U.S. Department of Transportation (Maritime Administration) Office of Deepwater Ports and Offshore

• BACKGROUND

While worldwide natural gas is in plentiful supply, the United States (U.S.) holds less than 4 percent of world reserves. During 2006, about 85 percent of all natural gas consumed in the U.S. was domestically produced. By the year 2025, as demand increases, domestic production is only expected to account for 78 percent of consumption and, LNG imports are projected to increase eight-fold to 4.4 trillion cubic feet per year.

Imported LNG serves to relieve the Nation’s growing energy needs by diversifying energy sources. Deepwater ports are necessary to enhance the Nation’s ability to import LNG from world wide sources. The Energy Information Administration’s recently released Annual Energy Outlook 2007 states U.S. energy consumption projected for the year 2025 will be about 25 percent higher than it was in 2006.

This rapid growth in energy consumption has resulted in a dramatic increase in the size of the world-wide LNG tanker fleet and a related manpower demand. It is estimated that as many as 3,700 to 5,000 additional mariners may be needed by next year. The magnitude of this shortage will only serve to negatively impact this industry’s excellent safety record. Over the last 5 years the global LNG carrier fleet grew by 73 percent, from 128 to 222 vessels. And, an additional 133 LNG vessels are scheduled for delivery to service the global LNG trades by 2010. This expanded fleet will require as many as 10,000 additional seafarers, of whom almost 3,000 will be licensed officers. This offers tremendous employment opportunities for both licensed and unlicensed U.S. mariners.

The increase also comes at a time when we are already experiencing a greater demand for
seafarers in general due to the significant increase in international trade. These factors offer our Nation unique economic growth opportunities and new challenges. Ultimately, the employment of highly trained and skilled licensed U.S. mariners will help alleviate the world-wide shortage of professional mariners confronting the international LNG shipping industry and, assist in maintaining the LNG industry’s exceptional safety record. Further, international vessel operators are increasing the wages and benefits offered to keep or attract qualified crew, narrowing the gap between the wages and benefits paid to Americans and those paid to their foreign counterparts.

In recognition of the growth of the worldwide fleet and the associated logistical and safety problems with this expansion, Congress amended the Deepwater Port Act in 2006 through the Coast Guard and Maritime Transportation Act of 2006 (Pub. L. 109-241, (2006)) to direct the Secretary of Transportation, and, by delegation, the Maritime Administrator, to develop and implement a program to promote the transportation of LNG to the U.S. on U.S.- flag vessels.

At present, sixteen liquefied natural gas (LNG) deepwater port (DWP) applications and one offshore oil port have been filed. Five licenses have been issued to date. Four licensed projects and one approved project are located in the Gulf of Mexico region. Two projects (one licensed and one approved) are located off the Massachusetts coast.

As the lead federal agency for the licensing of offshore LNG and oil DWP terminals, the
Maritime Administration is charged with ensuring that each facility is constructed and operated in a safe and secure manner. In keeping with Congressional directives, the Maritime Administration encourages the use of U.S. citizens and U.S.-flag vessels in the shipment of LNG to help enhance the overall security of LNG operations by ensuring that vessels are operated by qualified, highly trained and skilled U.S. citizen personnel.

The Act further directed the Secretary to give top priority to the processing of deepwater port licenses to LNG facilities that will be supplied with natural gas by United States flag vessels. Further, the Act directed that the nation of registry for, and the nationality or citizenship of, officers and crew serving on board vessels transporting natural gas to a deepwater port be considered when granting a license.

In order to promote and enhance programs under the initiative, the Maritime Administration sought public comment on efforts to expand and maximize utilization of U.S. vessels and crews in LNG services. In addition, the Maritime Administration solicited comments on the availability of qualified officers and crew, as well as the advantages of U.S. crew utilization.

On January 17, 2007, a Notice and Request for Comments on Utilization of U.S. Vessels and Mariners in the Marine Transportation of Liquefied Natural Gas was published in the Federal Register [Docket No. MARAD-2007-26841]. The notice was posted on the Department of Transportation’s Docket Management System (DMS) to obtain public opinion. The comment period closed on February 16, 2007.

• GENERAL SUMMARY

This memorandum provides a summary of the comments received in response to the Notice and Request for Comments: Utilization of U.S. Vessels and Mariners in the Marine Transportation of Liquefied Natural Gas issued by the Maritime Administration in the Federal Register on January 17, 2007 [Docket No. MARAD-2007-26841].

Comments were due by February 16, 2007, and in excess of 500 responses were received.1 The majority (486) of the responses were submitted by unions and individual union members. The Governor of Massachusetts, 4 Congressmen, 8 State Senators and 28 State Representatives also provided their comments. Three international bodies, six maritime companies, two maritime academies, two special interest groups, and seven private citizens constitute the remainder of the interested parties who submitted responses.

The written comments generally mirror the intent of the Deepwater Port Act amended through the Coast Guard and Maritime Transportation Act of 2006 in ensuring safe and secure deepwater port LNG operations by maximizing the utilization of U.S. vessels and U.S. crews on LNG vessels. Responses in support of the U.S. vessels and U.S. crews generally cited safety and security in LNG operations at U.S. ports and offshore receiving facilities, as well as economic (employment) opportunities as positive impacts.

Somewhat neutral opinions were expressed by international entities and some maritime
companies. However, in expressing these positions, two international entities, two maritime companies, and a special interest group also addressed their concerns, particularly with free trade and fair competition aspects of international markets and the limited pool of experienced senior LNG officers to man a growing LNG Fleet. One maritime company addressed similar concerns and the risk of retaliatory action by other Governments.

All the comments received will be considered in developing and implementing programs to promote the utilization of U.S. mariners and vessels.

• COMMENT SUMMARY

All 486 responses received from unions and individual union members supported of the
utilization of U.S. mariners and U.S. vessels in the transportation of LNG. The six unions that submitted their comments include: Marine Engineers’ Beneficial Association (MEBA); American Maritime Congress; American Federation of Labor and Congress of Industrial Organizations of Maritime Trades Department; Sailors’ Union of the Pacific; Seafarers International Union; American Maritime Officers and RTM Star Center; Masters, Mates, and Pilots and Maritime Institute for Research and Industrial Development.

The Sailors Union of the Pacific stated that the employment of U.S. crews aboard LNG vessels “…will serve the best interests of the U.S. It will further help to alleviate the public concern over safety and security issues surrounding the LNG terminal sites.” The American Maritime Officers and RTM Star Center commented about the importance of “…participating in a growth industry critical to U.S. economic security.” MEBA stated, “America can supply a stable and reliable group of mariners to safely and securely bring LNG to our shores. This must not be overlooked.”

1 The Notice provided information on how the interested parties and stakeholders could submit comments by mail, hand delivery, facsimile, or electronic means via USDOT electronic docket site. 402 comments were received on the above referenced USDOT docket.

One of the more prominent security threats related to LNG vessels has been the recent
documentation of stowaways aboard foreign-flagged LNG tankers. Seafarers International Union addressed this salient issue with their statement:

If it is possible for individuals to find passage on such vessels, it stands to reason that those who wish to inflict harm upon our nation would seek to use this method as a way to do so. Having U.S.-flag LNG vessels and crews would help to minimize this obvious threat from reoccurring.

Massachusetts Governor Deval Patrick expressed his support of employing U.S. citizen crews for “[t]he safe and secure transportation of liquefied natural gas [that] is critical to the well-being of the citizens of the Commonwealth of Massachusetts.”

Four U.S. Congressmen representing the Commonwealth of Massachusetts, Stephen F. Lynch, William D. Delahunt, Michael Capuano and Edward J. Markey expressed their support for U.S. crewed LNG tankers from a national and state security perspective as well as the economic opportunities that U.S. crewing provides.

Eight Massachusetts State Senators: Joan Menard, Michael Morrissey, Susan Fargo, Edward M. Augustus, Jarrett Barrios, John Hart, Robert Hedlund, and Pamela Resor responded in favor of enhancing the use of U.S. crews. The Special Commission Relative to Liquefied Natural Gas Facility Siting and Use represented by Joan Menard (S-Sen) and Brian Dempsey (S-Rep) commented that “[the] Commission (Mass Legislature) further recommends that the state should consider within a Risk-Management Plan the potential benefits of requiring that licensed officer positions onboard a LNG tanker making port within the boundaries of the Commonwealth be fully licensed and certified by the USCG.” Twenty-eight Massachusetts State representatives also support enhancing U.S. crewed LNG tankers for safety and security reasons.

Two maritime academies responded to the comment request. The Massachusetts Maritime Academy presented its strong support to “[s]taff LNG vessels with U.S. Coast Guard Licensed Deck/Engine Officers.” The Calhoon MEBA Engineering School stated that “MEBA has a large pool of experienced LNG officers and officers that are willing to work in the LNG sector.”

Numerous private citizens submitted their comments in favor of “a dedicated American LNG Fleet and “[h]aving U.S. citizens aboard and in control of these vessels.” For example, Wayne A. Keinanen specifically noted that “The U.S.A was one of the first countries to develop the technology of LNG transportation, and would hate to lose this vital technology.”

There are six maritime companies that submitted comments. Among them, Woodside Natural Gas Inc., Neptune LNG LLC, and American Shipping Group support of the Maritime Administration’s U.S. crew initiative and also “…strongly support[s] the use of U.S. Flag vessels.”

On the other hand, the Consultative Shipping Group expressed their concerns that “[t]he
introduction of nationality requirements for political or other unilateral reasons runs the risk of retaliatory action by other Governments…thus damaging overall market efficiency.” While acknowledging that “[t]he addition of U.S. Officers would complement the ‘Global LNG Industry’ commitment to a diverse and inclusive population of Maritime professionals,” Shell Trading (US) Company also expressed concerns that “[t]he current U.S. Merchant Marine does not have a LNG Fleet; it must build or re-flag foreign vessels. The ‘spot trading nature’ of LNG conflicts with U.S. policy crewing.” Shell also noted that “[t]he U.S. has a limited pool of experienced senior LNG officers who sailed in the 80’s and 90’s. The remaining officers and crew and new academy graduates have little or no experience. The cost differential between American and foreign crews must be bridged.”

A special interest group, the Transportation Institute, provided a view in favor of the initiative that “[a] critical element of any proposed LNG terminal operation should be the assured use of U.S.-citizen mariners aboard LNG vessels and committed U.S. management to operate the fleet.” In regard to emergency communication, the Transportation Institute commented, “it stands to reason that those who speak English as an American citizen are going to have an easier time communicating with emergency and security response coordinators.” Another special interest group, the Center for Liquefied Natural Gas, provided both supportive and opposing opinions reflecting those offered by Shell Trading (US) Company.”

Three international bodies: the International Chamber of Shipping (ICS), the International Shipping Federation (ISF), and the European Community Ship-owners’ Association also submitted comments. Their positions are neutral with an inclination towards opposition by presenting their opinions that “…free trade principles with regard to International Maritime Transport should be observed” and “ICS and ISF are neutral on the question of encouraging the employment of particular nationalities of seafarers.”

In response to comments submitted, Maritime Administrator Sean T. Connaughton stated:

The increased interest in the transportation of liquefied natural gas, coupled with an already growing world-wide demand for qualified mariners, provides an unprecedented opportunity for the nation’s maritime industry. In direct response to this growing shortfall in manpower, the Maritime Administration has initiated an “LNG Crewing Initiative” to ensure that we develop a reliable and consistent supply of American mariners to serve on the LNG vessels that call at our nation’s gas receiving facilities. It is vital to our energy and security needs that the U.S. plays a key role in meeting the needs of a growing international fleet at a time when qualified mariners are in increasing demand.

• CONCLUSION

The Maritime Administration sincerely appreciates the efforts that we put forth in submitting comments to Public Docket MARAD-2007-26841. These comments overwhelmingly supported the utilization of U.S. flag and crews in the transportation of LNG to the Nation’s deepwater port facilities. The Maritime Administration, in response to this growing public interest and 6 legislative directive, is in the process of developing a voluntary deepwater port manning program to encourage the employment of highly trained and skilled U.S. mariners to meet the current and forecasted demand for professional mariners in the international LNG shipping industry.

In December 2006, the Maritime Administration announced an innovative public-private
partnership with SUEZ Energy. This was the first official partnership of its kind within the international LNG industry. Under this agreement, SUEZ will provide training and employment opportunities for U.S. citizen officers, cadets, and unlicensed mariners aboard their tanker fleet and at both of their planned deepwater port terminals off the coasts of Boston and Florida. Additionally, Excelerate Energy has entered into a similar agreement for the Northeast Gateway deepwater port facility in Massachusetts Bay and for its existing facility in the Gulf of Mexico. In January 2007, a Louisiana-based applicant, Freeport-McMoRan Energy, also committed to work with the Maritime Administration to develop programs to train and employ U.S. mariners on LNG vessels servicing their Main Pass Energy Hub facility being planned off the coast of Louisiana. Further manning agreements are under consideration with California and Florida based DWP applicants.

These agreements represent a sound public policy of increased safety, security, and improved transportation efficiencies and, they open up vital training and employment opportunities for U.S. mariners in the LNG industry. The Maritime Administration intends to continue to reach similar voluntary agreements with our pending and future deepwater port applicants and other energy companies serving the Nation’s international maritime markets.

The worldwide LNG tanker fleet currently lacks a single U.S.-flag vessel. As a direct result, few U.S. mariners have the opportunity to gain vital hands-on experience in this growing industry. Clearly, the lack of U.S.-flag LNG tankers translates into a lack of job opportunities for U.S. citizens. It is the Agency’s goal to help correct this situation and provide U.S. mariners opportunities in an industry vital to our energy and security needs.

The Maritime Administration strives to ensure a reliable supply of U.S. citizen mariners to serve on LNG vessels calling at U.S. energy receiving facilities. The Agency is working with the U.S. Merchant Marine Academy, state maritime academies, and other training facilities to develop and expand innovative educational programs. Specifically, the goal is to provide immediate employment for entry level mariners, both licensed and unlicensed, into the LNG industry (upon the completion of courses for the retraining and/or recertifying of current mariners who are sailing on vessels other than LNG).

The Maritime Administration considers the safe, secure, and efficient importation of an
environmentally friendly source of energy vital to the Nation’s economic growth. The licensing of deepwater ports contributes to the Department of Transportation’s strategic goal of improved mobility and reduced congestion by limiting the number of mega LNG tankers entering our Nation’s port facilities. The construction of deepwater port terminals also enhances public safety by isolating terminals away from congested population areas and, the utilization of U.S. crews will only further enhance operational safety. The Agency will continue its efforts to actively pursue public-private partnerships to expand service and flag agreements that ensure the Nation’s economic growth and security.