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Shipbuilders Council of America
20 F Street NW, Suite 500
Washington, DC 20001
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SCA Weekly Report | July 29 - August 2, 2019
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REMINDER: Register for the Fall 2019 Meeting
Only 2 Weeks Left to Register for the Shipyard Tour
This is a reminder to register for the 2019 SCA Fall Membership Meeting. You only have 2 weeks left to register for the fall meeting and still be able to attend the shipyard tour of Newport News Shipbuilding. Do not miss out on this exciting opportunity!
Registration for the SCA meeting is $550 per attendee. Please note that the registration fee increases to $650 after August 15, 2019.
A draft schedule of events can be found HERE.
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Budget Agreement Update
On Thursday, the Senate approved a two-year bipartisan spending bill by a vote of 67-28, setting the stage for a presidential signature. The bill would set a topline spending amount of $738 billion for fiscal 2020 and $740.5 billion for fiscal 2021. The budget sets a framework for spending as Congress will still need to pass individual appropriations bills ahead of the end of the fiscal year ending September 30th.
The agreement also ends sequestration, put into effect through the Budget Control Act of 2011.
Trump Hints at Future Defense Budget Cuts
In an interview with CSPAN, President Trump said that defense cuts being on the horizon. The President said, “we now have a very strong military. A lot stronger after this last budget. And then at some point very soon I'll be able to cut back. But we had to rebuild our military.” The full interview is available to view HERE.
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Gilday Testifies Before Senate Armed Services Committee; Confirmed By Full Senate
On Thursday, the Senate confirmed Vice Adm. Michael Gilday to serve as the next Chief of Naval Operations. Gilday had testified on Wednesday before the Senate Armed Services Committee, which questioned the three-star admiral about issues plaguing the Navy's new Ford-class aircraft carriers. The program has faced delays, cost overruns, and issues with new technology like its Advanced Weapons Elevators.
RELATED:
Senate Commerce Committee Passes 2-Year U.S. Coast Guard Reauthorization Act
On Wednesday, the Senate Commerce Committee passed S. 2297, the two-year Coast Guard Authorization Act. Among other things, the bill would authorize funding for three new heavy polar icebreakers as well as three medium icebreakers. The committee also adopted several amendments including:
- Baldwin (D-WI): Related to the acquisition of a heavy Great Lakes Icebreaker
- Cruz (R-TX): To provide restrictions on the members of the Maritime Transportation System Advisory Committee (MTSNAC) that represent Federal agencies
- Cruz (R-TX): To Increase the number of members on MTSNAC
- Scott (R-FL): To prohibit the operation or procurement of foreign-made unmanned aircraft systems
The Committee also considered two anti-Jones Act amendments offered by Sen. Mike Lee (R-UT). The first Lee amendment, defeated by a 22-4 vote, would have granted the executive branch broad and unprecedented waiver authority to allow the entry of foreign-flag vessels into domestic markets. The second Lee amendment, defeated by a 22-4 vote, would have allowed the Coast Guard to build its vessels in NATO countries. Joining Sen. Lee in voting for the amendments were Sens. Cruz (R-TX), Gardner (R-CO), and Blackburn (R-TN).
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National Bureau of Economic Research Releases Study on China’s Industrial Policy
In July, the National Bureau of Economic Research released a report entitled China’s Industrial Policy: An Empirical Evaluation. According to the summary, the paper examines an important industrial policy in China in the 2000s, aiming to propel the country's shipbuilding industry to the largest globally. Using comprehensive data on shipyards worldwide and a dynamic model of firm entry, exit, investment, and production, we find that the scale of the policy was massive and boosted China's domestic investment, entry, and world market share dramatically. On the other hand, it created sizable distortions and led to increased industry fragmentation and idleness.
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U.S. Coast Guard Calls for Industry Proposals for BWMS Testing
The U.S. Coast Guard has released a draft policy letter on the implementation of new nonviable-organism testing protocols for ballast water management systems, as required by the passage of the Vessel Incidental Discharge Act (VIDA). VIDA requires the Coast Guard to adopt nonviable type approval testing procedures, which the agency has long opposed. In a policy letter published last week on VIDA's implementation, the USCG said that it was not currently aware of any suitable protocols for nonviable testing, and it asked industry to submit proposals instead.
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Audit Finds DOD Agencies Failed to Check Adequacy of Contractor Cybersecurity
A new Defense Department inspector general audit has found DOD agencies routinely failed to check whether defense contractors were protecting sensitive information on their networks with the required security controls. The July 23 redacted report, "Audit of Protection of DOD Controlled Unclassified Information on Contractor-Owned Networks and Systems," shows DOD contractors did not consistently implement security requirements like multifactor authentication, while the military services and defense agencies didn’t have processes to verify whether the companies were using the cybersecurity controls.
The audit was requested by former Defense Secretary Jim Mattis after the reported breach of a Navy contractor by Chinese operatives resulted in the theft of unclassified but sensitive data related to advanced submarine warfare capabilities.
IG Report Exposes Serious Security Flaws at MARAD
DOT's inspector general gave a scathing review of cybersecurity measures at the Maritime Administration after an audit revealing that the IG hacked into MARAD's network, sending successful phishing emails and breaking into a locked office along the way. During the review, the watchdog got unauthorized access to MARAD's network using what a new report calls a "basic hacker technique." The IG's office then placed hacking tools on the network, which went unnoticed, and was able to access records containing personally identifiable information. If those records had been found by malicious hackers, the report says, they could have been used to steal citizens' identities, and the resulting credit monitoring fees would have cost MARAD $103 million, in addition to "serious public embarrassment."
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DOE Approves LNG Exports from Gulf LNG Project in Mississippi
Earlier this week, the U.S. Department of Energy issued an order allowing Gulf LNG Liquefaction Company LLC (GLLC) to export domestically produced liquefied natural gas (LNG) from the Gulf LNG Liquefaction Project. The project will be located in Jackson County, Miss., near Pascagoula. The project, owned 50% by Kinder Morgan’s Southern Gulf LNG Company LLC, will add liquefaction and export capabilities to Gulf LNG Terminal, an existing import terminal owned by Gulf LNG Energy LLC.
First Big U.S. Offshore Wind Project Hits Snag Due to Fishing-Industry Concerns
Trump administration infighting is holding up approval of the first major U.S. offshore wind energy project, with agencies sparring over whether the proposal does enough to protect the fishing industry, according to interviews and agency documents. The delays are a setback to President Donald Trump’s efforts to fast-track big energy infrastructure projects and could threaten the administration’s plans to launch a promising new domestic industry. Vineyard Wind, a joint venture between Copenhagen Infrastructure Partners and Avangrid Inc, was scheduled to begin construction this year 14 miles (23 km) off the coast of Massachusetts to power more than 400,000 homes by 2021 – making it the first large-scale offshore wind development in the United States. But a federal environmental study crucial to its permitting has been repeatedly delayed since April, according to published government timelines, without any public explanation from Trump administration officials. Vineyard Wind has said the delays could threaten the project’s viability.
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President’s Column- Answering the Call
Seafarers International Union – 1 August 2019
When a large number of civilian-crewed military support ships activated early last month, our members and port officials stepped up and smoothly filled the jobs on all three coasts. It’s a given that the SIU always answers the call, but when you combine a large-scale activation with a short deadline, there are bound to be challenges. I’m proud of the way our members in the halls and our people behind the counters came through under pressure, though I’m not surprised. Those opportunities for a bright future also require ongoing political action, not just on Capitol Hill but at every level of government. Our industry is heavily regulated, which means we constantly have to educate lawmakers about the U.S. Merchant Marine. And of course, you all know about the bogus attacks on the Jones Act, which is a full-time battle. File that one under “never-ending challenge,” but be assured we are winning, while not taking anything for granted.
It’s Past Time for the United States to Get Out of Puerto Rico’s Way
Truthout – Julia Sharpe-Levine – 29 July 2019
After almost two weeks of mass protests in which an estimated half-million Puerto Ricans — more than 15 percent of the island’s population — took to the streets to denounce government corruption, Gov. Ricardo Rosselló finally announced his resignation. Like Trump’s tweets, what this proposal fails to consider — apart from the close collaborative relationship the leaked messages revealed between Rosselló and the board, and the clear rejection of the board by the Puerto Rican people — is the central role that colonialism played in laying the groundwork for today’s political and economic crisis. For instance, the 1920 Jones Act, which decreed that only U.S.-built, -crewed, and -owned ships could carry goods between U.S. ports, has had devastating repercussions for Puerto Rico’s economy, which pays twice as much for goods from the U.S. mainland as neighboring islands not covered by the act, such as the U.S. Virgin Islands. A 2012 report from two researchers at the University of Puerto Rico estimated that the island lost $17 billion from 1990 through 2010 as a result of the Jones Act, and other studies have estimated even greater losses for Puerto Rico, Hawaii, and Alaska, ranging from $2.8 billion to $9.8 billion each year.
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Philly Shipyard Begins Work on Dry Docking Contract for MARAD Ship
Philly Shipyard has commenced work on its first contract to perform modernization, repair and maintenance work on a government ship, the SS Antares. The SS Antares is an Algol class vehicle cargo ship, owned by the U.S. Department of Transportation’s Maritime Administration (MARAD) and managed by TOTE Services, and undergoes routine repair and maintenance during its scheduled dry docking every five years.
Pierluisi Appointed Puerto Rico Secretary of State
On Wednesday, Governor Ricardo Rosello of Puerto Rico announced that he had appointed former Delegate to the House of Representatives Pedro Pierluisi as Secretary of State for the island. Rosello announced that he would be resigning from his post on August 2nd after several weeks of protests following the leaks of text messages between the Governor and members of his cabinet deriding other government officials, hurricane victims and constituents. Puerto Rico’s succession laws state that the Secretary of State assumes the governorship should the governor become indisposed. Protestors had called for a new Secretary of State to be appointed following the text message leaks because of the former Secretary of State’s participation in that discussion. Governor Rosello is expected to resign today.
MARAD Awards $7 Million in Marine Highway Grants
Earlier this week, MARAD announced the designation of nine Marine Highway projects and a Marine Highway route that will benefit Connecticut, Florida, Michigan, New York, Oregon, Texas, Virginia, Washington State and American Samoa. Marine highways are navigable waterways that can be used as alternate options to traditional shipping methods.
ONE Posts First Profit
Japanese carrier Ocean Network Express (ONE) has posted its first quarterly profit since the merger of the container businesses of K Line, MOL and NYK last April. ONE recorded a net profit of $5m in the first quarter of its fiscal year, which ends 31 March 2020, and has upgraded its outlook to a full-year profit of $90 million. The carrier said it had achieved profitability “at a higher pace than estimated”, after taking action to reverse the $586 million loss incurred in its first year.
Calls for IMO 2020 Grace Period Mount as Deadline Looms
Growing safety concerns around the IMO’s sulfur cap on marine fuels has led to talk of a period of “permitted noncompliance” following the January implementation date. With just five months to go before IMO 2020, there is much to do for ships not fitted with exhaust gas cleaning scrubber systems, which allow the vessels to continue to consume heavy fuel oil.
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If you have any questions, please do not hesitate to contact Paula Zorensky on the SCA staff.
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