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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � Appendix A Statement of William O. Gray OVERVIEW My reason for offering a supplementary statement to the committee report is that I feel that the report, as drafted, gives a seriously distorted view of what the current U.S. marine transportation system (MTS) is and where it came from and of the role played by the federal government. I fear that to the extent this is true, readers of the report, especially policy makers, may draw mistaken conclusions both on the current state of the MTS and on what action the federal government should take in the future concerning the MTS in order to ensure “safe navigation (… charting, marine safety, … weather and oceanographic information …), environmental protection….” (task statement). Thus, while I generally support

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � the committee recommendations, I feel that they fail to address adequately a number of more important steps the government should take in the interests particularly of safe navigation and environmental protection. To better understand what the MTS has become in the 50-plus years since World War II, two key points should be made: U.S. international trade has grown from an almost insignificant amount in the 1950s to nearly 2 billion tons per year now (Wall Street Journal, Sept. 9, 2003) and is worth more than 20 percent of U.S. gross domestic product (GAO/RCED-95-34, Cargo Preference Laws), and nearly all of this moves by ship. The nation is now dependent on seaborne imports for a major share of its energy, food, and consumer goods. If the ships (and the MTS) stopped, major shortages would occur in a few days or weeks, whereas 50 years ago the United States was virtually self-sufficient in most respects. These changes of the last half century were brought about largely through the ingenuity of a number of individual Americans and the world marine industry with virtually no U.S. governmental support (some would say despite the federal government). It is therefore revealing to look more specifically at the performance of both the marine industry and the government to get a proper perspective on the nation’s very large dependence on marine transportation for much of the prosperity and living standard Americans now enjoy. KEY MARINE INDUSTRY EVENTS FOR AMERICANS, 1939–2003 The most significant events leading to growth in U.S. international marine commerce, which were nearly all led by American industry, include the following: Between 1939 and 1945 the United States built nearly 6,000 merchant ships that helped save Europe. Most responsible were retired

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � Navy Admiral Emory S. (Jerry) Land, who supervised wartime shipbuilding for President Roosevelt, and industrialist Henry Kaiser, who pioneered efficient ship “manufacturing” techniques. In the early 1950s D. K. Ludwig, Elmer Hann, and Edward Deming improved Kaiser’s ideas and took them to Japan and Europe, where they have continued to improve and lead the world in efficient, economical ship production. Ludwig also pioneered much bigger and simpler ships (tankers and bulkers). In 25 years (1950 to 1975) ships grew from 20,000 deadweight tons (dwt) to more than 500,000 dwt, and the savings were such that the cost of much sea transportation is almost as low today as it was 50 years ago (A Century of Tankers, John Newton, 2002). In the late 1950s U.S. naval architect J. J. Henry invented liquefied natural gas (LNG) ships, hundreds of which now exist, and which may be the fastest-growing ship type for imports into the United States in the next 10 years (Chapter 2 describes LNG forecasts). In the early 1960s U.S. trucker Malcolm McLean invented the containership, which almost completely replaced break bulk ships, reduced load and discharge time from weeks to hours, and nearly eliminated pilferage. In the 1980s APL (then an American containership company) pioneered “post-panamax” ships (ships wider than the canal) and “double stack” trains (for container moves across the United States). The ability to move high-value goods rapidly over oceans made many foreign goods affordable and desirable to American consumers. Each of these innovations was the result of private American ingenuity and entrepreneurship with virtually no help from the federal government. So were most of the new terminals and techniques needed to handle larger and faster ships (lightering of tankers, single buoy moorings, container cranes, self-unloaders for dry bulk, etc.). During these major developments, which helped to fuel American prosperity and growth, it was a continuous struggle for industry to get the channels and infrastructure needed to handle these much larger and more efficient

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � ships of all types. Even today the United States is still incapable of receiving the largest or even most larger ships of any type—tanker, bulker, or containership—whereas developed and developing nations in many parts of the world have built “world-class” ports, often in totally new “grass-roots” fashion most suitable to fast, safe handling of cargoes of all types. In contrast, in the United States since World War II, we have created only one truly new “port”: Louisiana Offshore Oil Port (for tankers only), which is really not needed. The oil industry created other means of serving the Gulf Coast (lightering) when lengthy federal government delays and “red tape” threatened to slow oil imports. FEDERAL GOVERNMENT PERFORMANCE IN MTS SINCE WORLD WAR II The draft report correctly describes the widely dispersed responsibilities for marine matters in the federal government, even among the four most directly involved parties [the U.S. Coast Guard (USCG), the National Oceanic and Atmospheric Administration (NOAA), the U.S. Army Corps of Engineers, and the Maritime Administration (MARAD)] from shipping’s point of view. This division of responsibilities may also be a significant reason why so many involved in the marine industry find the performance of parts of the federal government so frustrating. They cite examples such as the following: Incredibly slow action on deepening/widening of important channels like Houston, where the current improvements did not start until 31 years after being deemed necessary, and New York/New Jersey, which is taking nearly as long. And neither of these projects, when completed, will be able to handle the largest containerships now being built (in contrast to much of Europe and Asia). Despite (or some, like myself, would say because of) government policies intended to help promote U.S. merchant shipping, the state of affairs in regard to U.S.-flagged and U.S.-owned shipping is at a very low ebb. Of course, promotion or administration of U.S. shipping pol-

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � icy, while nominally a MARAD responsibility, is basically the product of the U.S. Congress and laws it has passed. The following are examples of how these policies have, in my opinion, hurt the nation: The nation has almost no international trading merchant shipping that is U.S. built or under U.S. flag. This results from a hugely inefficient large-ship shipbuilding industry and very high seagoing labor cost. After World War II, the “big ship” yards relied on CDS (construction differential subsidy), Jones Act “build U.S.” law, and government business (the Navy) and hardly improved their productivity, so that today a ship built in a U.S. yard costs three to four times what it does in Europe or Asia. And alternative transportation (pipelines, tugs/barges, road, and rail) replaced most of the U.S. coastal fleet. The worst result now for the country is that much coastal traffic in the lower 48 that could move by sea instead clogs our busiest roads continually (like I-95 in the Northeast Corridor from Virginia to Maine). Bad tax law (Tax Reform Act of 1986) caused U.S. owners of foreign-flag tonnage (notably oil majors) to get rid of many ships that previously had been available to the government as “effective U.S. controlled” for use in times of national emergency. The Oil Pollution Act of 1990’s (OPA 90’s) nearly unlimited liability and criminal provisions for oil spills, together with a specific “nonpreemption” feature allowing all coastal states to have their own liability laws (mostly criminal), caused more oil companies (our nation’s best-capitalized companies) to sell most ships. While these congressional policy decisions are felt mainly in their adverse effects commercially (profits made offshore, not in the United States) and in the loss of a “U.S. fleet” for times of emergency, there are other adverse consequences from federal government actions, or inactions, that have a negative impact on safety and environmental performance in the U.S. MTS. Early in the study, I proposed that the committee discuss these negative consequences for safety in the report. This the committee has either not done or done totally inadequately.

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � MTS SAFETY ISSUES The following are the first three MTS safety issues I proposed for committee endorsement and strong corrective recommendation: Accurate hydrographic data (chart information and real-time tide, current, weather, and water depth information) are mariners’ (pilots’ and crews’) greatest safety need in U.S. waters, but they are frequently not available. At present funding rates NOAA cannot complete accurate surveys of critical areas for 15 to 20 years, and their real-time data system, PORTS, hardly gets funded at all (NOAA Annual National Survey Plans and FY 2004 Budget Summary). Groundings between federally maintained channels and private berths (and at private berths) are major issues in many ports (INTERTANKO PTS & UPDATE and RADM Henn Report to Commandant USCG 1992). Channel design and vessel maneuverability research is badly needed to safely manage large ships in restricted waters. There are no criteria for vessel maneuverability in restricted waters and at slow speed, and pilots are having increasing difficulty, particularly with the larger new vessels (SNAME Marine Technology, April 2003, “Channel Design and Maneuverability: Next Steps”). The problem in each of these cases is inadequate funding, a lack of assigned responsibility, or a combination of the two. Clearly the most pressing immediate problems are the first two, lack of accurate hydrographic and weather data and groundings in non-government-maintained waters. NOAA has the competence and tools to solve both problems. The money needed to do this promptly and correctly is almost trivial, but NOAA’s National Ocean Service gets tiny budgets (NRC 1994, Charting a Course into the Digital Era: Guidance for NOAA’s Nautical Charting Mission). The fourth, and most important, MTS safety issue that I hoped the committee would recognize and deal with is the criminal and multiple liabil-

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � ity of crew and owners for oil spills, almost regardless of fault. In the eyes of owners and crews this is a big negative factor for recruitment and retention of competent crews and in their performance. This situation has caused a significant number of owners to refuse to bring black oil to U.S. waters, and it has aggravated morale and fatigue issues for mariners. Furthermore, prosecutors in the United States have pressed charges against mariners not only under OPA 90 and state laws, but also under the Migratory Bird Treaty and the Refuse Act, both of which have even stiffer penalties than OPA 90. Interestingly, within recent months European Union (EU) bureaucrats have proposed similar criminal sanctions against spillers in the EU, but after a position paper by the Industry Roundtable (INTERTANKO, Intercargo, International Chamber of Shipping, International Shipping Federations, and BIMCO) was circulated to the EC describing the negative effects of automatic criminality, the lack of due process or legitimate defenses, and the conflicts with international treaty law [the United Nations Convention on the Law of the Sea and the International Convention for the Prevention of Pollution from Ships (MARPOL)], European parliamentarians strongly rejected imposing European criminal laws on oil spillers (to the chagrin of their bureaucrats) (Lloyd’s List, Oct. 13, 2003). Sadly to me, virtually all in the U.S. government, and now this MTS committee, have always rejected even considering changes to our federal and state laws to recognize spills for what they nearly always are—accidents. We should not automatically brand spillers as criminals. Such draconian measures should be reserved only for deliberate spills or gross negligence, as it seems the rest of the world is continuing to do. OTHER POINTS FOR COMMITTEE CONSIDERATION There are several other areas in which I feel this committee has missed the opportunity to make important observations and, ideally, recommendations: Several times I brought up at committee meetings the deplorable state of efficiency in most large U.S. container terminals. Although I am

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � basically a “tanker person,” I think this is well known to most in our industry, especially after the labor work stoppages in West Coast ports last September, which by some press reports cost the nation $1 billion to $1.5 billion a day. The strike by about 10,000 stevedores reportedly making much more than others in their line of work and refusing to use various proven productivity improvements lasted for, I think, 11 days. In a number of specific productivity comparisons by experts like John Vickerman, Principal of TranSystems, we have heard that productivity at the best U.S. container ports is something like 15 to 30 percent of the “world-class” level because U.S. labor refuses to accept modern technologies or to work more than 1 to 1.5 shifts. To me, these are unacceptable trends costing all Americans a lot of money. I think this MTS committee is missing a golden opportunity to bring this disgraceful trend to the attention of decision makers in the federal government and elsewhere. The second sentence of Chapter 1 of the draft states, “People have long been fascinated by marine activity … the variety of ships and other vessels that ply the world’s rivers, lakes, and oceans.” Don’t we in the industry wish this were so! It no doubt was in colonial times and the days of the clipper ships. But the sad fact is today that marine is a deeply “hidden” industry about which most Americans, and their congressional representatives, know or care almost nothing. The committee should say so, and it should recommend measures to let our citizens know how heavily our way of life is dependent on maritime commerce. Finally, there are two other points that deal with safety and environmental protection in the MTS: Since the 1950s most maritime nations have agreed as a matter of international treaty law to ensure installation of oily water shore reception facilities (SRFs); MARPOL 73/78 states in part: “The Government of each Party undertakes to ensure the provision at oil loading terminals, repair ports and in other ports in which ships having oily residues

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � to discharge facilities for the reception of such residues and oily mixtures … from tankers and other ships adequate to meet the needs of ships … without undue delay to ships.” Despite this clear mandate to governments “to ensure … reception facilities,” the U.S. government (and many others) has not only failed miserably to carry out this mandate, it has hardly done anything, or even tried to encourage creative ways, to meet this mandate. And now with the major concerns over invasive species transmitted in ballast water—a problem that might be partly solved by SRFs and continual pressure from industry (INTERTANKO, ICS, the Roundtable, etc.)—nothing is being done by our government. This committee had the chance to at least point out to decision makers this perpetual failure of our (and most other) governments. My final point concerns an issue covered in the “Safety Performance” section of Chapter 5. Mention, albeit brief, is made there of efforts by the Coast Guard and MARAD to create a marine hazardous condition or “near-miss” reporting system depending on confidential reports by witnesses to events (mention of industry, which participated and some feel led the effort, is neglected). This committee draft fails to tell the whole story, saying simply, “The near-miss database, however, was not established, in part because of legal and practical concerns about assuring mariner confidentiality.” What I feel the report should have said is that “after about 5 years of trying, Justice Department lawyers, and even USCG’s own lawyers, flatly refused to agree with any provision that might shield anyone providing information from any possibility of prosecution—this despite the fact that the system that the industry/government team had designed closely parallels a highly successful near-miss system in the commercial aviation world that the National Aeronautics and Space Administration runs for the Federal Aviation Administration, which the big airline companies feel has saved many lives over the last 20 years.” I would also add that to short-circuit a proven safety measure like this at the staff level (legal departments in USCG and the Justice Department) shows that the

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � federal system was unable to overrule this view, or perhaps it stemmed from the “trial lawyer mentality,” which permeates so many in our Congress. Industry is now aiming its “near-miss” efforts at CHIRP (Confidential Hazard Incident Reporting Project), which is being created in Britain with industry, U.K. government, and International Maritime Organization blessing and participation. Maybe in a few years as CHIRP succeeds, just as with spiller criminality and the EU, we in the colonies may have to admit we can still learn something from the old countries. I have concluded this dissenting statement with a “gut” safety issue because as a tanker man and former sailor, I empathize with the mariners, and as an MTS committee member I regard those at sea as my main constituency. Making the U.S. MTS safer will always be higher priority to me than simply making our container ports operate more efficiently. That may save money but not necessarily lives. November 5, 2003