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Thursday, February 24, 2011

Officials Looking Into Tanker Spill at Long Beach Port Terminal

Government officials are investigating the cause of an accidental discharge of 710 gallons of fuel oil Monday by an oil tanker berthed at a Port of Long Beach oil terminal.

Coast Guard Sector Los Angeles-Long Beach and California Fish and Game personnel are investigating the spill, which occurred at Tesoro’s Terminal at Berth 84A during an internal transfer of fuel onboard the Libyan-flagged tanker Aljalaa.

At approximately 7:30 p.m. on Monday the internal transfer process went awry and fuel was flushed over the vessel's deck into the water.

The USCG, DFG, and the vessel's emergency response management company, O’Brien’s Response Management, immediately established a Unified Command at the Tesoro Long Beach Terminal to coordinate the response.

Several oil spill response organizations responded to contain and to recover the fuel oil. Responders deployed 5,000 feet of containment boom around the affected areas of the wharf to isolate and control the spill. Vessel traffic was limited during the clean up.

No injuries or animal deaths occurred during the spill and clean up, according to the Coast Guard.

The incident is the second in less than a week at the port involving the Coast Guard. Friday evening a vessel at anchor was blown aground during stormy weather onto one of the man-made oil islands near the port. In this case no oil spill resulted, and a subsequent multi-agency inspection of the ship's hull found scraping but no punctures.

Tacoma Port Breaks 10 Percent Cargo Growth for Second Straight Month

After seeing consistent month-over-month decreases in cargo volumes for 20 of the 24 months in 2009 and 2010, the Port of Tacoma roared back in January, posting a solid double-digit percentage increase in total cargo handled an increases in both export and import boxes.

The port moved a total of 105,289 TEUs in January, a 13.3-percent increase over the same period in 2010. It was the fourth month of positive growth for the port, the second straight month of double-digit growth, and the best monthly showing in more than two years.

The port also boasted positive gains in both loaded export and loaded import container volumes for the month.

Port officials report handling a total of 35,054 loaded inbound TEUs, a 5.4 percent increase over January 2010. The port also handled a total of 26,621 loaded outbound TEUs, a sizable 24.3 percent increase over the year-ago period. It was the best January for loaded export container volume at the port since 2008.

Seattle Port Maintains Solid Growth in January

The Port of Seattle rang in the New Year with a solid performance in January, posting solid double-digit percentage increases in total boxes, import boxes and export boxes handed during the month compared to the year-ago period.

The port handled a total of 175,273 TEUs in January, a 13.3 percent increase over January 2010.

Port officials reported handling a total of 75,946 loaded inbound TEUs for the month, a 12.7 percent increase over January last year. The port also handled 54,001 loaded outbound TEUs, an identical 12.7 percent increase over the year-ago period.

Portland Shifts to Landlord Port Model For Box Terminal

ICTSI Oregon, Inc., a subsidiary of International Container Terminal Services, Inc., has taken over the operation of the Port of Portland’s Terminal 6 – the port's sole container terminal.

Under a 25-year lease, ICTSI will operate the Terminal 6 container and breakbulk facilities. ICTSI paid the Port $8 million upon closing the deal and will make annual lease payments of $4.5 million. As with most container terminal leases, as container volumes increase at Terminal 6, so too will ICTSI's lease payments to the port.

In a statement, port officials said that ICTSI will be "enacting ambitious plans to boost service for both imports and exports while leveraging intermodal rail facilities for movement of boxes to and from inland markets by train."

The lease, approved by the Port Commission in May 2010, will see the port function in a landlord capacity. Port staff will continue to directly manage and operate the port's remaining two maritime terminals, which handle mineral and grain bulk products, breakbulk cargo and auto imports.

The Port has owned and operated the container facility since the gates first opened in 1974 and is the last major West Coast ports to move to a landlord model for the operation of container facilities. The move to the landlord model for Terminal 6 was the result of a more than four-year effort by port staff.

Tuesday, February 22, 2011

Trade Group Seeks Audits of City Hall Tidelands Fund Moves

*This article first appeared in, and is reprinted here courtesy of, the Long Beach Business Journal.*

By Keith Higginbotham

A leading trade group is alleging that Long Beach City Hall violated its responsibilities as a state trustee over the city's port and tidelands by conducting back-room maneuvering in recent efforts to increase the amount of tidelands and Port of Long Beach-generated funds City Hall controls.

In the January 25 filing, the Pacific Merchant Shipping Association (PMSA) asked the California State Lands Commission (SLC) to use the agency's oversight powers to "police the actions" of City Hall in regards to the city's state-granted role as trustee of the port and the city tidelands.

"The Port of Long Beach is a public trust that by California law has to be managed for the benefit of all Californians," PMSA President John McLaurin said.

"We want to make sure that the activities undertaken in regards to public trust tidelands by city officials are taken with appropriate deference to the city's public trust obligations."

The trade group - which represents about 90 percent of the shipping lines and terminal operators serving West Coast ports - requested that the SLC investigate and perform audits of: a recent tidelands oil deal between the city and Occidental Petroleum (Oxy); the way City Hall officials placed Measure D on the November 2010 ballot; and, all the activities of the Long Beach Gas and Oil Department (LBGO) related to the tidelands.

The PMSA alleges that City Hall, in taking these actions, engaged in "a pattern and practice of behind-the-scenes activities" and breeched its "fiduciary duty owed the people of the State of California and in violation of the Public Trust Doctrine."

"The concern is that the Port of Long Beach is simply being treated as an ATM machine by the city for purposes totally unrelated to the Tidelands Trust and the responsibilities of the city to the trust," McLaurin said.

In the 142-page filing, which includes 131 pages of City Hall e-mails obtained under the California Public Records Act, the PMSA also called on the SLC to investigate and perform an audit of the city's Tidelands Operating Fund.

McLaurin said that an audit of the Tidelands Fund is the only way to "ensure that the expenditures from that account are being used for state trust purposes."

The PMSA also believes that at the heart of the case is an issue of transparency on the part of Long Beach.

"I think everybody in the State of California needs to know what tideland funds are being spent on," McLaurin said.

The Long Beach Business Journal has also verified that despite a more than 50-year-old California statute requiring the state auditor to conduct an annual audit of the Long Beach Tidelands Operating Fund, no state audit has been conducted of the fund in at least 17 years.

The Oxy Deal
One of the City Hall actions that the PMSA is asking the SLC to investigate is an oil deal between the city and Oxy that was signed in November 2009.

"We have significant questions about the Oxy deal and Measure D and how these things were undertaken without any detailed analysis of the financial, economic or public trust impacts," McLaurin said.

The deal originated in a 2006 proposal from Oxy to the city that would see the oil firm invest in new oil production in the harbor tidelands area in exchange for a share in the profits of any new oil production generated. Oxy argued that the incentive for additional profit would justify additional investment above what Oxy was spending under its existing contract with the city. This would in turn increase oil production and also the city's cut of the oil profits.

"Without ongoing capital infusion, the oil production will decline and [the city] may not be able to withstand the next downturn in oil prices," LBGO Manager of Oil Operations Curtis Henderson told port officials in an April 2009 e-mail.

Under the previous city contract with Oxy, the port received about 95 percent of the profits from the roughly 450 existing oil wells tapping city-owned reserves while the city received about 5 percent.

The new contract, which took effect January 1, 2010, split profits from any new production between City Hall and Oxy, with no money going to the port. The city receives 51 percent of these new profits while Oxy receives 49 percent. The lion’s share of these new profits for the city will go to the City Hall-managed Tidelands Operating Fund, with a nominal amount going to the General Fund.

Because the new contract hinged on the difference between existing and future oil production, a critical step in formulating the new contact was to determine exactly what the existing wells would produce in the future. Oxy proposed using an estimate of what is called the base production amount.

In 2007, the SLC, LBGO, and Oxy formed a team to work on developing a base production estimate for the existing wells.

During the eight-month course of the team's work, the SLC participants grew dissatisfied. In an October 2009 letter to LBGO's Henderson, a senior SLC official explained, "The SLC did not fully agree with the methodology used by the [team] to forecast future production from the [existing wells]." After the team released its findings, the SLC decided to develop a separate estimate in partnership with the port, which had already been looking to develop its own base estimate.

An April 2009 e-mail from port Chief Financial Officer Sam Joumblat to LBGO's Henderson explained the port's reason for seeking a second base production estimate.
"It is [the port's] fiduciary responsibility to get an independent appraisal of our asset before we sell to Oxy," Joumblat wrote.

The SLC and the port eventually came up with their own estimate, while Oxy and LBGO remained supportive of the first estimate.

The problem was that the two estimates, each based on their own methodology, varied greatly. Port documents suggested that the Oxy-supported estimate was 62-percent lower than the SLC/port estimate.

"Since Oxy is proposing to split profits over the existing reserves, then the lower the existing reserve (the base amount), the higher the amount they will split," wrote the port's Joumblat in a March 2009 e-mail to port senior executives.

Over the vehement objections of the port and the SLC, City Hall eventually accepted the much lower Oxy estimate. Nonetheless, the Long Beach City Council approved the deal supported by Oxy and LBGO.

Port officials at the time estimated the lower base amount would result in shifting as much as $150 million in potential port profits over 10 years to the city. Based on the average annual port oil profits over the past 10 years - about $13.1 million a year - the amount potentially going to the city under the lower base estimate over 10 years would likely be closer to $81 million.


Measure D
On November 2, 2010, Long Beach voters approved Measure D, which made two changes to the City Charter regarding the Port of Long Beach.

One change stripped the Port of Long Beach Harbor Commissioners of any authority over oil properties in the port area and gave this authority to City Hall, including any revenue generated by said properties.

The second change was in the way of an annual transfer of port profits to City Hall is formulated. Previously, the transfer amount was based on 10 percent of the port's audited annual net profits. Measure D changed this to 5 percent of the port's gross revenue.

What Measure D was really about from an industry viewpoint, was quite simple: money and control. That is, greater sums of port money for City Hall officials to spend as they see fit and more control by City Hall over the harbor department.

Prior to the election, nearly all of the major stakeholders involved in port-related industries expressed opposition to Measure D, citing several major concerns. The PMSA raised these same concerns in their filing to the SLC.

First, City Hall rushed the measure onto the ballot with almost zero vetting and with no analysis of the long-term impacts on the port.

On August 3, the final day for considering ballot measures for the November ballot, the city council approved Measure D for the ballot. The only public discussion of the Measure D item was during the July 27 Charter Amendment Committee meeting and at the August 3 council meeting. From the charter committee discussions on July 27, it is clear that the language for Measure D had only just been drafted. In fact, at the August 3 council meeting, the city attorney was still tweaking the language, only moments before the vote to place it on the ballot.

Not presented at the August 3 city council meeting was a study, report or analysis of how Measure D would impact the port. It was later learned that one was never done.

A study of Measure D by the SLC released shortly before the election stated that state lands staff, despite numerous requests to City Hall for such a study, report or analysis, was "unaware of any evidence that the city council analyzed and considered any potential impacts to port operations when it voted to place [Measure D] on the November ballot."

A second concern raised by the PMSA to the SLC was that Measure D is shifting significant portion of the port's revenue to City Hall, threatening the financial security and competitiveness of the port.

Port financial staff at the time estimated that Measure D would shift more than $130 million from the port to the Tidelands Fund over the next five years - $100 million in oil revenues and $33 million in added port-to-city annual transfers. This represents roughly 20 percent of the port's net income per year.

A major question asked by the PMSA, and many opponents of both the Oxy deal and Measure D, is "what is the Tidelands Operating Fund actually funding?"

By state law, the funds can only be spent in the tidelands and then only on very specific uses such as maritime, navigation, recreational, environmental, fisheries and the promotion of maritime commerce.

An audit, the PMSA argues, would offer a much-needed degree of transparency into the day-to-day functioning of the Tidelands Operating Fund.

The State Auditor
A final issue that was not included in the PMSA filing is one involving a 1964 California statute mandating an annual audit of the Long Beach Tidelands Operating Fund.

The statute, known as section 138, was cited as recently as 2005 in a ruling on a suit pitting, ironically, the State Lands Commission against the City of Long Beach. In the ruling, the judge cited Section 138, reminding both parties that, "each year the Auditor General must 'audit the Long Beach tideland revenues and expenditures and report thereon to the Legislature.'"

Under state government code, the auditor general's main role is to examine and report annually upon the financial statements prepared by the executive branch of the state, to perform other related assignments, including performance audits, that are mandated by statute.

However, in November 1992, the nearly 100-member staff of the California Office of the Auditor General was shuttered due to state budget cuts. Roughly six months later on May 7, 1993, Gov. Pete Wilson signed into law new legislation that formed the Bureau of State Audits and renamed the head of this office as the state Auditor.

SLC Chief Counsel Jennifer Luchessi said that the responsibility to perform an audit called for in the 1964 statute would likely transfer from the auditor general's office to the new state auditor's office.

"I believe the intent of the Legislature was to have these audits done - by whatever audit agency exists in the state government," Luchessi said.

In fact, there are examples of the reconstituted state auditor's office conducting audits required of the former auditor general by state law.

However, a search of all publicly accessible audits performed by the state auditor since the reformation of the state office in 1993 reveals that no audit or investigative report has been performed on the city Tidelands Operating Fund in the past 17 years. In addition, officials at the state lands commission and the city auditor's office could find no one who remembers such an audit being done by the auditor general or the state auditor.

SLC Executive Officer Curtis Fossum said he was not sure if the agency had ever investigated the Long Beach Tidelands Fund as a whole, but pointed out that the SLC has been close to litigating the city on several tidelands projects such as the Long Beach Convention Center. Fossum also pointed to numerous lawsuits since the 1950s that have involved the expenditures of tidelands funds.

The same statute also requires Long Beach to annually provide the Legislature with "a detailed statement of all expenditures of oil revenue . . ."

According to the Long Beach City Auditor's office, the city addresses this requirement by submitting a comprehensive annual financial report (CAFR) to the state. The SLC confirms that the city has been submitting an annual CAFR.

The CAFR details the various city funds' revenues and expenses for a given year, including both the Tidelands Operating Fund and the Tideland Oil Revenue Fund.

However, the CAFR is not a line-by-line reporting of what tidelands funds are spent on. The CAFR aggregates these revenues and expenses into broad financial categories.

It appears to come down to how the phrase "detailed statement" is interpreted.

For example, the 2009 CAFR - the latest issued by the city - details that the Tidelands Operating Fund had operating expenses in 2009 of $82.3 million. These expenses are broken out under four categories: Personal Services ($25.9 million); Maintenance and Other Operations ($46.3 million); Amortization ($714,000); and, Depreciation ($9.5 million).

However, there is no further break down of each of these categories. There is no way to tell, for example, what specific projects the $46.3 million from the Maintenance and Other Operations category is being spent on.


Remedies Without A Timeframe
For its part, the state lands commission said it is taking the PMSA filing very seriously and analyzing it closely.

"Each of the commissioners and I received a copy of the filing, as well as the attorney's general's office," the SLC's Fossum said. "We are looking at it now and discussing it with the attorney general's office."

Asked if city and port officials had been notified about the PMSA filing, Fossum responded, "I am not aware if they have received a copy yet."

Fossum admits that the SLC doesn't have staff looking at the specific issues raised in the PMSA filing and due to staffing cuts likely doesn't have the staff to conduct the investigations and audits requested. However, Fossum said that the SLC is working with the state attorney general to determine if the work could be performed from the AG's office.

While SLC officials would not speculate on the outcome of the PMSA filing, they did offer several possible remedies.

If nothing amiss is found in the audits, the status quo would reign.

"It may simply be a question of what kind of stewardship and fiduciary responsibility the city is bringing between its port operations and its other operations," Fossum said. "And if there is nothing illegal, then what we would likely do is simply report back to the commission and the Legislature on whatever those conclusions might be."

Fossum points out that the Legislature is the ultimate arbiter on trust issues.

"We can make recommendations on the trust, but only the Legislature can make changes to the trust," Fossum said.

If problems were found, several additional scenarios open up. The first would be referring the case to the attorney general's office (the SLC does not have prosecutorial powers). A second scenario would be that the city might have to pay back money already taken from the port.

Fossum pointed to the Nexus lawsuit in the late 1990s, where the City of Los Angeles was found to have improperly used port tidelands funds for non-tidelands uses.
"The end result was that the City of Los Angeles had to give back some $60 million to the port over a number of years to pay back those tidelands funds that were inappropriately removed," Fossum said.

"Ultimately, the city is the responsible trustee and it is their obligations to manage those lands and those funds as a trustee of the state," Fossum said.

The results of any investigations or audits may not be soon in coming, though. Given the staffing and budget problems being felt throughout Sacramento, it is no surprise that SLC officials declined to give a time frame for any action.

"We are still reviewing the letter and trying to organize ourselves and think about what the PMSA is really alleging. With that said, we don't have any kind of real time line on how we are going to respond," Luchessi said.

Lawmaker Seeks to Eliminate Owner Operator Drivers from Calif. Ports

California Assembly Speaker John Perez (D-Los Angeles) has introduced a state Assembly Bill that would eliminate independent owner operators from servicing ports in the state.

Assembly Bill 950, introduced February 18 by Perez, would classify all port-servicing truck drivers as employees, even if a driver is currently working as an independent owner operator under contract with a motor carrier.

At the ports of Long Beach and Los Angeles, the two busiest container ports in the Western Hemisphere, more than 80 percent of more than 10,000 drivers servicing the two ports are independent owner operators paid by the load, as opposed to per-hour employee drivers. Similar percentages exist at the other California ports.

The bill, if passed, would almost certainly violate federal trucking statutes preempting states and localities from regulating interstate commerce. According to the trucking group The Waterfront Coalition, those close to the issue in California do not expect the proposal to progress swiftly despite the fact that the bill is sponsored by the powerful Assembly speaker.

The Port of Los Angeles has been involved in litigation for more than two years over attempts by the port to mandate that only employee drivers be use at the port. Brought by the American Trucking Associations in 2008, the case is now in the Ninth Circuit Court of Appeals. The Port of Los Angeles employee mandate remains under a court injunction while the appellate panel hears the case. The court is expected to rule on the case sometime before this summer.

Bulker Runs Aground Off Long Beach

A storm sweeping through Southern California February 18 led to the grounding of the Panamanian-flagged bulker M/V Ocean Sunrise on Island Freeman, one of four man-made oil islands located off the Long Beach shore, according to United States Coast Guard reports.

The 624-foot vessel drifted from its anchorage in San Pedro Bay and struck the rock-clad 14.6-acre island around 6:30 p.m. The ship had been at anchor southeast of the Port of Long Beach under the order of the Coast Guard for more than a week after a routine inspection found debris in an oil tank.

Once the vehicle was secured following the incident, the Coast Guard inspected the vessel for leaks and conducted mandatory drug and alcohol tests of the vessel's 25-man crew.

An early morning fly-over Saturday by a Coast Guard MH-65 Dolphin helicopter aircrew from Air Station Los Angeles along with a Coast Guard pollution investigator did not identify any oil sheens near the ship or Island Freeman where the vessel ran aground.

The Los Angeles Port Police and Long Beach Police also sent dive boats out with Coast Guard personnel onboard to inspect the Ocean Sunrise's hull integrity under the waterline using divers and a remotely operated vehicle. Video taken from the ROV showed multiple scrapes along the hull but no damage that could cause the vessel to sink or leak oil.

The port built the four roughly 10-acre islands in the mid-1960s as platforms to drill more than 1,100 oil wells into the East Wilmington Oil Field located beneath the bay. All four were completed by the end of 1966.

The islands, built in roughly 30-45 feet of water, are camouflaged with landscaping, steel facades and sculptural concrete screens. A common myth is that the aesthetic work was designed by Walt Disney or one of his animators. This myth likely grew out of the fact that one of the primary landscape architects on the project, Joseph Linesch, went on to do many theme park projects around the world, including Walt Disney World and Disneyland.

In 1967, the Long Beach City Council renamed the islands after the four US astronauts that had died in the line of service up to that time. Three islands were named after the astronauts who died in the January 1967 Apollo 1 capsule fire: Gus Grissom, Edward White and Roger Chaffee. The fourth, located 1.25 miles off-shore, is named for Theodore Freeman, a member of the astronaut corps who died in the crash of a T-38 Talon jet during a 1963 NASA training flight.

California AG and OOIDA Trucking Group Ask to Join LA Port Clean Truck Litigation

The California Attorney General filed an amicus brief February 18 with the Ninth Circuit Court of Appeals to join in support of the Port of Los Angeles in litigation over portions of the port's Clean Truck Program. At the same time, the Owner Operator Independent Drivers Association (OOIDA), a trade group representing independent truck drivers nationwide, also filed an amicus brief with the court to join the case in support of the American Trucking Associations (ATA) trade group which has alleged that the port truck program violates federal interstate commerce laws.

If approved as amicus curiae, or "friend of the court," parties to the suit, the California Attorney General Kamala Harris and OOIDA would not be allowed to argue their respective positions as a direct party to the case, but can volunteer information on points of law under discussion or other aspects of the case to assist the court in reaching a decision.

The ATA, which represents more than 37,000 trucking firms nationwide, first filed suit in federal District Court against the port in July 2008 arguing that portions of the port's Clean Truck Program violates the Supremacy Clause of the US Constitution and federal laws governing interstate commerce.

A lower court ruled in favor of the port on Sept. 15, 2010, finding that while the portions of the port truck program under argument did violate federal law, the port was exempt from the federal regulations.

District Court Judge Christina Snyder's ruling hinged on the concept of market participation. Judge Snyder found that the port, through its truck program, was operating as a participant in the local port drayage market and not simply as a regulatory agency. As a market participant, Judge Snyder said, the port is exempt from the cited federal regulations under federal preemption guidelines.

In its original appeals filing, the ATA reiterated its original arguments from the lower court suit that the port is not a market participant and asked the appellate panel to overturn Judge Snyder's ruling.

Attorney General Harris, in her filing, urges the Ninth Circuit Court of Appeals to uphold the district court's decision and stresses that a public agency can make a business decision to go "green" when spending its own funds to contract for services.
OOIDA, in their filing to join the case, slammed Judge Snyder's ruling in favor of the port and urged the appellate panel to rule in favor of the ATA.

The Ninth Circuit has received all written arguments and rebuttals in the case and is currently preparing to set a date for oral arguments. Following the oral arguments, the court is expected to rule on the case sometime before this summer.

American Maritime Partnership Takes the Helm from Maritime Cabotage Task Force

PMM Online Staff

American Maritime Partnership (AMP) is the new name for the Maritime Cabotage Task Force, the largest coalition of maritime interests in the United States, which has been in operation since 1995. The new moniker better reflects the coalition’s focus on the domestic maritime industry’s role in promoting national, homeland, and economic security. To increase awareness of itself in the social media world, AMP has launched a new website: www.americanmaritimepartnership.com, and has new social media applications on Facebook and Twitter.

“A strong domestic maritime industry is critical to our national security, makes our homeland more secure, and fosters nearly 500,000 American jobs,” said James Henry, President of the Transportation Institute and Chairman of the Board of Directors of AMP. “The American Maritime Partnership will continue to support policies that help ensure ample US sealift capacity to defend our nation; keep America’s waterways secure with strong laws and oversight of the US government; and work to sustain the nearly 500,000 jobs and $100-plus billion in annual economic output that follow in the industry’s wake. For example, every job in a domestic shipyard results in four additional jobs elsewhere in the US economy.”

Continued growth of the domestic maritime industry hinges on continued adherence to time-tested principles, namely that domestic waterborne commerce and related activities be conducted in vessels that are US-owned, US-built, and US-crewed. AMP will continue to champion these tenets as the only foundation for a strong domestic maritime industry.

“The average American is totally unaware that the US maritime industry pioneered many of the advancements that transformed waterborne commerce worldwide. The containership, the self-unloading vessel, and articulated tug-barge units are but a few examples,” said Henry.

AMP inherits from MCTF the most broad-based coalition the US maritime industry has ever assembled. Its 450-plus members span the United States and its territories and represent vessel owners and operators, shipboard and shore-side labor groups, shipbuilders and repair yards, marine equipment manufacturers and vendors, trade associations, dredging and marine construction contractors, pro-defense groups and companies in other modes of domestic transportation. These diverse but allied interests share a common goal: to promote the long-standing US maritime laws fundamental to national and economic security. Upon a foundation of US ownership, construction and crews, the United States has built an unsubsidized domestic fleet that is the world leader in efficiency, innovation and safety.

Under US domestic maritime laws, commonly known as the Jones Act, cargo shipped between two US ports must move on American vessels. These laws are critical for American economic, national, and homeland security, which is why they have enjoyed the support of the US Navy, Members of Congress of both parties, and every President in modern history.

AMP has launched a website called Americanmaritimepartnership.com and has new social media applications on Facebook and Twitter. AMP’s Facebook Page can be found under American Maritime Partnership (AMP) and its Twitter page is twitter.com/AMPmaritime.

Jensen Maritime Consultants Celebrates 50 Years

Seattle Naval Architecture firm Jensen Maritime Consultants is an example of the benefits of talent, hard work and customer loyalty. Although the firm started small, Jensen Maritime Consultants has risen to national prominence in naval architecture and marine engineering. Along the way it molded the careers of several renowned naval architects and engineers, many of whom are still with the firm today. Jensen Maritime Consultants, now part of the venerable Crowley Marine Services group, is preparing for its next successful 50 years.

In 1961, Benjamin F. Jensen left his job as Vice President of a successful Seattle shipyard to start a one-man firm, designing work and fishing boats for the emerging West Coast marine industry. Ben Jensen had earned a degree in mechanical engineering from the University of Washington, and had served his country as a Chief Engineer on a Navy destroyer escort during World War II. When the war ended he was ready to start his career. After receiving his professional engineer’s license he helped establish Marine Construction & Design (MARCO), where he designed a series of popular and beautiful fishing vessels. In 1961 he left MARCO, and opened his firm in downtown Seattle to continue designing fishing boats for the local fleet.

Jensen had met fellow naval architect Lawrence Glosten, and the two formed a friendship and an alliance, with the two men sharing an office in Seattle’s Polson building. The alliance worked well for the men, says Sue Williams, who recently retired after 30 years with the firm.

“Ben’s sharing offices with Larry Glosten took a natural turn of events,” says Williams. “They weren’t partners- just sharing office space, but it seemed like Ben had the majority of workboat and fishing clients, while Larry’s clients were more often research vessels and feasibility studies for the University.”

Jensen and Glosten continued this arrangement until 1972, when Jensen outgrew the space and moved his firm to Seattle’s Fisherman’s Terminal. By that time Jensen’s firm had grown to include a staff of 10, with almost all of the firm’s work centered on fishing vessels, with tugs and workboats filling in the gaps.

During the 1970s, Bristol Bay became the center of the biggest boom in the history of American fisheries, and the Bristol Bay king crab fishery went from a catch of nearly nothing to 13 million pounds in 1971. By 1980 the total catch was 130 million pounds, accounting for 80 percent of the king crab catch in Alaska and the largest king crab harvest ever seen.

From the mid 1960s to the early 1980s, more than 200 crabbers were built in Seattle, many of them to Ben Jensen’s designs.

Sue Williams joined Jensen in 1980.At that time, the firm was a partnership, with Ben Jensen owning most of the firm, and partner naval architects Gil Nilsson and Tom Breiwick each owning 5 or 10 percent. Williams was hired to run the office from the front desk. She had previously worked in the accounting department of a marine equipment supplier, and was a natural for the job. When Williams joined the firm, Jensen was already thinking about selling part of the company to a group of Norwegian investors. In 1981, a majority interest in B.F. Jensen & Associates was purchased by Maritime Technical Consultants Corporation, a Norwegian-owned firm, and the name of the company was changed to Jensen Maritime Consultants, Inc. (JMC).

The Norwegian partners bought Jensen’s stake in the company after his death in 1983, and gave Sue Williams a 5 percent stake in the company to persuade her to stay on and manage the financial affairs of the successful firm.

“No one in the house was keeping the books,” says Williams. “We were sending the accounting information back to Norway every month, and it wasn’t working very well,” she says. Williams was quickly promoted to VP of finance for the firm. “The owners had me interviewing people for the position,” she says. “I knew I could do the job, and I told them so, and they agreed.”

Williams and others in the company gradually bought out the Norwegian owners, and by 1993, Sue Williams had become the president and majority owner of JMC.

“It was the right place at the right time,” she says. Williams held the position for 10 years, before stepping aside. “For ten years it was a great place to be,” she says, “but as time went on it became difficult to be President of an engineering corporation without an engineering background.”

Longtime Jensen partner Jonathan Parrot assumed the position in 2003 after a gradual transition, and Williams stayed on as director of finance for the company. She is “semi-retired” but continues to perform financial and marketing duties on a part time basis.

In 2008, Jensen Maritime Consultants was acquired by Crowley Maritime Corporation. Crowley saw the acquisition as a way to provide its technical services group with a marine engineering and naval architecture resource to enhance the company’s existing capabilities, and Jensen saw the opportunity to have access to different areas of the marine field that wouldn’t have been available to the company on its own, while still serving its existing clients.

“The day to day financial responsibilities, like payables and receivables transferred to Crowley,” says Williams, “and we gained access to human resources as well as training resources that hadn’t been available to us. It was a pretty big deal, and a good thing for us.”

Jonathan Parrott joined the firm in 1979, after getting his degree from renowned naval architecture school Webb Institute. “I was fresh out of school, looking for a position,” he says. “I had been looking all summer. There was a slump on the East Coast, and it wasn’t much better here,” Parrott says. The crab boat boom had started to recede, and Jensen had seven staff at the time. Parrott went in to see about a job.

“One of the Jensen naval architects had decided to become a fisherman,” he says. “He bought a boat and wandered off to do some seining.” Parrott took the job.

The firm was finishing up some crab boats from the boom times, and Parrott came onboard to see the completion of the last two Jensen-designed crabbers, including the 125-foot Vitus Bering.

“I did a lot of stability stuff and grunt work,” he says. “I was doing 30 incline tests a year.”

After Ben Jensen’s death, Parrott got involved in designing seiners and gillnetters. “We got a contract to work with Bender Shipbuilding on the first big 200-foot factory trawler,” he says. “On that project we had increased our staff to 15 people, and then the Japanese client came back to Bender and said they could only pay half of what they had promised.” The project was cancelled, along with the firm’s engineering contract. “We had to lay off eight people,” says Parrott. “That was a hard thing to do. It made us very conservative in hiring practices and financial matters going forward.”

The firm had enough small boat work to keep the remaining staff busy, and the firm produced designs for their first big factory trawler, the Northern Glacier, delivered by Tacoma’s J.M. Martinac in 1984, and the smaller factory trawler Rebecca Irene built at Eastern Shipbuilding in 1985.

“We started doing pretty well,” he says. “We did lots of factory trawlers and a lot of little gillnetters, and converted a lot of crabbers into trawlers.” The company also began designing more tugboats and passenger vessels, and eventually moved into the workboat market, becoming a leader in tugboat design.

Parrott sees a lot of growth on the horizon. “Were bringing in some new people with different experiences, and being part of Crowley opens a lot of doors.” Parrott says Jensen is now working with oil and, heavy-lift companies, and has jobs coming up in Sakhalin and Alaska.

The company’s line of tugboats is getting more exposure as well. Crowley operates two of Jensen’s latest tugs on long term charter from Bay Delta Towing, and Jensen has participated with the in-house Crowley designers in the design of several new boats. The firm is also exploring international business. “We’re getting a lot more interest from overseas people who want a choice of designs,” says Parrott. “A yard in the Far East is interested in building a couple of our tugs- a series tug and a small purpose-designed boat.”

Jensen’s new affiliation with Crowley brings a new series of engineering opportunities. Most of them find their way to the desk of John Hveding, Jensen’s Chief Marine Engineer. John is a longtime Jensen employee and partner who came to the US from Norway in 1985, after having worked as a Marine Engineer in shipyards and marine construction in Norway and in the North Sea

“I was ready for a change, and I had friends in Seattle, so I came for a while and took the position at Jensen,” he says. “That was 25 years ago, and I’m still here.”

Hveding’s expertise in piping and hydraulic system design, as well as the mechanical and engineering aspects of the business, has kept him busy over the past 25 years, as the firm has grown and expanded. His shipboard and shipyard experience are being put to use in a whole new way with projects that include moving massive oilfield modules to the North Slope of Alaska on Crowley’s heavylift 455-series barges.

“It’s a new challenge, but it’s very interesting work,” he says. Challenges include securing the massive modules to the barges to withstand brutal North Pacific conditions, and positioning the modules in such a way that the point loads don’t crush the deck plates of the floating equipment.

The sealift-related engineering is a new field for the company, and Hveding is kept pretty busy managing a staff of five in his department while approving and stamping engineering drawings. “We have a new naval architect coming on that will be able to help me with some of that work,” he says.

One of the biggest issues facing the North Pacific fishing fleet is stability, and one of the industry’s most knowledgeable stability experts is Eric Blumhagen, Manager of Naval Architecture for Jensen.

Blumhagen started working for Jensen in 1988, right out of school- the school of civil engineering at the University of Washington. Blumhagen was pursuing a career in civil engineering, and took a few classes on naval architecture on a lark. “Acquaintances told me at the time that there was no future in the marine industry,” he says.

On joining the firm, Blumhagen started on stability issues and worked his way up through the company. “One of the secrets of engineering,” says Eric, “is the way you do things in college is only tangentially related to how you do things in practice.” He notes that practical experience is often the best teacher.

Fishing vessels are particularly prone to stability issues, says Blumhagen, because they are fundamentally opposite of other marine vessels, including cargo and passenger vessels. “For every other boat, you load up in port and go to another port and offload your cargo,” he says. “In fishing you start empty, go out and load, then come back in. The loading takes place in a much less-controlled environment, and it’s bound to lead to problems.”

Blumhagen says fishing is the last bastion of the unregulated marine industry, but has come a long way since he started in the field.

“We are light years ahead, especially on this coast, of where we were 13 years ago, as far as education and caring about stability,” he says. The Coast Guard has helped, sending out teams to educate the crab fleets about overloading their vessels. “I haven’t had to tell a crabber to take pots off the boat in 5 years,” he says. “You see everyone, from little boats to leaders in the industry like American Seafoods and Trident, caring about stability, and safety in general, and realizing that safety saves them money.”

Blumhagen is very happy with the recent acquisition by Crowley. “As a small company we might have had to turn down opportunities to upgrade software or purchase new equipment, because the cash simply wasn’t there,” he says. “Now with Crowley we can put a model together to show that the purchase will pay off in three years and be profitable, and we can get a check signed. That makes a huge difference in how we run our business.”

Another bonus from the Crowley purchase is the fact that Crowley brought Jensen in-house, installing the firm in the Crowley main offices at Pier 17 on Seattle’s Harbor Island.

“With the resources at pier 17 we’re right at the water to see tugs and captains and crews,” says Blumhagen. “There’s a lot of operational experience only a 2-minute walk away.” Blumhagen says this allows the Jensen staff to talk to crews. “As engineers we tend to not get much feedback from users,” he says. “We’ll hear from the owners, but not the deckhands. Now we can get perspective from the ‘boots on the deck plates’ and use operational experience to help improve our designs.”

Eric Blumhagen says the shift gives the company the opportunity to make a lot of changes and overcome some inertia. “Having Johan (Sperling) and Jonathan (Parrott) in their new positions just lays the groundwork to become a bigger company and sets us up to plan ahead for growth,” he says. “We can be as big as anyone else on the waterfront- we have the same resources they have now.”

Johan Sperling, Vice President of Jensen Maritime, will have been with the company for 10 years this May. Sperling, a native of Sweden, came to the US to attend the University of New Orleans on a tennis scholarship. “My father was a psychologist in Sweden, and I kind of rebelled against following in his footsteps. I felt the opposite of psychology was engineering, and the best engineering program at UNO was the naval architecture program, so I picked that.”

Before joining the firm, Sperling worked for the American Bureau of Shipping (ABS) in New Orleans, where he was hired while still in school earning his degree. “When I was at ABS I wanted out of New Orleans,” he says. “My Swedish blood couldn’t take the warm weather.”

Sperling came to Seattle, and set up interviews with the top three naval architecture firms. “Sue (Williams) interviewed me and offered me the job,” he says. He accepted the position without even interviewing with the other firms.

“I worked as a naval architect and became part owner after four years or so,” he says. “I started going to trade shows and representing the firm, and discovered that I had a knack for the business end.” In 2007 Sperling went to business school to sharpen his skills, then approached the leadership with a proposal to expand his day-to-day business role. He was given the company’s business development operations, working under Jonathan Parrott.

Parrott became President of the company after a slight reorganization of the company. “We had a situation a few years ago where we had some leadership changes, and Sue Williams took over in the interim.” The company explored its options, and determined that Parrott should step in and take over. “It was OK, but I’m a naval architect- I like drawing boats,” he says. “I was a decent administrator, but I wasn’t suited for it.”

In January of this year, Jensen announced a leadership reorganization. “The changes play to the current staff’s strengths,” says Sperling. “As of the first of the year, I officially became Vice President responsible for profit and loss, operations and personnel, and Jonathan Parrott became Vice President, New Design Development.”

Parrott’s new position will allow him to do the work he loves, which is designing vessels of all types. He is no longer involved in the day-to-day administrative tasks he has handled over the past 5 years, and instead is taking a more active role in Project Development and New Designs. This will include more travel to visit clients and shows world-wide, and the elimination of his administrative tasks will give him time to do that without negatively impacting how Jensen runs internally.

“He’s unique,” says Sperling, about Parrott. “He loves his design and engineering work, and wasn’t really happy dealing with the administrative side of the business.” Sperling is much happier with the business side, and sees nothing but opportunity for the company.

The company now has 26 employees, up from 12 when Sperling joined almost a decade ago.

“Our association with Crowley has given us the ability to approach big shipyards to discuss big projects,” says Sperling. “It took a while, but the yards are taking note that we can help them work with Crowley.”

Sperling says the Jensen family is adapting to the new situation as well- with a bit of help. “I have a list of things we’re not allowed to say anymore,” he says. These include, “We have always done it this way,” and “you are too young to know,” as well as “we tried that before.”

Sperling says the firm is working well in the new environment, and sees great things in Jensen’s future.

“We’re much more than we were before,” says Sperling. “There are no limits to what we can do with the backing Crowley has given us. If we haven’t at least doubled in size in a few years, we’re doing something wrong.”