SCA Weekly Report | October 31 - November 4, 2022

Shipbuilders Council of America

20 F Street NW, Suite 500

Washington, DC 20001

www.shipbuildersusa.org

SCA Weekly Report | October 31 - November 4, 2022

ANNOUNCEMENTS

Add Your Voice in Support of AOWFA

The American Offshore Worker Fairness Act (AOFWA) would require foreign vessels to utilize either U.S. mariners or citizens of the vessel’s home country while operating in offshore energy activities in U.S. waters.

This would change the current practice where foreign vessels utilize crew members from low-wage countries at day rates no American would or should accept. This unfair practice gives foreign vessels a competitive advantage over U.S. vessels and takes jobs away from American mariners.

Closing this loophole will greatly assist American mariners and U.S. companies participating in both the offshore oil and gas and offshore wind industries. The legislation further reduces the cost disparity between U.S.-flagged and foreign-flagged vessels by:

1. Requiring foreign mariners working in the U.S. offshore energy markets secure a Transportation Worker Identification Credential (TWIC). Current regulations allow such mariners the option to secure a TWIC while U.S. mariners are required to secure and hold a valid TWIC.
2. Limiting the number of visas that can be issued for each foreign vessel operating in U.S. waters and takes steps to ensure that these visas are connected to the mariner’s work on that vessel.
3. Requiring each foreign vessel in U.S. offshore energy markets to prove their ownership structure annually.
4. Requiring the U.S. Coast Guard to annually inspect foreign-flagged vessels operating in U.S. offshore energy markets to ensure compliance with these changes.

CLICK HERE to send a letter of support for AOWFA to your Congressional Delegation

CONGRESSIONAL NEWS

Offshore Energy Battle Looms Over ‘Must Pass’ Defense Bill

One of the most underappreciated high-stakes legislative fights in recent memory — featuring some of the strangest political bedfellows — is coming soon to a lame-duck session near you.

The issue: House-passed legislation attached to that chamber’s version of the National Defense Authorization Act that would require the use of U.S. crews or similarly paid workers on foreign vessels servicing offshore energy projects.

The idea is that by barring cheaper labor from low-wage countries, U.S. offshore services firms can better compete on price and ultimately drive more domestic shipbuilding. But powerful forces working against the measure have kept it out of the Senate’s NDAA, with both sides scrambling to influence the post-election outcome.

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NAVY NEWS

Navy Plans to Seek Block Buy for Next Five Columbia-Class Subs

he Navy wants to purchase the next five hulls for the Columbia-class ballistic missile submarine program in a five-ship block, a plan that will require special permission from Congress but also has the potential to yield billions in savings.

Rear Adm. Scott Pappano, the program executive officer for strategic submarines, told an audience at the Naval Submarine League symposium this week the choice to purchase hulls three through seven in a block is meant to send a “positive signal” to the industrial base as well as maintain the program’s notoriously thin schedule margin.

A “block buy” essentially means the Navy would place orders for the long-lead time materials for several ships to the industrial base through a single contract, as opposed to traditional ship contracting in which deals are inked and ships are bought individually.

The benefit for the Navy is the deal results in economic order of quantity savings, essentially buying wholesale — and when the program is as large as Columbia, that can mean billions of taxpayer dollars saved. The incentive for industry to cooperate is that it creates a guaranteed level of work — and money — well into the future. The Navy plans to spend some $128 billion for a total of 12 Columbia-class subs.

Navy Wants to Initiate ‘Scoping Study’ to Examine Shipyard Capacity

Within the next year the US Navy wants to initiate a “scoping study” aimed at determining if the service needs to establish a fifth public shipyard to support future submarine maintenance, according to a senior officer involved in the task, a notion that previously met with some resistance from lawmakers.

Rear Adm. Jonathan Rucker, program executive officer for attack submarines, told reporters at the Naval Submarine League symposium that industry frequently asks the Navy about considerations for a new public shipyard. He also stressed that the scoping study was preliminary and there is no clear consensus in the service yet about whether another shipyard is even necessary, let alone whether it will be built.

Navy Issues RFP for Expendable Drone Mother Ship

The Navy may soon launch a program for an expendable, uncrewed ship that would ferry other kinds of drones to missions at sea. The idea is for the unmanned ship to cost less than other traditional Navy vessels and last only five years instead of 30 years like other ships, according to a notice to industry issued Monday. The notice refers to the ship as “attritable,” meaning they are not built to survive an attack.

The Navy wants to hear from companies on the best acquisition approach for the program. That could involve building prototypes that are used operationally after testing, a traditional Pentagon program of record, or a non-traditional approach. The cost estimate in the proposal should be for a lead mother ship and 10 additional vessels in the same class. The Navy envisions awarding a design contract in mid-fiscal 2026, and wants delivery of the first drone mother ships within 24 months of contract award.

OFFSHORE WIND NEWS

Dominion Settles on Performance Issues That Threatened Wind Farm

Dominion Energy has reached a settlement agreement regarding the performance guarantees established by Virginia regulators that had threatened to derail the development of the 2.6-gigawatt Coastal Virginia Offshore Wind (CVOW) project. The company reports that if approved by the regulators, the settlement resolves its appeal to the state with a shared financial responsibility and increased regulatory oversight of the operations. The company has also continued to take further steps to de-risk the project while reaching the agreement.

At issue was a performance guarantee for the wind turbines to perform at a 42 percent capacity factor or better in any three-year period, with Dominion required to cover any shortfalls. The company filed an immediate appeal of the ruling highlighting that there were no exceptions for natural disasters such as hurricanes which would be beyond its control as well as a cyberattack, climate change, or any other factor.

IN THE NEWS

Philly Shipyard Wins Contract to Build Three Aloha Class LNG-Fueled Containerships for Matson

Earlier this week, Matson announced that they signed a contract with Philly Shipyard for the construction of three additional 3,600 TEU Aloha class ships for an aggregate price of $1 billion. The first vessel is expected to be delivered in the fourth quarter of 2026 with subsequent deliveries in 2027. The new vessels will join Matson’s two Aloha class ships previously delivered by Philly Shipyard in 2018 and 2019. The 854-foot vessels are the largest containerships ever built in the U.S. and were ordered in 2013 at a cost of $418 million for the pair. The vessels are the fastest in Matson’s fleet, designed to operate at speeds in excess of 23 knots.

Similar to those sisterships, the new vessels will be equipped with dual fuel engines that are designed to operate on either conventional marine fuels or liquefied natural gas (LNG), as well as other “green ship technology” features, such as a fuel-efficient hull design, double hull fuel tanks and freshwater ballast systems. While the earlier ships require some modification to operate with LNG, the new ships will be delivered LNG-ready.

The Diesel Market is in a Perfect Storm as Prices Surge, Supply Dwindles Ahead of Winter

A perfect storm is taking place in the diesel market, with dwindling diesel reserves, a drought on the Mississippi River pushing more product to rail and truck, and a possible rail strike leading to a surge in prices that is expected to continue. Diesel prices have increased by 33% for November deliveries.

“The national average price for diesel today is $5.30 per gallon and is expected to go up 15 to 20 cents in the next few weeks,” said Andy Lipow, president of Lipow Oil Associates, LLC. Reserves for diesel this time of year have not been this low in decades, with the greatest shortfall in the Northeast region including New York and New England.

Diesel inventories in the New York/ New England markets are facing an acute crisis, down over 50% since last year and at the lowest level since 1990, according to Lipow. Lipow said East Coast refineries are making as much diesel as they can and dependent on tankers and barges for supply, any weather delay causes a terminal to run out of product. According to the EIA, East Coast refineries operated at 100% capacity in June and July. “Last week, they operated at 102% of capacity,” Lipow said. “No more supply is forthcoming from the four East Coast refineries.”

Keel-Laying Ceremony Held for NOAA Oceanographic Research Vessel

Late last week, The National Oceanic and Atmospheric Administration (NOAA), the U.S. Navy, and Thoma-Sea Marine Constructors held a keel laying ceremony for Discoverer, a new oceanographic research vessel being built for NOAA. The 244' Discoverer will support a wide variety of NOAA missions, ranging from oceanographic research and exploration to studying marine life, climate, and ocean ecosystems. Discoverer and its sister ship, Oceanographer, will incorporate the latest clean energy technologies, including vessel emission controls and high-efficiency diesel engines. NOAA’s fleet of research and survey ships is operated, managed, and maintained by NOAA’s Office of Marine and Aviation Operations. NOAA ships are crewed by NOAA Corps officers and civilian professional mariners.

If you have any questions, please do not hesitate to contact the SCA staff.