American Shipbuilding Association

American Shipbuilder

Volume 16, Issue 4                                                                       July-August 2010

House Approves Energy Legislation in Response to the Gulf Oil Spill

On July 30th the House of Representatives passed HR 3534, the Consolidated Land, Energy, and Aquatic Resources (CLEAR) Act. The bill responds to the oil spill crisis in the Gulf of Mexico and addresses safety and environmental issues associated with energy development and production. The legislation incorporates provisions from the Oil Spill Accountability and Environmental Protection Act of 2010 (HR 5629) which was passed by the House Transportation and Infrastructure Committee on July 1st.

The blowout on the mobile offshore drilling unit Deepwater Horizon on April 20th led to an explosion that left eleven crew members dead. Prior to the initial capping of the well on July 15th the U.S. government and independent scientists estimated that between 35,000 and 60,000 barrels of oil were flowing into the Gulf daily. The incident has caused extensive damage to marine and wildlife habitats, as well as the Gulf's fishing and tourism industries.

Section 727 of HR 3534 requires that future offshore energy facilities for oil and natural gas be built in the United States. This provision was sponsored by Representative Gene Taylor (D-MS). His original amendment, as adopted by the House Transportation and Infrastructure Committee, also extended the “made in America” requirement to renewable energy facilities such as wind and wave. The legislation was narrowed to oil and gas facilities to avoid House Committee jurisdictional issues that could have prevented the measure from being included in the CLEAR Act. Representative Taylor is committed to working in conference with the Senate to expand the provision to also cover offshore wind turbines and wave platforms.

The United States currently possesses the capability and capacity to build offshore energy facilities whether they are oil and gas drilling units, wind turbines, or wave energy production facilities. Without legislation requiring future offshore energy facilities to be built in this country, America will remain dependent on foreign countries for our energy needs.

House Bill Proposes Funding for 10 Naval Ships

The House Defense Appropriations Subcommittee completed work on its FY 2011 Defense Appropriations Bill on July 27th. The text of the legislation will not be released until the bill is considered by the full committee when Congress returns from the August recess. However, preliminary information indicates that $15.2 billion was recommended for the Navy’s Shipbuilding and Conversion account, and $1.5 billion for the National Defense Sealift Fund.

In the press release issued by Subcommittee Chairman Representative Norm Dicks (D-WA), “Reaching and maintaining the Navy’s stated requirement of 313 ships requires that 10 to 11 new ships are constructed each year. Over the last decade, the Navy has requested less than seven ships per year. The fiscal year 2011 request improved on this by requesting nine ships. The Committee goes one step further by providing funding for the nine ships requested by the President and adding funding for the construction of an additional Mobile Landing Platform, bringing the total ship count for fiscal year 2011 to the ten ships required to reach a fleet size of 313 ships.”

Senate Appropriates $5 Million in Support of Commercial Shipbuilding

On July 22nd, the Senate Appropriations Committee passed the FY 2011 Transportation Appropriations Bill (S 3644), providing $5 million in new loan guarantees for the Title XI Ship Loan Guarantee Program. The House Transportation Appropriations Subcommittee provided no funding for the Title XI program in its version of the legislation (HR 5850), and seeks to rescind $5.3 million from the amount appropriated for the program in FY 2010. Preliminary reports, however, indicate that the House Defense Appropriations Subcommittee has added $60 million in funding for Title XI loan guarantees as part of the National Defense Sealift Fund in the FY 2011 Defense Appropriations Bill. The Title XI program must be funded annually to restore stability to commercial shipbuilding, allowing ship owners to plan and budget their fleet recapitalization needs.

Administered by the Maritime Administration (MARAD), Title XI provides American ship owners with a federal guarantee of 87.5% of a commercial bank loan for 25 years. The program is essential to ensuring affordable finance rates at reasonable terms and conditions to allow ship owners to replace and expand their fleets of ships to meet the nation’s energy transportation needs, domestic commerce requirements, and to serve as a military auxiliary fleet in times of emergency.

With the continued stagnation of the credit market and low rates of manufacturing nationwide, the federal guarantee provided through Title XI is essential to recapitalizing America’s merchant fleet. In the report accompanying the Senate version of the FY 2011 Transportation Appropriations Bill, the Committee stressed “the affordable financing opportunities that these loans allow are critical to ensuring that ship owners can build ships in the United States.” The Senate also encourages MARAD to move quickly to approve applications for loan guarantees, which will provide work to American shipyards.

Senate Adds Funds for the Coast Guard National Security Cutter

The Senate Appropriations Committee passed its version of the FY 2011 Homeland Security Appropriations Bill (S 3607) on July 15th, providing $966 million for Coast Guard surface ships. This is an increase of $110 million over the Administration’s budget request.

The Senate bill provides $648 million for the National Security Cutter (NSC) which will complete funding of the 5th NSC and provide for the purchase of long-lead items for the 6th ship of the class. In the report accompanying the bill, the Senate expressed concern with the current manner in which the cutters are being acquired, noting that the 12 legacy cutters the NSC class is designed to replace are “frequently out of service due to unscheduled maintenance requirements… which is directly impacting the Coast Guard’s ability to perform its many missions.” Appropriators stressed that one NSC must be procured each year until all 8 have been purchased to ensure efficiency and to keep costs down, in addition to making certain these vessels enter the fleet as soon as possible.

China’s Military Rise Continues

On August 16th, the Department of Defense (DOD) released its annual report to Congress, titled “Military and Security Developments Involving the People’s Republic of China.” The report documents China’s continued and aggressive development of its military, in particular its naval fleet and shipbuilding industrial base. China’s growth into an economic power is providing that country with more resources devoted to building its military and supporting its domestic infrastructure. However, as with previous reports, DOD acknowledges that due to the lack of transparency, China’s long-term plans and intentions regarding its military remain unclear. Below are excerpts from the DOD report.

Shipbuilding Industry. China operates a vibrant and globally competitive shipbuilding industry. China is the second largest shipbuilder in the world. Shipyard expansion and modernization have increased China’s shipbuilding capacity and capability, generating benefits for all types of military projects, including: submarines; surface combatants; naval aviation, including aircraft carriers; and lift assets. China continues to rely on foreign suppliers for some propulsion units and, to a lesser degree, fire control systems, cruise missiles, ship-to-air missiles, torpedo systems, sensors, and other advanced electronics. Modular shipbuilding techniques will allow China to spread production across multiple locations, increasing both efficiency and output. China has already demonstrated an ability to surge submarine and amphibious production.

You Can Make A Difference

Well Said!

“Control of the seas can mean peace. Control of the seas can mean victory. The United States must control the seas if it is to protect your security…”

1963

American Shipbuilder

Volume 16, Issue 3                                                                       May-June 2010

Senator Thad Cochran Receives Herbert H. Bateman Award

Honored for consistent leadership in support of a strong shipbuilding industrial base, Senator Thad Cochran (R-MS) was presented with the American Shipbuilding Association’s Herbert H. Bateman Award during a ceremony held on June 23 rd. The Bateman Award is the shipbuilding industry’s highest honor.

“Thad Cochran, throughout his 38 years of service in the U.S. House of Representatives and in the U.S. Senate, has been a tireless advocate for a stronger shipbuilding industry and our Nation’s sea services. He has consistently increased shipbuilding budgets to fund more naval ships to meet national security requirements. He has provided funding to recapitalize the aging fleet of Coast Guard cutters for homeland security, and has promoted commercial shipbuilding in the United States. He is also a tremendous supporter of the Jones Act, which requires ships transporting cargo between U.S. ports to be American-built, -owned, and –crewed,” said ASA President, Cynthia Brown.

“His long and impressive record in support of a larger Navy, Coast Guard, and merchant fleet, and the supporting shipbuilding industry has made him a very deserving recipient of the Herbert H. Bateman Award,” Brown said.

The Herbert H. Bateman Award was established by the American Shipbuilding Association in 2000. This award is given annually to an individual in the Executive Branch, Legislative Branch, or industry who has demonstrated years of consistent, outstanding, and inspirational leadership in fighting for a stronger shipbuilding industry. Representative Herbert H. Bateman (R-VA), the award’s namesake who served the First District of Virginia from 1981-2000, demonstrated these qualities throughout his tenure in the U.S. House of Representatives. Previous recipients of the Herbert H. Bateman award include: Representative Herbert H. Bateman (R-VA); Senator Olympia Snowe (R-ME); Representative Gene Taylor (D-MS); Senator Ted Stevens (R-AK); Representative Duncan Hunter, Sr. (R-CA); Senator Trent Lott (R-MS); Representative Jo Ann Davis (R-VA), Senator Susan Collins (R-ME), and Representative John P. Murtha (D-PA) and Senator Jack Reed (D-RI).

House and Senate Authorize FY 2011 Shipbuilding Budget Request

On May 28 th the House of Representatives passed its version of the FY 2011 National Defense Authorization Act (HR 5136). The Senate Armed Services Committee completed its version of the bill (S 3454) on the same day. Both bills authorize the Administration’s budget request of $13.9 billion for nine naval ships. The Committees approved the Administration’s request for two Virginia-class attack submarines; two DDG-51 multi-mission destroyers; one LHA amphibious assault ship; one mobile landing platform; two littoral combat ships; and one joint high speed vessel.

In the reports accompanying the respective House and Senate versions of the legislation, both chambers expressed concern in sustaining two surface combatant shipyards with the Navy’s acquisition strategy of buying three DDG-51 multi-mission destroyers every two years. The Senate report referenced previous studies conducted by the Navy, which concluded that the surface combatant industrial base “can only be effectively sustained if shipyards were building the equivalent of three DDG-51 destroyers per year, with additional work…”

In the report accompanying its bill, the Senate Armed Services Committee distinguished “the specialized shipbuilding industrial base for large surface combatants, amphibious ships, Navy auxiliary ships and littoral vessels as a critical component of national security and expects the Department of Defense to appropriately sustain this industrial base.”

In support of commercial shipbuilding, the House bill authorizes $60 million for the Title XI ship loan guarantee program administered under the Maritime Administration of the Department of Transportation.

Commandant of the Marine Corps Meets with the Congressional Shipbuilding Caucus

On June 16 th the Congressional Shipbuilding Caucus, co-chaired by Representatives Gene Taylor (D-MS) and Rob Wittman (R-VA), hosted a meeting with the Commandant of the Marine Corps General James T. Conway to discuss the Marine Corps’ ship force structure needs, emerging global threats, and the U.S. shipbuilding industry. Other Members of the Caucus in attendance were Representatives Todd Akin (R-MO), Rodney Alexander (R-LA), Jason Altmire (D-PA), Joe Courtney (D-CT), Susan Davis (D-CA), Darrell Issa (R-CA), Mike McIntyre (D-NC), Tom Perriello (D-VA), Bobby Scott (D-VA), and Joe Wilson (R-SC).

In his opening remarks, General Conway highlighted the Marine Corps accomplishments in the wars in Iraq and Afghanistan, and its overwhelming humanitarian response following the earthquake in Haiti. He emphasized that in order for the Marine Corps to fulfill its missions and respond to existing and emerging threats, the Nation must maintain a fleet of 38 amphibious ships. He cautioned that any number below 33 vessels would become “untenable”, and the risk to the Marine Corps and America’s security interests would be too great. Noting that the capability of the Marine Corps’ fleet remains in high demand around the world, the Commandant stressed that the “value of the amphibious fleet cannot be questioned.”

The General said that America’s naval capability is often “taken for granted”, and that it is a struggle for the Navy to ensure adequate funding for all its platforms. The General noted that the Navy, which is responsible for purchasing the vessels for the Marine Corps, has competing priorities. He said funding for aircraft carriers, submarines, and surface ships are higher on the Navy’s priority list than amphibious ships. In order to elevate the importance of maintaining a strong amphibious fleet, the Marine Corps continues to emphasize the flexibility of the amphibious platforms and their contribution to forcible entry and maintaining a presence offshore. In response to a question on how the Marine Corps approaches its ship requirements with the Navy, the General said that his approach has been to emphasize the number of ships it needs rather than a particular dollar amount to give the Navy flexibility in buying amphibious ships.

The General said that whenever shipbuilding is addressed, that the Navy and Marine Corps always take into consideration the industrial base and how the work is distributed among the Nation’s shipyards. According to him, the Navy, Marine Corps, and shipbuilding industrial base together form a vital component of America’s national defense, and “that capability must not be allowed to dwindle.”

Senators Request $60M for the Title XI Program

Senators Mary Landrieu (D-LA), Roger Wicker (R-MS), and nine of their colleagues sponsored a letter to the Senate Transportation Appropriations Subcommittee in support of appropriating $60 million for new Title XI ship loan guarantees.

Administered by the Maritime Administration, Title XI provides small and medium sized U.S. ship owners with a federal guarantee of 87.5% of a commercial bank loan over 25 years. With America’s commercial fleet of ships rapidly approaching retirement age, the affordable financing provided by Title XI remains vital to ensuring that ship owners are able to place orders for new ships in America’s shipyards. Sixty million dollars, at a minimum, is needed annually to satisfy the demand for commercial ship construction.

The Maritime Administration has seen a surge of applications for financing or refinancing of ship construction projects in recent years. The influx of applications underscores the need for consistent funding of the Title XI program to assist American ship owners. Funding of the program will stimulate job growth and stability. Once an application for Title XI financing is approved, the ship construction order is immediately placed in a shipyard, instantly creating and sustaining jobs in the shipyard and supplier base. Title XI is a proven wise investment of taxpayer dollars. An appropriation of $60 million in FY 2011 will finance up to $1.2 billion in new ship construction, and it will create and sustain roughly 13,000 shipyard jobs and tens of thousands more jobs in the supplier base.

In addition to Senators Landrieu and Wicker, the following Senators signed the letter in support: Senators Christopher Dodd (D-CT), Joe Lieberman (I-CT), Jack Reed (D-RI), Olympia Snowe (R-ME), David Vitter (R-LA), Mark Warner (D-VA), Jim Webb (D-VA), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR).

Rep. Duncan Hunter Warns of Cuts to National Defense

In the June 14 th edition of Defense News, Representative Duncan Hunter (R-CA) wrote an op-ed on the dangers of cutting U.S. defense spending when America must recapitalize its armed forces to meet threats from emerging peer competitors. Following are excerpts from the article:

“There is no shortage of threats facing America today or emerging on the horizon. In Afghanistan, our military is engaging a dangerous enemy while global terrorism, fueled by radical ideology, will take more than fire power to defeat…All the while, Iran continues its march toward acquiring nuclear weapons, North Korea continually provokes its neighbors, and China is arming itself faster than any other country in the world. Each of these threats is unique and presents its own set of challenges, which is why America’s armed forces must be prepared on all fronts.”

“Despite the longevity of most military equipment, the resources that originated during the Cold War are growing older, becoming increasingly unreliable and affecting core security capability, including the ability to project power worldwide… Nowhere is this more evident than with an aging U.S. naval fleet… a point missed by Defense Secretary Robert Gates during a recent critique of the annual defense budget and our national security funding priorities.”

“The Navy faces numerous obstacles to its 30-year shipbuilding plan… Meanwhile, China’s trajectories for surface ships, submarines, and fighter aircraft are steadily increasing. Other advancements by Iran and North Korea to acquire nuclear capability have been unwisely met with billions of dollars in cuts to our missile defense budget.”

“…Strengthening national defense must remain among our top funding priorities. New security threats will continually emerge, some far more serious than others, making it even more necessary that we are prepared to confront any situation that arises with a fighting force that is second to none.”

Well Said!

“Naval power is the natural defense of the United States.”

President-elect John Adams

1796

Volume 16, Issue 2                                                                       March-April 2010

National Shipbuilding Budget Policy Act Introduced

On April 15 th, Representative Rob Wittman (R-VA) introduced legislation in support of making recapitalization of America’s Navy and commercial fleets a national priority. The National Shipbuilding Budget Policy Act (HR 5035) calls for funding naval shipbuilding at $20 billion a year from fiscal year 2011 through fiscal year 2015. The legislation also authorizes $60 million annually for the Title XI Ship Loan Guarantee Program to assist U.S. ship owners in rebuilding America’s commercial fleet.

Congressman Wittman authored this legislation in response to a declining fleet of naval and commercial ships to meet America’s security and economic interests.

Today’s naval fleet is at a 93-year low of 286 ships. According to the Navy’s report submitted to Congress in February regarding its annual long-range ship construction plans, the Navy continues to envision a plan for a baseline battle force fleet of 313 ships. However, the Navy report states that future year ship construction budgets will average no more than $15.9 billion annually (in FY 2010 dollars). Representative Wittman issued a press release stating that “unless new ship construction budgets are increased and sustained above the current projected levels, the fleet will continue to shrink and ships will continue to be acquired inefficiently. We’re already well behind in funding for maintenances and acquisition and, we can’t afford inefficiencies in these times of tighter budgets.”

America must also invest in its commercial fleet of ships. Loan guarantees administered under the Title XI Loan Guarantee Program will provide U.S. ship owners with access to affordable financing to recapitalize and expand their fleets to meet America’s energy transportation needs, domestic commerce requirements, and to serve as a military auxiliary fleet in times of emergency. With the tightening of the credit market and hesitancy of lenders to agree to large commercial loans, the federal guarantee provided through Title XI has become even more important to rebuilding America’s transportation infrastructure. An estimated $12 billion is needed to rebuild this country’s commercial fleet. Annual appropriations of $60 million would leverage $1.2 billion in new ship construction each year.

Making a concerted investment in America’s sea services a national priority will create and sustain hundreds of thousands of highly skilled jobs in all fifty states. Predictable and stable budgets will ensure steady rates of ship construction, resulting in cost savings to the taxpayer and ships for America’s national and economic security.

Representative Wittman is the Co-Chair of the Congressional Shipbuilding Caucus and is a member of the House Armed Services Seapower and Expeditionary Forces Subcommittee. HR 5035 has been referred to the House Armed Services Committee for further consideration.

ASA Legislative Priorities Announced

In response to inquiries regarding the American Shipbuilding Association’s ( ASA) legislative priorities for fiscal year 2011, Association President Cynthia L. Brown stated that ASA would work to encourage Congress to:

• Increase the Navy’s shipbuilding budget;
• Appropriate $60 million for the Title XI Ship Loan Guarantee Program;
• End the de facto purchase of foreign-built ships by the Department of Defense; and
• Develop the Marine Highway to expand the shipment of cargo domestically by sea in order to reduce congestion on highways.

Nuclear Posture Review Reaffirms Importance of Maintaining Navy Capabilities

The Department of Defense, in the Nuclear Posture Review (NPR) released on April 6 th, stressed the importance of the U.S. maintaining its strategic missile capability and the vital role naval ships play in maintaining America’s ability to deter nuclear attacks. Particular emphasis was placed on the importance of the country’s ballistic missile submarine (SSBN) force. According to the NPR, “ensuring a survivable U.S. response force requires continuous at-sea deployment of SSBNs in both the Atlantic and Pacific oceans, as well as the ability to surge additional submarines in crisis.”

The U.S. currently has fourteen nuclear capable Ohio class SSBNs. The first Ohio class retirement is planned for 2027. In order to maintain America’s at-sea presence the country must continue to develop the follow-on to the Ohio class submarine. According to the NPR, “Today, there appears to be no credible near or mid-term threats to the survivability of U.S. SSBNs…However, given the stakes involved, the Department of Defense will continue a robust SSBN Security Program that aims to anticipate potential threats and develop appropriate countermeasures to protect current and future SSBNs.” Given the time involved in designing, building, and testing new submarines, the NPR references that the Secretary of Defense has directed the Navy to “begin technology development of an SSBN replacement.”

The Ballistic Missile Defense Review (BMDR) issued by the Department of Defense in February stated that in addition to ballistic missile submarines, surface ships will play an integral role in America’s missile defense strategy. In response to the rapidly expanding regional missile threat, the BMDR noted that the Administration is taking steps to upgrade more Navy ships to incorporate the Aegis ballistic missile defense capability.

Secretary of the Navy Meets with the Congressional Shipbuilding Caucus  

The Congressional Shipbuilding Caucus, co-chaired by Representatives Gene Taylor (D-MS) and Rob Wittman (R-VA), hosted a meeting with Secretary of the Navy Ray Mabus on March 18 th to discuss the Navy’s fiscal year 2011 budget request and shipbuilding plan. Other Members of the Caucus in attendance were Representatives Roscoe Bartlett (R-MD), Travis Childers (D-MS), Joe Courtney (D-CT), Susan Davis (D-CA), Gregg Harper (R-MS), and Steve Scalise (R-LA). Distinguished guests included Commandant of the Coast Guard Admiral Thad Allen; Lieutenant General George J. Flynn, Deputy Commandant of the Marine Corps for Combat Development and Integration; Brigadier General Timothy C. Hanifen, Deputy Commanding General, Marine Corps Combat Development Command; and Brigadier General Richard L. Simcock, Legislative Assistant to the Commandant of the Marine Corps.

In his opening remarks, Secretary Mabus characterized the Navy’s shipbuilding plan as “realistic,” with the future years defense plan balancing how much ships will cost and how much the Navy could budget for new ships. The Secretary stated that with the procurement of an average of ten ships a year in the next five years, the fleet will be on a path of growth up until the mid 2020’s. However, once procurement for of the replacement of the Ohio class of ballistic missile submarines (SSBN) starts, it will place extreme pressure on the rest of the shipbuilding budget and reduce the amount available for the procurement of other ship classes by half until that program is complete. “We need to look at the next five to ten years to have an impact,” said Mabus, “past 2020 the plan becomes notional since circumstances will cause the fleet numbers to change. We need to balance the future years in terms of missions, budgets, and the industrial base. We need to put in [the budget] what the Navy thinks it can afford and what we need to do our job.”

Secretary Mabus stated the need for the U.S. to maintain a “global fleet” capable of reaching every part of the world. He praised the U.S. Navy’s capability to engage in conventional and irregular warfare, partner with navies of other countries to build cooperative relationships, and provide humanitarian assistance and disaster relief. The Secretary applauded the Navy and Marine Corps recent response to the Haiti earthquake. With the port destroyed and the airport congested, U.S. Marines were able to get ashore and begin delivering aid to the Haitians and airlifting quake victims. The arrival of the naval ships, including the aircraft carrier USS Carl Vinson and USS Bataan Amphibious Ready Group, provided critical platforms in the days immediately following the earthquake, and the Ready Group remains on station in the waters off Haiti providing continued humanitarian relief and support. The Secretary stressed that America must continue to have the ability to “project force, discourage peer competitors, and build relationships with other countries to deter aggression. American cannot do without its Navy.”

Regarding the shipbuilding industrial base, Secretary Mabus praised the businesses and the highly skilled men and women who build the nation’s fleet. The Secretary noted that if the industrial base is not protected, the unique and specialized skills will be lost and would be “difficult to get back, if ever.” He described the Navy and shipbuilding industry’s relationship as a partnership, stating that while the industry has the responsibility to invest in its facilities and train its workers, the Navy has the responsibility to provide certainty as to the type of ships it wants and when the Navy wants them.

Established in January 2005, the Congressional Shipbuilding Caucus seeks to educate lawmakers about the U.S. shipbuilding industry and works for the enactment of budgets and policies to rebuild America’s sea services and shipbuilding industrial base. The Caucus currently numbers 114 members of the House of Representatives. It is one of the largest and most proactive caucuses in the House.

New Partners

The American Shipbuilding Association welcomes the following new member companies:

Marmetal Industries, LLC  

A leading manufacturer, supplier and distributor of metal products, Marmetal Industries is headquartered in Horsham, Pennsylvania.

Pacific Ship Repair & Fabrication, Inc.

With locations in San Diego, California, and Port Orchard, Washington, Pacific Ship manufactures structural and ballistic doors, hatches, and scuttles; manholes; ladders; and deck fittings.

Potter Electric, Inc.

Potter Electric of National City, California, is a distributor of marine electrical supplies and components.

Sales Systems Limited – Fastener Division

A supplier of industrial fasteners, Sales Systems Limited, is located in Portsmouth, VA.

SSS Clutch Company, Inc.

Located in New Castle, Delaware, SSS Clutch Company is a manufacturer of clutches for marine propulsion.

Well Said!

“For in this modern world, the instruments of warfare are not solely for waging war.

Far more importantly, they are the means for controlling peace.”

Admiral Arleigh Burke

1961