Thursday, February 3, 2011

FMC Commissioner Hopefuls Renominated by Obama

President Barack Obama has resubmitted to the US Senate the nomination of Port of Long Beach Harbor Commissioner Mario Cordero and the renomination of current FMC Commissioner Rebecca Dye as Commissioners at the Federal Maritime Commission.

President Obama included the two FMC nominations along with 80 other potential administration nominees for various positions in the government. The president first renominated Commissioner Dye for a third term as a Federal Maritime Commissioner, and announced the nomination of Cordero, in September 2010. This submission lapsed with the end of the previous Congressional session.

The FMC is an independent regulatory agency of the United States government charged with the administration of the regulatory provisions of federal shipping laws and responsible for the regulation of ocean-borne transportation in the foreign commerce of the US.

Commissioner Dye was first nominated to the five-seat FMC board in 2002 by President George W. Bush and confirmed by the United States Senate in November 2002. She was nominated to her second term, which expired on June 30, 2010, by President Bush in July 2005, and confirmed by the Senate later the same month.

Prior to joining the FMC, Commissioner Dye was Counsel to the Transportation and Infrastructure Committee of the US House of Representatives from 1995 until 2002.

“If confirmed by the Senate, I will be fair-minded and objective in executing the Commission’s statutory directives," Commissioner Dye said during confirmation testimony to the US Senate Committee on Commerce, Science, and Transportation in November 2010. "I will do all I can to guarantee that all entities regulated by the Commission are provided with a fair market environment in which to operate. I will also work to eliminate unfair shipping practices by foreign governments, and protect cruise ship passengers against undue financial risk.”

First time FMC nominee Cordero is an attorney currently serving his second six-year term as a Port of Long Beach harbor commissioner. The harbor commission sets policy and provides oversight for the operation and maintenance of the port. During his tenure on the port board, Cordero has been involved in the harbor commission's approval of numerous environmental remediation programs designed by port staff to cut harmful pollution generated by port activities.

“I am eager to put my experience to work on behalf of the Federal Maritime Commission," Cordero told the Senate Committee in November. "The Commission’s work is vital in assisting the economic recovery by facilitating international trade through the nation’s ports, as well as supporting increases in the efficiency and sustainability of shipping and port operations.”

Ironically, Cordero now faces appointment to a position setting national maritime policy while he has spent much of his tenure on the Long Beach port board as a staunch defender of local government rights superseding federal interstate commerce laws such as those administered by the FMC.

Dye and Cordero will have to testify again before the now Republican-led Senate Committee and if approved, then be approved by a vote of the full Senate.

Vigor Extends Tender Deadline for Todd Shipyards

A proposed $130 million purchase of Seattle's Todd Shipyards by Oregon-based Vigor Industries has hit some minor turbulence.

Shareholders of Todd had until January 28 to tender shares to Vigor for purchase at $22.27 each. However, under the terms of the agreement approved by the Todd board, Vigor needed to obtain a minimum of 67 percent of the outstanding shares before moving forward with the purchase.

By the expiration of the tender offer on Jan. 28, Vigor had amassed 2.9 million shares, or 50.7 percent of the outstanding shares. The firm has now extended the tender offer until February 4.

Vigor officials downplayed the situation as a show of reluctance on shareholders' part, saying instead that it was likely due to several large block shareholders hoping to get more money per share by waiting. However, as of Feb. 3, the Todd price per share was still slightly below the Vigor tender offer and has not risen above the $22.27 offered since Jan. 25.

If Vigor fails to reach the 67 percent minimum, the firm plans to call a vote of the shareholders.

Vigor plans to take Todd private if the deal is approved and combine the two firms.
The Todd board of directors unanimously approved the Vigor agreement in December 2010. Todd’s directors and officers and certain other stockholders who own an aggregate of approximately 15.3 percent of Todd’s outstanding stock also entered into agreements at the time pursuant to which they agreed to transfer their Todd shares to Vigor and to vote their shares in favor of a merger if a vote is taken.

Last month, Vigor obtained antitrust approval from the federal government to move forward with the Todd purchase.

Oakland Port Gets $5M to Electrify Three Busy Berths

The Port of Oakland has received $5 million from Bay Area air quality regulators to install ship-to-shore power systems at three frequently used berths.

Officials from the Bay Area Air Quality Management District hope that the funds, along with $3.9 million also handed out to four technology firms to provide electric vehicle charging infrastructure, will spur other metropolitan areas nationwide to move in a similar direction.

“Shore power is one of the most effective ways to reduce emissions from vessels at the Port of Oakland,” BAAQMD Executive Officer Jack Broadbent said. “These projects will significantly reduce pollution and improve air quality.”

Ship-to-shore power systems allow vessels calling at the port to plug into the landside power grid for electricity needed to keep ship systems operating while at berth. This allows the ships to turn off their diesel auxiliary engines that normally provide maintenance power while at dock. Running these auxiliary creates up to half of all the pollution that vessels generate per port visit.

Installation of the ship-to-shore systems will occur at three of the port's most frequented berths – one at the Hanjin Terminal and two at the Oakland International Container Terminal – which collectively see visits from around 500 vessels per year.
Officials at BAAQMD estimate that the ship-to-shore systems will eliminate 33 tons of ozone forming pollutants and particulate matter from Bay Area skies per year.

The ship-to-shore projects are being funded through the Air District’s Mobile Source Incentive Fund, which is collected from a $2 registration surcharge fee on vehicles registered with the Department of Motor Vehicles in the District’s jurisdiction.

According to the BAAQMD, an additional $20 million in funding is now available for shore power systems and cargo handling equipment projects through the BAAQMD Goods Movement Program. Applications are available online at: goods. Applications are due by March 15, and will be reviewed, evaluated and ranked by Air District staff.

EPA Seeks Public Comment on Review of California Goods Movement Regulations

The United States Environmental Protection Agency plans to review whether the California state air regulator properly adopted stringent emission rules on port and rail cargo handling equipment used within the state.

The California Air Resources Board approved the regulations back in December 2005. The rules require on-road cargo handling vehicles to be fitted with the "best available control technology" to reduce emissions. Off-road vehicles, such as mobile cranes or yard tractors, are also required to be fitted with the highest level of emissions control available.

Normally, federal air quality regulation supersedes state regulations under the Clean Air Act, but California is the only state to have a waiver from the EPA. The EPA is now seeking public comment to help the agency determine if the California rules comply with the federal Clean Air Act and whether California should require a new waiver to cover the 2005 rules.

The agency is accepting public comment through March 17, but has scheduled a hearing in Washington, D.C., on Feb. 17. The EPA said it would cancel the hearing if no interested party requests it by Feb. 7.

FIDLEY WATCH - Expertise

Chris Philips, Managing Editor

Contributing editor Hugh Ware (Other Shores, this issue, page 46) reports that at least one US Navy rear admiral believes in climate change. “We in the US Navy believe climate change is real. It’s going to have big impacts, especially in the Arctic, which is changing before our eyes,” says Rear Adm. David W. Titley, oceanographer and navigator of the US Navy.

For what it’s worth, the editor of Pacific Maritime Magazine, and its sister publication, Fishermen’s News, agrees. We also “believe” in climate change. Man’s participation in the process is still very much in question, and will be a subject of debate at least until the politics are removed from the issue and science can be applied. We feel the sun plays a fairly large role.

Although the issue is outside of their area of expertise, many in congress still “believe” in man-made climate change. These include 219 members of the House of Representatives, who perhaps also “believe” that man is making the sun shine hotter and the rain fall more (or less) and causing the polar ice to melt.

These people, mostly lawyers, have the power to make law in our country. It is our duty to elect the people we feel are best equipped for the job, but often we elect instead the representative who promises us the biggest piece of the pie. The results are predictable.

In 2006, when Dubai Ports World sought to purchase management contracts for some East Coast terminals, Congress got involved and demonstrated its vast ignorance of all things maritime. The unfounded outrage that followed finally convinced Dubai Ports World to take their money somewhere they were more appreciated.

When the Deepwater Horizon drilling rig caught fire and exploded, killing 11 workers and spewing up to 60,000 barrels per day in to the Gulf of Mexico, Congress again weighed in.

In early June, the Houston Chronicle (erroneously) reported, “The Jones Act, the maritime law that requires all goods be carried in US waters by US-flagged ships, has prevented Dutch ships with spill-fighting equipment from entering U.S. coastal areas.” Other media picked up the story and broadcast it nationwide.

In response to the concerns of many who believed that the Jones Act was somehow responsible, National Incident Commander Admiral Thad Allen, who had instructed the appropriate agencies to ensure any Jones Act waiver requests regarding the BP oil spill response receive accelerated processing, pointed out that none had been required for the 15 foreign-flagged vessels operating at the time in the Gulf of Mexico. Allen noted that a foreign flag vessel can conduct certain operations as part of the flotilla if it is an oil spill response vessel and meets the requirements of 46 USC § 55113.

Nevertheless, three days later, Senator Kay Bailey Hutchison (R,TX), Senator George LeMieux (R, FL), and Senator John Cornyn (R,TX), unnecessarily but to great fanfare introduced legislation that would temporarily allow foreign marine vessels to assist with the oil cleanup effort in the Gulf of Mexico.

“The Jones Act is currently preventing resources from being used in the monumental cleanup effort, and is hindering the ability of foreign vessels to assist Gulf communities in preventing oil from reaching their shores,” said Hutchison, erroneously. She wrongly continued, “The administration has failed to issue a waiver on the Jones Act, which is blockading foreign vessels from working with their American counterparts to remove the oil from the waters of the Gulf.”

Senator John McCain (R, AZ) chimed in: “The best course of action is to permanently repeal the Jones Act in order to boost the economy, saving consumers hundreds of millions of dollars,” he said. “I hope my colleagues will join me in this effort to repeal this unnecessary, antiquated legislation in order to spur job creation and promote free trade.”

There were many problems with the spill cleanup, but the Jones Act wasn’t one of them. While those familiar with the Jones Act already knew that, it was satisfying to see the non-partisan National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling confirm the fact. On January 11th, the commission released their report, “Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling”, prepared at the request of President Obama. The President had charged the Commission to determine the causes of the disaster, and to improve the country’s ability to respond to spills, and to recommend reforms to make offshore energy production safer.

The report states:
“News reports and politicians alleged that the federal government turned away foreign offers of assistance because of the Jones Act, a law preventing foreign vessels from participating in trade between US ports. While decisionmakers did decline to purchase some foreign equipment for operational reasons – for example, Dutch vessels that would have taken weeks to outfit and sail to the region, and a Taiwanese super-skimmer that was expensive and highly inefficient in the Gulf – they did not reject foreign ships because of Jones Act restrictions. These restrictions did not even come into play for the vast majority of vessels operating at the wellhead, because the Act does not block foreign vessels from loading and then unloading oil more than three miles off the coast. When the Act did apply, the National Incident Commander appears to have granted waivers and exemptions when requested.”

In the days since the report, Senators Hutchison, McCain, LeMieux and Cornyn have been uncharacteristically silent on the issue. Perhaps they have gone back to focusing on their area of expertise.

Chris Philips, Managing Editor

Tuesday, February 1, 2011

Alternate Fuels for Marine Propulsion Plants

By Louis Lemos

Commendable strides in the pursuit of alternative fuels and energy sources are being made, thanks mainly to private enterprise initiative and governmental endeavor, expressed by the US Department of Energy, to share information with interested members of the public. Meanwhile, public awareness of this progress is also assured by trade and consumer media reports on the topic of atmospheric pollution by exhaust emissions from ships. Proposed counter measures within the realm of feasibility and currently in use include legislation mandating that ships use low sulfur fuel within coastal waters such as Sulfur Emission Control Areas (SECA), or switching to shore power (cold ironing) while moored alongside the pier; increased use of Selective Catalytic Reduction (SCR) systems and electronically-controlled common rail fuel injection systems.

The overall effect of such measures has produced a significant drop in nitrous oxides, sulfur dioxides, hydrocarbons and particulate matter. The trend toward diesel-electric main propulsion plants involving medium speed engines of the trunk piston type, mainly for large passenger cruise liners, coastal ferries, research ships and some offshore support vessels, has also contributed significantly to the reduction of pollutant bearing exhaust emissions.

The difference in NOx emissions produced by diesel-electric plants can be as much as 20 percent lower than that of their straight-diesel-powered counter parts. This is attributable to the fact that the diesel engines in a diesel-electric propulsion plant, operate at a fairly constant speed, conducive to fairly stable combustion temperatures, maximum efficiency, optimum fuel economy and resultant uniformity of exhaust emissions with reduced pollutant content.

Cylinder Liner Lubrication
Currently, most large container ships, bulk carriers and super tankers are propelled by large slow speed, large bore diesel engines of the crosshead type. Many of them are now equipped with electronically controlled common rail fuel injection systems in addition to Selective Catalytic Reduction (SCR) systems of which there are several variations. Because of their immense size, these engines with cylinder bores ranging from 500 millimeters to 980 millimeters (19.68 inches to 38.58 inches) cannot rely on splash lubrication of the cylinder walls exclusively. For this purpose a separate cylinder liner lubrication method is employed using mechanical lubricators, independent of the main engine-driven lubrication system. The requirements for independently lubricating the cylinder liners of slow speed, large bore engines are to neutralize acids formed during combustion and thereby protect the cylinder liner from cold corrosion attack, to establish a reasonably stable oleous film between the cylinder liner and the piston rings and to preserve a degree of cleanliness of the cylinder liner surface and piston ring pack.

Low Sulfur Fuel Compatibility
It has been established that the requirement for continued reduction in allowable sulfur content of fuel, such as Low Sulfur Fuel (LSF), and Ultra-Low Sulfur Fuel (ULSF), adversely affects cylinder liner lubrication, particularly of the large-bore, slow-speed, main propulsion diesel engines. This is due to the use of a cylinder oil having a rather high Total Base Number (TBN), such as 70 TBN, that may result in excessive deposits on the pistons and scuffing of the cylinder liners. The severity of such adverse factors will vary in accordance with the degree of usage of LSF. For ships operating on trans-oceanic routes, wherein the majority of their running time is outside of the above-mentioned coastal areas, the use of conventional diesel fuels with relatively-higher sulfur content will be permissible. However, upon approaching such regulated areas it will become mandatory to switch to LSF for the duration of passage and/or presence therein. Conversely, ships engaged mainly in coastal trade on a full-time basis, and burning LSF, will require the use of a cylinder oil of a correspondingly lower Total Base Number such as 40 TBN. Given that the acidity of diesel fuel is proportional to the level of sulfur content, the Total Base number of the lubricant is relative to the oil’s ability to neutralize the acid. This is why the Total Base Number of an oil is also considered to be its Neutralization Value, and can be expressed as a measure of the acidity or alkalinity of the oil, whichever characteristic it possesses, and is also called the Acidity Number. A significant advantage of these mechanical lubricators is that, based on the known sulfur value of the fuel, the corresponding feed rate of the cylinder lubricant can be adjusted accordingly, for maximum effect. Should the need arise to change from the 70 TBN cylinder oil, commonly used for high sulfur fuels, to the lower 40 TBN cylinder oil, for use with low sulfur fuel, it is advisable to contact the lubricant supplier to determine the recommended feed rate of the lubricant, in order to ensure that the appropriate degree of cylinder liner lubrication is maintained.

The Cost of Compliance
While the enforcement of restricted exhaust emissions is of prime concern to ship-owners, so too is the difference in cost between conventional heavy fuel (380 centistokes) averaging 2.5% Sulfur Oxide (SOx), currently available for about $480.00 per ton, versus Marine diesel Oil (MDO) rated at less than 0.1% SOx, reportedly, around $695.00 per ton, depending upon the location of the bunkering port. Hence, compliance with the law becomes a rather expensive proposition. In addition to which, the contemporary solution to such outlawed exhaust emissions, involving switching from conventional heavy fuel (380 centistokes), or from No. 2 diesel fuel, to a distillate fuel with very low sulfur content, known as Ultra-Low Sulfur Fuel (ULSF), has caused problems of its own. Typically, related incidents involving ULSF have adversely affected cylinder liner lubrication of large-bore, slow-speed main propulsion diesel engines, and the diminished lubricity of ULSF has also been determined to be the cause of fuel injection pump binding of generator engines, resulting in loss of power. In one such incident, the generator failure resulted in a loss of steering power aboard a vessel heading into port.

Furthermore, it has been found that bio-fuel blends (also used as substitutes for conventional heavy fuel), are detrimental to elastomer sealing materials (a form of polymerized compounds), used in certain fuel transfer pump oil seals, apparently due to acidity of the bio-fuel due to oxidation. Given the temperature difference between MDO and ULSF, and the potential for fuel injection pump seizure, MAN diesel & Turbo has devised a diesel “switch” to handle changeover between high and low sulfur fuels, independent of engine load, and to automatically adjust fuel temperatures in the MGO cooler, for vessels entering or departing from SECA regulatory zones. The system is also designed to “log” the changeover process for official documentation for port authorities if and when required. This system is actually a later version of the “switch” originally developed by MAN diesel for the changeover from MDO to LNG, applicable to dual-fuel engines. Another alternative to the ultra-low sulfur fuel lies in the potential efficacy of “exhaust gas scrubbers”, such as those built by Hamworthy, Krystallon and the dry-scrubbing system recently certified by Germanischer Lloyd for MAN Diesel and Turbo, to reduce the levels of emission effluents by a factor not less than 95% sulfur oxide (S0x); 78% for nitrogen oxide, (NOx), and about 83% for particular matter (PM) within the next five years.

Dual Fuel
Yet another possible alternative lies in the feasibility of converting contemporary main propulsion diesel engines, whereby they become capable of burning “dual fuel”. This would involve retaining the conventional marine diesel oil (MDO) capability and modifying the engines to be capable of also burning liquefied natural gas (LNG). Several recently built European tankers, designed for the LNG trade with dual fuel (DF) capability plus a fleet of Norwegian ferries currently in operation are also burning LNG, from which the exhaust emissions are reportedly extremely low. While conventional wisdom appears to fault marine diesel engines for their exhaust emissions far more so than that of their highway or railroad counterparts, the truth is that for a riverine tugboat pushing a “fleet” of twelve of fifteen loaded barges upstream, the diesel engine exhaust emissions are estimated to be approximately 0.470 grams per ton/mile; which is about 27.70% lower than that of railroad trains and 35.60% lower than that of highway trucks, and are expected to become even lower if and when they eventually switch to burning LNG, given the current trend toward the adoption of LNG as a preferred marine engine fuel.

Since most ships are now powered by oil-burning diesel engines, either direct-drive, geared-drive or diesel-electric drive, the number of steam ships still in operation has diminished considerably. However, in the case of heavy oil tankers, such as VLCCs, (Very Large Crude Carriers), despite their large main propulsion diesel engines of 50,000-bhp or more, steam boilers play a prominent role in providing steam to sustain the cargo tank heating coils. This is due to the fact that in cold climates such as found in Northern European seaports, the relatively low sea water temperature has chilled the heavy black crude oil to a such a high viscosity that the cargo can not be pumped out without being pre-heated by the steam-heated tank coils. In such instances, the critical factors become (a) the oil seals of the fuel oil transfer pumps and boiler service pumps and (b) the steam boiler burner tips. Are they all currently designed for use with ULSF? Or do they also need to be replaced with ULSF-compatible components? The inevitable conclusion to all this is that solutions to certain problems that in turn, create problems of their own, are unacceptable and must be carefully evaluated before allowing one problem to be replaced by another potentially worse. Hence, responsible ship owners and ship managers cannot afford to ignore the above-mentioned factors, and have a moral obligation to alert their crews to such potential problems and take appropriate instructive and/or corrective measures to ensure that the required level of “readiness” is capable of sustaining the appropriate level of sea-worthiness.

Likewise, in view of the growing trend towards dual-fuel diesel engines, despite their several years of experience with various grades of diesel fuel, an appropriate level of readiness will be required of all those crew members involved with bunkering and monitoring of LNG fuel aboard ship. Meanwhile, ashore, it is reasonable to assume that as the demand for LNG as a marine fuel increases, and that suppliers develop the technology for economic mass production of same, that the price of such fuel will gradually decrease to a more competitive level. Meanwhile, considering their extensive experience with LNG as a marine fuel, with the design of ships and main propulsion engines specifically designed and built to be powered by LNG, Rolls-Royce is probably the most valuable source of information on this subject within the vast maritime community.

LA City Council Reverses, Backs Port on Shipyard Plan, Calls for Alternative Site

The Los Angeles City Council on Tuesday voted to backtrack on an earlier threat to force Port of Los Angeles officials to continue working with a Long Beach firm seeking to redevelop and reopen a shipbuilding yard at the port.

The Council voted unanimously to affirm the port's decision late last year that severed ties with Gambol Industries. The move comes one week after a Council committee voted to overrule the port decision.

Gambol has been trying for over a year to move forward with a $50 million plan to re-develop the shuttered South West Marine shipyard along the port's main channel into a modern ship repair facility. The firm, which claims it has a solid business plan that would create up to 1,000 of union trade jobs at the proposed facility, has garnered support from some trade unions, local officials and residents desirous of the promised jobs. However, the plan has also faced stiff criticism from the port, shipping industry, and longshore unions who fear the plan will delay ongoing port development.

In 2009 and under pressure from Los Angeles City Councilmember Janice Hahn, whose district covers the port area, the port's governing board signed a memorandum of understanding giving Gambol exclusive negotiating rights for the South West marine site. After nearly a year of consideration, the port's five-member governing board voted to end negotiations with Gambol over the project in December 2010.

Port officials have questioned the efficacy of the Gambol plan since before the signing of the MOU and warned that the shipyard plan could seriously delay an ongoing Army Corps of Engineers dredging project in the port's main channel. Numerous terminal development projects at the port, which faces the specter of serious competition with the expected opening of the Panama Canal's larger locks in 2014, hinge on the deeper main channel.

Port staff has spent more than five years planning and permitting the dredging project, including the use of South West Marine's two slips as a location to deposit the main channel dredge material. According to port officials, finding another location for the dredge material could take years. The Army Corps told the City Council in a Jan. 31 letter that the possible delays in finding a new location for the dredge material could range from 24 to 36 months and require a new Environmental Impact Report.

Hahn, who heads the committee that last week vetoed the port decision to severe ties to Gambol, failed to garner enough votes on the Council to move forward with forcing the port to work with Gambol. Instead, she changed the proposed agenda item shortly before the Council meeting to support the port's earlier decision.

However, Hahn also included two additional items, one of which could lock the port into making a home for a shipyard facility at the port. A second portion of the agenda item calls on port officials to "designate a location for a shipbuilding and repair facility for large vessels at the Port of Los Angeles with the understanding that this action shall in no way delay the Main Channel Deepening Project."

While the port was given no time frame in which to find a location, it is clear that the port is being asked to identify a spot, not just look for one. This would eliminate the possibility that the port could investigate the matter and find no suitable location for a shipyard at the port. However, because the MOU with Gambol is now expired, the port could look at other possible operators. The port could come back and report to City Council that it has identified a location – Al Larson's Boat Yard, a ship repair facility across the street from the South West Marine facility. The owners of Larson's have in the past talked with the port about expanding and upgrading their facility.

Port Executive Director Geraldine Knatz told the Council that the port is planning to create a master plan for the long-range development goals of the Terminal Island portion of the port. She said that the search for a shipyard location could be conducted while putting together the master plan.

The Council also asked Knatz to report back within 30 days on how the port plans to preserve the WWII-era buildings at the South West Marine site. The city wants the buildings saved for their historical significance.

Can The Market Support a Los Angeles Ship Building Yard?

Over the past year and a half, the Port of Los Angeles has been working with a Long Beach-based firm that seeks to redevelop and reopen a shuttered ship building facility at the port.

Gambol Industries has proposed spending $50 million to convert the now-closed Southwest Marine shipyard into a state-of-the-art, union-staffed ship building facility that would seek to build large commercial vessels.

Gambol has also promised 500 to 1,000 blue-collar jobs when the proposed facility is fully operational. With the average wage of a United States production worker in the shipbuilding trade hovering close to $20 an hour, according to Department of Labor statistics, this could be a lifeline for many in the union trades in the bleak Southern California employment market.

Despite efforts in the early 2000s to bring a shipyard to the neighboring Port of Long Beach failed for lack of believable business plan by applicants, Gambol claims that it has not only the investment but a business plan that will guarantee success.
But, is there the business to support a new large-scale ship building facility in Los Angeles?

Southwest Marine, the previous operators of the Los Angeles facility, shuttered in 2006 after trying to make a go of it for nearly 25 years.
And over the past 40 years, the West Coast has seen shipbuilding facilities vacate at a staggering pace.

There are currently six major, or first-tier, shipbuilding yards in the United States. These are facilities categorized as fully developed, large shipyards building large naval combatants and/or deep-draft, ocean-going merchant ships. Only one of these, General Dynamics-NASSCO in San Diego, is on the West Coast.

In addition, there are currently 14 so-called second-tier ship building yards in the US. Second-tier facilities are categorized as well developed, mid-to-large sized shipyards capable of building mid-sized to large merchant and naval vessels, offshore drilling rigs and high-value, high-complexity smaller vessels. All but one, Todd Pacific Shipyards in Seattle, are located in the Gulf, East Coast or Great Lakes regions.

There are also 77 active small ship builders nationwide, each specializing in building smaller commercial vessels, such as tugs, towboats, offshore service vessels, fishing vessels, ferries and barges. Only 14 of these 77 are located on the West Coast and of these, only one – fishing boat builder Van Peer Boat Works in Fort Bragg – is located in California.

Since the 1970s, 45 West Coast ship building firms – including one first tier, 10 second tier, and 34 small yard operators – have either gone out of business or reverted to ship repair-only facilities.

This means that in the past four decades, the number of ship building yards on the West Coast has declined by 78 percent from 71 facilities to 16 – leaving only a single fishing boat builder left in California.

And the kind of contracts that Gambol envisions are not exactly overflowing the in-box of shipbuilding firms. Last year, only five major cargo vessels were delivered from US yards. These were built by two shipyards – NASSCO and Aker Philadelphia. In fact, the total US output of commercial oceangoing vessels has not risen above ten vessels a year since 1983. All told, a total of 33 oceangoing cargo vessels larger than 10,000 dwt have been built at US yards in the past decade, most at Aker and NASSCO.

While it is certain that there is business out there for a small shipyard that is efficient and can sell itself, there appears to be almost no market for a shipyard seeking to build major commercial vessels, as Gambol has said it envisions doing in Los Angeles.

And the news is not just bad for cargo vessels. Currently, only one US-built cruise ship – completed in 1958 – is operating in the world cruise ship fleet (of vessels over 10,000 dwt). All of the nearly 20 large cruise ships currently on order worldwide are being constructed in Germany, Finland, or Italy.

Also worth mentioning is that one of the major reasons for the large WWII ship building development at the ports of Long Beach and Los Angeles was close proximity to Henry J. Kaiser's steel mills in Fontana, California. Kaiser also had similar facilities near the Bay Area shipyards to provide steel. None of these facilities, or others like the U.S Steel plant in Utah, exist on the West Coast today. Steel for any new vessel would have to be shipped in, either via rail or via ship, and most likely from outside the United States.

China currently produces more than 40 percent of the world's steel and is the world's largest exporter of steel. The four major world steel exporters – China, the European Union, Japan, and Russia – account for 70 percent of the world's steel production. Meanwhile, US steel production has dropped by nearly 50 percent since 2007. While the US still boasts more than 50 sizable steel producing firms, the two largest – US Steel and Nucor – don't even rank in the top 10 largest steel producing firms in the world (by production tonnage), coming in at 11th and 14th respectively.
In addition, the facility Gambol envisions using is not in the best of shape.

Originally built during World War I, the facility received a major upgrade during World War II and another, its last, back in 1959. The ten or so buildings on the facility are World War II-vintage structures and none of the facility's numerous dry docks and construction finger slips that cranked out more than two dozen Navy destroyers in WWII exist today. Even taking into account Gambol's proposed plan to invest $50 million in the facility, the bottom line is that the facility, for all intents and purposes, has remained virtually unimproved for more than 50 years.

And with the Los Angeles City Council's decision on Tuesday to uphold the port's position that the shuttered facility's two slips must be filled in to meet the schedule of a needed port dredging project, Gambol is now in search of a new location at the port.

In reality though, the only place available in Los Angeles is the Southwest Marine location. There is no doubt that Gambol's $50 million investment proposal was built upon taking over a facility that at least had the structural skeleton of a shipyard – with slips, crane ways and buildings – in place. Without this skeleton, Gambol would have to recreate it elsewhere, undoubtedly at much greater cost and effort.

Wilhelmsen Ships Service Acquires Nalco Subsidiary

Norwegian vessel service and product provider Wilhelmsen Ships Service announced Tuesday that it had finalized an agreement with Illinois-based chemical and water treatment firm Nalco to buy subsidiary Nalfleet, a sales and technical service organization specializing in marine chemicals.

WSS, which already owns marine chemical firm Unitor, said in a statement that the acquisition of Nalfleet "will further strengthen and enhance the company’s marine chemicals offer to the maritime industry."

Financial details of the acquisition were not released.

Last week, WSS announced that former Nalfleet General Manager Graham Hunter will head up the WSS marine chemicals operations, effective Feb. 1.

Hunter will head a management team overseeing Nalfleet and Unitor and work toward developing WSS's position in the marine chemicals market.

“The Unitor and Nalfleet brands will remain and we are currently developing business and marketing strategies for both ranges of chemicals. Focus now is on ensuring a smooth transition for our customers and improving our global offer and customer solutions brought to the marine market,” Hunter said.

All Nalfleet business is expected to be transferred to WSS by the end of the first quarter. During a transition period set to last from Feb. 1., through the third quarter of 2011, WSS has frozen all chemicals prices.

“A time of transition and integration is demanding for everyone involved," President of Wilhelmsen Ships Service, David Tandy said.

"Nonetheless, I’m confident that we have the strength and organizational flexibility to take good care of our customers throughout the changeover. As a customer centered service organization it is key that we share synergies with our customers from day one; that is why we will now hold prices on chemicals.”

Seattle Port Gains 'AAA' Rating for Upcoming Bond Sale

Credit ratings agency Fitch Ratings has assigned an 'AAA' rating to two Port of Seattle limited tax general obligation bonds, or LTGO bonds, set be sold via negotiations on Feb. 9.

These include a LTGO issuance for $30.3 million and a $76.7 million LTGO refunding issuance.

Fitch also affirmed the 'AAA' rating and issued an outlook stable outlook for a previous $255 million LTGO issuance by the port.

The ratings agency based the three ratings on several rationale, including: the port revenue from property taxes; its location within 'AAA'-rated Kings County; low debt levels; strong port finances forecast through 2016; and, the port's position as a leading US port.

Fitch also cited strong financial performances by the port and airport, and the maintenance of ample tax levy capacity to repay bonds.

According to Fitch, the port district's tax base is large, diverse, and wealthy compared to state and national averages. Despite the downward tax base pressure, taxable property values per capita remains high and taxpayer concentration is very low.
Income levels in the area are 20 percent to 30 percent above state and national levels and the poverty rate is lower. However, the county has been affected by the national recession, with unemployment at 8.4 percent in 2010 compared to a low of 3.8 percent in 2007.