U.S. Coast Guard Honors Lost Lives

By MarEx 2015-08-02 16:36:35

Admiral Paul Zukunft, commandant of the U.S. Coast Guard, addressed Coast Guard crews and the general public during the National Memorial Service in Escanaba Park in Grand Haven, Michigan, on July 31, 2015. The annual memorial service, held during the Coast Guard Festival, honors Coast Guard members who have lost their lives during the past year.

Pictures: U.S. Coast Guard (website and facebook)

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Latest U.S. Attack Sub Commissioned

By MarEx 2015-08-01 19:48:17

The Virginia-class attack submarine USS John Warner (SSN 785) was commissioned during a ceremony attended by more than 2,500 in its future homeport of Naval Station Norfolk, in the U.S. on Saturday.

Proudly displaying its motto “On a Mission to Defend Freedom,” the ship is the 12th Virginia-class attack submarine to join the Navy’s operating fleet.

The ship’s namesake is John Warner, a five-term U.S. Senator from Virginia who also served as 61st Secretary of the Navy from 1972 to 1974. His wife Jeanne is the ship’s sponsor.

Warner is also the only Secretary of the Navy who served as both an enlisted man and an officer, in both the Navy and the Marine Corps. As a Sailor during World War II he served as an electronics technician third-class petty officer, and in the Korean War he was a captain with the Marine Corps 1st Marine Air Wing serving as a Ground Communications Officer.

“Let them know of your presence and your determination to defend freedom,” said Warner, as he addressed the audience and the ship’s crew. “Defend the sea lanes of the world which are the very arteries of international commerce. Manned by our submarines, our surface ships, and naval aircraft, we are carefully working to keep those sea lanes open – not just for us but for all.”

The keynote speaker for the commissioning ceremony was Admiral Jonathan Greenert, Chief of Naval Operations.

“This boat is the latest incarnation of American sea power and is a strategic asset for this country,” said Greenert. “This affords us what we refer to as global access, and it is fundamental to any mission that you ask your military to do. Frankly, we are challenged in space, we are challenged in cyber, we are challenged in the air and we are challenged on the surface. We are not currently challenged in the undersea. We own the undersea domain. We must keep that situation as we go into the future.”

John Warner is the second of eight Block III Virginia-class submarines to be built. The Block III submarines are built with new Virginia Payload Tubes designed to lower costs and increase missile-firing payload possibilities. The first 10 Block I and Block II Virginia-class submarines have 12 individual 21-inch diameter vertical launch tubes able to fire Tomahawk Land Attack Missiles (TLAMS). The Block III submarines are built with two-larger 87-inch diameter tubes able to house six TLAMS each.

As the most modern and sophisticated attack submarine in the world, the submarine can operate in both littoral and deep ocean environments and presents combatant commanders with a broad and unique range of operational capabilities. John Warner is a flexible, multi-mission platform designed to carry out the seven core competencies of the submarine force: anti-submarine warfare; anti-surface warfare; delivery of special operations forces; strike warfare; irregular warfare; intelligence, surveillance and reconnaissance and mine warfare.

The submarine is 377 feet long, has a 34-foot beam, and will be able to dive to depths greater than 800 feet and operate at speeds in excess of 25 knots submerged. It will operate for 33 years without ever refueling.

“The commissioning of the USS John Warner marks the beginning of what is expected to be 40 years of distinguished service for this great submarine – a fitting tribute to a man who served his nation for so long as a Sailor, a Marine, a United States Senator and, as one of my most esteemed predecessors as Secretary of the Navy,” said Secretary of the Navy Ray Mabus.

“This ceremony is not only a celebration of a man who dedicated so much of his life to his country and to the Department of the Navy, but also a reminder of the partnership our Navy shares with the shipbuilding industry in Senator Warner’s home state of Virginia and the continued success of the Virginia-class attack submarine program.”

Construction on John Warner began April 29, 2009. The submarine’s keel was authenticated during a ceremony on March 16, 2013, and the submarine was christened during a ceremony September 6, 2014.

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Stena Pained by Tunnel Funding

By MarEx 2015-08-01 03:21:13

Stena Line has issued a statement saying that it considers the European Commission’s tacit approval of public financing for the Fehmarn Belt fixed rail-road link between Denmark and Germany to be discriminatory and not in line with E.U. State aid rules.

Consequently, Stena Line will await the publication of the full decision and consider appealing the decision.

Stena Line is one of the world’s largest ferry operators with 35 ferries and 22 routes in northern Europe.

“The existence of nine ferry routes between 14 different ports is based on established interconnectivity needs and fair competition,” says Carl-Johan Hagman, CEO Stena Line. “The market is more than adequately served by these ferry routes. All the State’s involvement achieves is an extra eight billion euros cost for the taxpayers.

“A fixed undersea tunnel link between Rødby and Puttgarden supported by unjustified State aid creates an un-level playing field and distorts competition with the well-functioning ferry services which have been provided for many years. It also goes against the principle of shifting transport away from road.”

Stena Line notes that the European Commission’s press release does not confirm whether the payment of state aid has taken place, but simply states that if state aid is involved, the aid can be approved.

In doing so, the Commission seems to be taking an approach which is entirely out of touch with well-established case-law of the Union Courts and the practice of the European Commission, such as the Øresund Commission Decision, which confirms that public financing for commercially exploited infrastructure is subject to the State aid rules, says Hagman.

In addition, the Commission does not seem to have prescribed a timeframe for the state aid. “The idea of open-ended state aid without time limits, for a project of this magnitude, simply makes no sense,” says hagman. “This provides the operators of the tunnel with the ability to use the state aid to dump their state-subsidised prices, thereby squeezing out competitors such as ferry operators.”

Stena Line awaits the publication of the full Decision and will consider to challenge the Decision before the Union courts in Luxembourg. No doubt other affected operators will be doing likewise.

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A Vote for Responsible Arctic Development

By Wendy Laursen 2015-07-31 21:09:31

Shell’s Arctic drilling is expected to begin soon. MarEx spoke to David Holt, President of the U.S. Consumer Energy Alliance (CEA), to discuss what it means for Alaska and the nation’s Lower 48 states.

Does the CEA have an official view on whether or not Shell should have been given the go-ahead in the Chukchi Sea?

CEA has long advocated for expanded access to responsible offshore energy production as a means to grow our economy and lower energy prices. CEA supports the expansion of energy development on federal lands in Alaska in particular to protect the longevity of the Trans-Alaska Pipeline System, ensure the financial solvency of the state of Alaska, and provide consumers in Alaska and throughout the nation with a domestic source of fuel.

For that reason, and grounded in the understanding that we can have both energy development and environmental protection, CEA has advocated for the federal government to move forward in a timely manner to grant the approvals necessary to access resources in the Chukchi. With federal waters offshore Alaska estimated to contain a mean ~27 billion barrels of undiscovered oil and ~132 trillion cubic feet of undiscovered natural gas, Alaska’s offshore has a critical role to play in meeting U.S. energy supply needs.

How do you view the Chukchi Sea’s potential?

With an estimated mean undiscovered, technically recoverable 15.38 billion barrels of oil and 76.77 trillion cubic feet of natural gas, the Chukchi Sea offers more resources than any other undeveloped U.S. energy basin, and according to experts may be one of the world’s largest sources of untapped oil and gas.

Access to these resources is critical to maintaining a domestic supply of affordable and reliable energy and sustaining and enhancing our economic and national security and quality of life, and approval for Shell to explore its Chukchi leases is a pivotal step toward ensuring that consumers in Alaska and across the United States can actually realize the economic and societal benefits associated with our vast Arctic offshore resources.

The CEA website shows a recent poll of a small part of the U.S. Do you think that is indicative of the wider community in the U.S.?

Since October 2014, CEA has conducted public polling in Alaska, Georgia, Iowa, Louisiana, New Hampshire, and South Carolina, and they all conclude the same thing: Voters in all six states strongly support offshore energy exploration in the U.S. Arctic.

Recent CEA polling in Virginia, North Carolina, and West Virginia also reflects overwhelming voter support for expanded offshore energy exploration. Combined with other nationwide polling showing overwhelming support for offshore energy exploration, there is no doubt that this is broadly reflective of Americans’ views overall. Since December alone, CEA has submitted more than 200,000 comments from consumers all across the country in support of Arctic development.

What does the go-ahead for Shell mean for Alaska?

In addition to helping to ensure a steady stream of energy supplies that keeps the Trans-Alaska Pipeline System operational, successful drilling and subsequent development could mean substantial jobs, economic activity and public revenues.

A 2009 study by the University of Alaska’s Institute of Social and Economic Research and Northern Economics found that over a 50-year period new offshore energy production in Alaska’s Chukchi, Beaufort, and North Aleutian Basin would produce an annual average of 35,000 jobs – both directly and indirectly tied to the industry – for the state of Alaska alone, with a total payroll of $72 billion and potential state government revenues totaling $15.3 billion.

It also projected total employment as a result of Chukchi development to exceed 22,000 by the end of the 50-year period. Importantly, the overwhelming majority of Alaskans support energy development with 73 percent of the state’s voters voicing specific support for offshore drilling in U.S. waters inside the Arctic Circle.

What does approval for Shell mean for the rest of the U.S.?

Beyond access to billions of barrels of domestic oil and trillions of cubic feet of domestic natural gas, a follow-up study in 2011 by the same organization estimated that over a 50-year period economic activity resulting from offshore development in Alaska’s Beaufort and Chukchi seas could generate an annual average of 54,700 jobs nationwide, an estimated cumulative payroll amounting to $145 billion, and $193 billion in federal, state, and local revenues. It also found that Chukchi Sea development alone could generate 24,600 U.S. jobs and $96 billion in government revenues.

Additionally, development in the Beaufort and Chukchi will help build a U.S. presence in the Arctic region, a place where we currently lag behind other nations. The Arctic is growing in importance as new opportunities open up for energy exploration and transportation. It is important that the U.S. build on its gains in the region with its leadership of the Arctic Council by consolidating its activities in the region and offering a check on other nations that seek to use the Arctic to advance their own self-interests.

As a federal advisory committee recently reported to the U.S. Secretary of Energy, “The U.S. Arctic can make an important contribution to sustaining overall U.S. crude oil supplies at a time when Lower 48 production is projected to be in decline, and extend the energy security benefits that the United States is currently enjoying.”

How do you view environmental concerns regarding impact on marine animals in the area and the potential for an oil spill?

CEA recognizes that we can have both energy development and environmental protection, and understands that offshore development can and must be done safely.

Since the original Chukchi lease sale 2008, there has been ample opportunity for environmental review and public input, and as the Bureau of Safety and Environmental Enforcement recently noted, Chukchi drilling activities are being held to the “highest safety, environmental protection, and emergency response standards.”

It is also noteworthy that since 1971, when Arctic drilling began, more than 80 wells have been drilled in the Alaskan OCS – all without incident.

Do you believe the government has been vigilant in its appraisal of the drilling project?

Proposed drilling in the Chukchi has been subject to years of government reviews since the leases were first issued in 2008. Considering that it takes 10 to 30 years of preparation and drilling to bring oil to market, as the National Petroleum Council recently reported to the U.S. Secretary of Energy, we must begin to explore these resources now in order to ward off a renewed and otherwise forecasted reliance on imported oil.

That is one reason why the recent issuance of Chukchi drilling permits, although a good interim step, is so troubling. “Just in time” regulatory approvals create an environment of tremendous uncertainty and discourage rather than incentivize the significant investments that will be required to develop Arctic offshore resources.

To highlight the urgent need for increased Alaskan production, despite the resurgence of domestic production associated with the energy revolution, net imports of oil to the western U.S. have skyrocketed. With its strong reliance on Alaskan energy, it is no surprise that this has coincided with a steady decline in production in Alaska.

Is there anything else you would like to say?

The majority of American consumers and businesses leaders understand that energy production is not an either-or choice between economic and environmental prosperity. They know the potential risks – and sky-high rewards – associated with offshore energy production. They know we can mitigate the risks and solve the challenges linked to environmental protection and responsible energy development.

There is a lot riding on sustaining and expanding Alaskan energy production – the pocketbooks of consumers, the balance sheets of businesses and governments, and the job security of millions. This opportunity is too important to let pass us by.

That said, oil and gas is not the only answer. We can and must diversify our energy portfolio and expand use of wind, solar, geothermal, nuclear and other energy sources – as well as continuing our great track record of conservation and improved efficiency. We need it all to drive our economy, with oil and natural gas meeting most of our needs for at least the next several decades.

The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive.

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English Bay Spill: Canada Can Do Better

By Wendy Laursen 2015-07-31 20:19:47

Canada has concluded an independent review of the environmental response operation to the fuel spill in English Bay in April, and 25 recommendations have been made to improve future response efforts.

The report by John Butler, Independent Review of the M/V Marathassa Fuel Oil Spill Environmental Response Operation, presents recommendations aimed at improving the environmental response capability of the Canadian Coast Guard, Environment Canada, Transport Canada and their partners.

Denying Responsibility

On Wednesday April 8 the sailing vessel Hali observed a sheen of oil in English Bay and reported it to the Canadian Coast Guard (CCG). The CCG managed the response and clean-up operation with support from key partners including Western Marine Response Corporation.

Although the captain and representatives for the Marathassa initially denied responsibility, it was subsequently determined in the early morning of April 9 that the Marathassa had discharged an unknown quantity of intermediate fuel oil (suspected to be IFO 3802) into English Bay on April 8.

A Complex Response

Due to the complexity of the incident, the Commissioner of the CCG initiated a review for the purpose of identifying what worked well and what could be improved. In this case, the response and clean-up lasted a total of 166 days. Skimming of the fuel oil was conducted immediately and completed on day four. The polluting vessel was boomed in the early morning on April 9, and shoreline clean-up continued until day 16.

There was minimal impact on the public from a health and safety perspective. However, Environment Canada estimated that approximately 20 birds were affected.

Communication Problems

CCG used an inclusive approach to the Unified Command structure, bringing in other levels of government and non-governmental organizations, which was seen in a positive light by most. As the response progressed, the Unified Command, under CCG leadership, became increasingly coordinated.

However, the review found that CCG should improve its communication protocols with partners to ensure accuracy of communications. A combination of factors such as uncertainty of roles and responsibilities, miscommunications and technical difficulties, resulted in a delay in the response of 1 hour and 49 minutes.

Information sharing on a common network was not possible due to Government of Canada electronic policies and protocols, which limited the effectiveness of the Incident Command Post.

Early alerting of the municipalities, First Nations, and stakeholders of the incident was delayed due to the low classification of the incident in the provincial alerting system. Some partners were notified of the incident via informal channels due to previous working relationships or were alerted by the heightened media attention.

Many response partners noted that the current area response planning timelines don’t meet the immediate need to engage partners to develop an effective plan in Vancouver Harbour.

The lack of a physical presence of Environment Canada impacted the effectiveness and efficiency of the Environmental Unit.

Public communications from the Unified Command was challenging, as energy was focused on supporting government officials in media briefings, rather than ensuring key facts about the on-water operation were being shared with citizens and Unified Command partners.

Government Response

“I have directed the Canadian Coast Guard, in concert with their federal partners and other levels of government, to act swiftly on all of Mr. Butler’s recommendations,” says Gail Shea, Minister of Fisheries and Oceans. “Implementation of all recommendations is already in progress. Once all 25 recommendations are complete, I will report back to British Columbians. In the meantime, I am urging closer cooperation between all environmental response agencies in Canada’s major ports.

“I want to once again thank the citizens of Vancouver and the nearby municipalities for their active engagement, their outpouring of concern and their overwhelming willingness to be involved in clean-up efforts. I come from a maritime community and I fully understand and share the frustration of having a foreign ship enter a Canadian harbor and spill fuel into our waters,” she said.

“I want to reassure British Columbians that the Government of Canada is strongly committed to ensuring the protection of our marine environments. The polluter pay principle means that the polluting vessel is responsible for the costs of cleaning up the mess they left in English Bay. Our government will aggressively pursue compensation. As Canada’s trade with the world grows, we must be able to ensure that economic activity on our waters be conducted safely and responsibly.”

The report is available here.

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NOL’s New Fleet Attractive to Buyers

By Reuters 2015-07-31 19:12:55

Singapore state investor Temasek Holdings’ planned sale of shipper Neptune Orient Lines (NOL) offers potential buyers a modern fleet at a comparative bargain price expected to be around $2 billion, industry and banking sources said.

The catch? The asset has lost more than $1 billion in four years and may be on the block at a time when the global container shipping industry is in the grip of a severe prolonged downturn. The global sector’s debt has nearly doubled to $86 billion over the past decade, said Rahul Kapoor, Singapore director of Drewry Equity Research, with spot Asia to Europe and transpacific container freight rates near six-year lows.

Still, industry sources say NOL’s new ships and 2.8 percent slice of the global container shipping business can be expected to appeal to players seeking an edge over rivals. Qatar-controlled United Arab Shipping Company (UASC) can be expected to join the likes of Germany’s Hapag-Lloyd AG and Hamburg Sud in running the rule over NOL, these people said.

Temasek, with nearly $200 billion in assets, recently hired Citigroup to seek buyers for the majority stake in NOL it bought in 2004 for S$2.8 billion ($2 billion), the people added, triggering the sale of the whole firm under Singapore rules. NOL has made losses in five of the past six years, but the bank’s task may have become a tad easier after the shipper said on Thursday it eked out a tiny net profit in April-June after six straight quarters of losses.

Buyers would need to offer at least 30 percent more than NOL’s current market value of about $1.8 billion – the usual premium paid to acquire a publicly traded company, bankers said. Both Citi and Temasek declined comment.

“UASC now has much wider options since the Qataris took control, and the Qataris want to be world-class in everything they touch,” said a Hong Kong-based structured asset banker involved in shipping and transportation deals.

UASC, Hapag-Lloyd and Hamburg Sud all declined to comment.

“The company has a duty to consider all options to maximize shareholder value. Hypothetically if I receive a good price for the business, we will always consider selling,” said NOL Chief Executive Officer Ng Yat Chung, speaking after Thursday’s results.

“What I can say now is that the company is totally focused on returning the liner business into profitability,” he said. In line with that commitment, it sold its only profitable logistics division for $1.2 billion this year.

Boosting NOL’s appeal is the fact that a buyer would gain a young fleet for around half the cost of new vessels, said Andy Lane, a partner at Singapore’s CTI Consultancy.

“My favorite motivation for the buy remains fleet renewal,” said Lane. “There is global overcapacity, but shippers also need to keep their fleets right-sized, flexible and young.”

($1 = 1.3697 Singapore dollars)

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