any current or future U.S. Coast Guard regulations for ballast water treatment (no more ballast water exchange). Ecochlor could be the first company to receive USCG STEP approval, and this is expected in the fourth quarter of 2007.
of invasive species, but they can’t move the technology forward until there’s a standard to build to and apply to saltwater vessels.” In the time that has passed since he made this statement, not much has arguably changed in terms of legislative and regulatory oversight. Fortunately, the marine industry has steadfastly ignored this roadblock and has moved the technology forward. Although the IMO’s approval process is much further along than any federal standard being contemplated in the United States, not all member states have ratified that standard. And the standard being tossed around in
“It is clear that carriers want to solve the problem of invasive species, but they can’t move the technology forward until there’s a standard to build to and apply to salt water vessels.” Looking Ahead – Achieving Workable Policies The three technologies listed above by no means represent all that industry has to offer. As many as eight different firms, large and small, are either in the process of developing technologies to deal with invasive species or already have working prototypes aboard various classes of commercial vessels. Beyond this, the ports of Los Angeles and Long Beach are teaming up with another shipping line to test a shipboard ballast water treatment system designed to remove non-native species from ballast water. This is truly a time when industry, tired of waiting for governments to come up with substantive, defined and unified standards, has decided to move the ball forward itself. Jim Weakley, President of the Lake Carriers Association (LCA), said back in 2003, “It is clear that carriers want to solve the problem
Washington is said to be somewhat tougher to achieve. Marrying the two benchmarks together will likely evoke memories of the implementation of OPA 90 regulations on foreign tonnage trading in U.S. waters. Eventually, long-time operators like Hyde Marine and Ecochlor are hopeful that the Coast Guard’s STEP program, using their equipment and partner shipping companies, will help to provide data that will yield a defined standard in the not-too-distant future. Still others, like industry heavyweight Alfa Laval, are focusing on the already-defined IMO approvals first. Either way, and notwithstanding the apparent lack of progress on the domestic front, a ballast water management standard will be achieved. The only questions left to be answered are when and what that standard will be. Industry looks to be ready to take it from there. MarEx
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MarEx off the clock
Off the Clock But Still Plugged In A Galรกpagos Cruise Adventure Highlights Protection of a Fragile Ecosystem 40 the maritime executive
By Joseph Keefe
MarEx off the clock
Signing On The prospect of taking a seven-day cruise on the motor vessel Eclipse was thrust upon me in a rather backhanded way by my clever wife. Over dinner one night, she announced that this year’s vacation would involve a trip to the Galápagos Islands. She had already put down a sizable cash deposit and had already gotten the kids wound up with tales of giant tortoises and a visit to faraway Quito, Ecuador. It was virtually a done deal when I decided to tune in and find out what it was all about. The words “June 30th departure aboard M/V Eclipse” immediately jumped out at me from the travel brochure. The more I read, the more I liked what I saw.
At Sea Again On Tuesday afternoon, I took a nap. It seemed like the right thing to do. Following an enormous Ecuadorian-style breakfast, I had already hiked to the top of a centuriesold Galápagos volcano. Then I was treated to a boat ride around the point of the same equatorial island so that we could ride and play among the sharks and sea lions. In what was left of the morning, I snorkeled with penguins, sea turtles, sting rays and tropical fish. Lunch and two glasses of wine came next. While most of the other passengers seemed to think that still another activity was in order, I declined and went back to my spacious cabin to prepare myself for the sumptuous dinner that was sure to follow.
Another Perspective, Another Time and Another Ship In the summer of 1984, I was sailing Second Mate aboard the chemical tanker David D. Irwin. It was not pleasant work and the mission itself was not particularly glamorous. In the space of a 75-day trip on board, we might
load the vessel five times in Smith’s Bluff, Texas, followed by as many as seven port calls along the Gulf and East Coasts, discharging as many as twenty-two grades of various chemicals, gasolines and other nasty substances. These discharge operations were always followed by a ballast voyage consisting of tank cleaning, mucking and other equally demoralizing activities. Built in a pre-OPA 90 world, the WWII-era ship had not been converted for segregated (clean) ballast carriage. Therefore, it was necessary to decant dirty ballast, clean each and every one of the 37 cargo compartments and then refill selected tanks with clean ballast. All in all, however, it was reasonably well-paying work that I had spent four years preparing for at the Massachusetts Maritime Academy. At some point during one of my vacations from this “fun” with Union Oil of California, my future wife suggested to me that it might be fun to take a cruise. After an appropriate pause in the conversation during which I formulated a civil response, I advised her that I would never – and I meant NEVER – get on a boat during any vacation: much less PAY someone for that privilege. Almost 27 years later, Debbie and I have been to many places on various continents but have always strictly adhered to that sacred tenet. Then came Eclipse.
The Premier Sightseeing Platform in the Galápagos Market There are bigger ships and there are faster ships plying the tourist game around the Galápagos Islands. Of the 80+ craft licensed to do so, most carry only 16 to 20 passengers. Two or three others carry between 100 and 200 passengers. Occasionally, one of the mega-liners will come and go. And then there is Eclipse. Just 210 feet long, Eclipse has been refitted more than once in the years following her the maritime executive
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MarEx off the clock
launching in 1982. In 1999, the vessel was fully converted and refurbished, top to bottom. Accommodating just 48 passengers, Eclipse provides an intimate experience, but with the steady feel of a large, secure oceangoing vessel. In the sometimes choppy waters of this island paradise located 600 miles off the coast of South America, smaller boats experience considerable movement. The larger cruise ships that we sometimes crossed paths with were equally steady, but their deeper drafts did not allow them to go where the relatively shallow-draft Eclipse (11 feet) could venture. The two Deutz 1175 BHP engines generate a cruising speed of 11 knots with sufficient bunker capacity for maximum range. We covered a lot of distance and saw places that probably 80 percent of the other tourists never knew were there. Eclipse sails with a crew of 31, plus four naturalist guides. The second statistic is significant: Ecuador requires at least one naturalist guide for every 16 tourists visiting the islands. Naturalists, paid for by the tourism license holder, must escort these tourists at all times. Ocean Adventures elects to employ an extra naturalist for all sailings, thus bringing the ratio of tourists to naturalists down to 12:1. To my knowledge, no other cruise vendor makes such a commitment to its passengers. The benefit of smaller groups, both in the water and ashore, was fully evident during our daily excursions. Eclipse has four types of sea-view cabins. We chose two “Superior Staterooms” on the Boat Deck. Slightly smaller than the more expensive Deluxe Staterooms, they were still nicely equipped with picture windows and 42 the maritime executive
were large enough to do more than just sleep there. This is not always the case on other ships. The ship is fully air-conditioned and cabins were meticulously serviced at least three times daily. All rooms have well-appointed bathrooms consisting of a shower, toilet, sink, cabinet, hairdryer and a basket of toiletries. The laundry service aboard the vessel was remarkably efficient, especially given the pressures exerted by 48 demanding customers on a smaller platform. The beauty of Eclipse was rooted not only in her simple elegance but also in the utility that only a smaller ship can provide. The disembarkation of 48 passengers and four guides onto four “pangas” (launch boats) was safely accomplished twice daily in less than ten minutes. The same could not be said for the larger vessels, and the smaller boats were not any better. Beyond this, I rarely saw anyone from the smaller boats who did not have the seasickness “patch” firmly adhered behind one of their ears. That certainly would not be how I would want to spend my holiday.
Special Considerations: Operating in a “World Heritage Site” Environment In late June, as we were preparing to depart for our adventure, the United Nations Educational, Scientific and Cultural Organization’s (UNESCO) World Heritage Committee declared the Galápagos Islands to be a “World Heritage Site in Danger.” The 19 islands of the Galápagos and their surrounding marine reserve have been characterized by UNESCO as a unique living museum and showcase of evolution. After spending more than a week there, I can confirm that they are right.
UNESCO’s primary concerns with the welfare of this island paradise are related to threats by invasive species, growing tourism and immigration. UNESCO’s committee also noted that cruise ship visits have increased by 150 percent over the past 15 years with as many as 150,000 tourists visiting last year alone. Although the influx of immigrants to the islands has been restricted by Ecuador, this effort has only been partially successful. Pressure from the tourist trade has ramped up the need for personnel to service its requirements. Hundreds of people live on the islands illegally. The problems are real and not likely to go away any time soon. Most of the regulatory pressures brought to bear on the community, however, are being exerted on the tourism boats that ply the waters around the Galápagos. Ashore, local sewage systems are unable
MarEx off the clock to fully manage the needs of the local residents. Nevertheless, the thrust of local efforts to preserve the place made famous by Charles Darwin is being placed squarely on the shoulders of the marine community. In that regard, Eclipse has few peers. Safety and respect for the environment are priorities aboard the Eclipse, which conforms to SOLAS (Safety of Life at Sea) and ISM (International Safety Management) regulations, as well as to the strict environmental standards set by the Galápagos National Park authorities. Additionally, with a maximum of 50 departures per year, Eclipse accounts for just two percent of total annual tourism traffic. In contrast, the vast majority of the other vessels plying these waters, some of a nondescript nature, operate under considerably lessstringent environmental and safety standards. As UNESCO continues to analyze and formulate policy to combat the loss of habitat, future efforts will rightfully be trained on the smaller tourist platforms. Until then, if you are looking to visit the islands with the additional goal of leaving the smallest environmental footprint possible, then Eclipse may be your best bet. In theory, most of the 84 vessels in the Galápagos market should be subject to SOLAS, IMO (International Maritime Organization) and/or ISM regulations, but enforcement is spotty here, at best. Tighter enforcement is coming and not just in the Galápagos. U.S. Coast Guard Commandant Thad Allen recently told MarEx that the Coast Guard’s next big challenge will be the enforcement of regulations on vessels of 300 gross tons or less. While Allen is clearly referring to security issues when he calls it “the small boat threat,” the issues related to small-
er vessels are many. Someday these issues will transcend security.
Coming Trends – Preserving Paradise Conservación y Desarrollo, one of Ecuador’s leading conservation organizations, developed the SmartVoyager sustainable tourism certification program, which awards its seal of approval to tour boat operators and hotels in Ecuador meeting a set of strict conservation standards. The standards were designed in collaboration with scientists, conservation experts and tour operators to deal with a host of environmental and social concerns. The standards are also being adapted to smaller vessels holding no more than 16 passengers. Ocean Adventures hopes to obtain the SmartVoyager certification (http://www.rainforestalliance.org/tourism.cfm?id=smartvoyager) for Eclipse. The audits are ongoing as MarEx goes to press with this edition. The prestigious certification validates “best practices” in environmental and waste management on the ship. For example, one way that Eclipse has reduced its environmental footprint is the use of a Trabold fuel filtering system. The fine filtering system, according to Ocean Adventures’ Managing Director Ben Dod, allows Eclipse to consume less fuel and generate less used oil, which reduces pollution. The patented filtering system can also provide savings of as much as 90 percent on lubrication oil, preserve engine life and reduce fuel costs. Dod says other shipboard processes, such as trash mashing, ozone purification of water and the pangas’ 4-stroke engines, are also reducing the vessel’s environmental footprint. SmartVoyager has also begun to certify hotels on the Ecuadorian mainland. Hotels are expected to live up to the same rigorous standards as the boats in exchange for the SmartVoyager certification. Ships like Eclipse, which include all vessels of 400 gross tons that carry more than 15 passengers, will need to have an approved blackwater treatment system on board by January of 2010.
Specific Solutions: Wastewater Treatment Comes Out of the Closet Headhunter, Inc. is another company stepping up to meet the needs of the Galápagos Islands and other fragile ecosystems around the world. Earlier this year, the U.S. Patent and Trademark Office recognized Headhunter of Fort Lauderdale, Florida with a patent on treating wastewater. The new system uses a cross-flow filtration method to separate solids from the water, and nearly 100 “HMX
systems” have been installed on yachts, drill ships like Global Santa Fe’s Arctic IV, and a few very large fixed offshore structures for the production of natural gas in Brazil. The systems were designed for the marine industry and small spaces. Mark Mellinger, Vice President of Sales for Headhunter, told MarEx, “Everyone in the marine industry is familiar with the reverse osmosis process for creating fresh water from seawater. Our company has mastered this
technique as it applies to the wastewater treatment process. We have also designed a process that can be varied in order to meet the new International Maritime Organization standards when they are ratified.” “TIDALWAVE HMX®” compact sewage treatment systems are U.S. Coast Guard-certified Type II Marine Sanitation Devices. They are also IMO-approved for worldwide compliance with Annex IV Regulation 3(1)(a)(i) of Marpol73/78, which regulates sewage from ships. These units are accepted in accordance with Resolution MEPC.2(VI), which outlines the performance standards. Standard models are available for treating up to 50,000 U.S. gallons per day (189 cubic meters per day). Designed for quick starts and stops with the push of a button, the TIDALWAVE HMX® system uses chemical oxidation, hydro-maceration and patented cross-flow separation techniques to thoroughly destroy influent biomass. The optional electrocatalytic system generates sodium hypochlorite on board from seawater or brine, which eliminates consumables during operation. The four-stage process provides for the treatment of black and gray the maritime executive
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MarEx off the clock water with a sterile effluent for disposal. The PLC controller allows the treatment technique to be customized after installation for varying hydraulic and organic loading conditions or to meet varying performance standards in different areas. These systems are provided in marine-grade aluminum or steel construction with a durable, flexible ceramic-epoxy coating for superior corrosion protection. While Headhunter’s newest wastewater treatment equipment may well be a revolutionary breakthrough in this market, Headhunter is no stranger to South America. Headhunter’s International Sales Manager, Max Vidaurre, said, “We have already sold at least twenty units in the Galápagos market alone, with two delivered to the Ecuadorian Navy for their patrol boats, with another four on order.” The government sales are significant, because as enforcement ramps up in the region, area governments – especially Ecuador itself – know that they have to also be in compliance if they hope to enforce the standards they espouse. Bringing the Galápagos market up to standards, which for the most part has gone unregulated for decades, will not be an easy task. Headhunter already appears to have a leg up on its competitors in the area, especially since the HMX® chemical systems take up less space than comparable biological systems and are easier to maintain and operate. On the 80 or so smaller boats plying this market, both space and ease-of-operation will be at a premium as they try to improve their image as “green” operators.
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If You Go: Be in the Know A vacation in the Galápagos is probably not for everyone. It is expensive and, for some, vacation in a remote archipelago might not meet their definition of a luxury trip. Eclipse may be as close as you are going to get to that standard. Fellow passengers advised me that the food was not up to par with what they had experienced in other cruise markets, but I found our dining experience to be more than satisfactory. Indeed, tour operators Abercrombie & Kent have chosen the vessel as their exclusive platform in the Galápagos. Their resume of operating in less-than-first-world environments is second to none, and they did not disappoint us on this occasion, either. At a minimum, I found Eclipse to be the perfect foil to the standard, 2,000-passenger departures out of Miami. Ocean Adventures is clearly not satisfied with the status quo and an extensive maintenance and repair schedule is planned in the coming months. Later this year, Eclipse will be fitted with new carpets, towels, bedding, wardrobe and closet doors, dining room chairs, upholstery on all furniture, interior painting,
extensive refurbishment of interior and exterior woodwork, main-engine maintenance and an underwater hull inspection. The ship will also be dry-docked in 2008. In addition to the hull sandblasting and repainting, there will be extensive maintenance of both prop-shafts and propellers and a main engine overhaul. The total investment will be around $2 million. Most tourists do not come to the Galápagos for a luxury cruise. If planned carefully, however, the adventure can include very comfortable accommodations, excellent meals and superb service. Very few of the operators in this market can approach Ocean Adventures in this regard, but Eclipse does not own the market on “green” tourism here either. Headhunter has sold at least four of its patented systems to ETICA, a Metropolitan Touring subsidiary with four vessels in the Galápagos. For the 31 licensed vessel operators in the area, operating in a “green” mode will very soon be just as important as providing a reasonable standard of comfort and service to their clients. Savvy passengers will demand both and the future of the Galápagos may well depend on it. MarEx
jones act global
By David W. Brill, Esq.
The JonesAct Goes Global:
Or Does It?
Admiralty Law Prepares for the New Reality of Scores of U.S. Sailors on Foreign-Flag Ships
It is welcome news that the worldwide demand for qualified seamen is so high lately that some Americans are finding their way onto foreign and flag-of-convenience (FOC) vessels. It’s also nice that Congress has provided the U.S. Maritime Administration (MARAD) with the creative tool that allows it to provide an incentive for foreign and FOC ships to man LNG vessels with a few hundred Americans. And as MarEx has recently reported, MARAD is putting would-be LNG terminal operators who commit to these concepts at the head of the line. This isn’t the first time we have seen U.S. merchant mariners on foreign-registered vessels. As the global nature of the world’s economy continues to expand, it probably won’t matter very much to the people who seek these jobs. I would guess that most American mariners would look very favorably at a Master’s position on an LNG tanker, paying $150,000 per year, and I don’t think they would care if it were registered on Mars. But like most things that sound too good to be true, it just isn’t that simple. The key is the Jones Act and its interpretation. Amidst all of this activity, the U.S. fleet will survive, not only because of the cabotage laws themselves but also because we are in the middle of the most robust domestic shipbuilding boom in more than two generations. Today’s Jones Act debate, always lively, tends
to be focused on looking at where a ship is built and repaired, who is doing the work, and what parts are being used. It is an important discussion to be sure, but lost in all of it are the American seafarers who go to sea. Too often we forget that the Jones Act was written and contains specific language intended to protect the people who man our ships. These are rights not necessarily afforded by common international maritime law, and soon these sailors will ride the ships of other countries in significant numbers. Remember, one of the core aims of the Jones Act was and is to keep the U.S. merchant marine viable. The manner by which the Act is to facilitate this result is by mandating that a ship owner/employer with sufficient operations in the U.S. could not use any contractual device to prevent an injured seaman, whether American or foreign, from suing the owner/employer for the seaman’s injuries in a U.S. court. The Jones Act made a seaman’s right to trial in the U.S. a substantive right. However, since 2000 or so, courts around the nation have applied (perhaps more accurately, misapplied) the provisions of a section of the Federal Arbitration Act (FAA) implemented by a 1958 convention called the Convention on the Recognition of Foreign Arbitral Awards (a/k/a the New York Convention). The courts have read the provisions of this Act in a way that now permits certain, especially
foreign and FOC ships, to contract around the Jones Act jurisdiction by placing arbitration clauses in seamen’s contracts. The clauses typically call for arbitration to take place in far-off places, like Manila or Panama City. By doing so, the courts have limited the feasibility, let alone effectiveness, of these types of cases, notwithstanding the alternative dispute resolution of the foreign arbitration process. Regardless of the reason for the courts’ applying the Convention to seamen’s contracts, this development raises many questions in the context of current and foreseeable maritime environments. These questions aren’t going away, and they will need to be eventually answered. They include: What happens when the market spigot is turned off and/or MARAD’s incentive drive runs its course? Similarly, what Jones Act protections are being afforded those Americans who will soon be invited to toil on those shiny new LNG ships as a consequence of MARAD’s incentives? Hypothetical questions are easy to pose and still easier to kick around by the water cooler. But here’s a real scenario: At a brand new LNG import terminal – say for argument’s sake that it is in Massachusetts – a Liberianflagged LNG vessel arrives and commences the mooring operation. Despite the best of equipment and skilled sailors, a wire hawser parts and severely injures both men working
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jones act global on the bow. One is Croatian and the other American. Will the American officer receive Jones Act protections on a foreign platform? How about the foreigner? Neither? Or both? These are convoluted questions, but they are important ones. Take the scenario a step further. The courts decide that the American is entitled to full rights, including Jones Act protection. Meanwhile, the foreign sailor and his family are left high and dry, with a limited, predetermined payout. The implications are enormous. These LNG vessels soon to be crewed, in part, with Americans under the thin veneer of enhancing homeland security have now become ticking time bombs crewed with a staff of “haves” and “have-nots.” It is not a stretch to say that this atmosphere could become pervasive within the world of global ocean shipping. These are but some of the questions that are engendered by our judiciary’s recent interpretation of the applicability of the New York Convention to seamen’s contracts. Now it would not be overreaching to say that today’s maritime executive would probably not be a fan of personal injury lawsuits, especially as they apply to Jones Act vessels. It has been said that admiralty law in America today
has less to do with General Average than it does with slip-and-fall cases. But seamen’s rights just got a little more complicated. The savvy executive will prepare in advance for the event which we all hope never happens, but probably will. The time to do this is now, before that first LNG shipment arrives at one of the 40-plus U.S. import terminals now in the planning, permitting and building stages. There are at least two things that the average person should not watch: The making of sausage comes to mind, as does the enactment of laws in Washington. Fitting the Jones Act into the concept of a flat world will also be messy. But this is a fundamental task from which shipowners, operators and seamen will not be able to turn their heads. It is coming and the matter, legally speaking, is far from settled. Trust me on this one: I’m a lawyer. MarEx David W. Brill is a graduate of Franklin & Marshall College, BA, 1989, and the University of Miami School of Law, JD, cum laude, 1992. He is the managing partner of the Pembroke
Pines, Broward County, Florida, office of Downs Brill Whitehead, The Law Firm. The office and Mr. Brill handle all areas of the firm’s plaintiff injury and wrongful death practice, which includes crew and passenger admiralty and maritime, medical malpractice, automobile and trucking negligence, and premises liability, as well as class action litigation. Brill and his firm are of counsel to Miami-based law firm Crew Member Advocacy Center, which focuses exclusively on crew injury and death cases. Brill and Crew Member Advocacy Center founder, Julio Ayala, Esq., co-counsel all crew cases that go to litigation. Mr. Brill lectures for ALI-ABA on cruise line passenger litigation. He also recently lectured for the Louisiana Justice Association on the topic of arbitration clauses in seamen’s contracts. Mr. Brill is a former Assistant State Attorney for the 11th Judicial Circuit, Miami-Dade County, FL (1992-1995). His memberships include the American Bar Association, the American Association of Justice and the Florida Justice Association (Board Member). He is licensed to practice in Florida and before the United States District Court for the Northern, Middle and Southern Districts of Florida.
Maritime Security Expo 2007 6th Annual Expo & Conference
November 27-28, 2007•Jacob Javits Convention Center•New York City
The SAFE Port Act and other recent legislation guarantees over $5 Billion in Maritime/Port Security expenditures over the next 5 years. Organized By:
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For information on exhibiting or sponsorship opportunities, please contact George DeBakey, Harry Carter or Peter Cappiello at 301-493-5500.
www.maritimesecurityexpo.com
disaster response
Disaster Response
Leadership in Times of Crisis
By Michael Canic and Brett Reagan
When Hurricane Katrina struck the U.S. Gulf Coast, it had a devastating impact on many levels – human, material and economic. Like most companies, Point Eight Power had no contingency plan in place to deal with such an event. As the hurricane approached, almost all of the company’s employees evacuated the New Orleans area. Then, as the hurricane struck, the company recognized the urgent need to develop and aggressively implement a Disaster Response Plan. Within 72 hours of landfall, such a plan had been developed and was being implemented. This plan was built upon “Five Pillars,” which formed the basis of the company’s emergency response efforts. Maritime executives everywhere are likely to find these “Five Pillars” valuable, especially in the midst of yet another hurricane season and the now omnipresent threat to homeland security from any number of unknown and unfriendly sources.
Five Pillars 1. People First: The first responsibility of leaders is to their people. Point Eight Power’s primary objective was to account for its employees and their families. Were they alive? Unharmed? Safe? The company immediately began an intensive outreach effort. Moreover, as at least some employees were likely to need shelter, food, water, medicine and/or money, Point Eight Power established a needsresponse protocol and began to coordinate a relief effort. 2. Communication Is King: In the absence of communication, rumor and misinformation flourish, and the company knew that a comprehensive and aggressive communications effort was critical. Nevertheless, there were formidable obstacles: Landlines and cell phones in southern Louisiana were inoperable; the company’s
Web site was down; the status of its servers was unknown; its email system was not functional, and there was no Web mail alternative. However, through the efforts of Point Eight Power’s information technology partner, it was possible to secure third parties to temporarily move its Web domain to new hosting, establish Web mail access and redirect its 1-800 number. Executive Vice President and General Manager Brett Reagan then posted daily messages on the Web site, including a General Manager’s update. Additionally, employees were urged to fill out an online template with contact and status information. There were also dedicated sections on the Web site for clients and suppliers; Point Eight Power wanted to reassure them that the company had not only survived but was aggressively implementing a disaster response plan and intended to meet all of its commitments. It was soon clear that the company needed a physical presence outside Louisiana in order to establish a viable communications control center. After receiving numerous offers from both clients and strategic partners, Point Eight Power secured temporary office facilities in Houston. Almost immediately after, the company was able to convene daily team leadership meetings by phone. These sevenday-a-week meetings, each of which began with an update on how many employees had been located and their status, ensured that the leadership team stayed current and on task. A primary focus of these meetings was to develop and implement plans for direct contact with employees, clients, prospective clients and suppliers. The leadership team soon realized that real-time contact with its employees would provide much-needed emotional support and allow the company to gather critical
information. Thus, regular employee phone meetings were established that dealt with employees’ questions regarding the state of the facilities, the business, their employment and their pay. Throughout this period, Point Eight Power also stayed in close contact with its parent company for its banking needs, insurance claims and legal advice. 3. Gather Intelligence: In the days immediately following the hurricane, uncertainty reigned; it was paramount that Point Eight Power gather intelligence on the situation. Did the facilities still exist? Were they accessible? Were the worksites safe and secure? Was the equipment in working condition? Was work in progress undamaged? The company decided to pursue a joint strategy: Organize a reconnaissance mission of its facilities and concurrently research and secure access to alternate production facilities. Point Eight Power’s explicit goal was to meet every one of its existing commitments and not miss a beat with its business development efforts. To accomplish this, the company needed to piece together the status of its current contracts, leads and proposals. Without access to its server and e-documents, Point Eight Power had to comprehensively engage employees, clients, prospective clients and suppliers in order to get the necessary information. Intelligence was also required to ensure the controlled flow of money. What was the status of its bank’s operations? Could deposits, payables, payroll and taxes all be processed? An unrelenting contact effort also helped the company ascertain the answers to these questions and make adjustments as necessary. 4. Manage Morale: For many, relief came in the form of finding loved ones or being found themselves. However, after these feelings of the maritime executive
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disaster response relief subsided, the enormity and uncertainty of the recovery effort loomed large. Would Point Eight Power survive as a company? Would everyone get paid? Would layoffs be necessary? Morale was understandably fragile. Everyone needed to see a light at the end of the tunnel. Consequently, a “vision” was developed, and the firm enlisted everyone in its efforts to achieve it: A handful of success stories will emerge in the aftermath of Hurricane Katrina, a handful of companies who with focus, alignment and commitment will overcome the obstacles, survive and thrive. Point Eight Power will be one of those stories. Though this vision incited everyone to action, frequent management contact was also central to maintaining and improving morale. Managers conveyed positive but reality-grounded messages to employees. Point Eight Power had its managers almost overcommunicate in order to continually provide focus, reassurance, support and recognition. 5. Honor the Heroic Efforts: Crisis provides the opportunity for heroism. Employees witnessed many such examples at Point Eight Power, and it was important for overall morale to recognize and honor these efforts. One such effort was that of Dave Motto, Point Eight Power’s Production Manager, who realized the importance of monitoring the facility in real time. Dave decided to ride out the hurricane at the facility, enabling him to react to events that would otherwise have proven devastating for the company. For example, he discovered that the large bay doors to the facility had blown off their tracks. Reacting quickly, he backed up service trucks against the doors, which prevented them from breaking away and avoided a huge inflow of water that could have critically damaged the facility. David Doell, the Facilities Manager, was also a hero in Point Eight Power’s time of need. He spent many long hours securing the servers, without which the firm’s estimating, engineering and accounting functions would have been severely impacted. Furthermore, his efforts in relocating this equipment allowed the temporary Houston operations to quickly go live with minimal disruption. While many employees performed selfless acts for the company, a large number also reached out to those outside the Point Eight Power family. These employees focused on the less fortunate members of the community and provided shelter, food and support for them in various ways. Six weeks after the hurricane, there was 48 the maritime executive
no shortage of heroic efforts to honor, and the company decided to hold an all-employee appreciation party. This gathering signified that their collective efforts had succeeded in guiding Point Eight Power through the first recovery phase. Additionally, employees who voluntarily reported for work in the weeks immediately following the hurricane received full pay and compensatory vacation time. Those whose efforts were truly exceptional received travel vacation accommodations for themselves and their spouses.
Outcomes Within two weeks of Katrina, Point Eight Power verified the safety of the areas surrounding its New Orleans facility and obtained access passes for employees. A contingent of volunteers returned to work; following cleanup and repair activities, and with standby power generators available, production operations were quickly resumed. To help this core team be self-sustaining, the company dispatched a support van filled with food, water, cookware, sleeping bags and DVDs from Houston. Client relationships were effectively preserved. Almost all of Point Eight Power’s commitments were met. For the few that were not, the company pre-negotiated modest schedule adjustments. Several customers expressed amazement at the speed of Point Eight Power’s recovery. Supplier relationships were similarly preserved. Within three weeks, Point Eight Power had located all but one of its slightly more than 100 employees. Thankfully, all were unharmed, but many suffered damage to their homes and possessions, and two lost everything. The company’s employees pulled together, however, and provided shelter, food and clothing to those employees in need. Point Eight Power was effectively up and running while many other companies were just beginning to assess their situation.
Lessons Of the many lessons Point Eight Power learned, a handful stood out: 1. Invest in Contingency Planning: Although very few hurricanes have made landfall with Katrina’s force, it is clear in retrospect that even skeletal contingency planning could have mitigated Point Eight Power’s difficulties. 2. Respond Quickly and Aggressively: It would have been easy to spend days wondering what had actually happened and
what to do. The “Five Pillars” gave Point Eight Power a template for action; its leadership team provided the impetus. 3. Anticipate the Emotional “Roller Coaster”: The first two months after Katrina produced a number of highs and lows. From the severity of the hurricane (low) to locating its people (high) to realizing the extent of the destruction (low) to the successful initial response (high), the roller coaster of emotions was stressful for all. Point Eight Power is now exploring support mechanisms to deal with the longer-term effects of post-traumatic stress. 4. Stay Strong to Be Strong: In times of crisis, a leader carries many burdens, conscious or not. Point Eight Power believed that a focal mantra would help Brett Reagan deal with these burdens: “Stay strong to be strong.” To be strong for others, a leader must stay strong both physically and emotionally. To stay physically strong demanded a regimen of sleep, nutrition and exercise. To stay emotionally strong required scheduled downtime to recover and reconnect with family. 5. Don’t Prematurely Declare Victory: The recovery process is still in its infancy. New Orleans and the surrounding areas require a massive reconstruction effort. Point Eight Power made it through the first phase of recovery, but management recognizes that there is still much more work ahead. Dealing with this crisis made Point Eight Power hold a mirror to itself. Though the company poorly anticipated the ordeal, it has responded well to date. Point Eight Power, unlike many companies affected by Katrina, is still in the game. MarEx Michael Canic is a speaker, author, and principal of Edge Consulting Services in Denver, CO. Edge’s focus is to make strategy happen. He can be contacted at 303-537-1182 or mcanic@ edgeconsultingservices.com Brett Reagan is Executive Vice President and General Manager of Point Eight Power, a Belle Chasse, LA based company that designs, manufactures and services electrical control and distribution systems. He can be contacted at 504-391-6830 or breagan@pointeightpower.com
already green
Marine Stack Emissions Already Green: Trailer Bridge’s Unique Marine Freight System Reduces Pollution Through Unconventional But Cost-Effective Methods
No issue facing today’s maritime executive is more daunting than the overwhelming task of trying to stay in compliance with any number of environmental protocols being thrust upon the ocean transport world. And the regulatory noose is tightening quickly in many ways. Coast Guard, IMO (International Maritime Organization) and local protocols – sometimes at odds with one another – seem to propagate on a daily basis. Legislation and industry rules governing invasive species in ballast water, oil pollution, treatment of grey/ sewage water and criminalization of mariners all seem to dominate the news on a regular basis. Arguably, however, no issue is more ornery and causes more debate than the effort to reduce pollution from stack emissions from marine platforms. Like the debate over how best to control and eliminate invasive species through the handling and treatment of ballast water, reducing air pollution from ships and marine commerce in general will not be an easy fix.
Both involve discharges from the workhorses that carry the world’s commerce and, in both cases, the domestic and international parties that would regulate these discharges cannot come to a consensus on how it should be done. There’s also no doubt that industry wants to be a part of the solution that provides a greener environmental footprint.
No Consensus: The Problem Is Defined, But the Battle Over How to Solve it Rages On On the U.S. West Coast, efforts to reduce pollution from stack emissions are centering on the use of so-called “green,” low-sulfur diesel when in close proximity to the coastline, and on “cold ironing,” or plugging in vessels to the shoreside grid when alongside the pier. In other places – Houston, for example – port executives are reluctant to use cold ironing until they can be assured that stack emissions are not just being shunted off somewhere else in the supply chain. A new technology pioneered by a company called Wittmar Engi
By Joseph Keefe
neering will soon be employed in the port of Oakland, using LNG-powered units to provide cleaner energy to ships discharging or loading cargo there. All of these concepts are promising and warrant close attention from the marine community. Elsewhere, INTERTANKO has called for all large vessels to make the change to burning exclusively marine diesel oil (MDO). In contrast, the International Bunker Industry Association (IBIA) says that there is more than one way to get the desired results and technical innovations such as scrubbers and cleaner operating engines can be just as effective. With the IMO also looking at any number of methods to reduce particulate matter, carbon emissions, NOx (nitrogen oxide) and SOx (sulfur oxide) from marine platforms, many operators are taking a “wait and see” attitude with regard to their next move. But they may not have that luxury much longer.
Legislative Reform: The Coming Storm the maritime executive
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already green This spring’s decision by the U.S. Supreme Court to ramp up enforcement of the Clean Air Act and more strictly regulate emissions of pollutants from shore-based power plants might seemingly have little to do with what is happening on the waterfront, but the effort to clean up stack emissions from large oceangoing vessels is closely related. It is also producing vigorous discussions among industry, the IMO and other regulatory bodies about the best way to achieve the desired results. In fact, Roy Wilson, Vice Chairman of California’s South Coast Air Quality Management District, recently testified at a hearing to “Examine Port Pollution and the Need for Additional Controls on Large Ships” that his district cannot meet its federally-mandated air quality standards without significant air emissions reductions by ocean-going ships. Beyond this, he says, “Oceangoing vessels are also on track to become the third largest source of
NOx emissions by 2014 and the single largest source by 2023. Reducing marine vessel NOx emissions is critical to our attainment goals.” In response to the problem, companion House and Senate bills are also in the mix, promising stricter regulations and harsh enforcement. Both measures erase any doubts that changes will come sooner rather than later. Proposals for the entire marine industry to shift away from heavy fuel oils and highersulfur MDO will likely come more frequently now as the demand for cleaner fuels also drives refining practices. Clean air standards will also drive up fuel costs, eventually affecting every sector of the supply chain including the consumer, who depends on the 90% of world trade which travels by sea. Coast Guard Commandant Thad Allen addressed the matter of ship stack emissions in his address to INTERTANKO delegates earlier this year. He perhaps put it best when he said, “With regard to emission control, there needs to be some standard – but not 50 standards. Technology must be reconciled with regulations.” With competing proposals from any number of domestic and international sources, this will easier be said than done. It is abundantly clear that the way forward will likely be painful for ship operators as they attempt to comply with the existing and coming labyrinth of regulations intended to reduce air pollution from ships, some representing potential regulations which are far more onerous than those represented by Annex VI.
The Trailer Bridge Model: How It Works There is good news. While the IMO, EPA (Environmental Protection Agency), Coast Guard, individual states and everyone else try to decide what the one standard will be, where it will be enforced and when it will come into effect, the marine industry is taking 50 the maritime executive
things into its own hands. One such example of proactive thinking emanates from Trailer Bridge, Inc. (Nasdaq: TRBR), an integrated trucking and marine freight company offering service to and from all points in the lower 48 states, Puerto Rico and, most recently, the Dominican Republic. Trailer Bridge has used cleaner fuels to reduce pollutant emissions in the domestic container trades. Along the way, it’s made some money as well. Trailer Bridge employs a unique 53-foot container tug-and-barge system for its Caribbean destinations. While there is nothing unique about a tug and barge in the marine business, how Trailer Bridge moves its customer’s freight certainly is. The use of an unconventional, 53-foot container is one key linchpin of its business model. The use of cleaner distillate fuels to power its tugs is another. Trailer Bridge competes in the U.S. mainland to Puerto Rico trade and is now the only U.S.-flag service operating between the U.S. and the Dominican Republic. In both markets, Trailer Bridge offers the 53-foot-long by 102inch-wide containers with an interior capacity of 3,860 cubic feet as its standard freight container. The containers are the largest in the trade, and the company has ordered 1,000 new ones and 850 new 53-foot chassis in preparation for expanding beyond its breadand-butter Puerto Rico route. The 53-foot containers have 62% more interior capacity than the standard 40-foot container, which is considered the standard in the trade. But the enhanced interior capacity of the 53-foot container is only the beginning. John McCown, Chairman and CEO of Trailer Bridge, told MarEx this month that its oldest unit, a 736-foot-long barge, is the largest oceangoing barge in the world today. Fitted with a midbody in 1996, it complements five newer, hybrid vessels specifically designed for 53-foot containers. Currently, Trailer Bridge boasts two sailings per week between Jacksonville and San Juan. Although Trailer Bridge prides itself as the innovation leader in cargo transportation between the U.S. mainland and Puerto Rico with its own fleet of trucks, drivers, equipment and vessels, it does compete with a much faster fleet of self-propelled container vessels. How it goes about this is at the heart of its success.
Who’s Actually Faster? Time at Sea Isn’t the Only Yardstick Trailer Bridge collects and delivers freight to its Jacksonville hub from all 48 continen-
already green Table 1: Vessel Comparison1 for Route Between San Juan, PR and Jacksonville, FL
VESSEL PROPERTIES Horsepower Expected speed (knots) Capacity (FEU) per vessel Engine type Fuel type Tonnes fuel consumed per day2 FEU-nm per day at sea Tonnes fuel/kFEU-nm
Lancer Sea Star 23,000 30,000 21.0 23.0 650 510 Steam-Turbine Steam-Turbine Residual Residual 87.8 114.5 327,600 281,520 0.2680 0.4068
TB Ro-Ro 7,200 9.0 608 Marine Diesel Distillate 26.4 131,220 0.2010
TB TBC 4,200 9.5 390 Marine Diesel Distillate 15.4 88,920 0.1730
1 TB = Trailer Bridge; RoRo = Roll-on/Roll-off barge; TBC = Triplestack Box Carrier; FEU = Forty-foot container equivalent unit (each carrying average of 17.5 tonnes cargo); nm = nautical mile = 1.15 miles 2 Vessel specifications and fuel-consumption data provided by Trailer Bridge; Sea Star fuel-usage estimated based on horsepower difference versus Lancer.
tal states. Using its own 53-foot chassis and containers, more freight can be carried in a single truckload than with a standard 40-foot container, which translates into fewer trucks on the road, less wear and tear on those roads, and commensurately less air pollution from the
trucks themselves. If this sounds eerily like the U.S. Maritime Administration’s short sea shipping initiative or “America’s Marine Highway” plan in action, then that’s probably music to John McCown’s ears. Less pollution and the efficient movement of freight are what Trailer Bridge is all about. Even John McCown Table 2: Comparison of Emission Factors (kg pollutant/tonne fuel) knows that the 53-foot Pollutant and Engine Type Residual fuel Distillate fuel container is not going PM to replace the standard Slow-speed diesel1 7.6 1.2 40-foot unit being loaded 1 Medium-speed diesel 7.6 1.2 by the millions onto conSteam-turbine2 4.4 0.3 tainer ships everywhere in CO2 Slow-speed diesel1 3,170 3,043 the world today. But with Medium-speed diesel1 3,170 3,043 the 53-foot container now 1 Steam-turbine 3,170 3,043 legal on the roads, coast SOx 1 to coast, getting more Slow-speed diesel 60 10 freight onto one truckMedium-speed diesel1 60 10 Steam-turbine1 60 10 load is becoming more NOx important every day. The Slow-speed diesel3 87 83 53-foot unit is fast becom3 Medium-speed diesel 57 54 ing the over-the-road Steam-turbine3 8.8 8.4 1 Engine-specific and/or fuel-specific data from Lloyd’s Marine Exhaust Emissions freight standard. In fact, Research Programme [28]. CO2 and SOx are fuel-related parameters; a 4% reduction at some West Coast conin CO2 for distillate fuel reported in recent IMO report [9]. tainer import terminals, as 2 Steam-turbine PM data for each fuel type from EPA [29]. 3 NOx emission factors for distillate assumed to be 5% lower due to less fuel-nitrogen; much as 30 percent of all steam-turbine NOx data reported by [30]. inbound 40-foot units are
unpacked upon arrival and restowed into the more spacious 53-foot units for inland transit. Trailer Bridge contends that this loss of time is one reason that its service cannot be judged by the speed of its tugs alone. “In some cases, we are actually faster than the self-propelled containership deliveries, when the inland phase of the movement is factored in.” The Trailer Bridge model probably wouldn’t work in all markets but represents a clean and efficient alternative in some Jones Act applications. While regulatory bodies haggle over what to do about stack emissions, the Trailer Bridge combination of efficient road transit and distillate-burning tugs provides a method of transport that is clean and readily available today. That it has proved its mettle in the U.S. to Puerto Rico trade goes without saying. The tables are illustrative. Table 1 provides analysis of fuel consumption efficiencies while Table 2 compares emission factors of residual and distillate fuels. The statistics in Table 2, of course, are not surprising, but the efficiency of the Trailer Bridge equipment in terms of fuel consumption per 40foot container equivalent is startling. It is this statistic that sheds real light on the environmental aspects of the Trailer Bridge model. (All tables extracted from a study entitled “Reducing Emissions From Cargo Transport and Improving Air Quality Between the Mainland U.S. and Puerto Rico Through Distillate Fuel Choice” by Dr. James J. Corbett, Associate Professor, College of Marine and Earth Studies, University of Delaware.) An internal study on pricing and the use of distillate fuels versus residual fuels in the Puerto Rican markets, prepared for Trailer Bridge, is illuminating. According to the study, “Price is the dominant factor in the Puerto Rico trade, but the perceived benefit
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already green of faster transit has resulted in a separation between self-propelled and tug/barge, more so with certain reefer and high-value cargoes. The tug/barge operators are acknowledged to already have the lowest overall per unit costs; while the gap would expand if everyone used distillate, it isn’t clear that that alone would make self-propelled ships non-competitive.” In other words, there will always be a requirement for the traditional, faster transit – no matter what fuel they choose to burn. For companies with non-time sensitive, preplanned inventory schedules, the Trailer Bridge system makes particular sense. McCown says that, for this reason, Trailer Bridge is JCPenney’s exclusive ocean freight carrier, as well as auto-supply giant Pep Boys’ major carrier of choice. He adds, “Efficient planning can trump a 20-knot container ship; hence ocean speed is not an applesto-apples comparison. Our consistency has won over clients. We’ve never cancelled a sailing and we have 104 scheduled each year. The issue of weather, where it supposedly impacts tug and barge tows in this market, is simply a myth.”
of its service has an impact on the environment. Any number of clean air initiatives are being tossed around on the West Coast as this article goes to press, with significant progress in this regard being made in the ports of Los Angeles and Long Beach, California. But in addition to reducing the number of trucks on the road by moving its freight in 53-foot containers, Trailer Bridge has also installed auxiliary power units (APUs) on its tractors. Based upon an actual test which included reduced idling of engines for A/C and other amenities at night, Trailer Bridge implemented the program and has experienced a 15% improvement in overall fuel economy. On an over-theroad tractor that does 125,000 miles per year, that translates into just over $10,000 per year in fuel cost savings at today’s prices. That makes buying and installing APUs a sound financial investment as well as something that is good for the environment (15% fewer emissions than you’d otherwise have with the same fuel type) and has the additional benefit of providing a quieter night’s sleep for Trailer Bridge drivers. Trailer Bridge’s commitment to increase fuel efficiency and make freight-related envi-
Table 3: Estimated Reduction in Annual Emissions for San Juan, PR to Jacksonville, FL Resulting From a Switch to Cleaner Distillate Fuel
Vessel Type Percentage of annual voyages per vessel type (total ~754 voyages) Reduction in PM emissions Reduction in CO2 emissions Reduction in SOx emissions Reduction in NOx emissions
Cleaner and Smarter Trailer Bridge’s recent inclusion in the EPA’s SmartWay Transport Program was a significant milestone for both entities. As the first marine company to be so enrolled, Trailer Bridge’s cleaner environmental footprint has been put on display as a model of what can be accomplished with current technologies. The SmartWay Transport Partnership is an innovative, voluntary collaboration between the EPA and the freight industry designed to increase energy efficiency while significantly reducing greenhouse gases and air pollution. For the EPA, Trailer Bridge’s inclusion is another way to link a “green” marine operator to a more efficient road system that employs fewer trucks to move the same amount of cargo. Trailer Bridge is not the first party to recognize that the over-the-road, inland portion 52 the maritime executive
Lancer Sea Star 41% 14% Regional Reduction 94% 94% 52% 4% 4% 2% 83% 83% 46% 5% 5% 3%
ronmental improvements translates into as much as six times fewer emissions per cargo unit compared to the self-propelled vessels now serving Puerto Rico. Although the efficient movement of freight remains a key factor in maintaining customer relationships, shippers in this market are becoming increasingly concerned about their environmental footprint. Indeed, shippers who are members of the SmartWay Transport Partnership commit to move 50% of their freight with carriers who are also members, and the Partnership currently has over 450 members. For its part, and as a SmartWay Transport Partner Carrier, Trailer Bridge has committed to: ■ Measure the environmental performance of its tractors. ■ Identify goals to improve the environmental performance of its tractors. ■ Encourage shippers to consider participation in the Partnership.
■ Track company performance to meet these goals. ■ Assist in the establishment of a marine category in the Partnership by participating in EPA-sponsored workshops and measuring the environmental performance of its vessels.
The Bottom Line: Now and Later In the world of marine freight, it’s all about the money. “Green” is nice, but the industry has yet to arrive at the point where environmental considerations completely trump the cost of doing business. Still, John McCown insists, “The rates we get for our 53’s are typically above what our self-propelled vessel competitors get for their 40’s, but the ability to get more freight in our 53-foot units translates into our per-cubic-foot pricing being lower.” Coupled with Trailer Bridge’s efficient inland service, this can translate into a comparably priced movement from point A to point B, and that is why Trailer bridge continues to make money. Eventually, all commercial marine traffic will have to toe the line in terms of air emissions. Until recently, the marine business was largely unregulated in this regard, especially when out to sea. At the point where the self-propelled market is forced to either employ cleaner burning engine equipment or switch to marine distillates altogether, the playing field may tilt even further in the direction of Trailer Bridge. McCown concedes that the gap in environmental advantage between his slower, cleaner burning tugs and the self-propelled market will narrow considerably, but the cost for those competitors to comply with new regulations could also increase by 15 to 30 percent annually. At that point, even shippers who loathe seeing their freight moving at slower speeds than 20 knots may come around to the Trailer Bridge business model.
Down the Road: Transferring the Trailer Bridge Model to Other Markets John McCown sees the Trailer Bridge system as “a little bit of a different slant on the concept of short sea shipping.” He also remains bullish on the Jones Act trade as the perfect venue for continued success. Although Trailer Bridge’s recent expansion into the Dominican Republic market should be a signal to others that the model could also play out in the non-Jones Act trade, John McCown has his eyes on some untapped domestic prizes as well: “At the top of our list are Alaska and Hawaii. We see no reason why we can’t bring
already green our model into those markets.” And why not? Both states operate under strict environmental standards and tend to be receptive to the kind of businesses that espouse the same qualities. In these markets, an environmentally-sensitive shipper may be willing to pay a small premium to transport its cargo with fewer environmental trade-offs. Table 3 illustrates annual emission reductions that might result from a switch to burning distillates. In a recent press release McCown declared, “We intend to grow the company and its earnings by extending the benefits of our unique and differentiated system to more current and new shippers…We have a superior transportation system and platform with a demonstrated competitive advantage, and I believe that our prospects going forward have never been better.” Currently profitable, Trailer Bridge’s stock has also had a nice run of late. Its take on how to run an efficient, clean operation has its fans, but its future, as John McCown knows, may depend on being able to expand its service into other markets. The timing of that expansion could be just around the corner, especially if clean air initiatives as they relate to ocean transport move forward quickly. Under those conditions, shippers with less
time-sensitive and/or perishable cargoes could migrate to the Trailer Bridge system. Naturally, Trailer Bridge CEO John McCown was happy to spend a great deal of time with MarEx as we prepared this article. As we finished up, however, we asked him the obvious question with regard to his freight system: Are you burning the so-called “green,” low-sulfur diesels right now and have you considered making the switch to get even greener? He conceded that Trailer Bridge was not at this time using ultra-low sulfur diesel fuel to power its fleet. He then paused and added, “When the self-propelled operators in our markets catch up to us in terms of environmental performance, we’ll look at it.” As the regulatory noose for marine stack emissions tightens, that time could be coming sooner than he thinks. Until then, though, Trailer Bridge is still one of the cleanest games in town. MarEx
About Trailer Bridge: Trailer Bridge provides integrated trucking and marine freight service to and from all points in the lower 48 states, Puerto Rico and the Dominican Republic, bringing efficiency, service, security and environmental and safety
benefits to these traffic lanes. This total transportation system utilizes its own trucks, drivers, trailers, containers and U.S.-flag vessels to link the mainland with Puerto Rico and the Dominican Republic via marine facilities in Jacksonville, San Juan and Puerto Plata. Additional information on Trailer Bridge is available at www.trailerbridge.com. Joseph Keefe is the Managing Editor of The Maritime Executive. He can be reached at jkeefe@maritime-executive.com.
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pollution:
beyond the soiled beach
Protection Against Pollution: WQIS Defines the Challenges of Liability and Response
Beyond the Soiled Beach: Criminality, Terror and Ports of Refuge It used to be that defining pollution liability and obtaining the right insurance coverage to mitigate that risk was a fairly simple proposition. A vessel’s liability limits, under the terms of the Oil Pollution Act of 1990 (“OPA 90”), were clearly defined. Vessels wanting to trade in U.S. waters knew what they had to do, and for the most part they all got it done. In 1971, the Water Quality Insurance Syndicate (WQIS), in response to its members’ needs, invented the oil pollution liability policy. Since then, that policy has evolved with the times and the rapidly changing landscape of the business of marine transportation. There’s little doubt, however, that the founders of WQIS could not have envisioned in 1971 the climate for pollution claims in the year 2007. The past 36 years have been active ones in terms of the evolving world of spill response and pollution insurance coverage. Watershed events such as the Exxon Valdez grounding and the 9/11 terrorist attacks have left an indelible mark on the business of moving cargo on the water. Along the way, it has become fashionable to criminalize the spillage of oil and hazardous substances. That trend further accelerated in the wake of 9/11. Reconciling this new development with existing spill response infrastructure, especially after a possible terrorist event, has become a major challenge for underwriters and the clients they serve. Beyond the threat of terrorism and criminal sanctions, the issue of “ports of refuge” is also muddying the waters. Vessels in real distress, with the best of intentions to remedy their situation, cannot be assured of attaining a port of refuge when it is most needed. All of these developments impact the world of liability and insurance coverage in a profound way.
Terror and the Shipowner According to Richard Hobbie, President of WQIS, the major fallout from the events of 9/11 was “the clash of two major issues, those being the increasing use of criminal sanctions in reaction to spills of oil and hazardous substances and the practical and emotional consequences of terrorist events or possible terrorist events.” The past several years have seen the use of criminal sanctions against the responsible party and, by association, its insurer, when a spill occurs. 54 the maritime executive
Criminal sanctions are quite properly used to combat deliberate dumping of oil and other intentional environmental misconduct. Accordingly, with the accepted tenet that insuring against intentional criminal acts is against public policy, pollution insurers have not provided such coverage. However, the growing use of strict liability and negligence statutes by the Department of Justice and other law enforcement agencies and the corresponding lower culpability level necessary for criminal liability have resulted in insurance coverage being developed for certain criminal liabilities. Post-9/11, the first question asked now at an oil spill is not how much oil has been spilled but whether it is a terrorist event. Government officials may treat the location of an oil spill as a crime scene, which completely transforms and complicates what had previously been a pollution event, which is bad enough in itself. Although some of the inequities in the use of criminal sanctions against responsible parties may eventually be addressed by legislation, only serious revisions to existing laws will result in tangible improvements to the situation. As a result, says Richard Hobbie, the possibility of criminal sanctions must be considered by a responsible party and its insurer when planning oil spill response strategies and responding to a spill. Hobbie uses the example of a recent explosion on a gasoline barge at an oil storage terminal in the port of New York as a perfect example of this quandary. Post-9/11, events such as these tend to draw speculation about the possibility of terrorist involvement. Although in this case the cleanup and environmental impact were minimal, the potential for a serious spill of a more noxious substance – like crude oil, for example – could lead to FBI intervention and the subsequent delay of spill response while the “crime scene” is secured. If this happens, a shipowner, while trying to do everything in his power to minimize the spill, is confronted with circumstances beyond his control – circumstances that could greatly increase the cost of the spill itself, the environmental damage and, worse, the eventual interpretation of the shipowner’s actions as inadequate, leading to possible criminal penalties. In the years following the events of 9/11,
the Department of Homeland Security has paid out hundreds of millions of dollars in Port Security Grants. The threat of terrorism is real, and the gaping hole presented by 95,000 miles of shoreline and more than 300 ports magnifies the potential exposure for all of us. As a result, when a spill occurs, the vessel operator, its management and crew need to be aware they could be the target of a criminal investigation. Asserting their right under the Fifth Amendment against self-incrimination could hinder a cleanup response and could also be considered “lack of cooperation with responsible officials,” which could result in a breach of a vessel’s liability limits under OPA 90. Accordingly, insurers like WQIS are working to integrate the response to the terrorism threat into their existing spill response infrastructure that was developed largely in response to OPA 90. At the same time, it is important to prevent unnecessarily increasing a shipowner’s exposure to criminal liability.
The Changing Face of Criminal Liability As It Is Applied to Oil Spills Federal and state governments have fully embraced the concept of applying criminal sanctions against mariners, shipowners and terminals involved in spill situations. Regardless of the lack of intent or negligence, the trend for society and law enforcement in general is to treat the polluter as a criminal. Anyone who doubts this has not been reading the flurry of Department of Justice (DOJ) press releases, which seem to hit the newswire weekly, announcing the latest conviction or plea agreement. But there are other implications for spill response when the event was the result of terrorist actions or the possibility exists that terrorism caused the event. Of course OPA 90 itself contains criminal provisions. One such provision states that not reporting a spill is a crime. OPA 90 has also served to strengthen the criminal liability provision of other environmental statutes, including the Deepwater Port Act, the Intervention on the High Seas Act, the Port and Waterways Safety Act, and the Act to Prevent Pollution from Ships. Says Richard Hobbie of WQIS, “For the most part, OPA’s criminal provisions follow traditional concepts of criminal law,
pollution:
which require some showing of knowledge or intent, or at least a negligent act. This would include instances of deliberate dumping.” Still, today’s prosecutors and the law enforcement arms that work with them look for other, more imaginative ways to tighten the screws on would-be polluters. Aside from the possibility of terrorism, the heightened scrutiny of environmental incidents by such entities as the EPA, the FBI and the U.S. Coast Guard has further ramped up the rate and severity of prosecutions. In addition, existing statutes – not previously in play for pollution incidents – are now being used by prosecutors in such cases. The implication that Congress has failed to enact appropriate pollution legislation has emboldened prosecutors and investigators to invoke statutes that were never intended to apply to mariners in a pollution event. By extending the scope of these statutes, owners, operators, masters and crew all face exposure to criminal sanctions. There are numerous examples of this trend, and WQIS points to two that are significant: ■ The Migratory Bird Treaty Act (“MBTA”): Under MBTA, it is unlawful to, at any time, and by any means, or in any manner, to pursue, hunt, take, capture, or kill any
migratory bird. We add emphasis on the word kill, as you will note that the language of MBTA does not require that it be a negligent or intentional act. With this kind of interpretation in mind it would be possible for a person to be driving a car, have a bird fly out from the bushes, strike and kill the bird and then be found criminally guilty of “killing” the bird. Congress’ original intent in 1918 when it enacted MBTA was to target hunters of migratory birds, and this was how MBTA was used prior to the Exxon Valdez spill. Following the Exxon Valdez spill, MBTA was used to support a criminal prosecution against a shipowner in connection with a maritime oil spill. ■ The Refuse Act of 1899 is also now being used to target vessels that have had an oil spill. The Refuse Act makes it unlawful to discharge “refuse matter” from a ship into navigable waters. This is another example of a statute used in a way that the original drafters of the legislation surely had not intended. Hobbie also reminds MarEx readers that vessels and shipowners are now not alone in their peril. These laws can broadly be applied to terminal and facility operators as well and,
beyond the soiled beach
he says, “It should be noted that eight states in the U.S. make cargo owners either jointly or contingently liable along with the vessels.”
Ports of Refuge: Developing Responsible Response Policy When the Bahamian-flagged, single-hull tanker Prestige sank after encountering heavy weather off the coast of Spain in November of 2002, the physical manifestations of the event were easy to see. Carrying 77,000 tons of fuel oil, the vessel foundered for several days and then sank. At least 500 miles of shoreline were impacted and the livelihoods of thousands destroyed, perhaps forever. The full impact of the spill will not be known for generations, but the fight to determine what really happened rages on even today. A high-profile court case between Spain and one of the world’s largest classification societies also looms large in the window. Lost in all the noise over single hulls and seaworthiness is the reality that this disaster, or at least the magnitude of it, could have been prevented. Denied a port of refuge by at least two nations, the options for the stricken vessel were limited. In the opinion of many, this ultimately sealed its fate. For insurers, the
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pollution:
beyond the soiled beach
issue of planning for the next “Prestige” event includes more than just demanding double hulls and strict port state control. It also involves a cooperative agreement between countries and states on how to best handle the next potential crisis in a way that not only mitigates the consequences of a spill but does so without coloring the process with a parochial eye. This will be easier said than done. The United States has developed a National Contingency Plan and regional plans to take into account and preplan for spills of all sizes. The location of equipment and materials is predetermined. Tank vessel owners must
dialogue and, ultimately, be better prepared to avert a potential catastrophe.
Education and Cooperation Preparing for an event that you hope will never happen is just as important as having insurance to pay for it and the spill-response equipment to deal with it if and when it does happen. All parties need to know that in a high-visibility spill, it is more than likely that both federal and state officials will commence a criminal investigation immediately. This will involve the Coast Guard, investigators from the EPA and FBI, and the U.S. District Attorney’s
“Even with all the efforts that have been made in the U.S., there has been little candid discussion or planning that would better prepare us for a fully-laden tanker off the coast needing permission to enter sheltered waters for offloading or salvage.” prepare and submit their own vessel response plans to the Coast Guard for approval. Under OPA 90, drills are held from small tabletop exercises to exercises with hundreds of people participating. WQIS, for example, has its own spill management team, the Marine Pollution Response Group, that participates in these drills and responds to actual spills. Still, says Richard Hobbie, “Even with all the efforts that have been made in the U.S., there has been little candid discussion or planning that would better prepare us for a fully-laden tanker off the coast needing permission to enter sheltered waters for offloading or salvage.” According to WQIS and Hobbie, it should be a priority of the planners to identify “ports of refuge” along all of our coastlines. Equipment for booming off the vessel, offloading the cargo and salvaging the vessel must be identified and available in those locations. States should initiate memoranda of agreement among themselves so that there will be less likelihood of one state trying to pass the problem off to another. If formally established, such ports of refuge will make the decision to use them much easier. It is arguably much better to have a localized serious event than risk the kind of event that played out in Europe due to the sinking of the Prestige. Since at least eight states in the U.S. make cargo owners jointly or contingently liable for spills from vessels carrying their oil, this is not just a vessel owner’s problem. Environmental groups, vessel owners, insurance companies and cargo interests all have a strong incentive to encourage government action and participate in the process to create a more open 56 the maritime executive
office and may additionally involve local police, state police and an investigative unit from a state environmental enforcement agency. The investigation could also involve officials from more than one state if the spill migrates into another state – something that often happens. Multiple states can also mean the possibility of conflicting laws or possibly different requirements under different state laws. It is therefore important to educate crews, operations management personnel and marine executives themselves on the possibility of criminal sanctions and what is expected of them during the aftermath of the initial event. As has been pointed out painfully at recent Congressional hearings, the Coast Guard enters many situations wearing more than one hat. The guidelines for the Coast Guard’s criminal investigation are contained in the Commandant’s Instruction for the Criminal Enforcement of Environmental Laws. The WQIS team says that the following must be kept in mind with respect to the Coast Guard’s activities when there is a spill: ■ Once a casualty is reported it is the Coast Guard’s responsibility to investigate. ■ One of the purposes of the investigation is to determine whether there is evidence of a crime. ■ Where there is “reasonable cause” or a “serious marine accident” (including a serious threat to the environment), the individuals involved will be asked to submit to drug and alcohol testing. ■ The Coast Guard may issue subpoenas to require persons to appear and to produce documents.
It pays to do your homework. When a pollution event occurs, coverage determinations are made by reviewing the policy provisions, including exclusions that would preclude coverage for some or all criminal violations and whether state or federal jurisdictions would preclude coverage on public policy grounds, notwithstanding policy provisions.
Editor’s Note: The Water Quality Insurance Syndicate Policy Form (2007), in effect since June 4, has been revised. Some of the major revisions to the 1998 clauses include:
PART I Coverage: ■ COVERAGE A: This section covers the main liabilities under OPA 90. Coverage is as before except that two new sections of the Act are being added. ■ COVERAGE A (3) adds Section 1007, which provides coverage for foreign claimants including the provision that allows recovery anywhere in the world if the oil spilled was loaded in Valdez, Alaska. This Valdez provision is not covered but may be added by endorsement. ■ COVERAGE A (4) adds coverage for liabilities under Section 1009 of the Act, which allows any person to bring an action against any other person who is liable or potentially liable under the Act. ■ COVERAGE F (3) provides coverage for circumstances where third parties load oil onboard a vessel without the knowledge of the owner/operator. This generally happens in the dead of night and allows that third party to rid itself of waste oil without having to pay for it. ■ COVERAGE F (4) provides coverage for the offloading of a vessel when demanded by the Federal On-Scene-Coordinator after an occurrence even if the oil does not present a substantial threat of pollution. ■ COVERAGE H is new and provides coverage for liabilities arising under federal statutes other than OPA and CERCLA where such costs would have been covered under OPA or CERCLA. Examples of this include the National Marine Sanctuaries Act and the National Seashore Act, both of which authorize the government to impose liabilities on vessels discharging oil or hazardous substances into or onto the seashore or sanctuary. ■ COVERAGE L is new. It provides coverage for liability arising under state law up to the MarEx policy limit purchased.
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