Congress Sends Defense Authorization Conference Report to President
The House and Senate passed S.1059, the FY’00 National Defense Conference Report, on 15 September and 22 September by a margin of 375 to 45 and 93 to 5, respectively. The bill authorizes just over $7 billion for Navy shipbuilding. Congressman Norman Sisisky (D-VA) and Senator Olympia Snowe (R-ME) highlighted during floor debate the improvements made by the conferees to the Navy’s shipbuilding account.
The Administration requested funding for only six naval ships in its FY’00 budget. This low rate of naval ship production will result in a naval fleet of only 200 ships, well below the bare minimum requirement of 300-ships to meet the nation’s military strategy. Recognizing this crisis, S. 1059 improves on the Administration’s budget by authorizing $375 million above the request to begin construction of the LHD-8 amphibious assault ship in fiscal year 2000 rather than 2005. Beginning construction in FY’00 will avoid a break in production of this ship class and will result in almost $1 billion in savings to the taxpayer.
The conference report also authorizes $80 million to begin construction of a 20th large, medium speed roll-on/roll-off (LMSR) to meet growing demands for military sealift, and extends the cost-saving Multi-Year Procurement contract of the DDG-51 class of destroyers to the six ships to be procured in fiscal years 2002 and 2003.
Additionally, Section 1014 of S. 1059 grants the Navy long-term lease authority of 20-years or more for the services of newly built non-combatant ships. This acquisition approach will enable the Department of Defense to afford sealift and logistic ships for the 21st Century. The conference report also expands the National Defense Features program to give DOD the authority to pay up-front the life cycle cost of designing, constructing, maintaining, and operating defense features built into commercial ships. These cost-effective approaches to acquiring the services of auxiliary ships will help ensure that scarce acquisition dollars are dedicated to procuring the major warships that comprise a 300-ship Navy.
Finally, Section 1013 of S. 1059 directs DOD to submit a comprehensive report to Congress on the long-range shipbuilding plan to meet naval ship force structure requirements of our National Military Strategy. This report will clearly demonstrate that a 300-ship Navy cannot be sustained if the Navy’s shipbuilding plan is not increased to at least 10 ships per year.
ASA President Responds to an Ill-Informed WSJ Editorial
In response to an editorial in the WALL STREET JOURNAL criticizing Congress and theshipbuilding industry, ASA President, Cynthia L. Brown, penned the following letter to the editor:
"Your 31 August editorial "Lotts of Ships" reflects a false and ill-informed opinion of the American shipbuilding industry, the U.S. Congress, and the realities of "global" competition. Readers of the WALL STREET JOURNAL deserve better, and so does the shipbuilding industry in this country.
You state that American shipbuilders are "fat and happy" on military contracts. Nothing could be further from the truth. Since 1994, the U.S. Navy has procured only six ships per year. This is the lowest number since the depth of the Great Depression in 1932. Six ships a year cannot make an industry of six major shipbuilders fat — much less happy. If this industry gets any leaner there will be no shipbuilders left to build the sophisticated combatant ships that defend America and the Free World in places like Iraq, Africa, Kosovo, the Straits of Taiwan, China, North Korea, etc.
Rather than mis-representing the U.S. shipbuilding industry, the WALL STREET JOURNAL should be clamoring for Americans to wake-up and recognize that our many freedoms — including freedom of opinion and speech — are jeopardized when this Nation’s Navy is too weak to defend our principles against current and future adversaries.
Yes, U.S. shipbuilders once led the world in the construction of cruise ships. This market collapsed, however, not because of the shipbuilding industry, but because airplanes overtook ships as the travel mode of choice. The re-emergence of the cruise industry in the past twenty years is not because ships have returned as the preferred means of transportation in and of themselves, but rather as a vacation experience.
The reason the cruise ships departing U.S. ports for foreign ports were not built in the United States is that the governments of Europe subsidize as much as 50 percent of the cost of constructing such ships in their yards. What cruise company wouldn’t want a 50-percent discount on its capital investment?
And to avoid U.S. corporate income tax, these same cruise ships don’t fly the American flag. Their countries of registry do not tax the revenue earned from ships engaged in either the carriage of goods or passengers. Ironic isn’t it that over 90 percent of the revenue earned by these corporations comes from the American taxpayer — yet the American economy gets so little in return. Carnival Cruise Lines, as an example, reportedly earned $652 million in tax-free income last year by having its ships registered under a foreign flag.
Understandably, American ports, which are owned and supported by American tax dollars, would like to have more cruise ships calling at their docks — regardless of where they are built or registered. This increase in traffic would increase revenue for the ports, the local food service companies, and local tourism. These jobs are important. But they only tap the surface of a potentially tremendous economic boost that the U.S. economy could realize through expansion of the high-tech ship engineering and manufacturing sector that should rightfully serve this market.
American shipbuilders and American cruise companies pay American taxes; they account for thousands of highly skilled engineering, manufacturing and seagoing jobs, and; they offer Americans the safest cruise vacations because they build and operate their ships to the highest safety and environmental standards. Rather than lambasting American industry for abiding by U.S. laws, you should be asking why American industry is penalized for doing just that.
Instead, the WALL STREET JOURNAL suggests that Americans should just surrender the U.S. cruise market to tax evading companies who contract for the design and construction of their ships in foreign subsidized shipyards. What is worse, you criticize America’s elected Representatives and Senators for trying to do what’s right for all Americans. This unjust criticism only perpetuates cynicism in our elected leaders.
Lastly, let the record show that when Senator Inouye’s U.S.-Flag Cruise Ship Pilot Project legislation was proposed and adopted by the Members of the Senate and House Appropriations Committees, no American shipbuilder had been selected to build the cruise ships for American Classic Voyages. Ingalls Shipbuilding of Mississippi was awarded the contract to design/build two 1,900-passenger ships, with options for four additional ships, more than a year after the legislation was enacted, and following a fierce competition with Avondale Industries of Louisiana and National Steel and Shipbuilding Company of California.
As a result of Senator Inouye’s legislation, the largest cruise ships ever built in the United States will create thousands of highly skilled manufacturing jobs in 47 states. This contract marks America’s re-entry into the cruise ship market after a 40-year absence. And it is just the beginning of the creation of an "All American Cruise Ship Industry" — an industry built by Americans for Americans. I urge the WALL STREET JOURNAL to come up for air and join us in making this challenge a reality. After all, neither you, nor I, nor your readers will have the freedom to express our views if America’s shipbuilding industry — against tremendous odds — fails."
Alaskans Debate the Merits of the BP/ARCO Acquisition
Alaska Governor Tony Knowles, on 23 August and 20 September, publicly stated concerns over the potential monopolistic implications that would occur if the BP-ARCO acquisition were to result in BP controlling over 70 percent of Alaskan North Slope oil and over 80 percent of the available tanker capacity. He also stated that BP would have to honor the existing ARCO contract to build three new double hull tankers. He was silent, however, as to how many more new double hull tankers BP would have to commit to build as a condition of Alaska’s support for the BP-ARCO acquisition. This is an issue of concern among Alaskan environmental groups, which are advocating a need for BP to accelerate its replacement schedule for the aging fleet of single hull tankers that it uses in Alaskan waters.
The Oil Pollution Act of 1990 (OPA 90) requires all oil tankers trading in U.S. waters to be double-hulled by the year 2015, and establishes a liberal phase out schedule for single-hulled ships. BP currently uses a fleet of 11 ships – eight of which are single hulled and must be phased out of the Alaskan trade by law by 2006. Those eight single hulled ships represent a requirement for carrying capacity.
ARCO is currently building three state-of-the-art double-hulled tankers at Avondale Industries, New Orleans, LA. If the acquisition is approved, BP will be legally obligated to honor that ARCO contract. Until BP makes a definitive commitment in the form of a signed contract, the unresolved question for Alaska is, how will BP be able to carry all of the ARCO oil and the oil it is currently carrying in eight single hulled tankers in only three double-hulled ships?
Industry News
Three ASA Shipyards Awarded T-ADC(X) Contracts
Avondale Industries, New Orleans, LA; Ingalls Shipbuilding, Pascagoula, MS; and National Steel and Shipbuilding Company (NASSCO), San Diego, CA, have each been awarded a $1.5 million study contract for the first phase of the U.S. Navy’s new T-ADC(X) Auxiliary Dry Cargo ship. The T-ADC(X) class of combat logistics force ships is intended to replace the Navy’s aging dry stores and ammunition ships.
Avondale’s Bossier to Retire
On 28 September, Albert L. Bossier, Jr., President and Chief Executive Officer of Avondale Industries, Inc., announced his retirement effective 1 November. Bossier has been a leader in the shipbuilding industry for over 40 years, and the head of Avondale Industries for the past 21 years. Congratulations to Al Bossier for his tremendous contributions and years of dedicated service to this industry. We wish him well in his retirement.
Well Said!
"I’m always concerned about not building enough ships. Obviously, if you can’t build enough ships you’re not going to be able to maintain a Navy into the future. So, the more we can do to improve our shipbuilding program, the better I like it."
Vice Admiral Conrad Lautenbacher
Deputy Chief of Naval Operations (Resources, Warfare Requirements, and Assessments)
Inside the Navy
September 13, 1999
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