U.S. Ports Move On From Labor Dispute

By Wendy Laursen 2015-05-08 20:04:04

Import cargo volume at the U.S.’s major retail container ports is returning to normal levels as officials prepare to count votes on ratification of a new West Coast labor agreement, but industry is calling for more long-term development to secure port activity into the future.

The Pacific Maritime Association and the International Longshore and Warehouse Union tentatively agreed on a five-year contract in February. While ILWU leadership has recommended that members vote for ratification, votes won’t be counted until May 22. The lack of a contract and operational issues led to crisis-level congestion at West Coast ports after the previous agreement expired last July.

“Dockworkers and management made a massive push to clear the backlog of cargo over the past several weeks and West Coast ports are getting back to normal despite concerns such as the Teamster picketing seen in Los Angeles and Long Beach earlier this month,” National Retail Federation Vice President for Supply Chain and Customs Policy Jonathan Gold said.

“We hope to see this month’s ratification vote go smoothly and then settle into a long period of efficient, dependable operations before we have to think about contract talks again. But there are still plenty of other issues impacting congestion that the ports need to work through.”

Supply Chain Changed

Congestion at West Coast ports has prompted many importers to shift their cargo elsewhere, prompting speculation on how long the shift might last. West Coast ports handled 55 percent of cargo this January, down from 64 percent during the same month in 2014, while East Coast ports handled 45 percent, up from 36 percent.

“Importers and exporters are reviewing their supply chain plans for the future, and not necessarily in favor of the West Coast,” Hackett Associates Founder Ben Hackett said. “Looking on the practical side, a number of factors favor a return to the West Coast.”

Hackett said sending ships from Asia to the East Coast is more expensive than the West Coast, takes longer, and results in higher expenses to move the cargo to Midwest distribution centers by rail. In addition, importers have significant investments in West Coast distribution centers that would not easily be abandoned.

Clearing the Backlog

According to an analysis from the monthly Global Port Tracker report released by the National Retail Federation and Hackett Associates, ports covered by Global Port Tracker handled a record-high 1.73 million TEU in March.

The ports covered in the analysis are Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Hampton Roads, Charleston, Savannah, Port Everglades and Miami on the East Coast, and Houston on the Gulf Coast.

Driven up by a sudden surge of backlogged cargo from vessels that were sitting at anchor waiting to be discharged after the labor dispute ended, the number was up 44.9 percent from February and 33.1 percent from March 2014.

April was estimated at 1.55 million TEU, up 8.1 percent from 2014. May is forecast at 1.56 million TEU, up 5.4 percent; June at 1.53 million TEU, up 3.7 percent; July at 1.57 million TEU, up 5.1 percent; August at 1.58 million TEU, up 3.9 percent, and September at 1.6 million TEU, up 1.1 percent.

The first half of 2015 is forecast at 8.8 million TEU, an increase of six percent over the same period last year.

Excessive Number of Large Vessels

Hackett said the strong increases in volume are coming as shipowners are launching an excessive number of large new vessels that could lead to a price war on shipping rates.

“This upsets the supply/demand balance,” Hackett said. “There is not enough demand to justify this level of capacity increase. Expect rates on both coastal services to fall to all-time lows.”

A Call for Infrastructure Modernization

Thousands of stakeholders in Washington, D.C., and across the country are coming together for Infrastructure Week, May 11-15 where they will highlight the critical importance of investing in and modernizing America’s infrastructure, including its seaports and their land- and water-side connections.

“Seaport activity accounts for a quarter of the U.S. economy and it’s time to build America’s 21st century transportation infrastructure to support continued economic growth and deliver prosperity to all Americans,” said Kurt Nagle, president and CEO of the American Association of Port Authorities (AAPA).

Congress plays a critical role ensuring that the U.S. remains a global economic powerhouse. AAPA strongly supports several vital programs important to seaports that are on the congressional schedule over the next few weeks. These include: Trade Promotion Authority (TPA) legislation, long-term reauthorization of surface transportation legislation that includes a strong freight program and reauthorization of the Export-Import Bank to encourage more U.S. exports.

“Given seaports’ essential role in trade and transportation, AAPA urges Congress to prioritize investments in port-related infrastructure. Such investments pay huge dividends in terms of sustainable job and economic growth and tax revenues,” said Nagle.

AAPA has a number of funding priorities that will help the country build and maintain a 21st century transportation infrastructure, including:

• the U.S. Department of Transportation’s Transportation Infrastructure Generating Economic Recovery (TIGER) program, which helps improve port infrastructure as well as water, rail and road connections to seaports;

• the U.S. Army Corps of Engineers coastal navigation program to modernize and maintain U.S. harbors for efficient importing and exporting of goods;

• the U.S. Department of Homeland Security’s Port Security Grants program and the U.S. Environmental Protection Agency’s Diesel Emission Reductions Act (DERA) environmental grants, both of which keep seaports sustainable and help safeguard local communities.

In the spirit of Infrastructure Week and in the interest of building and sustaining 21st century transportation infrastructure, AAPA is urging Congress to take action on these priorities.

Tax Victory

The AAPA celebrated a major funding victory at the end of April with the passage of the U.S. House of Representative’s 2016 Energy and Water Appropriations bill and two included amendments.

The bill and accompanying amendments increase funding for Harbor Maintenance Tax to 36.3 million, which will help achieve a 2016 port improvement target of $1.25 billion. This is a major milestone for U.S. ports hoping to improve and maintain existing infrastructures. In total, AAPA member ports claim they will need $28.9 billion by 2025 in order to improve the road, rail and tunnel systems that support U.S. port operations.

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Shell Demonstrates Arctic Spill Response Capabilities

By Wendy Laursen 2015-05-08 19:10:02

Shell’s controversial plan to recommence drilling operations in Alaska’s Chukchi Sea has been met with protest by people from around the world. However, Shell’s Alaska program has gone to great lengths to make sure a worst-case scenario, such as an oil spill, never takes place, and the company has just released an animation demonstrating its spill response capabilities.

Shell is preparing 25 vessels to begin a two-year drilling program in the Chukchi Sea off the coast of Alaska. Although Shell had to pull out of the region in 2012 after an oil rig ran aground, the Arctic oil reserve “remains a massive value opportunity,” the company has said.

A New Plan

Shell has submitted new plans to explore the Arctic to the U.S. Interior Department after the Obama administration upheld a 2008 Arctic lease sale last month, clearing an important hurdle for the company. The Bureau of Ocean Energy Management (BOEM) has until May 10 to approve or reject Shell’s plans.

The new plan proposes continuing the Chukchi Sea drilling exploration that initially began in July 2012. The program outlines the drilling of up to six wells within the Burger Prospect that would be completed using the drillship Noble Discoverer and the semi-submersible drilling unit Polar Pioneer. The vessels would be removed from the Chukchi at the conclusion of each drilling season.

BSEE Inspection

Describing its spill response plans, Shell says its onsite oil spill response assets would be deployed within an hour. If a well control problem were to occur, Shell would activate its emergency response team. As a first step, trained rig personnel on board the Noble Discover or Polar Pioneer would assess the situation and take measures to bring the well back under control. This could involve the deployment of a blowout preventer if required.

The plan builds on the 2012 plan approved by the U.S. Bureau of Safety and Environmental Enforcement (BSEE), and late last month Christy Bohl and Steven Pearson from the BSEE Oil Spill Preparedness Division, Alaska Section, traveled to Valdez, Alaska to observe oil spill responder training and deployment of oil spill response equipment.

This equipment is a critical component of Shell’s Chukchi Sea Regional Exploration Program Oil Spill Response Plan (OSRP). Equipment deployed during the visit is owned and/or operated by the Arctic Slope Regional Corporation Energy Services (AES), and Ukpeaġvik Iñupiat Corporation (UIC) Artic Response Services, two of Shell’s oil spill removal organizations listed in the company’s OSRP.

All operators are required to have an OSRP reviewed and approved by BSEE. The bureau conducts a variety of equipment inspections and deployment exercises, some of which may be unannounced, to validate the tactics, logistics, resource availability and personnel proficiency identified and relied on in the approved oil spill response plan. Equipment preparedness and personnel training verifications are important regulatory tools for ensuring that an OSRP is sound and effective, says BSEE. The inspections help to confirm that the nation’s offshore resource explorers and petroleum energy providers are ready to respond when a discharge of oil occurs from any of their offshore facilities.

The visit and inspection echo BSEE Director Brian Salerno’s recent comments when he viewed Shell’s deployment demonstration of its undersea containment dome. After the demonstration, he stated, “Arctic operations require extra effort to prevent safety or environmental incidents. We are leaving no stone unturned to ensure operators have addressed all relevant risks. It is equally important that operators be prepared to respond in the event of an incident, especially in a scenario which threatens the environment. This exercise is part of a comprehensive effort to verify the readiness of the necessary response capability.”

Safety Questioned

Six Greenpeace climbers intercepted the Polar Pioneer 750 miles north-west of Hawaii in April as it headed to the U.S. The activists scaled the 38,000 ton platform to protest against the planned drilling.

Climber Johno Smith from New Zealand, had this to say while on the platform: “I believe that shining a light on what Shell is doing will encourage more people to take a strong stand against them and other companies who are seeking to destroy this planet for profit. I’m just one voice out here, but I know I’m not alone, and millions if not billions of voices demanding the right to safe and healthy lives will have a huge chance of changing things.”

Greenpeace has said that it believes Shell’s operation in the Chukchi Sea can’t be performed safely, citing that Noble Drilling, one of Shell’s biggest Arctic sub-contractors and owner of the Noble Discoverer, had pleaded guilty to committing eight felonies in connection with Shell’s failed attempts to drill in the Arctic Ocean in 2012.

Back in 2012, the Greenpeace said: “Arctic oil drilling is a dangerous, high-risk enterprise and an oil spill under these icy waters would have a catastrophic impact on one of the most pristine, unique and beautiful landscapes on earth. The risks of such an accident are ever present and the oil industry’s response plans remain wholly inadequate.

“The US Geological Survey estimates that around 13 percent of the world’s undiscovered oil could lie under the area north of the Arctic Circle. Sounds like a lot? At our current oil consumption rate, that’s actually only three years’ worth of resources.”

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

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UAVs to Be Banned in Arctic, Antarctic

By MarEx 2015-05-08 17:38:35

This week two major associations representing tour operators in the Arctic and Antarctic respectively, have stated that they will not allow visitors to bring recreational Unmanned Aerial Vehicles (UAV) into the regions.

The International Association of Antarctic Tour Operators (IAATO) reached an agreement at its 26 Annual Meeting to forbid the use of the devices for the 2015-16 season. Similarly, the Association of Cruise Operators (AECO) announced today that they will be banning UAVs as well.

The popularity of the flight and camera systems have grown dramatically in the last several years due to the fact that the devices are generally lightweight and inexpensive. Many tourists use the devices to capture photographs and videos of the surrounding landscapes. However, the operation of UAVs may lead to increased noise pollution, disturbances to wildlife and may interfere with scientific work.

AECO said in an online news release that, “Travelers to pristine Arctic areas enjoy unique nature and wildlife experiences, remoteness and silence. AECO finds that some of these values may be at risk if the general use of UAVs is allowed to continue to increase in the Arctic.”

Additionally, any systems weighing it at under 22kg (55lbs) do not require any type of operator certification. This has raised concerns regarding potential pilot errors resulting in lost vehicles or damage to protected areas.

The ban on UAV extends only to use for recreational purposes. IAATO further stated that its ban will be reviewed next year to allow for changes in UAV regulations as well as potential technological advances.

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BSEE Releases Annual Report on Oil, Gas

By MarEx 2015-05-08 14:59:18

The Bureau of Safety and Environmental Enforcement released its first ever annual report on May 5, coinciding with a press conference at the 2015 Offshore Technology Conference.

The BSEE 2014 Annual Report summarizes oil and gas activities from the past years, presents comparisons to previous years, and describes BSEE’s analysis of trends. The Annual Report also outlines current BSEE initiatives and the agency’s plans to reduce risk in the coming year.

Some notable statistics from the report include the following:

– Total US gas production for 2014 came in at 1,332,457,785 MCF (thousand cubic feet) with over 95% coming from the Gulf of Mexico region. Alaska was the second largest producer of gas followed by the Pacific region.

– Total US oil production for 2014 was 528,348,277 barrels, of which 96% originated in the Gulf of Mexico. The Pacific region ranked second and Alaskan ranked third.

– The BSEE invested nearly $14 million in 30 new projects in Fiscal Year 2014 to develop and assess oil spill mitigation options.

– There was an increase in deepwater floating drilling rig activity from 40 (19 drill ships and 21 semisubmersibles) in 2013 to 52 (33 drill ships and 19 semisubmersibles in 2014). In addition, six new drill ships are expected to start work in the Gulf of Mexico in 2015.

– Over $5 million was collected from 53 cases from January 1, 2014, to December 31, 2014 for violations on the Outer Continental Shelf (OCS).

– The number of incidents occurring on the OCS saw an overall decline in the period of 2011-2014 compared to 2007-2010.

– Most OCS fatalities (44%) arose from explosions or fires.

– Major collisions on the OCS have been declining since 2011

– A majority of major incidents were determined to be caused, at least in part, by human performance factors, including communications, training, and equipment operation difficulties.

“Part of managing risk is monitoring the trends we are seeing offshore, and gauging the effectiveness of our approach,” said Director Salerno. “We are pleased to see that some of the most serious incidents offshore, including fatalities, are decreasing. But our work is far from done. For example, the Annual Report observes an increase in loss of well control events. That’s troubling, given the potential for such incidents to have grave consequences.”

The BSEE additionally announced the launch of the SafeOCS program. SafeOCS is a voluntary and completely confidential system, in which the Bureau of Transportation Statistics (BTS) will collect and analyze near-miss reports submitted by individual OCS workers, companies, and others. The aggregated data will be shared with the general public through the BTS website, and used to identify safety trends and increase understanding of offshore risk.

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Philippines Looking Towards More Competitive Shipping Market

By Kathryn Stone 2015-05-08 13:29:32

The Philippines is taking major steps to ease its over 50-year old cabotage laws in order to allow for a more competitive shipping market. The House bill passed this week is part of a series of legislation that will permit foreign cargo vessels to conduct coastal trade in the Philippines.

Currently, the Tariff and Custom Code of the Philippines limits trading rights within the country’s waters only to vessels of Philippine registry. According to Representative Mark Vilar, one of the bill’s authors, domestic shipping is extremely costly due to a limited amount of competition. Additionally, the lack of competition has put the market in the hands of a small number of companies, further driving up price points.

The House Bill termed HB 5610 was approved earlier this week and is set to become law when an accompanying bill in the Philippine Senate is approved. Easing the 57-year old cabotage law, the new bill will allow for the transport and co-loading of foreign cargos within Philippine waters by foreign vessels. Ships coming into the country will be able to transport container cargo to a destination port within the Philippines after it has cleared a port of entry. Also, the co-loading provision allows for foreign vessels to transport container cargo of another foreign vessel bound for the same port.

President of the Philippine Exporters Confederation, Sergio R. Ortiz-Luis Jr., stated earlier this year that it was likely three pieces of legislation aimed at curtailing the cabotage laws would pass by 2016.

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Diana teams with Wilhelmsen

NYSE-listed Diana Shipping and Wilhelmsen Ship Management have announced the creation of a new 50/50 joint venture, Diana Wilhelmsen Management (DWM).
DWM will be based in Limassol, Cyprus, and will commence operations by the end of June. It will begin operations by providing management services to
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