Prospects Abound, But Where's the Money?

By H. Clayton Cook, Jr., counsel, Bastianelli, Brown & Kelley

While the U.S. commercial shipbuilding industry outperformed the U.S. economy between 1992 and 2001, this period witnessed the construction of barely a dozen large ocean going vessels for our U.S. domestic trades with an aggregate cost of not much more than $500 million. In contrast, U. S. national transportation needs for the current decade will require the construction of four to five dozen such commercial vessels which, taken together with the building of smaller vessels to meet our other domestic needs, will involve shipbuilding contracts in excess of $6 to $7 billion.

The majority of this work is federally mandated by the Oil Pollution Act of 1990, or involves the replacement of vessels in our U.S. non-contiguous trades that have reached the end of their useful lives. The balance is driven by U.S. population growth and environmental concerns that are not likely to abate.

These U.S. national transportation needs are clear and immediate. However, the means for financing the vessels to meet these needs remains uncertain. During the last such period of major U.S. shipbuilding activity two important federal government assistance programs administered by the U.S. Maritime Administration (MarAd) under Title VI and Title XI of the Merchant Marine Act of 1970 (the 1970 Act) were employed to meet vessel financing needs. To date, in this decade, there has been only limited recourse to these two potentially important financing programs.

And, the Bush Administration Office of Management and Budget (OMB) has apparently targeted both of these programs for termination. What conclusions can we draw concerning U.S. shipbuilding to meet our U.S. national transportation needs for the current decade?

The U.S. Shipbuilding Scene: Vessel Needs The Jones Act and the Passenger Vessel Services Act reserve the carriage of cargo and passengers between U.S.

ports to vessels built in the United States, operated under U.S. registry and owned and operated by U.S. citizens.

These Acts protect U.S. shipbuilders from competition by foreign shipyards and provide a relatively stable maritime investment opportunity. While the world shipbuilding market is such that U.S.

shipbuilding opportunities are limited to the U.S. domestic trades, there are well documented, existing and near-term transportation needs which will provide significant building opportunities for U.S. commercial shipbuilders. The most important opportunities are those which result from the Oil Pollution Act of 1990 and the needs for double hulled vessels in our U.S. coastwise and Gulf of Mexico energy related services. These and other petroleum related requirements should provide varieties of employment which will bridge the entire spectrum of shipyard size. Supplementing this work, and of equal importance for our larger shipyards, are the ocean-going container and RoRo tonnage fleet replacements needed for our non-contiguous services, and perhaps for the initiation of coastwise feeder operations. Smaller yards should find ample supplemental employment in producing a wide variety of vessels, with perhaps the single most important subject matter being the vessels for expanding passenger and passenger/ vehicle ferry services.

Other stories from June 2002 issue


Maritime Reporter

First published in 1881 Maritime Reporter is the world's largest audited circulation publication serving the global maritime industry.