The View From Workboat: Red, White and (a little bit Blue)
SCA’s Matt Paxton weighs in on future prospects for America’s mid-tier shipyards, while delivering a pro-Jones Act message to a largely International Workboat Show crowd.
New Orleans, LA: What a difference a year makes. Or, does it? This year’s International Workboat Show got kicked off on Wednesday afternoon with a light and amusing introduction by Workboat host and Editor David Krapf, who brought everyone up-to-date on the prevailing economy. Deadpanning for his audience, “The economy is so bad that… (fill in the blanks here),” he also made light of the evaporating shipyard backlogs and the (continuing) and troubling lack of financing for new projects. As he introduced this year’s keynote speaker, Matt Paxton, President of the Shipbuilder’s Council of America (SCA), he also promised a talk that would give his audience guidance on how to expand to find new business, retain what they had and in general, survive the current economic climate. For his part, Paxton did not disappoint.
Paxton’s message on Wednesday was simple enough. And, for those in attendance who did not know what SCA is all about, he left no stone unturned in his efforts to educate a largely International audience about SCA’s core objective: Protecting and Defending the Jones Act. While that message perhaps might not have “played well in Peoria,” it did come in the same week that Louisiana Senator Mary Landrieu announced that she “welcomes IRS Efforts to Enforce Foreign Vessels’ Compliance with U.S. Tax Laws,” hence the talk was well timed with the coming climax in the battle between foreign flag operators and their American-flag counterparts in the U.S. Gulf of Mexico. At stake there is an anxiously awaited edict by U.S. Customs and Border Protection (CBP), who will decide which vessels can do what and where in the GOM. As it turns out, SCA is keenly interested in the outcome of this disagreement, as well.
SCA represents the interests of 42 of America’s mid-tier shipyards, spread amongst as many as 21 states and affecting about 85,000 shipyard workers (down from a peak of 180,000 in 1980). Although its output and capacity represents less than 1 percent of the world’s shipbuilding efforts, Paxton also reminded his listeners that SCA builds primarily for the U.S. flag fleets – one of the world’s oldest – and that in a very short period of time, that fleet will need to be recapitalized. That work will be fueled, according to Paxton, largely by OPA-90 phase-out replacements, GOM oil patch additions and an ever increasing share of government (military) contracts. In fact, he said, as much as 60 percent of today’s government work is being directed towards his constituency. That’s the good news. He tempered that message by reminding everyone that future contracts had to be financed and then began to outline, bullet by bullet, on just how that could be done.
Paxton’s hopes for the future hinge on a number of domestic programs and initiatives, including but not limited to: small shipyard grants (where, he admitted, demand exceeded availability by a factor of ten), FHA ferry grants (spread around 29 states), new rulings on government “cost differential coverage” for MSP ship repairs, short sea shipping, Title XI and the Capital Construction Fund (CCF). The CCF program, in particular, assists operators in accumulating capital to build, acquire, and reconstruct vessels through the deferral of Federal income taxes on certain deposits, proceeds from the sale or loss of vessels, and vessel depreciation. The CCF program enables operators to build vessels for the U.S. foreign trade, Great Lakes, noncontiguous domestic trade (e.g. between the West Coast and Hawaii), and the fisheries of the United States. It aids in the construction, reconstruction, or acquisition of a wide variety of vessels, including containerships, tankers, bulk carriers, tugs, barges, supply vessels, ferries, and passenger vessels.
On Wednesday, however, what Paxton didn’t say was as important as the message he tried to hammer home. Left unanswered was the question of how anyone can expect that significant Title XI funds will be made available any time soon, especially in the messy wake of the Hawaii Superferry debacle. Paxton also admitted that the pipedream of shortsea shipping – which certainly could provide a windfall of work for mid tier yards in way of “series” production methods – was at least ten years away and probably more (especially given the Obama Administration’s continued neglect of MARAD through the Department of Transportation). In the end, Paxton appears to be pinning most of his immediate hopes on a full court press on Capital Hill on the CBP GOM oil patch issue. Neatly summing up the SCA party line, he firmly asserted, “SCA, working with OMSA, supports CBP revocation and IRS tax filing requirements for foreign flag vessels.”
Still, and pointing to what he characterized as “the most significant potential market for Jones Act vessels, both new construction and repair,” Paxton steered his talk to the prospects for U.S. yards garnering an increased share of offshore renewable energy opportunities. This effort includes energy-efficient boats, specialty vessels, and wind turbines. And until the Obama Administration puts more than hot air into the waterfront as a way in solving the Highway Trust fund Crisis and fully integrating the supply chain through short sea shipping, it would appear that he’s right.
Matt Paxton’s roadmap for success, at least for SCA’s membership, probably makes a lot of sense. For those foreign-flag operators and vendors in attendance, however, the message probably left many wondering where they will fit in if SCA and OMSA get their way. More than likely, there’s enough work to go around for everyone. For his part, Paxton wants only to “know what standards are.” Once defined, he said, the shipyards can shape their business plans to comply. And, if his pro-Jones Act mantra left a few people “blue” on Wednesday, he’s not about to apologize for it. This week’s International Workboat Show provided a highly visible platform for SCA’s core objectives. That’s not something anyone here is likely to forget any time soon. - MarEx.
Joseph Keefe is the Editor in Chief of THE MARITIME EXECUTIVE. He can be reached with comments on this editorial at [email protected]. Join the Maritime Executive ‘Linked In’ group at by clicking http://www.linkedin.com/e/gis/47685>