Tuesday, November 6, 2012

Alaska and Hawaii See Upswing

By Jim Shaw

The economies of the 49th and 50th states are continuing to show a slow but steady improvement, with the value of tourism in Hawaii expected to nearly equal its 2006 record this year. According to the Hawaii Tourism Authority, tourists visiting the islands spent $9.59 billion over the first nine months of the year, a 20 percent increase from a year earlier. At that pace spending could reach $13.89 billion by year’s end, eclipsing the record of $12.63 billion set in 2006.

Taking advantage of the growth Norwegian Cruise Lines (NCL) has decided to make a $30 million investment in its Honolulu-based cruise ship, the 2005-built Pride of America, with the renovation work to be accomplished at Pearl Harbor. Another cruise line, Seattle-based InnerSea Discoveries, will send its 76-passenger Wilderness Explorer to the state next year to operate a series of seven-night cruises out of Honolulu.

At the same time, Alaska is preparing for an upswing in its cruise business as ships return to the state following a lowering of a controversial passenger tax. However, new fuel requirements may stunt this growth by 2015. The state is also moving forward with its plans to export more LNG while keeping a close watch on the Northwest passage where record low ice levels are allowing more navigation at a time when US icebreaker capacity has shrunk to a new low.

Growth Sparks Refurbishment
With forecasts improving dramatically for Hawaii’s tourism business, Norwegian Cruise Line will give its Honolulu-based Pride of America a major refit in March when the 80,439-gt ship enters dry dock for a 14-day stay at Pearl Harbor. According to NCL’s chief executive officer, Kevin Sheehan, more than $30 million will be spent on the vessel to add 24 new ultra-luxurious suites, four additional inside staterooms and four of the line’s unique Studio staterooms for solo travelers. The staterooms, two of which will measure 566 square feet while the remainder will measure between 414 square feet and 363 square feet, will be located on Deck 13. In addition, a Cagney’s Steakhouse and a Brazilian-themed steak house known as Moderno Churrascaria will be added to the ship.

Other amenities will include the installation of upgraded flat-panel TVs in all staterooms, improved wireless Internet access, new carpeting in all guest areas, updated physical fitness equipment and renovations to the vessel’s photo and art galleries.

Sheehan said NCL, which once operated three ships among the islands, is confident in the success of Pride of America and will continue to evaluate the possibility of bringing a ship back to Hawaii in the future.

InnerSea to Hawaii
Although Pride of America is the only large US-flag cruise ship operating among the Hawaiian Islands, Seattle-based InnerSea Discoveries has announced it will send its 76-passenger Wilderness Explorer ex-Spirit of Discovery to the state next year to operate seven-night cruises between Oahu and the Big Island. The 166-foot-long vessel will join the cruise line’s smaller 36-passenger Safari Explorer in the islands, which launched seven-night upscale cruises in the state last fall.

The Wilderness Explorer sailings will include visits to Oahu’s Kaena Point State Park and Waianae Harbor as well as stops at Opihihali; on Maui, Honomalino Bay; on Lanai and Kailua-Kona; on the Big Island.

“We are sending the Wilderness Explorer to Hawaii to add another option for travelers seeking an active island adventure at a moderate price,” said Tim Jacox, InnerSea’s executive vice president of sales and marketing. Jacox said that cruise fares for the vessel’s Hawaii sailings will start at $2,495 based on double occupancy and will feature a number of chances for both dolphin and whale-watching plus a night swim with giant Pacific manta rays and snorkeling at the Molokini undersea crater off Maui.

Pasha Adds Box Capacity
In the commercial cargo sector Pasha Hawaii Transport Lines began offering a container shipping service between San Diego and Hawaii this past summer using the 2005-built auto carrier Jean Anne after having the vessel modified to accommodate up to 100 TEUs. Pasha Hawaii general manager Reggie Maldonado said the new service was added because of requests by customers. “Pasha Hawaii had been approached by many of our customers to expand our specialized shipping services to include container shipping,” he said. “We are pleased to be able to offer this new service to our customers.” By operating the service to and from San Diego, Pasha’s entry into the West Coast container market is not in direct competition with Matson, which serves the ports of Long Beach, Oakland and Seattle, but Pasha clearly has more ambitions as its second ship, the combination container-ro/ro carrier Marjorie C, nears completion at the VT Halter yard in Mississippi. The 692-foot Con/Ro, due to enter service next year, will have the ability to carry 1,400 TEUs, both above and below deck, as well as up to 2,750 vehicle units. A stern ramp rated at up to 250 metric tons will also allow the new ship to carry heavy rolling stock and oversized cargoes.

Alaska Cruise Growth
In Alaska, the 2012 cruise season brought about 940,000 visitors to the state, a 6 percent increase from the previous season, with 2013 numbers expected to be even stronger. Some of the growth can be attributed to the reduction of Alaska’s cruise passenger tax from $50 per person to $34.50 per person two years ago. This saw several ships returned to the trade after long range itineraries were adjusted but John Binkley, president of the Alaska Cruise Association, said there were also several other reasons for the growth. “There were more ships brought back to Alaska and some had longer itineraries,” he noted. Binkley also said there were a few more shoulder season sailings operated in early spring and late fall as well as bigger vessels employed.
“For next year, it’s a combination of more ships, larger ships and more sailings for the ships that are coming,” he observed, “so the combination of all that should push us right over the million-passenger mark.” If this target can be met it would be about where Alaska’s cruise passenger numbers were five years ago. However, the cruise industry is already facing another obstacle to growth in Alaska, with the cost of new emissions rules – the first of which went into effect this past August - expected to have an even greater impact than the passenger tax.

New Emissions Rules
The cruise industry estimates that the new Environmental Protection Agency (EPA) offshore emissions rules for ocean vessels in US coastal areas have raised fuel costs by about 40 percent for cruise ships operating to Alaska, or about $220,000 on a typical 7-day cruise.

A further tightening of emission limits effective in 2015 will raise that to almost 70 percent over previous costs, and to absorb such a cost the per-passenger price of a seven-day cruise would have to go up by about $125 based on current fuel prices. Cruise ship operators say they can bear the 40 percent cost hike, as they have the passenger tax, but not the 70 percent increase. The 2015 rule change, “would harm us significantly,” said Stein Kruse, president and CEO of Holland America Line, one of the main cruise operators to Alaska. “We don’t see a way to pass that cost on to our customers, and we would have to take steps to mitigate the increase which will affect our deployments.” Cruise ship waste water in the 49th state is also a continuing problem and the Cruise Ship Waste Water Science Advisory Panel met in Juneau for three days during September to tackle the subject. It expects to submit its findings and recommendations to the Alaska state legislature early next year and have a new wastewater permit for the 2013 cruise season ready by the time the current permit expires in April.

Alaska Ship & Drydock
While the cruise industry is seasonal in Alaska, Vigor Industrial, the new owner of Alaska Ship & Drydock (ASD) at Ketchikan, wants to make shipbuilding a year-around industry. It is hoping the construction of a new $31 million assembly hall and production center at Ketchikan Shipyard will do the trick. “The new assembly hall positions the Ketchikan Shipyard to be very competitive for emerging shipbuilding opportunities in Alaska,” said Adam Beck, ASD President. “Its strategic position coupled with the exceptional expertise of ASD’s skilled workforce in meeting the needs of Arctic and north-water mariners, makes ASD an important part of Vigor’s ongoing growth plans.”

Beck noted that the Ketchikan yard is now capable of constructing ships of up to 500 feet in length, with the new 70,000-square-foot assembly hall located adjacent to the five-story production center to minimize material flow and maximize efficiency. Over the past nine months ASD has been building modules for Alaska Longline Company’s 136-foot by 40-foot factory longliner Arctic Prowler and expects to deliver the vessel in early 2013. Shortly after that a new $10 million steel fabrication shop will be opened at the yard, which is expected to assist ASD in the construction of a number of new “Alaska” class ferries wanted by the State of Alaska.

LNG Export Potential
On the horizon is the possibility of large-scale exports of natural gas from Alaska to Japan, a country that has been exploring energy options to nuclear power after the shutdown of all but two of its 53 nuclear reactors since last year’s 9.0-magnitude earthquake and resulting emergency at the Fukushima Daiichi nuclear plant. Alaska Senator Lisa Murkowski has been championing the state’s 35 trillion cubic feet of natural gas as a possible solution to Japan’s problem. “Alaska’s gas is the perfect fit to meet Japan’s energy needs,” she said. “An LNG line from the North Slope could deliver long-term, stable energy supplies to Japan at a reasonable price.”

Murkowski also noted that an LNG pipeline from the North Slope to tidewater in southern Alaska could deliver affordable natural gas to Fairbanks as well as other communities in Southcentral Alaska. At the same time, gas exports from the state wouldn’t present the same concerns and controversies that surround potential exports from the Lower 48 because of Alaska’s geographic position and the current glut of shale gas. Alaska has been sending natural gas to Japan for more than four decades from Cook Inlet and this is currently the only LNG currently being exported from the US.

Arctic Worry
While Alaska is examining potential gas exports to Japan, as well as watching Shell’s petroleum drilling efforts off its West Coast (see Pacific Maritime Magazine, August 2012), its Arctic frontier may be visited by more ships as northern ice continues to melt. A former Soviet research ship, the 100-passenger Akademik Ioffe, has been making several annual 14-day cruises in the Northwest Passage for a private tour operator while several sailboats were able to make the passage this past summer because of low ice conditions.

In July the US Coast Guard Cutter Healy, the nation’s only operational polar icebreaker, departed Seattle on the first of three Arctic missions scheduled for the year. Left behind were the service’s two heavy icebreakers, Polar Sea and Polar Star. The latter is currently undergoing $57 million worth of repair work at the Vigor yard in Seattle and is expected to return to service next year. The former, which suffered a major engine failure in 2010, was to have been scrapped starting this year but got a reprieve in October when the Senate voted to delay demolition.

In the meantime, China, Russia and Canada are all preparing to build new icebreakers. China, which successfully sent its A-2 class Xuelong through both the Northeast and Northwest passages this year, is having a new icebreaker built that will be capable of moving through ice up to 1.5 meters thick at a speed of 2 to 3 knots. At the same time, Russia, the world’s icebreaking leader, is preparing to build a $1.1 billion ship that will be capable of breaking ice 4 meters thick.

Closer to home, British Columbia’s STX Canada Marine is designing an icebreaker for the Canadian Coast Guard that will have the ability to break through ice 2.5 meters thick. The US Coast Guard has argued it needs a minimum of three heavy icebreakers and three medium icebreakers to maintain a constant presence in the Arctic but, to date, Congress has not appropriated money for any new construction and some Republicans have argued that both heavy US icebreakers should be mothballed until the Coast Guard can more sharply define its Arctic mission.