SCA Weekly Round-Up
June 18-22, 2012
House Approves FY13 MARAD Funding
On Tuesday June 19 the full House Appropriations Committee (HAC) approved the fiscal year 2013 Transportation, Housing and Urban Development funding bill, which includes funding for the Maritime Administration (MARAD). The Senate Appropriations Committee (SAC) completed its markup in April. SCA’s summary [HERE] details both the HAC and SAC funding totals for MARAD, including funding for the Title XI Loan Guarantee Program and the Small Shipyard Assistance Program (SSAP). SCA was instrumental in SAC's decision to increase funding for the Title XI program from the requested amount and include funding for SSAP when none was requested by the Administration. SCA will continue to support the SAC mark on the Hill when the two funding bills go to conference later this summer.
Defense Appropriations Status Update
Senator Inouye, chairman of the Senate Appropriations Committee, said Tuesday said he plans to mark up the FY13 Defense spending bill after the July Fourth recess but acknowledged that the legislation may again slip until late in the year. The Defense spending bill could be used as a vehicle to clear other controversial bills or even an omnibus spending measure. Inouye said his committee was waiting for the House to complete its work on its spending bill before acting on the Senate version. The House still has not determined when it will act on its Defense spending measure. It is becoming increasingly likely that the House will take it up on the floor in the latter part of July. The House Appropriations Defense Subcommittee approved in early May its $607.7 billion bill, HR 5856, ignoring caps set in last year’s deficit reduction law and setting up a conflict with Senate Democratic appropriators. Inouye has indicated a desire to stick closely to spending caps set in the bipartisan deficit reduction law, setting Defense allocations at $511.2 billion for the base budget. But he would boost the war funding to $93.5 billion to help close the gap with the House. The war funding does not count under the statutory caps, providing Inouye some flexibility in managing spending reductions under the base spending bill.
McCain/Murray Sequestration Amendment Passed by Senate
Sens. John McCain (R-Ariz.) and Patty Murray (D-Wash.) combined their separate amendments to the Farm Bill requiring the Obama administration to explain the impact of sequestration cuts in the next two months. The two senators had separate amendments included in the farm bill on the Senate floor this week dealing with the automatic spending cuts, with McCain’s requiring a Pentagon report on the $500 billion in defense cuts through sequestration and Murray’s calling for an Office of Management and Budget report on the cuts to non-defense spending. In a rare show of bipartisanship they combined the two amendments requiring reports from the administration on all of sequestration. The amendment, which passed by voice vote, requires a report from the Pentagon on the defense cuts by Aug. 15 and reports from the Office of Management and Budget and the President in the next 30 to 60 days explaining the full spectrum of sequestration.
NAM Forecasts Effect of Defense Cuts on Jobs
The National Association of Manufacturers (NAM) released a study calculating the impact of defense spending cuts on the economy & jobs. Using a forecasting model that assumes both the BCA reductions and the sequester, manufacturing loses about 1.0 percent, or 130,000 jobs, in 2014 and 2015, relative to the baseline. Peak job loss will occur in 2014, with the spending cuts from the budget caps and sequestration costing the U.S. economy 1,010,000 private sector jobs, including 130,000 manufacturing jobs. Many of these jobs tend to be at the direct and indirect suppliers of defense equipment and related materials (the study looks at 65 industries). An additional loss of over 200,000 military jobs occurs in 2014. Employment gradually recovers back to the baseline by 2022. Within the overall manufacturing sector, the largest job losses are in the large nondurables sector (food, textiles, chemicals and fuels) and the transport equipment sector. The biggest proportional reductions are within transportation equipment and instruments. In particular, ships and boats lose 3.3 percent of jobs by 2014 and 1.7 percent of jobs by 2022. The search and navigation equipment industry takes the biggest proportional hit, with a maximum loss of 9.3 percent of its employment in 2016 and 8.6 percent in 2022. California sustains the largest job loss, followed by Virginia and Texas, which lose 115,000 and 109,000 jobs, respectively. The report can be read HERE.
LEGISLATIVE AND POLICY UPDATE
House Transportation and Infrastructure Committee to Hold SPR Carrier Review
On Wednesday, June 27, the House Transportation and Infrastructure Committee, Subcommittee on Coast Guard and Maritime Transportation will host a hearing titled “A Review of Vessels Used to Carry Strategic Petroleum Reserve Drawdowns.” Tom Allegretti, Vice Chairman of the American Maritime Partnership and President of AWO will provide testimony on behalf of AMP. The hearing will take place Wednesday, June 27 at 10:00 am in 2167 Rayburn House Office Building.
House Passes Drilling Bill
On Thursday, the House voted in favor 248-163, of H.R. 4480, the Strategic Energy Production Act of 2012. The legislation would require the U.S. to develop a plan to meet the projected demand for energy, and is intended to increase oil production and avoid EPA rules. The bill would also allow more U.S. drilling if oil is released from the Strategic Petroleum Reserve (SPR). The language now goes to the Senate, where no action is expected.
Plan to Dismantle Icebreaker Put on Hold
Plans to dismantle one of the nation's two heavy icebreaker ships, the Seattle-based Polar Sea, have been put off for at least this year. Senators Maria Cantwell, Mark Begich and Lisa Murkowski have secured a six-month agreement with the Coast Guard to delay the scrapping of the Polar Sea heavy duty icebreaker, which would have left the U.S. without a heavy-duty icebreaker while the Polar Star undergoes a yearlong refurbishment. The Coast Guard was ready to have propellers and other core components ripped off the Polar Sea to sell or to use on the Polar Star. Cantwell was unsuccessful last year in efforts to secure congressional funding for the $30 million to $50 million needed to repair the decommissioned Polar Sea's engine, which made it difficult for the Coast Guard to justify the cost of keeping the ship. But Adm. Robert J. Papp, Jr., Coast Guard Commandant, agreed not to dismantle the ship while other strategies for funding are pursued. Language from Cantwell to prevent the decommissioning of the Polar Sea is pending in authorization bills for both the Coast Guard and the Maritime Administration. The United States currently has no working heavy icebreakers, and building a new icebreaker could take 10 years and cost $800 million to $1 billion.
Arctic Symposium Planned for Fall
The Navy and Coast Guard plan to host a symposium on the Arctic in September at the Naval War College in Newport, RI, to identify and prioritize arctic capabilities and needs for the next five years. The symposium will be a joint effort between the Navy’s Task Force Climate Change and the Coast Guard’s Office of Emerging Policy. As the advocate for arctic capabilities at the combatant commander level, NORTHCOM will participate as well. The State of Alaska, U.S. Army Corps of Engineers, and select private industry members will be invited to attend. The symposium will include as its focus the recommendations of a January GAO report on the Arctic, which can be read HERE. Participants hope the symposium will provide a forum through which the Navy and Coast Guard can collaborate in more detail on capabilities and investments in the Arctic region. The recommendations that come out of the symposium will help inform the Navy’s FY15 POM.
ARG Shifts to Mayport Early
Secretary of the Navy Ray Mabus announced last week that the first amphibious ready group (ARG) ship scheduled to shift homeport to Naval Station Mayport, FL, will arrive in the last quarter of 2013. The USS New York, the USS Iwo Jima and the USS Fort McHenry, will shift from their current homeport of Norfolk, VA to Mayport. The USS New York will be the first to change homeport, followed by the USS Iwo Jima and the USS Fort McHenry in 2014. Mabus originally announced Feb. 28 that the ARG would arrive no later than 2015. The Navy says it accelerated the timeline to ensure continued viability of the Mayport ship repair industrial base and to maintain the capabilities of the Jacksonville fleet concentration area, preserving surge capability and reducing risk to fleet resources in the event of natural or man-made contingencies.
JONES ACT UPDATE
Maritime Executive Slams Failure of U.S. Maritime Policy
Stephen Carmel, Senior Vice President for Maritime Services at Maersk Line, declared, “The U.S. has no overarching maritime strategy which addresses the U.S. flag merchant marine’s role in our nation’s maritime power,” in an Op-Ed in Maritime Executive. You can read the full article HERE.
STUDIES AND REPORTS
NAM Forecasts Effect of Defense Cuts on Jobs
See “SEQUESTRATION UPDATE” above.
DOD Launches Mobility Capabilities Assessment
The Defense Department has started its “Mobility Capabilities Assessment for 2018,” an assessment of whether the Pentagon’s planned cargo aircraft and ship inventories are sufficient to execute the new defense strategy through 2018 and could lead to changes in the military’s transportation fleet. The assessment is expected to take nine months and is a joint effort between the Office of the Secretary of Defense, the Joint Staff and the U.S. Transportation Command. It will provide the analytical foundation for transportation issues in next year’s QDR. This is the sixth large-scale mobility study DOD has conducted since 1992, and previous mobility studies have influenced the apportionment of billions of dollars in Pentagon spending. The study will determine the projected 2018 mobility inventory, to include container ships, roll-on/roll-off vessels and joint high-speed ships.
Two CRS Shipbuilding Reports Updated
Two Congressional Research Service (CRS) reports by Ron O’Rourke, specialist in naval affairs, have been updated to reflect FY13 legislative activity thus far. Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress and Coast Guard Cutter Procurement:Background and Issues for Congress both include program backgrounds, issues for Congress to consider this legislative cycle and funding developments due to Congressional activity.
Ports Survey Released
According to a survey conducted by the American Association of Ports Authorities (AAPA), U.S. seaport agencies and their private-sector partners plan to invest a combined $46 billion over the next five years in wide-ranging capital improvements to their marine operations and other port properties. AAPA continues to advocate for a national freight infrastructure strategy and for the U.S. Congress to quickly pass a reauthorized multi-year transportation bill that targets federal dollars toward economically strategic freight transportation infrastructure of national and regional significance. U.S. Bureau of Economic Analysis formulas show that investing $46 billion in infrastructure at U.S. ports creates more than 500,000 direct, indirect and induced domestic jobs, accounting for more than 1 billion person-hours of work. Currently, inadequate infrastructure connecting ports to landside transportation networks and water-side shipping lanes often creates bottlenecks, resulting in congestion, productivity losses and a global economic disadvantage for America. The U.S. spends only 1.7 percent of its gross domestic product on transportation infrastructure. AAPA’s news release can be read HERE.
MAINTENANCE AND MODERNIZATION NEWS
Contract Issues Affecting Cost of Ship Maintenance
Commander Naval Surface Force signed out a letter regarding the significant impact contract issues are having on the cost of ship maintenance and the number of lost operational days. It puts the dot squarely on SEA 02. It also puts in place rigid guidance on 100% package lock. You can read the letter HERE.
LCS to be Homeported in Singapore- Poses Maintenance Challenge
Secretary of Defense Leon Panetta has recently gone on record saying that LCS's will be forward deployed to Singapore not homeported there. That is not insignificant. Forward deployed ships have to have all maintenance done in the US or by US workers except for emergent repairs required to maintain systems operational. That means the Navy must work out not only how crew swapping will be done but also how the ship will be maintained with its small crew forward deployed.
INTERNATIONAL NEWS OF INTEREST
Canadian National Shipbuilding Procurement Webinar Update
On Wednesday, the U.S. Commercial Service Marine Division of the U.S. Department of Commerce hosted a Webinar on opportunities relating to the Canadian national shipbuilding procurement strategy. As the Canadian Government continues to move forward with upgrades and new capital purchases of marine equipment under their “First Defence Strategy,” the U.S. Commercial Service will continue to make available resources to be part of this procurement program. To learn more about the services and upcoming events visit: HERE. To view Wednesday's presentations, please click HERE.
Canadian Navy Acknowledges Destroyer Shortfall
Canada’s Defence Department has confirmed the country's aging fleet of destroyers will be retired before replacements are ready. The Conservative government and Canadian Forces are under significant pressure as they race against the clock to start cutting steel on new vessels through their promised $35 billion national shipbuilding procurement strategy. The Navy's Iroquois-class destroyers were built in the early 1970s and underwent a major upgrade in the 1990s so they could provide anti-submarine warfare, anti-aircraft defence as well as command-and-control capabilities for Canadian and allied naval task forces. The destroyers are expected to reach the end of their planned service life beginning in 2017, at which point they will be over 43 years old. Canada's 12 Halifax-class frigates will have to take on many of the tasks currently assigned to the destroyers. Negotiations with Irving Shipyard in Halifax and associated contractors responsible for building the next generation of naval surface combatants will be finished by 2016, with the first ship to be delivered in the early 2020s. But the $26.6 billion Canadian-surface-combatant (CSC) project to replace the destroyers as well as the frigates would need to enter the design phase in 2012 to ensure the rest of the process - including contract negotiations with industry - moved ahead smoothly. The first naval vessels to be produced under the Conservative government's national shipbuilding plan - armed Arctic vessels - will be delivered three years later than anticipated and there could be a spill-over effect on the destroyers and frigates.
Next NAVFAC Announced
Rear Adm. (lower half) Katherine L. Gregory will be assigned as Commander, Naval Facilities Engineering Command/Chief of Civil Engineers (NAVFAC), Washington, D.C. Gregory is currently serving as commander, Naval Facilities Engineering Command Pacific, Pearl Harbor, Hawaii.
New Member Receives Committee Assignments
Ron Barber, the Democratic Congressman from Arizona who won a special election to replace Gabrielle Giffords, has been assigned to the Armed Services and Homeland Security Committees.
EPA Pushes New CO2 Rules for Marine Engines
On Monday, the U.S. Environmental Protection Administration (EPA) announced it would not pursue rules to limit the greenhouse gas emissions from airplanes and boats, opting to first wait until a federal appeals court decides the controversial issue of whether greenhouse gasses are a threat to human health and welfare. In its announcement, EPA started the Agency "does not intend at this time to initiate either an endangerment finding or a rulemaking regarding emissions of greenhouse gases and black carbon from nonroad engines and vehicles, including marine engines and vessels, under section 213(a)(4), in the near or medium term." Click here to read EPA's full announcement for boats and nonroad sources.
SHIPYARD PHOTOS NEEDED FOR NEW SCA WEBSITE
SCA would like to feature pictures of member shipyards on our new website. Photos of shipyard workers and ships during all phases of construction, repair and maintenance are requested. Additionally we’d like to feature aerial and panoramic photos of yards and facilities.
Please send all photos to email@example.com. To send copies of photos on a CD, please mail to our address:
Shipbuilders Council of America
ATTN: Paula Reever
655 Fifteenth Street, NW
Washington, DC 20001
SAVE THE DATE
SCA’s Fall General Membership Meeting will be held October 15-17th, 2012. Mark your Calendars!