Ingalls Shipbuilding Signs Contract to Build
Largest Cruise Ships in America — Ever
Senate Majority Leader Trent Lott (R-MS), Senator Daniel Inouye (D-HI), Senator Thad Cochran (R-MS), Representative Gene Taylor (D-MS), Representative Neil Abercrombie (D-HI), along with Secretary of the Navy Richard Danzig and Maritime Administrator Clyde Hart joined Ingalls Shipbuilding and American Classic Voyages (AMCV) on March 9, 1999 to observe the signing of a contract to build two large oceangoing cruise ships in the United States – the first in forty years. This contract calls for $880 million to design and construct two 1,900 passenger ships for the Hawaii island trades, with options for up to four more vessels. This undertaking, named Project America, is the result of legislation sponsored by Senator Inouye and enacted as part of the FY’98 Department of Defense Appropriations Act.
Congressional leaders and members of the Administration reinforced the necessity of the Passenger Vessel Services Act (PSA), the Jones Act, and the Title XI Ship Loan Guarantee Program to U.S. national security and to sustaining the defense shipbuilding industrial base of this country. This project will benefit all aspects of the American economy. It will rejuvenate cruise ship construction in the United States and create over 5,000 shipyard, seagoing, and shore-side jobs. Commercial construction of vessels for the PSA and the Jones Act will allow U.S. shipbuilders to continue to employ their highly skilled workforce, reduce the cost of building ships for the U.S. Navy, and sustain the industrial base to meet national security requirements. Senator Lott proclaimed, "I’m very proud that Americans will once again be constructing cruise ships. Commercial construction in U.S. shipyards helps to sustain the shipbuilding industrial base that is critical to national security." Senator Inouye added, "The construction of these cruise ships, with nearly $1 billion in private capital, will make U.S. shipyards more competitive internationally and will promote the U.S.-flag cruise industry."
Secretary Danzig said the Navy is a strong supporter of commercial shipbuilding in U.S. shipyards and anticipates that this project will save the Navy millions of dollars by reducing shipyard overhead and helping to sustain the shipbuilding industrial base. Administrator Hart, who oversees the Title XI Ship Loan Guarantee Program in which AMCV has sought financing, also stressed the importance of sustaining the core shipbuilding industrial base.
Cynthia Brown, President of the American Shipbuilding Association (ASA), stated that "if the OECD Shipbuilding Trade Agreement had been implemented by the U.S. Congress, Project America would never have come to be." Preservation of the Passenger Vessel Services Act, the Jones Act, and favorable Title XI loan guarantees for ships built for these trades is absolutely essential to U.S. shipyards building commercial ships. The OECD agreement strikes at the heart of these laws.
Responding to questions from Congressmen Herbert Bateman (R-VA) and Tom Allen (D-ME) at a House Armed Services Hearing, Jerry St. Pe’, Chairman of the Board of ASA, claimed that the OECD agreement would have precluded Ingalls Shipbuilding from winning the contract for the cruise ships and that the Association opposes its implementation because of its devastating impact on the defense shipbuilding industrial base.
Transportation Subcommittees to Examine OPA 90
Upon the 10-year anniversary of the catastrophic Exxon-Valdez oil spill, Representatives Rodney P. Frelinghuysen (R-NJ) and Frank LoBiondo (R-NJ) continue to lead in preserving the integrity of the Oil Pollution Act of 1990 (OPA 90). Concerned that vessel owners and operators have been seeking and gaining waivers to the double hull provisions of the OPA 90 law, Representatives Frelinghuysen and LoBiondo have requested a General Accounting Office (GAO) study to determine the level of owner/operator compliance and status of tanker replacement. Coinciding with this request and the 10th anniversary of the Exxon Valdez catastrophe, the Transportation Subcommittees on Coast Guard and Maritime Transportation and Water Resources and the Environment plan to hold a hearing to review the performance of OPA 90 on March 24, 1999.
OPA 90 established an explicit and liberal phase-out schedule for all existing single hull tankers to be phased out of service, and requires that all tankers trading in U.S. waters be double hulled by the year 2015. 10 years since enactment of the law, only 11% of the Jones Act tanker fleet has been replaced with double hulls, and not one additional double hulled tanker has entered the Alaskan oil transport trade. This is well below the orderly transition envisioned by Congress. As a matter of fact, the Jones Act tanker fleet, which today averages 23 years of age, is older than the fleet 10 years ago – with ships as old as fifty years. Tankers are normally scrapped internationally when they reach 20 years.
Obviously Representatives Frelinghuysen and LoBiondo have reason to be concerned. Companies are placing the environment at greater risk by delaying the replacement of their old, unsafe single hulls with environmentally safe double-hulled ships. Their tactics include seeking waivers from the Coast Guard that allow the reconfiguration of their vessels in order to extend their OPA 90 phase-out date. Such exceptions place the marine environment at greater risk of oil spills and should be stopped.
To their credit, American Heavy Lift, ARCO, Hvide Marine, and Mobile, are the exceptions, and have either taken delivery or placed orders for double-hulled tankers. Unfortunately, these responsible owners are being economically penalized because they are "playing by the rules," while others are seeking ways to circumvent the OPA 90 phase-out schedule in order to offer cheaper rates to the detriment of America’s marine environment.
Oil spills continue to occur throughout the world. Since 1989, over 940 million gallons of oil have spilled, or the equivalent of over 85 Exxon Valdez tragedies. Most of these spills have come from single hulled tankers. As long as old, single-hulled tankers remain in U.S. coastal waters, the chances of another catastrophic environmental disaster like the Exxon Valdez continue to increase. In contrast, incidents involving double-hulled tankers have spilled little or no oil. Double hulls are proven oil spill preventers. It is long overdue for oil companies to place their orders for double-hulled vessels.
ASA Chairman Testifies on State of Naval Shipbuilding
Jerry St. Pe’, Chairman of the Board of ASA, testified on March 9th before the House Armed Services Subcommittee on Military Procurement chaired and ranked by Representatives Duncan Hunter (R-CA) and Norman Sisisky (D-VA), respectively, on the state of naval ship construction.
According to St. Pe’, the U.S. Navy is currently ordering the lowest number of ships since the Great Depression. In response to this low procurement rate, the six major shipbuilders left in this country that build capital ships for the U.S. Navy have been forced to slash their employment roles by 33 percent. Where once there were 1.2 million Americans employed in U.S. shipyards, currently there are only 55,000 highly skilled workers employed in ASA shipyards. "The nation cannot afford to lose another major shipbuilder, nor the essential core of skilled labor, and still meet the sea power requirements of the nation today and tomorrow," said St. Pe’.
At the same time, shipyards have made significant investments in technologies, facilities, and workforce training in order to reduce overhead costs. "Our achievements in cutting costs, while remaining on the cutting edge of technology, are unparalleled anywhere in the defense industry," stated St. Pe’. "In spite of our ongoing achievements in reducing costs while building the most technologically advanced ships in the world, the benefits will not be fully realized until stable, high rates of ship production are achieved."
The Navy’s current fleet is at 320 ships – the smallest fleet since the beginning of World War I in 1917. The Chief of Naval Operations has publicly stated that unless the Navy’s shipbuilding budget is immediately increased, the service risks falling below the minimum of 300 ships required to support the Navy’s missions and operations of today. "But if you are going to draw the line in the sand at a 300-ship Navy, the time to do that has already passed," said St. Pe’. "The fleet will fall below 300-ships, the question is how long will you allow it to remain below that level," he asked. According to St. Pe’, the nation must act today to increase the Navy’s shipbuilding rates to 10 to 12 ships per year to stabilize a 300-ship fleet. The fiscal year 2000 budget requests only 6 ships, or $6.7 billion – almost half of the average annual budget of $12 billion necessary to fund a 300-ship Navy.
During a recent field hearing in Naples before the House Armed Services Subcommittee on Readiness, VADM Dan Murphy, USN, tragically stated, "The heart of our naval power in the European Theater is the combined fighting capability of a carrier battle group and amphibious ready group. As recently as December the Secretary of Defense and Chairman, Joint Chiefs of Staff revalidated the importance of maintaining this core capability continuously on Station in the Mediterranean. Yet, the numbers do not support the requirement. Later this year we will likely be without either."
According to St. Pe’, "the most important cost saver in ship production is stability…. Higher rates of ship production result in cost savings, and stable annual budgets result in stable shipbuilding production rates." St. Pe’ also emphasized that commercial business practices in buying and financing ships, such as incremental funding and multi-year procurement contracting for combatant ships, and long-term lease authority for noncombatant ships provide stable budgets and stable budgets equate to stable production.
"The nation faces a crisis that requires action now. A bare bones minimum of 300-ships cannot be sustained with a build rate of six to eight ships. It requires 10 to 12. It requires increased budgets," concluded St. Pe’.
Industry News
Wyden, DeFazio Sponsor Legislation to Crack Down on Foreign-Built, Foreign-Flagged Vessel
Senator Joseph Wyden (D-OR) recently introduce S.498, the Coastal Protection and Vessel Control Improvements Act, in response to the oil spill from the foreign-built, foreign-flagged vessel, New Carissa, in Coos Bay Oregon. The bill would give the Coast Guard greater discretion in barring vessels from U.S. waters if there is a safety concern by requiring both foreign and domestic vessels to notify the Coast Guard of their intent to enter U.S. territorial waters. Representative Peter DeFazio (D-OR) sponsored companion legislation in the House that was adopted as an amendment to the Coast Guard Reauthorization bill in subcommittee.
BIW Signs Contract With Spanish Shipyard
Bath Iron Works Corporation (BIW), Bath, ME has recently signed a contract to provide technical support services to the Spanish shipyards Espresa Nacional Bazan (E.N. Bazan), which is constructing the Spanish Navy’s newest class of surface combatants, the F-100 AEGIS Frigate, at Bazan’s Ferrol shipyard. The AEGIS combat system is produced by Lockheed Martin Government Electronics Systems in Moorestown, New Jersey. BIW will provide support both in Spain and in the U.S. over the next several years to assist E.N. Bazan with the integration of the AEGIS combat system on the F-100 ship class during their construction.
Well Said!
"300 is the absolute minimum we can live with, and we think it will be pretty awful."
ADM Donald Pilling, USN
February 25, 1999
American Sea Power in the 21st Century Forum
On the bare bones minimum Sea Power fleet
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