Marine Transportation System

What Will This Congress Do?

In Congress, Infrastructure, Marine Highway, Politics, Ports, Security, Surface Transportation Policy, Water Resources on January 9, 2015 at 1:45 pm

Nearly a dime’s worth of days into the New Year, this is no time to rehash what happened in the last Congress. A new Congress—the 114th of our maturing nation—is now underway. And what a new Congress it is.

Republicans now rule Capitol Hill and veteran Senate Democrats are being reminded of how it feels to be called Minority. (Republicans have held the majority in the House and Senate more often than not in the previous 10 congresses, since 1995.) At the other end of the avenue is a president who has confronted more than his share of domestic and international crises. January is the starting gun for his latest test – working with the 114th Congress and its routinely unfriendly and uncooperative Republican membership. In that respect, so far, there is not much new about this Congress.

The leaders in the House and Senate themselves face internal and external challenges as they assume on behalf of their caucuses the collective role of governing. Politico used apt “cliff” and “landmine” metaphors for what faces Speaker Boehner (R-OH) and Majority Leader Mitch McConnell (R-KY) as they advance legislation through their own caucuses. The leaders know that the GOP is well positioned to turn around the “do-nothing Congress” label that the Republicans made possible—even intended—over recent years. (Yes, the dethroned Harry Reid hardly facilitated the legislative process in the Senate but Messrs Boehner and McConnell are faced with colleagues in the rank and file who came to Washington to stand in the way of government. Twelve Republicans found reason to vote against returning Boehner to the Speaker’s chair, as if he is didn’t well serve the cause(s) of conservative Republicans.) This go-round Democrats, with little control over committees, the bills they produce, and the floor schedule, will not be plausible scape goats for a failure to legislate. And in the Senate McConnell may be 6 votes shy of a filibuster proof majority but he has a pool of moderate Dems and an Indie who are potential “ayes,” such as we will see with the upcoming Keystone XL vote.

The success of a legislature is measured by legislative productivity. Can this Congress be productive with the Obama White House, which has vetoed exactly two bills in the past six years?

As previously noted, President Obama also will be tested. How well he will deal with the new Congress, his constitutional partner in making law? No doubt we will see more vetoes in his last two years in office but his legacy will depend more on what is accomplished than what he blocked.

In other words, they need each other. Few points will be awarded if progress is not seen in Washington. So, the question is whether the president can find within him the resolve of Bill Clinton, who famously made lemonade out of the GOP blowout of 1994, and whether the Republicans will function as if they want to be remembered as the “did-something Congress.”

All of that is background to a rundown of just some of the issues and questions that are of interest to the port/maritime industry and the larger freight sector.

The president put his previously stated policy view into surprise policy action with his late December announcement on normalizing diplomatic relations with Castro’s Cuba. Any number of ports, exporters and others were pleased by the news. There is bipartisan support among some in the House and Senate but Congress will either come down hard on the White House initiative or, rhetoric aside and with an eye on what Castro might do in the months ahead, show a willingness to reconsider the long-standing trade embargo that can only be ended by a change in law.

Last year, Congress came close to hitting the “target” of spending $1.2 billion from the Harbor Maintenance Trust Fund. The enacted water resources law (WRRDA 2014) sets ambitious, incrementally higher targets for Congress to meet with funding for channel maintenance and other work authorized to be supported by trust fund monies. Will the Republicans, as the saying goes, “put trust back in the trust fund” or continue to allow the Harbor Maintenance Tax assessment on cargo to be used as general revenue applied against the Federal budget deficit?

Last year the House and Senate produced a “sense of Congress” statement generally in support of the US-flag and Jones Act sectors. It can be interpreted as reaffirming existing maritime policy. Around the same time John McCain (R-AZ) reaffirmed his own maritime policy to undo the Jones Act in a speech to the Heritage Foundation. He and the petroleum industry actively urge changes to current law, which is to say, the end of the Jones Act. Meanwhile the Maritime Administration and the Secretary of Transportation will steer a draft National Maritime Strategy through the policy and political wringers of the White House. What will that document say about Administration policy and what if anything needs to be done to improve the US merchant marine or American ports?

In 2015 Congress will have to tackle surface transportation policy and funding. Will it include real money to renew freight corridors and build new infrastructure to support modern, intermodal commerce? Will Congress bite the bullet and find the money to pay it or, for that matter, to save the failing Highway Trust Fund? Past refusal by Congress to tackle this issue has depressed road and transit funding and been a principal expression of austerity economics—advocated by most Republicans, but abetted by many Democrats who also have avoided new revenue proposals—during a time when the country was climbing its way out of The Great Recession. Should this Congress produce a transportation bill that only perpetuates an inadequate level of funding and papers over the structural deficiencies of Highway Trust Fund financing it will not make for a convincing accomplishment.

The issues that may arise in the new Congress are many. Committees are establishing their work plans for the year ahead. What will the Republican majority serve up in the way of budget cuts and appropriations? Will a uniform ballast water policy finally become law? Will the TWIC reader rule that seems to assume container terminals to be at a lesser risk be implemented without alteration? How will Title XI vessel financing fare and will marine highway policy wither from inattention? Will Congress see a Federal role in helping ports, cities and businesses plan for rising sea levels and assist in improving waterfront infrastructure for the coming decades? Will the Coast Guard prepare helpful guidance and rules on cybersecurity and will the industry actively engage in developing it? Will Federal policy foster clean fuel initiatives for the freight modes and encourage off-shore wind energy development? How will the committees answer shipper complaints about railroads? Will a Republican Congress and a White House Democrat come to terms on tax reform, infrastructure funding, and trade policy?

At bottom, how well do the legislators of the new Congress—both Republicans and Democrats—understand, and how will they respond to, these and other issues of relevance to the port/maritime sector?  Pbea

New Congress. New Maritime Policy?

In Congress, Leadership, MTS Policy, Politics on November 15, 2014 at 3:30 pm

As the first draft of this piece was being put to page some small percentage of voters were practicing their citizenship at the polls. The prospects for the Democrats, as a whole, were not very good. Ten days later, and as I now refine this text, the field still is being cleared of Election Day debris. Not just the sloppily pinned signs on the road medians but prognosticators’ tattered reputations and a few shattered incumbents were strewn on the political landscape in need of reclaiming. By far more than the paid pollsters divined in the weeks before November 4, the Republicans were handed the reins in Congress and a number of State Houses. The party consolidated its control of the House and leapt into the majority in the Senate with at least 53 seats and a net gain of eight. The final count awaits a December conclusion in Louisiana where GOP prospects in the run-off are good.

Public dissatisfaction with government in Washington is close to universal but for reasons I will leave to others to explain the Republican Party benefited substantially more than its competition and that will keep them in power, especially at state level, for several years to come. As if speaking for his fellow Republicans across the country re-elected Gov. Sandoval (R-NV) said, “This is a night to savor.”

By the numbers, incumbent US Senate Republicans will be vulnerable in 2016…but let’s not get ahead of ourselves. The matter before us is the next two years of the 114th Congress.

This week the rank and file of both parties in both chambers opted to retain current leadership. Soon we will learn the names to inhabit chairmanships, ranking minority posts, and committee lists. Meanwhile, in the current lame duck session the legislature is expected produce appropriations to keep the government functioning through the fiscal year. They will decide whether the Keystone XL pipeline project should be started, and take up a few other must-pass items before bringing the 113th Congress to a close.

Long before Election Day the US-flag maritime community nervously eyed voter surveys because of what a possible Republican return to power in the Senate could mean. Now, the controlling party is known; how that majority will be reflected in maritime related legislation will be something to watch.

One can easily find Republican legislators who are considered friends of the US maritime industry, whether driven by interest in US-flag cargo preference policy, shipyard activity, the labor force, other sectors that benefit by existing policy, or just a sense of what a nation should say about its maritime capability, security, etc. But that doesn’t mean that the maritime community in Washington, DC was sanguine or unconcerned about the prospect of the GOP taking the lead in producing legislation. In fact, unions, shipyards, US flag operators and others with a stake in the status quo were in varying degrees of pre-election anxiety.

The community has been frustrated with the Obama Administration’s willingness to ease cargo preference requirements. Now, potentially as problematic, Republican legislators who, for philosophical or constituency reasons, have not been inclined to extend Ex-Im Bank authorization or fund cargo preference policy—both key issues for the US merchant marine—will have more influence in policy setting. Add to that the fact that congressional support for the Jones Act is lacking in some quarters where the marketplace is revered and shipper interests—including domestic petroleum producers—would exchange the US flag for lower vessel costs. Some ports hit hard by disruptive events and who need short term Jones Act waivers in order to manage logistics crises, may find some more receptive offices.

A few years ago Jones Act and US-flag interests started Maritime Industry Congressional Sail-In Day to lobby the Hill with a particular aim to educate legislators who are new to maritime issues. The old guard–those who recall there once was a House Merchant Marine and Fisheries Committee, soon 20 years defunct—are nearly gone from Congress as a consequence of natural and electoral attrition. (The American maritime sector has suffered from attrition as well, with a reduced presence in international shipping and, in some respects, an aging Jones Act sector.)

More recent Republican additions to Capitol Hill are a decidedly more conservative population—some of them Libertarians and self-identified tea partiers—who are more market- and less government-oriented. They arrive in Washington with little knowledge of the American maritime tradition and even less of its policy and the rationale behind that policy. They read material from policy critics and, presumably, its advocates.

On the Senate Commerce, Science & Transportation Committee are Marco Rubio (R-FL), Ted Cruz (R-TX) and Ron Johnson (R-WI) who, for example, have opposed reauthorizing the Ex-Im Bank (“corporate welfare”) and could be in the mix to chair the subcommittee with jurisdiction over maritime policy. Veteran John McCain (R-AZ), the likely next chair of the Armed Services Committee, has a record of proposing the repeal of the Jones Act. Referring to a McCain quote in a Wall Street Journal blog, a union newsletter carries this heading: “Sen. John McCain Calls Jones Act’s National Security Benefits Laughable.”

Maybe change is coming, maybe not.  If anything, there is a good chance we will see more jousting on US maritime policy.   Pbea

Europe is Breaking the Egg

In Efficiency, Energy/Environ, Infrastructure, MTS Policy, Ports on October 5, 2014 at 11:16 pm

Before we get to John Graykowski’s “Europe is Breaking the Egg” I would like to pose my own chicken-and-the-egg question as one might ask it here in Wonkington, D.C. Which comes first: the policy or the strategy? One might also ponder how good is a forward looking strategy when the policy is of the past century. The Maritime Administration is preparing a “National Maritime Strategy.” It is a principal objective of Administrator Chip Jaenichen and probably has been encouraged by congressional supporters of the U.S. flag industry who, like most of us, have not liked seeing the merchant fleet decline but who, unlike us, are in a position to redefine U.S. maritime policy. The piece below begs the question whether a new national maritime strategy would benefit by first fixing the national maritime policy that for the most part has been in place while the United States lost its prominent role in world shipping. Certainly it would make it easier on Mr. Jaenichen and the Secretary of Transportation to have an updated national policy framework as a basis for new strategies to get to where we need to be. John Graykowski’s article first appeared in Pacific Maritime Magazine on September 1, 2014. You can find it here. He poses the policy question in the context of a growing American supply of natural gas and the multiple benefits to be realized by fostering a bunker switch to LNG. This is the third in his series for MTS Matters on the subject of developing LNG distribution infrastructure to advance the adoption of LNG as a marine fuel. It also is a recurring theme in these pages.  Pbea

We may soon be able to retire the tiresome “chicken and egg” cliché to describe LNG development, since there has been movement in the last year in Europe and the United States that indicates the circle may be breaking; but it’s too soon to tell whether the movement is temporary or permanent. What is apparent, however, it that Europe has moved forward in a more focused and strategic way, to create LNG infrastructure and markets, which is yielding results. By 2016, permanent LNG bunkering facilities will be in operation in Rotterdam and Antwerp – both among the largest ports in the world – thereby signaling that the supply uncertainties have been resolved. It bears asking, therefore, how Europe has done this, and whether we should consider similar measures here if the goal is to expand LNG as a marine and transportation fuel throughout the United States.

In 2008, Norway effectively made LNG the preferred fuel choice for marine operators through a combination of regulatory mandates relating to Nitrogen Oxide (NOx) and financial incentives covering up to 80 percent of the capital cost of the LNG-related components. Following these actions, the number of Norwegian vessels using LNG as a primary fuel went from 3 to 12 vessels in five years, with more than 50 vessels of various types now under construction along with the supporting LNG infrastructure. Concurrent with this, Norway is addressing the regulatory and operational issues, and is now seen as a leader in marine LNG development.

The European Union (EU) is also pursuing a comprehensive effort to increase LNG as a marine fuel with the goal of developing LNG infrastructure in every major seaport by 2020, and every inland terminal by 2025; a total of 139 ports across Europe. This goal coincides with estimates that by 2020, 1,700 dual fuel vessels will be built or converted worldwide, with many of these operating in, or calling on, the EU.

By 2020, the United Arab Shipping Corporation (USAC) dual fuel container vessels will be operating between the Far East and Europe. This activity will spawn additional interest and movement in Europe and among its global trading partners leading to a rapid transition from diesel to LNG as a major transportation fuel.

The EU is employing a “carrot and stick” approach combining financial support for the conversion and construction of vessels and infrastructure with increased regulation. Projects such as the Trans-European Network for Transport (Ten-T) and the Rhine-Main-Danube initiatives have produced significant results. $139 million has already been allocated to 7 Ten-T projects to support vessel conversion and LNG infrastructure development, with more funding promised. Support of up to 50 percent of project costs is available for vessel conversion, construction and infrastructure, and just recently the first inland dual fuel barge was delivered and will shortly begin operations.

The EU adopted an approach that combines: (1) clear and defined goals that LNG will displace traditional marine fuels; (2) increased environmental regulations; (3) financial incentives to spur the initial transition; and (4) coordination among ports, governments; regulatory agencies and stakeholders to create uniform regulatory structures. Given the intrinsic advantages of LNG, there is recognition that the market would likely drive toward greater adoption of LNG without assistance. However, many vessel owners and gas suppliers are reluctant to be the first to make the investments in LNG vessels and infrastructure regardless of the advantages. The EU has determined that these measures are necessary in order to reduce perceived risks, accelerate market decisions, and attain the stated goals for LNG deployment.

In contrast, the United States does not have a national policy to support LNG as a marine and transportation fuel. Instead, our LNG market is developing project-by-project, driven by first-adopters such as Harvey Gulf, Tote, Matson, and Crowley with no federal support or strategy; despite the tremendous benefits LNG offers to the country. While we have seen some movement in disparate locations, there is not so much as a policy statement that commits this country to the development of LNG as a transportation fuel; and there are certainly no programs to support the construction of vessels and infrastructure to make this possible nor to address regulatory uncertainties and enhance public acceptance of LNG.

The challenges and obstacles that exist here are no different from those in Europe, and LNG is new to everyone. It appears, however, that the EU has tackled this question in a more coherent, direct, and proactive way that is rapidly producing results. To be sure, there are major differences between the US and the EU in terms of governmental structures and processes. The EU can promulgate Europe-wide regulations and implement promotional programs, and has a history of doing so. Here, that role would be shared between Congress and the Executive Branch, and that is yet another challenge given the continuing dysfunction between both branches of government.

A policy declaring that LNG as a transportation fuel is in the national interest, and committing to the support, promotion and encouragement of its development would have several immediate effects:

  • It would be a clear signal to all potential stakeholders that LNG is “real” and has the backing of Congress and Administration;
  • It would put federal agencies on notice – and could require them– to collaborate with industry on practical and uniform regulation, reduced delays and greater certainty; and
  • It could include limited and temporary financial incentives such as loan guarantees or tax incentives to accelerate LNG conversion, because early adopters should be encouraged in order to build a sustaining market that benefits the entire country.

Federal resources are constrained, but without a national commitment, LNG may not gain the critical mass and momentum to create a long-term viable market. Regulatory direction is important, and does not involve direct costs, but if combined with properly structured and managed loan guarantees or tax incentives they would have a greater likelihood of jump-starting this industry at low risk and large benefit to the whole nation in emissions reductions, energy independence, economic activity in shipyards and elsewhere. The promise of LNG is so great it deserves this sort of recognition, attention, and effort. Clearly the EU sees it that way, and we should as well and the risk if we don’t address it in this way is diminished potential for LNG to transform this country and the lost opportunity to lead the world in LNG development and utilization.   John Graykowski

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