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Environmental Protection Air, Water (& Fish Too)

Making the Connection Broadband & VSAT


Seabulk Towing: Providing Service Excellence Through Safety

Inland Waterways A Critical Time

January/February 2009


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Tom Crowley, Chairman, President & CEO, Crowley Maritime Corporation


1/26/09 8:16:12 PM

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Volume 13, Edition 7, January/February 2009


Case Study:

CROWLEY MARITIME This 117-year-old firm has survived wars, the Great Depression, booms and busts, and the ups and downs of a cyclical industry and emerged stronger than ever.



Executive Interview:


Chairman, President and CEO BY TONY MUNOZ

32 Inline by Design

GE’s New Inline Six- and EightCylinder Engines Have Many Applications BY LARRY PEARSON

35 Invasive Species Update: End Game in Sight? BY JOSEPH KEEFE

39 Making the Connection with Broadband and VSAT Leisure Liners Hit the ROI Trifecta by Slashing Connectivity Costs, Building New Revenue Streams and Boosting Crew Morale BY PATRICIA KEEFE

44 Requests for “Ports of Refuge” by Vessels in Distress – Considerations for U.S. Ports BY NEIL KLEIN

48 Night-Vision Systems Shift Threat Detection to Threat Assessment

MarEx Departments Executive Achievement


John Waggoner


hornblower Marine services



52 Major U.S. Insurance Provider Ready As IMO Bunker Convention Enters Into Force BY MAREX STAFF

54 “Plan B”: Crew Comfort Takes Center Stage Slowing Economy Finds Owners Retrofitting and Repowering; Interior Renovation May Be Just As Important BY MAREX STAFF

56 Legal Directory

10 Captain Sergey Ponyatovsky President, inFlot world wide inc. BY MAREX STAFF

Washington Insider

12 Economic Stimulus and EPA Regulation Provide Opportunities and Challenges BY LARRY KIERN


16 Inland Waterways Investment Is Critical to Economic Recovery and Future Growth BY CORNEL MARTIN

Upgrades & Downgrades

18 Enough Already! BY JACK O’CONNELL

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RW Fernstrum


9:39 AM

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PublISHer tony Munoz :: edItor In CHIeF Joseph a. Keefe :: SenIor CoPy edItor John J. o’Connell, Jr. :: art dIreCtor Evan naylor :: aSSIStant art dIreCtor daniel Bastien :: SenIor VICe PreSIdent SaleS & MarKetIng Brett Keil :: adVertISIng SaleS Manager Elizabeth Johnson :: SaleS aSSoCIate irena ortlani :: SaleS aSSoCIate tom darr :: SaleS aSSoCIate - gerManIC euroPe hansjorg Brans :: Internet SerVICeS Manager Matthew Miller :: aCCountIng Manager Marci ryan :: CIrCulatIon danielle Phillips :: the Maritime Executive, llC (issn 1096-2751) 3200 s. andrews avenue, ste. 100 Fort lauderdale, Fl 33316 telephone: (866) 884-9034 Fax: (954) 848-9948 For subscriptions please visit the Maritime Executive (issn 1096-2751) is published bimonthly by the Maritime Executive, llC, 3200 s. andrews avenue, suite 100, Fort lauderdale, Fl 33306, tel. (866) 884-9034. sUBsCriPtions: domestic subscription rates are $36, per year. international subscription rates are $86, per year. application to mail at periodicals postage rates is pending at Fort lauderdale, Fl and additional mailing offices. For single copies of the magazine or reprints of articles appearing in this magazine, contact the Maritime Executive at (866) 884-9034. CoPYright: © Copyright 1996 by the Maritime Executive. all rights reserved. the Maritime Executive is fully protected by copyright law, and nothing that appears in it may be reproduced, wholly or in part, without written permission. we cannot be responsible for the claims of manufacturers in any of the items. Editorial manuscripts and photos will be handled with care but no liability is assumed for them. PostMastEr: Please send address changes to the Maritime Executive, 3200 s. andrews avenue, suite 100, Fort lauderdale, Fl 33316. Change of address notices should be sent promptly with old as well as new address and with ZiP code or postal zone. allow 30 days for change of address. 4 | January/February 2009

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Cautious,Yes. Risk Averse? No.

Joseph Keefe Editor in Chief

Joseph Keefe can be contacted at jkeefe@ with comments, input and questions on this editorial or any other piece in this magazine. The Maritime Executive welcomes your participation in our editorial content.

This new year commences in a much different fashion than, say, 2008. And having begun this editorial with a colossal understatement that probably dwarfs even the breadth of the current economic downturn, I also feel compelled to continue on with this train of thought. That also means, of course, that I will need to either provide some profoundly deep advice or make some grand prognostication about the coming 12 months and beyond. But it’s a lot simpler than that, actually. Here’s why: I get to speak to a wide range of industry players on a daily basis: the Coast Guard, ship operators, maritime attorneys, shipyard executives, service providers, and the very people who manufacture the parts and gizmos that make up each and every vessel that sails the seven seas, inland rivers and Great Lakes. They can individually tell me the day or week that they started to feel the current financial crunch. As I keep my ear to the ground, it is also becoming more than obvious that the guiding principle of the new year can be summed up in one word: caution. To be sure, veterans of the last bit of “rough seas” in this business are determined not to make the same mistakes twice. That’s a good thing. On the other hand, caution that translates into a bury-your-head-in-the-sand approach is the wrong way to go. The process of owning – and effectively running – a successful business enterprise necessarily involves risk. Being able to manage that risk, while at the same time advancing your business plan, will be the key to surviving these unquestionably perilous times. And yes, this editor has owned and run a marine-related service business in the past. Even during those periods when we had to stop and pause to ponder how we were going to make payroll during a particular month, I also knew that we had to keep on doing what we were paid to do, or perish. That metric translates very well to your own business model, even today. There are plenty of opportunities out there right now. Sorting them out is a job for someone a lot smarter than me. I have a friend whose primary occupation is to invest in the market – I guess they call these people “day traders.” He hasn’t had a paying job since 1986, and he does quite well for himself. He called me the other day to ask about this shipping company or that steamship line, digging into the nuances of the charter markets and other esoteric stuff. I had to disappoint him. I told him that if I knew when the charter markets were going to turn around or when we could expect to see a robust rebound in East-West container traffic, I would have fielded his call from my private island on an “809” area code phone. And I wouldn’t be passing out the answers to just anyone. I do know this: It will turn around, and when it does, the individuals and firms that positioned themselves to take advantage of emerging conditions will profit handsomely. As we gather steam in 2009, the end of January also finds our first edition of the new year hitting the streets. Chock-full of wide-ranging articles on the environment, high-tech communications at sea, and ideas on how to make your crews more comfortable (and more likely to return to your boats), there is literally something for everyone in this edition of MarEx. On the cover, Tom Crowley returns to explain how his privately held firm was able to have a terrific year despite everything else that was going on around them. In the eight years since we last profiled him, Crowley has stayed aggressive, played it smart and, in the process, defied the odds. The results speak for themselves. You might say the same thing about THE MARITIME EXECUTIVE. As you deploy the proverbial sea anchor to dampen those choppy financial waters, stay with us as we deliver – online and in print – the valuable news and business intel that will carry all us into the next boom market. And that’s something that you can count on. Mar Ex

6 | January/February 2009

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executive achievement:

John w. waggoner, Hornblower Marine Services

By MarEx staff

the recognized leader in american Casino and Ferry operations Has His eye on Perfecting the Shortsea Shipping Concept Here at Home JOHN WAGGONER’S SELF-DESCRIBED “circuitous path” to his current role as President and Chief Executive Officer of Hornblower Marine Services (HMS) has been a personally satisfying one. Active in the passenger vessel industry for over 30 years, he began his career in the sport fishing business but has been involved in many and varied maritime segments including commercial fishing, offshore oil support vessels, dinner cruise and excursion vessels, casino boats, and car and passenger ferry operations. His role in the next phase of the American maritime industry, however, will likely define his career – and just perhaps jumpstart the foundering concept of domestic shortsea shipping.

getting Started: a different route

Waggoner’s marine career started ordinarily enough when, in the sixth grade, he took a half-day fishing trip out of San Diego. Now hooked for life on the water, he leveraged his substantial Midwest work ethic into a position as deckhand in the very same fleet of boats. Eventually, and after serving as Director of Marine Operations for Hornblower Dining Yachts’ fleet of 29 dinner cruise vessels, John and his partner founded HMS. Waggoner calls Jerry Aspland, the former President of ARCO Marine, Inc., an early mentor. Along the way, though, Waggoner has himself mentored countless numbers of employees. Active in many civic organizations, he is also a member of the California Maritime Academy Foundation’s Board. Waggoner told MarEx this month that, “Knowing what I know now, I probably would have gone to a maritime academy.” Instead, and true to his passion for the oceans, he earned a Bachelor of Science degree in Marine Biology in 1979 from California Polytechnic State University in San Luis Obispo. Later, he would receive his MBA from the same institution. Concurrent with all of that, he managed to earn his ocean operating license and spent time working

in the offshore oil supply business. While getting his MBA, he worked for Exxon. He even sold securities for a summer but knew his heart wasn’t in it. That “circuitous path” would lead him back to the water, where John still lives his childhood dream of “being able to play with boats the rest of his life so he will never have to grow up and get a real job.”

growing up – and branching out

From a startup company of just two employees, Waggoner has fostered the firm’s growth – which he calls his greatest accomplishment – into one which employs almost 300. Since the firm’s inception in 1995, HMS has grown at an average rate of 58 percent annually in terms of gross revenues. These days, HMS is recognized as a leader in providing consulting, management, and construction oversight for a wide range of marine operators – startup and existing businesses alike. Even today, Waggoner still shares knowledge and resources with his former employer, whose six-state operation is the largest dinner cruise operation in the nation. From the outset, Waggoner’s fledgling HMS enterprise was a success. After landing a contract to convert a dinner boat to a casino boat in Missouri, he soon got another – this time involving a 3,000 passenger casino boat. It was here that his now familiar expertise in marine logistics was first tested. Challenged by the Coast Guard to prove, among other things, that the casino boat could be operated in a safe fashion under a variety of scenarios, Waggoner’s team formulated an Emergency Disaster Plan for the operation. The drill that followed was, at the time, the largest emergency disaster drill ever attempted in the Midwest and involved 21 state, local and federal agencies. John’s continuing dedication to safety eventually earned a Commendation from the Commandant of the U.S. Coast Guard for his substantial and lasting contribution to promoting passenger vessel safety.

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Johnwaggoner John Waggoner IS Shortsea Shipping

Along the way, HMS launched the largest casino boat in the world, right here at home in Indiana. Well-paying casino work would ultimately allow HMS to enter the high-speed ferry game, where Waggoner’s crew has distinguished itself in management and logistics savvy for such high-visibility projects as the Westpac Express and Hawaii Superferry. Both projects were notable for their many challenges, and Waggoner says, “No two projects are the same.” Today, Waggoner frequently finds himself in Trinidad where he is actively engaged in a new ferry project and perfecting an enviable shortsea model. There, he has helped local workers reduce their roundtrip commute by as much as two hours, while also reducing the carbon footprint of the island’s rapidly growing automobile fleet. At a time when many marine businesses are experiencing real pain in a contracting economy, HMS reports a very different picture. The Trinidad project does not necessarily fit within the HMS business model of “staying in the domestic markets,” but Waggoner has also not been afraid to look to emerging markets to generate new business as the U.S. economy experiences its cooling-off period. Beyond this, many of Waggoner’s clients tend to be state, local or federally funded enterprises. These transportation projects, often critical “moving roads,” can be the lifeblood of local com-

munities. HMS, he says, is therefore weathering the current economic storm very well.

Planning and Preparation: Based on Experience

Eventually, Waggoner knows, his expertise may be critical in developing a national shortsea shipping model. And it is no accident that he was recently appointed to the National Academy of Sciences’ Marine Board. Waggoner characterizes ferries as “moving roads,” but also understands the need for a demonstration project to jumpstart the process. With the credibility that would come from a successful startup project, Waggoner says, “We’ll hopefully find funds for a moving highway.” Tomorrow, the guy who has organized high-speed ferries, casinos, dinner boats, and scores of other marinerelated projects might just be our best bet to take the concept of “America’s Marine Highway” and turn it into a reality. The “circuitous path” traveled by Hornblower Marine’s CEO is poised to become the roadmap for efficient, clean and green, shortsea transportation. Harnessing his proven history of success in executing new ventures and re-engineering existing businesses in the passenger vessel industry is arguably the perfect recipe for producing shortsea efficiencies on a much wider scale. And if he tends to make it look easy, that’s because he’s still having fun. Let’s hope he never stops. Mar Ex

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executive achievement:

Captain Sergey

PonyatoVSKy, President,InFlot world wide Inc.

By MarEx staff CAPTAIN SERGEY PONYATOVSKY, President of INFLOT World Wide, one of the most prestigious cruise line agencies in the world, is among the more interesting people we have interviewed here at MarEx. INFLOT operates in Russia, the Baltic, Black Sea ports, Asia, and the Caribbean, and Sergey is now working with cruise line executives to reestablish St. Croix as a port of call in the Caribbean. Ponyatovsky was working at the INFLOT cruise department in St. Petersburg during the 1991 Russian coup, which ultimately triggered the collapse of the Soviet Union. As 146 million of his fellow countrymen looked on in awe as Mikhail Gorbachev was placed under house arrest, Ponyatovsky had only one thing on his mind: How to get 700 Americans on the Vistafjord, a Cunard cruise ship, out of the port of St. Petersburg and the country safely? Ponyatovsky, an experienced ship’s captain and graduate of the State Marine Academy in Leningrad, was having problems getting a pilot to board the ship and take it out of port. He began frantically calling phone numbers on the agency list, but to no avail. Eventually, he found someone willing to listen and reminded him that, no matter what the outcome of the coup, Russia was still a sovereign nation, and business and the lives of its citizens would continue henceforth. He spoke of the professionalism of mariners and the responsibility of the agency to get the Americans and the ship out of the country. Finally, he was successful and the ship and its American passengers left, but it came at a price. He was brought into the government offices and questioned by officials about his over-zealous diligence. While this may sound strangely humorous to many of us today, Ponyatovsky relates how the INFLOT ship agency started up in 1934, and how in 1939 Stalin had 80 percent of the company’s employees executed as spies because of their dealings with foreign-flag ships. One can only imagine, as the Soviet Union collapsed, what government officials thought about the good captain’s efforts to save a group of Americans. During the transitional period of 1993-1994, Ponyatovsky began working with private yachts and cruise ships, and also managed to have a new pier built so the local citizens would have a place to watch the vessels come and go. But he had to

deal with the bureaucrats who were looking for payoffs and bribes, and he says it was a very difficult time because there was no system and everyone was looking for what they could get for themselves. During this same period, the cruise ship Silver Cloud came to St. Petersburg with Arnaud de Borchgrave, the chief editor of the Washington Times and the chairman of United States Global Strategy Council. His friend was the mayor of St. Petersburg, and the vice mayor of the city was Vladimir Putin. Over time, because Putin was in charge of the city’s foreign affairs, Ponyatovsky and Putin became acquaintances. During the early 1990s, Ponyatovsky spent a lot of time traveling to the United States and became close with many of its cruise executives. Eventually and partly as a result, he bought the INFLOT agency because it always had an excellent reputation for managing port operations, conducting tours and working with the various cruise lines. While Ponyatovsky had a good life in the new Russia with his family, including a new house, a driver, and a vibrant business, moving to the United States to be near the core of the cruise line industry was, as he terms it, “the next logical step in the process.” In the late 1990s he finally moved to Fort Lauderdale, primarily to keep the revenues safe from the uncertainty of the new and developing Russian infrastructure. Recently, Ponyatovsky was appointed to the Board of Governors of the Maritime Security Council, which deals with policies and programs to protect against terrorism and piracy. The council is made up of members of the industry, government officials, and port and shipping executives. One of his first and foremost activities as governor was to bring the U.S and Russia together to work toward a better business alliance. Since 2000, Ponyatovsky, realizing the cruise industry will continue to grow, has been investing in port infrastructures. He is currently investing in St. Croix and is keeping a close eye on the potential of Cuba. He particularly likes St. Croix because it has great piers, a lively city, excellent beaches, and one of the largest refineries in the world, which could provide ships with low-cost bunkers. MarEx plans to stay in touch with Ponyatovsky to see how his business expands and how Mar Ex the St. Croix investment works out.

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washingtoninsider Written by Larry Kiern, Winston & Strawn LLP


Economic Stimulus and Epa Regulation Provide Opportunities and Challenges for the Maritime Industry A Consensus for Bold National Economic Stimulus Emerges With the November elections behind us, the nation’s attention is firmly fixed on action to stimulate America’s economy. The loss of over two million American jobs in the last year means that domestic unemployment could reach double digits without swift and effective action. Conservative and progressive economists alike urged the new Obama Administration and 111th Congress to move swiftly to enact an enormous stimulus package. Unlike the years 1930 and 1931, when America’s economy cratered amidst uncertainty about what to do and stubborn ideological opposition to government intervention, there was unanimous agreement this time around that strong government action is necessary. As President Obama’s new chief economist, Lawrence Summers, wrote recently, “In this crisis, doing too little poses a greater risk than doing too much.� While there will no doubt be disagreement about the precise parameters of the stimulus, a remarkable consensus has emerged about its basic contours. Its principal purpose, at least initially, is job creation. Lacking that, it will be impossible to turn around the housing market and consumer demand, two areas essential to a lasting recovery. Bold action is necessary to return people to work and restore public confidence so that consumers

will resume spending. Additionally, the new Administration’s proposal, the American Recovery and Reinvestment Plan, promises to address America’s backlog of neglected infrastructure projects. Despite several years of economic growth from 2002 – 2007 and massive deficit spending, critically important investments in America’s future remain unfunded. Consequently, the Obama Administration and Congress promise to invest in public projects that will work for the American people. These include repairing and building our nation’s schools, investing in information technology systems to improve the efficiency of our notoriously inefficient health care system, and rebuilding our roads, bridges, and public transit systems. The sad state of the nation’s essential transportation systems is but the most obvious example of neglect. While what first comes to mind may be the congested state of our nation’s crumbling highways and bridges, those are but symptoms of the underlying problem, which is a neglected national transportation system. Presidential advisor David Axelrod emphasized the need for broader based action when he explained that “We want to do it in a way that leaves a lasting footprint, by investing‌ and rebuilding our crumbling roads, bridges and waterways.â€?

Forensic experts:

Maritime Infrastructure Investment Opportunities While the lion’s share of transportation infrastructure investment will undoubtedly flow to highways and bridges, important maritime projects merit funding. These include investments in U.S. Coast Guard initiatives and our maritime transportation system. The Coast Guard has particularly worthy infrastructure projects that are already approved and underway and can quickly use increased funding to employ many more workers. The badly needed modernization of its fleet has contracts in place across the nation that could easily be accelerated with additional funding. For example, the service is currently building new national security cutters and patrol boats. These programs should be accelerated immediately, putting more American shipyard workers back to work. Additionally, the service must accelerate repair and modernization of its critically important icebreaker fleet. Congress and the Bush Administration recently acknowledged the need and provided an initial $30 million for long-overdue work on the icebreaker Polar Star. But this funding was plainly insufficient and should immediately be increased and the program accelerated and expanded to modernize the icebreaker fleet and build new icebreakers so that America has the capability to

Environmental Compliance

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 protect its national interests in the Arctic. The nation’s ports and waterways need increased investment as well. Sadly, many of these projects have long been in the works but have languished because of a lack of political will to apply the surplus funds available in the Harbor Maintenance Trust Fund. These funds should be released immediately and used to restore America’s public resources rather than withheld to reduce the deficit. Current circumstances make it difficult to justify withholding a dredging surplus of over $4 billion while waterway projects go unfunded and America’s marine highways needlessly fill with silt. Combining the new Administration’s aim to invest in environmental protection with the need to spur the domestic automobile industry, Congress should provide funding to ports to promote the purchase of a new generation of environmentally efficient trucks for draying. Such a program, like that developed in California’s ports of Los Angeles and Long Beach, would both stimulate the economy and improve air quality.

New EPA Regulation Challenges Vessel Operators On December 19, 2008, the U.S. Environmental

washingtoninsider Protection Agency (EPA) issued the controversial Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels (VGP), regulating vessel discharges under the Clean Water Act. The EPA regulation follows legislation enacted by Congress last summer exempting recreational and small commercial vessels from the impending regulation. The practical result is that the new regulation applies only to larger commercial vessels. As a general matter, the Clean Water Act bars the discharge of pollutants into the waters of the United States unless authorized by a permit or expressly exempted. The new EPA regulation resulted from protracted litigation by environmental groups, who challenged a longstanding EPA exemption carved out for discharges incidental to the operation of vessels. In March 2005 a federal district court struck down the EPA exemption, and EPA’s appeal of the decision to the U.S. Court of Appeals for the Ninth Circuit failed. Ultimately, EPA did not appeal the decision to the Supreme Court, and the district court ordered vacatur of vessel exemption by December 19, 2008. While EPA met the deadline, the court also agreed to extend the exemption until February 6, 2009 at the request of representatives of the maritime industry and the EPA to facilitate

compliance with the new rule. The VGP includes new diverse regulatory requirements added by many states as “conditions� to their certification under the Clean Water Act. The resulting patchwork represents the balkanization of vessel discharge regulations long feared by the maritime industry. Oddly, while European nations have recently moved toward unification and harmonization of their maritime environmental regime, the United States drifts in the opposite direction. The net result is that vessel operations in the United States have become more complicated, burdensome, and expensive, and vessel operators and their crews face the threat of greater sanctions, including criminal prosecution. This result is particularly ironic considering the failure of federal and state governments to tackle the most serious sources of water pollution in the United States, agricultural runoff and municipal waste. Recent reports by the Washington Post detailing the complete failure of the EPA and the states to protect the Chesapeake Bay over more than two decades highlights the misplaced regulatory emphasis directed at vessels. States and other jurisdictions that figure prominently in maritime commerce were deemed to have waived certification and therefore are




Visit us during CMA, Stand 79

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washingtonInSIder covered by the new ePA rule by default. these include texas, louisiana, Washington, oregon, maryland, virginia, delaware, North carolina, south carolina, Alabama, Puerto rico, the u.s. virgin islands, and American samoa. half the states, two tribes, and one territory, Guam, certified the ePA rule. curiously, Alaska and hawaii, both significant maritime states, failed to certify, but have indicated they will. For those 28 states that certified the vGP, the additional conditions they promulgated in their certifications became part of the regulation applicable to discharges in their respective waters. the result is a patchwork of disparate rules. several states conditioned their certifications on additional graywater discharge restrictions. Georgia mandated use of marine sanitation devices. maine restricted discharges of graywater and blackwater in its coastal waters and in “No discharge Areas.” other states, such as connecticut, illinois, michigan, Nebraska, New hampshire, New Jersey, and New York, prohibited graywater and blackwater discharges. New York and massachusetts imposed nearshore ballast water exchange requirements, even though the ePA decided the exchanges were not justified on the Atlantic and Gulf coasts. ballast water standards approved by the international maritime organization (imo) will become effective in 2016 and most Great lakes states, including ohio, indiana, illinois, minnesota, michigan and Pennsylvania, basically adopted the imo ballast water standards and timetable. by contrast, New York required vessels that will enter New York waters to have stringent ballast water treatment systems by 2012. california mandated new conditions requiring vessels to comply with the state’s numeric effluent limits. consequently, as of February 6, 2009, vessels calling in california must monitor waste streams and not exceed those limits. in the face of public comments regarding the jurisdictional reach of the new vGP requirements, the agency conceded that its rules only apply in the territorial waters of the united states and that the periodic inspection and reporting requirements should be “read in light of what they are – conditions prerequisite to discharge into waters of the u.s.” this means that vessels entering u.s. waters must only conduct a weekly inspection during the week before coming into u.s. waters and will not be required to conduct weekly inspections at other times when the vessel is outside the united states. similarly, quarterly sampling would be required only during the quarter prior to entry,

and an annual inspection would be required during the year prior to entry. likewise, corrective actions must be taken by the later of the specified deadline or the vessel’s return to the united states. vessel operators should complete comprehensive vessel discharge reviews incorporating the provisions of the vGP as soon as possible so that issues can be resolved and personnel trained prior to arrival in u.s. waters. And vessel operators must take into account the specific requirements of the states and other jurisdictions a vessel may visit. sadly, what has been missing from this strictly regulatory approach to reducing pollution from vessel discharges is a significant investment of public resources to help vessel operators minimize pollution and develop cost-effective ballast water treatment systems. the creative resources available in our nation’s maritime academies have gone largely untapped in addressing these goals. Additionally, vessel operators should be given incentives to spur investment in improved systems to reduce pollution. And the new Administration and congress should invest in research and development to produce and certify effective ballast water management systems and encourage vessel owners to install them swiftly.








the New Year presents the maritime industry with both opportunities and challenges. the political imperative for economic stimulus provides remarkable opportunities for funding badly needed and long-overdue maritime projects. the political imperative for more demanding environmental regulation presents vessel operators and ports with unprecedented compliance challenges. Wise public policy should recognize the merits of harnessing these developments by providing funds Mar Ex that accomplish both.



larry Kiern is a partner at Winston & Strawn LLP, an international law firm of 900 lawyers. His practice concentrates on maritime issues, including legislative, regulatory, and litigation matters. Before joining Winston & Strawn, he was a Captain and law specialist in the U.S. Coast Guard who served as the Legislative Counsel and Deputy Chief of the Coast Guard’s Congressional Affairs Office.

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2:58:05 PM









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Marex: OP-eD

Inland Waterways Investment Is critical to economic recovery and Future Growth By cornel Martin, President and cEO, Waterways council, Inc.

The new year brings much uncertainty about the economy, the future of certain industries and businesses, the housing market, and a new administration’s plans. but one thing that is certain is the value of our inland waterways transportation system for providing a less costly, fuel-efficient and environmentally friendly way to move our nation’s “building block” commodities, both domestically and for export. Our inland waterways system transports about 20 percent of our nation’s coal to generate electricity in utility plants and around 22 percent of our domestic petroleum products. This system is the primary artery for more than half our grain and oilseed exports. All told, more than 625 million tons of freight commodities valued at more than $70 billion move on America’s inland navigation system annually. And with worldwide trade expected to double over the next decade and with our highways and railways facing serious capacity issues, our inland rivers may be even more critical tomorrow than they are today for transporting products efficiently. There are other considerations as well. A new study by the National Waterways Foundation underscores the “green” value of this transport mode. Inland waterways relieve congestion on our already over-crowded highways and railways. One jumbo barge has the same capacity as 70 trucks or 16 rail cars. A typical 15-barge tow on our nation’s rivers is equal to 1,050 trucks – in other words, just one barge movement equals 1,050 truck movements! To sustain these many benefits and stimulate economic recovery for our nation, investment in our inland navigation system of locks and dams is critical. Many of our locks and dams are more than 50 years beyond their economic design

life and are deteriorating rapidly, impacting efficiency, safety, and our world competitiveness. We must modernize our lock-and-dam system so that our farmers, coal miners, oil producers and stone/aggregate suppliers can transport their products cost-effectively and efficiently, allowing them to remain competitive in world markets. It took only two to three years to build some of the first modern locks and dams on our nation’s rivers in the 1920s and 1930s, but today it takes increasingly longer periods of time to bring new locks online. We must find ways to improve the current waterways project delivery system and ensure that navigation projects supported by expenditures in the Inland Waterway Trust Fund are built in a timely and cost-effective manner. The need for improvement in the process is evident when comparing current projects with lock-and-dam modernization projects authorized a little more than 20 years ago under the Water Resources Development Act (WRDA) of 1986. Construction for all seven of the WRDA ’86 lock-and-dam modernization projects proceeded at a pace that saw the new or modernized locks become operational fairly quickly, anywhere from four to eight years, with the average for all seven projects equaling 6.3 years. Since then, the estimated time to complete lock-and-dam modernization projects has ballooned well beyond reasonable time and costs; only one post-WRDA ’86 project thus far has seen its modernized lock become operational (Marmet, near Charleston, West Virginia). An example of this disappointing project delivery system is the Lower Mon project on the Monongahela River near Pittsburgh, under construction for 13 years with the Corps of Engineers’ current estimates for completion being another 13 years at best – around 2022 – with cost overruns pushing original estimated costs from $550 million to new estimates exceeding $1.3 billion. This is a problem not only for commercial users of the system, who need efficient and reliable ways to move the nation’s commodities, but also for every taxpaying citizen who cares about how government should perform on its behalf. Our nation must fix this problem and work harder to modernize our lock-and-dam system if we want to remain

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OPEDc.MarTIn world leaders. For example, China has announced plans to spend a half-trillion dollars over the next three years to stimulate its economy. Last November Waterways Council, Inc. (WCI) submitted testimony to Congress urging the inclusion of $1.5-$2.0 billion for the nation’s critical lock-and-dam infrastructure system under the second economic stimulus package focused on infrastructure investment, job creation, and economic recovery. WCI specifically urged Congress to fund a total of 16 congressionally-supported, lock-and-dam modernization projects with approximately $1-$1.5 billion that could productively and quickly (perhaps within 90 days of enactment) expedite job-creating construction work associated with the projects. It also requested an additional $500 million to be appropriated in the stimulus bill for productive, high-priority, employment-enhancing operation and maintenance (O&M) work on the inland waterway system. At press time it was unclear when the full economic stimulus package would be presented or what priority would be given to our nation’s inland waterways infrastructure, but we will continue to urge our leaders in Congress and the new Administration to recognize the importance of our nation’s inland navigation system and address its critical needs. America’s inland navigation system offers our country an opportunity to compete in the world market, but if we

don’t make necessary investments now, our future as a world leader is in jeopardy. Mar Ex

cornel Martin is Waterways Council’s new President and CEO. Prior to being named to this position he was Chairman and CEO of Direct Workforce, Inc., a contract labor company serving the shipbuilding, ship repair, and oil and gas industries based in Houma, Louisiana. Previously, Martin served as President and CEO of the Canadian American Transportation System. He also served as Vice President - Corporate Affairs of American Classic Voyages Company, parent of the Delta Queen Steamboat Company (and other cruise line subsidiaries). In the early 1990s, Mr. Martin worked as Vice President – Southern Region, for the American Waterways Operators. During the 1980s he was a member of the senior professional staff of the House of Representatives’ Coast Guard and Navigation Subcommittee and Legislative Assistant for Maritime Affairs for Congressman W.J. “Billy” Tauzin of Louisiana. He can be reached at

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upgrades Downgrades

enough already!

Shipping Stocks, along With the Markets, Got clobbered in 2008. Is There More to come? IT WAS THE THIRD WORST YEAR EVER for stocks. Only the Panic of 1907 and the Depression year of 1931 were worse, and not many of us were around back then (thankfully). For the record, and in case you’ve already forgotten, the Dow Jones Industrial Average fell 34 percent last year (compared with 53 percent in 1931 and 38 percent in 1907). The more broadly based S&P 500 and Nasdaq indices fell 39 and 41 percent, respectively. Most of the damage occurred in the September-November timeframe, with the market reaching a low for the year on November 20. If you had been smart enough to follow the old Wall Street adage of “Sell in May and go away” (the markets actually peaked in May), you would be sitting pretty right now, having avoided losing about half your portfolio. But most of us weren’t that smart and now find ourselves faced with the stark realization that (1) the gains of the last five years have all been wiped out, and (2) stocks are now trading below where they were 10 years ago. Huh? Whatever happened to the time-tested strategy of “buy and hold”?


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Aren’t stocks supposed to go up (not down) over time and even outperform all other asset classes over the long term? Oh well, we’ll just have to chalk it up to (what?) and content ourselves with the prospect of capital loss carryforwards for many years to come. The good news, if you can call it that, is that the U.S. actually fared better than the rest of the world. That 34 percent decline in the Dow looks downright measly when compared to the 46 percent decline for the rest of the world, ex the U.S. No region was spared. Europe, as measured by the Dow Jones Stoxx Index, fell 46 percent, a record. Latin America and Asia-Pacific, along with other emerging markets, were among the hardest hit, each declining 53 percent. Individual countries fared even worse, with two of the erstwhile favorites (remember BRIC?) – Russia and China – down a whopping 72 and 65 percent, respectively, inspiring protests in both countries. Brazil, another member of BRIC and Latin America’s largest economy and stock market, was not far behind with a 57 percent decline, while India – another erstwhile darling and charter BRIC member – fell 52 percent. But the blue ribbon went to lowly Iceland, where a banking crisis of historic proportions rendered the local currency worthless and reduced equity values by a staggering 96 percent. Even Ireland, the former Celtic Tiger and pride of the Eurozone, was not immune, falling 69 percent, behind only Iceland and Russia. The lone safe haven was Treasurys, where interest rates began the year at attractive levels and stayed that way until the final few months. As the Fed began to lower rates, the price of these higher-yielding bonds soared. The 30-year bond fared best, up more than 40 percent in 2008, followed by the 10-year at 23 percent and the two-year at eight percent. But this window has already closed as panicked

18 | J a n u a r y / F e b r u a r y 2 0 0 9

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jackO’connell investors, seeking the safety of Uncle Sam, have flocked to Treasurys and driven rates to record lows.

What Goes Up… Must Come Down

Now for the really bad news (as if you didn’t already know): Shipping stocks were among the market’s worst performers. Nevermind declines of 40 or 50 percent. We’re talking 70 and 80 percent. Why? Because the bubble in commodity prices finally burst, and the value of everything these vessels carry – from coal to grains to oil – plummeted. Couple that with a worldwide recession, falling consumer demand, declining trade, and frozen credit markets, and – well – you get the picture. In the face of all this, if your shipping portfolio lost less than half its value in 2008, you

Courtesy: Barron’s

See the Possibilities

should be writing this column. Let’s start with 2007’s #1 performer and everyone’s favorite trading stock, DryShips (DRYS). This is the largest publicly traded drybulk company with a fleet of 40 vessels, and it also owns Ocean Rig, an ultra-deepwater drilling company, which it plans to spin off to investors during the first quarter of 2009. DRYS is a day trader’s (if there are any left) delight. After peaking at 130 in mid-2007, it traded as low as 3 in late 2008. Plenty of room for arbitrage there! On an average trading day, nearly half of DryShip’s shares change hands. You can literally double your money, or lose half of it, in a week in this stock. Unfortunately, after a 330 percent rise in 2007, DRYS came crashing back down to earth in 2008, falling 86 percent and finishing #1 on our Bottom 5 list of worst performers. But DryShips was not alone (see Chart 1). Based on a selective yet comprehensive survey of maritime equities in 2008 with a market capitalization of at least $100 million, plenty of them had declines in the 70 to 80 percent range. As you would expect, the Bottom 5 is not a pretty sight. And as you would also expect, the list is composed entirely of drybulk carriers. Bulkers suffered the most due to the previously mentioned Great Commodity Bust of 2008 and the consequent epic collapse in shipping rates. The Baltic Dry Index, which tracks rates on the 40 most heavily traveled

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jackO’cOnnell cHarT 1: bOTTOM cOMPany (Symbol)

5 12/31/08 Price

1. DryShips (DryS) 2. excel Maritime (eXM) 3. eagle bulk (eGle) 4. navios Maritime (nM) 5. Genco Shipping (GnK)

$10.66 7.04 6.82 3.16 14.80

change in ‘08

-86% -82 -74 -74 -73

shipping lanes, peaked in May at 11,793 and ended the year at 774. That’s a decline of 93 percent, which would make the Index – if it were a stock – the winner in our unofficial poll. Nothing like that had ever happened before. No wonder these stocks did so badly. Did someone say shipping was a cyclical business? Now for the Top 5 (see Chart 2). In any other year, they would be the Bottom 5. cHarT 2: TOP


cOMPany (Symbol)

1. nordic american (naT) 2. Tidewater (TDW) 3. Seacor Holdings (cKH) 4. Frontline (FrO) 5. Knightsbridge (VlccF)

t t t t t t t t t t t t t

12/31/08 Price

$33.75 40.27 66.65 29.61 14.65

change in ‘08

+3% -27 -28 -38 -39


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Amazingly, there actually was one company whose stock was up in 2008. (Trivia question: Can you name the only two Dow stocks that were up in 2008?) That company was Nordic American Tankers (NAT), a name not previously mentioned in this space but one clearly worth watching. NAT operates a relatively small fleet of 13 Suezmax tankers and is committed to paying out most of its free cash flow in dividends, resulting in an attractive double-digit yield for investors (last year its yield was close to 20 percent). The rest of the Top 5 is split evenly between oil service companies (Tidewater and Seacor) and tanker companies (Frontline and Knightsbridge). As a group, tankers did best, in part because of their attractive dividends and in part because the demand for oil, despite falling somewhat, didn’t fall as far or as fast as other commodities.

The road ahead

Is there more to come in 2009? Hard to say. If history is any guide (and it sometimes is), the answer is a qualified no. Following the Panic of 2007, when stocks fell 38 percent, they rose 46 percent in 1908. In 1931, when the Dow had its worst year, falling 53 percent, it declined another 23 percent in 1932 before rising 67 percent in 1933. The market crash of October 1987, when stocks fell 32 percent, was followed by a 28 percent gain in the next 12 months. More often than not, stocks tend to rise in the year following a sharp decline. What’s different this time around – and further encouraging – is the determination of governments around the world to work together to restore confidence and inject liquidity into a system that has ground to a halt. On the one hand, it’s hard to see how stocks could fall much farther, or commodity prices and shipping rates, for that matter, given the carnage of the last 12 months. On the other hand, is there any real reason to buy stocks right now, given the current economic outlook and the absence of available credit? According to most pundits, the true sign of a market bottom is not when people stop buying stocks or stop withdrawing their money from stock mutual funds. It’s when they lose interest. It’s when they no longer care. Ask yourself: Do you still care what happens in the market each day? Do you still watch the talking heads on CNBC? Do you still look at your monthly 401(k) or brokerage account statements? If the answer is no, then perhaps there is hope after all, and we have indeed touched bottom. Oh. Those two Dow stocks that actually rose in 2008? Walmart (up 18 percent) and McDonald’s (up six percent). Happy investing! Mar Ex

Jack O’Connell, the senior copy editor of this magazine and a former maritime executive, is a private investor who may own shares in some of the companies mentioned in his columns. The views expressed in this column are his and his alone and are not in any way to be construed as investment advice. 20 | J a n u a r y / F e b r u a r y 2 0 0 9

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crOWley M



In a world characterized by rapid change and the disappearance of one old-line company after another, crowley Maritime stands unique – not only among maritime companies, but among all companies. This 117-year-old firm has survived wars, the Great Depression, booms and busts, and the ups and downs of a cyclical industry and emerged stronger than ever. Now under the third generation of family leadership, the firm has steadfastly refused to go public and is the largest privately held maritime company in america, with interests ranging from tugboats and aTBs to logistics and salvage. How did it survive so long and so well, and what does the future hold? B Y T O N Y M UN O Z

a century of Progress

For more than 100 years Crowley Maritime has been recognized as a leader in marine and liner services. Now the third generation of leadership has made its indelible mark on the organization as it enters a new century of operations. Eight years ago, when MarEx first sat down with Thomas B. Crowley, Jr., he was in the process of redefining the company; and yet he was acutely aware of the company’s traditions and gritty infrastructure built over the previous 100 years. Steeped in an overshadowing history, which stood towering behind him, the young Crowley embarked on flattening the organization to be more reactive and responsive in the new Millennium. In the early part of the decade, as China and India drove the global economy to soaring heights, the maritime industry reaped the rewards of full employment, the best rates in 30 years, and shipyards teeming with modern equipment under construction. Tom Crowley, Jr., who was raised by a father who preached that “You can only eat one steak a day,” acknowledges both his grandfather and father were frugal men who continually reinvested in the most modern technology of their day.

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When Crowley became CEO in 1994, almost 80 percent of the company’s revenues came from the capital-intensive Liner Services Division, which serviced South America, Central America, Puerto Rico and the Caribbean Islands. When the South American economies softened, the entire company felt the strain of the economic downturn. The South America operation was eventually sold to Hamburg Sud. Crowley understood that in the lightening-fast speed of the information age, a more diversified and flatter company would be better equipped to make critical decisions, mobilize fleets and people, and survive the competitive battles for market share and profits. Crowley set about establishing an egalitarian organization free from the constraints of the traditional empirical, analysisparalysis corporation. First, he broke down the silos of the


The Dawn of a new era


business units by creating the company motto of “One Crowley.” Then he began shifting managers among the various operating units. For instance, the Marine contract services manager in Seattle was moved to the Liner Services Division in Jacksonville. The new philosophy of a flat, democratic organization said the overall company was what mattered and the business units all shared the same bottom line. Individualism was set aside, and Crowley focused on leaders who knew the culture and had the capacity to plan strategically. Being a privately held company and not beholden to shareholders made it easier to rotate the senior management team from one unit to another and gave the organization a fresh look, which ultimately invigorated the rank and file. Assisting the managers were cross-functional teams made up of people from the various business units, who were brought together to solve problems within the company.

1/27/09 9:57:26 AM





Democracy in the Workplace

Today, Crowley Maritime Corporation is managed by the leadership team, which consists of twelve senior managers. The group is made up of the six business unit managers and the heads of each of the support departments, including IT, Legal, the Controller’s office, Treasury, Insurance, and Senior Administration, and of course Tom Crowley and Bill Pennella, who is the Vice Chairman. With the exceptions of Crowley in Oakland; Rocky Smith, Vice President and General Manager, Pacific/Alaska, in Seattle, and the bicoastal Pennella, the leadership team is domiciled in the company’s Jacksonville, Florida headquarters. Symbolically, the Jacksonville headquarters are currently


being renovated and there will no longer be individual offices. Crowley believes a company without walls fosters teamwork and collaboration. The days of coming to work, closing the door to work on the computer and being isolated inside the four walls of an office are things of the past. Crowley himself doesn’t have an office. When we arrived at the Oakland offices for the “executive interview,� we were greeted by a receptionist, and sitting next to her was Tom Crowley at an open work station. The Jacksonville and Seattle facilities will now have “break-out rooms� for meetings. Most company meetings are comprised of small groups of three or four people, and rarely large groups, says Crowley. Being a member of the Young Presidents Organization and having lots of friends managing high-tech companies in Silicon Valley, Crowley has witnessed the virtues of an open work environment. He has seen the benefits of an egalitarian organization without territorial-

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“The proof of the ‘One crowley’ credo is the average tenure at the company. Most employees have been with the company for more than twenty years. crowley is mindful of employees’ feelings and attitudes, and when he travels to the various units he likes to have meetings with small groups so he can get to know them on a personal level.”

The Personal Touch


About two years ago the company bought back all the outstanding shares, and it is now entirely owned by Crowley, family trusts, and the employees. Consequently, the employees have a vested interest in the well-being of the firm and have bought into the egalitarian way of doing business. Ultimately, by having employees believe they’re not just minions or inconsequential functionaries, Tom Crowley has transformed his 117-year-old enterprise into a company of professionals who care about the quality of their service and the firm’s bottom line. Crowley believes that if a person comes to work for the title or a big office, then his company

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The proof of the “One Crowley” credo is the average tenure at the company. Most employees have been with the company for more than twenty years. Crowley is mindful of employees’ feelings and attitudes, and when he travels to the various units he likes to have meetings with small groups so he can get to know them on a personal level. He remembers as a child going with his father to meet a tug and barge that had just arrived and watching his father shake hands and socialize with the crew. Crowley says managing an open company is mostly about communication and mutual respect. To emphasize the point, the company conducts an annual employee survey administered by an outside group, and the leadership team reviews the results in detail. Because the leadership team listens and reacts, the survey participation rate is extremely high among union, administrative, waterborne, and shoreside personnel. Crowley is adamant about being accessible to each and every person within the company, and he accepts phone calls and emails from the troops. He prides himself in really knowing what’s going on within the rank and file of the company. In terms of working in an open environment, if employees have a personal situation to deal with, they can go into the break-room to call their doctor or speak to their child’s teacher. Beyond that, it’s all about business, and there are no secrets at the company.

is not the place for them. The proof is in the pudding, as the old saying goes, and 2007 and 2008 were record years for the Crowley Maritime Corporation. As the economic storm clouds hover over the world of global trade and commerce, the company’s future has never been more positive or bright. It is a tribute to a man who believes that executive ivory towers are a relic of the past, and who knows that just because his grandfather’s and father’s name is on the side of a container, ship, or tugboat doesn’t mean that he is “entitled” in any sense of the word. He has flattened the company so that he can see the horizon and react immediately to the perils of doing business in an increasingly global and competitive world. His vision will leave an indelible mark on a company filled with history and tradition, a company which – like its leader – honestly believes in the corporate branding, “Crowley, People Who Know.” Mar Ex


ity versus having and funding a hierarchy of executives with incredible perks. In most organizations, if you have more than one boss, you don’t have a boss. At Crowley Maritime, executives and business units share assets, which is much more efficient and cost-effective, and causes people to come together with very little politics involved.


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Tom crowley, Jr.

chairman, President & cEO, crowley Maritime corporation



It has been more than eight years since we last sat down with Tom crowley and picked his brain on the subject of the marine business in general and crowley Maritime in particular. at that time he was seven years into the job, having succeeded his father as cEO in 1994 at the tender age of 27. Only the second executive to grace this magazine’s cover twice, listen in as we follow the evolution of this more than century-old company under the leadership of its third-generation chief. You’ll enjoy the ride and, in the process, be treated to one managerial gem after another that just may make you rethink how you run your company. Marex: Since our last interview over eight years ago, crowley has continued to build an extremely diverse organizational structure. as ceO, how do you manage the diversity of businesses and regions? Tc: Over the past eight years we have

really changed the way Crowley is managed. I suppose some of the reason was out of necessity because we are so diverse. Another reason was to develop a culture built around leadership and not management. I began my career with a finance degree and a very analytical approach. You find out quite quickly that it is very difficult to run a company this diverse and this large by looking at the numbers. We began to realize that to make the company perform we needed to have the right people in the right job and provide them with the tools they

MarEx_30_Crowley.indd 26

need to lead their organizations and work for the common good of Crowley. We broke the company down into six business units and then built a support services group to provide the back office. Each business unit is headed up by a Senior VP/General Manager. Support Services has four SVPs heading up the areas of Administration, Legal, Finance, and Treasury. Marex: What are the divisions and where are they regionally? Tc: There are six business units. We

have the Marine Services business broken into two regions, Atlantic and Gulf headed up by John Douglass and the Pacific and Alaska headed up by Rocky Smith. Then we have Liner Services split in two regions, Puerto Rico and the Caribbean run by Rob Grune and Latin America headed up by John Hourihan.

The Marine and Liner Service business units tend to be more asset-based businesses while our Logistics and Technical Services units are less asset-based. Steve Collar heads up Logistics while Todd Busch is leading the Technical Services unit including Titan Salvage. Marex: Please expand a bit more on the leadership team. Tc: The leadership team is basically

the core of the organization in terms of leadership and setting strategies. In addition to the above mentioned business unit leaders, we have Bill Pennella serving as Vice Chairman of the corporation and splitting his time between Oakland and Jacksonville. Bill is my right hand and leads the Support Services for all of Crowley. Our support team includes Susan Rodgers, who heads up Administration; Dan Warner,

1/27/09 9:57:35 AM



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“The company now operates in an environment of more collaboration and teamwork. Therefore, it takes a different set of tools to manage people and for people to work in this type of environment.”



our Treasurer; John Calvin, our Controller; and Mike Roberts, who is our General Counsel. The leadership team consists of the eleven people mentioned above plus me and we meet weekly to discuss the important issues facing the company in the coming weeks. Four times a year we break away from the day to day to get together and discuss this longer term issues. We usually take a couple of days away from the office to do this. Marex: We keep hearing about the “leading One crowley” initiative. What exactly is this program? Tc: The “Leading One Crowley” pro-

gram started about three years ago with a mission to train our people to work as a team. Crowley does not have a traditional organization because we are very flat from top to bottom. We are a matrix organization where business units work together and share support services. Ultimately, it’s a different business style than we had in the past. The company now operates in an environment of more collaboration and teamwork. Therefore, it takes a different set of tools to manage people and for people to work in this type of environment. People need the right training and mindset to function properly, as do managers. Marex: What led you as ceO to move from the traditional pyramid structure to a flat organization? Tc: Actually, two things, agility and

cost. It’s expensive to maintain a corporate hierarchy and structure. Crowley competes globally with large international corporations and small companies at the same time. Therefore, to

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compete effectively, we must be nimble and quick to react, and at the same time have the economies of scale to deal with the big players in the market. Marex: crowley Maritime is diversified and physically spread out geographically. With you being based in the Oakland office, do you spend most of your time on the road visiting the operations? Tc: Certainly from the company

perspective I can never travel too much, but my family keeps me honest on that front. However, in terms of business, I can never travel enough to be in all the places that I need to be. When I do travel, I try to spend as much time internally with as many people as I can. While I have met with large groups, I really enjoy meeting with smaller groups of approximately 20 employees. A smaller group creates an open environment for questions and for getting to know one another. Marex: Please share some of the decisions that moved the company from its traditional core businesses like marine and liner services into more diversified operations and ultimately to today’s crowley Maritime. Tc: When I first came aboard, the

Liner Services group, which serviced South America, Central America and Puerto Rico, represented approximately 80 percent of the company’s revenues. When the South American economy softened and took a turn for the worse, it became clear that it was time for the company to get out of the international transport marketplace. So the service was sold to Hamburg Sud. Central America, Puerto Rico and

the Caribbean Islands were broken into separate units with different managers because they were entirely different business markets. As a matter of reference, we shipped raw, pre-manufactured goods to Central America, and finished products were shipped back to the states. Puerto Rico and the Caribbean, on the other hand, are essentially consumer-based markets with products going directly on the shelves. The shipping business is heavy in assets such as containers, ships, and terminals, and Crowley is already a major player in these markets. So in order to grow we have had to search for adjacent businesses such as logistics services. In Central America, for example, we’ve established distribution centers, trucking operations, and anything else that supports the customers on the Liner side and, at the same time, provides us with adjacent services, which allows us to become more valuable to our customers. We have distribution centers in Jacksonville and Miami as well. Marex: We see the company is also in the airfreight business. Is that global or within the same regions as the liner services? Tc: While the majority of the current

business is Central America, the license would allow for a global expansion if we chose. We have contracts with customers and airfreight cargoes to South Africa. Additionally, for Titan Salvage, we will charter aircraft and move equipment around the world when necessary. Marex: So in reality the expansion of crowley is taking place in adjacent businesses?

1/27/09 9:57:40 AM

TOMCROWLeY eXecInTeRvIeW eXec InTeRvIeW The investments we made in Titan salvage and Jensen Maritime and in technical services and logistics are much less asset-intensive, so the overall company can grow without investing as much into capital assets.

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was built around the apparel industry, and the value of Latin America was its proximity to the U.S. Labor costs were higher than in China and the region didn’t have an unlimited workforce like China, but its proximity to the U.S. market – and the attendant savings on shipping costs – made all the difference. We also saw other companies making investments in the region because of its stable economies and educated workforce. We asked ourselves, “What value did Crowley bring to the market?” And the answer was clear: It was “speed to market.” We could increase frequency by building smaller ships and having in-country employees to expedite shipments. We can move a container from a factory warehouse in Latin America and have it at a distribution center in the states in less than a week. You can’t do that from any other place in the world. Marex: crowley in short order will have 17 aTbs working in the Jones act. What has been the investment and will the company build double-hull tankers? Tc: The company has invested well

over $1 billion in the ATB double-hull fleet. In the past, the 450 Series barge fleet was our traditional workhorse on the West Coast and in the Florida and Atlantic petroleum markets. But ATBs are a different type of business. The 155 Series ATBs were built for the adverse weather conditions along the West Coast and to replace the larger and slower 450 Series units. The 155s were coming online at the same time

that we purchased the tanker operator Marine Transport Lines (MTL). Working with this first series of ATBs made it clear that they should be designed more like a tanker than a barge. Consequently, we designed the 650 Series with electric pumps, a cargo room, and more sophisticated cargo-handling capabilities.


Marex: What tankers from the MTL purchase are still in service? Tc: We have two ITBs that came with

the MTL purchase and they are working in the Gulf/East Coast market. We also have two tankers we purchased from Tosco and they move product to Florida for Marathon Oil. When we’ve completed building the 650 Series (185,000 barrels) ATBs, we will begin construction of the 750 Series (330,000 barrels), which will replace the two tankers and the ITBs. We have been reviewing the various tanker programs currently available in the marketplace, and the business models simply do not work for our customers. While the tankers have their place on certain routes, the ATBs are much more efficient and fit our customers’ requirements.


Marex: Tell us about the crowley Liner

program called “speed to Market.” Tc: Our Latin American business

JanUaRY/FeBRUaRY 2009

Tc: True, the globalizing is bringing forth adjacent business opportunities. We are also investing and “re-fleeting,” such as ATBs, tugboats and barges, into our core businesses. We not only want to grow on the asset side of our company but also on the service side. The investments we made in Titan Salvage and Jensen Maritime and in technical services and logistics are much less asset-intensive, so the overall company can grow without investing as much into capital assets. Certainly, we’re not getting out of asset-based businesses, but we absolutely want to blend the two investment expenditures and opportunities. From a company perspective, in the past we would charge for the asset and give away the services for free. With the amount of expertise built up over the years, we now know that the services are also a value to our customers. A good example is our recent purchase of a customs brokerage business in Miami called Customized Brokers. By helping our customers get their shipments through customs faster, we provide a valuable service to them which they are willing to pay for. Also on the asset side, the Liner Services business saw opportunities in refrigerated cargoes, and while the investment in reefer containers was not cheap, the Central American infrastructure was already in place. Therefore, without the need to invest in a new and complete infrastructure, the venture into reefer cargoes was profitable immediately.

Marex: crowley has been in alaska since the 1930s and remains a major petroleum player there. is this market mature with limited growth or do opportunities still abound? Tc: The Alaskan petroleum infrastruc-

ture leads me to believe the market will remain robust for the foreseeable future. Certainly, the gas pipeline project and potential offshore oil production are reasons for optimism. The U.S. energy

1/27/09 10:00:07 AM

TOMCROWLeY eXecInTeRvIeW eXec InTeRvIeW “When operating in foreign markets, we make a point of employing local talent as much as possible. Our Central american offices, for example, are not staffed with expats; in fact, we have 600 non-U.s. employees working there.” crisis is another reason for continued investment in Alaska.

Tc: The stage is being set for that now.

We want to continue to be a diversified company. We would like to see revenues grow on the service side of the business. At the same time, we need to continue to invest in our fleet and have a strong balance between the hard and soft sides of the company. Crowley has been structured into a modern company capable of responding immediately to any business circumstance or opportunity. We are growing our service (soft) capabilities while continuing to invest in hard assets. In terms of future growth in foreign markets, while our Jones Act investment is significant, we are also capable of working in Russia, West Africa, or Asia. When operating in foreign markets, we make a point of employing local talent as much as possible. Our Central American offices, for example, are not

JanUaRY/FeBRUaRY 2009

Marex: are you operating in any overseas oil markets? Tc: While we had a large operation


in Russia a few years ago, we are still operating an ice-breaking supply boat for a drilling rig that we towed into the country about three years ago. In addition, West Africa continues to be a strong market for the energy services group. About five years ago, after one of the hurricanes ripped through Cuba, the U.S. government relaxed the export restrictions for agriculture and foodstuffs into the country. Seizing the opportunity, the Liner Services Division obtained a license to transport the goods. Our license is still valid, and we still serve the island.


Marex: What does the future hold for crowley?

staffed with expats; in fact, we have 600 non-U.S. employees working there. Crowley’s core strength has always been based on its people. It’s not the Invader Class tugboats; it’s the people working the boats who are vital to the company’s future. We continue to invest in our people by teaching the dynamics of teamwork and through business synergies. We have flattened the company’s infrastructure to make all managers, including myself, available to all employees. My father was available to his employees and always reinvested in the business, as did his father, my grandfather. They both used to say, ”You can only eat one steak a day.” So I have restructured Crowley to be fleet-footed and responsive, and the company sits poised on the threshold of the next generation, streamlined and vibrant. Mar Ex

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MaRIneprOpuLsiOn MaRIne prOpuLsiOn L250 photo by Ge


The Galveston Ferry being rolled over after having been launched keel up. note the mounts for the Ge V228 engines at each end of the hull.

artist’s rendering of new dredge for the port of new Orleans, designed and built by Dredging supply company inc., reserve, La. The dredge will use one Ge L250 series engine powering a generator that will power the boat.

inLine by DesiGn

By Larry Pearson

Ge’s neW InLIne sIX- anD eIGHT-CYLInDeR enGInes Have ManY aPPLICaTIOns A NEW SERIES OF INLINE DIESEL ENGINES BY General Electric may be the perfect fit for many marine applications. The new L250 diesel features a streamlined design and fuel efficiency that meets EPA Tier II emissions standards and is upgradeable to Tier III standards. The sixcylinder L250 offers power output in a range of 2,009 to 2,588 hp, depending on engine rpm and whether the rating is for continuous or maximum output. The eight-cylinder engine picks up where the six-cylinder maxes out, starting at 2,679 hp on up to 3,438 hp.

narrow Footprint

The narrow footprint of the L250 means it can fit where space is a problem, such as in catamaran hulls and repower projects where available space may dictate the engine selection. Both the six-cylinder and eight-cylinder versions use mainframes of the same width. The mainframe is a onepiece iron casting that offers excellent vibration-dampening characteristics and main bearing caps that are bolted both horizontally and vertically for extra strength. Long a designer and manufacturer of turbochargers, GE incorporates this technology in its new L250 engines, which carry on the tradition with turbochargers that are engineered to match the engine for efficiency, performance, and mechanical packaging. These turbo-chargers can be placed on either end of the engine. The camshaft design of the L250 is very replacementfriendly because of its sectional design. Forged of carbon steel and joined by dowel-bolted flanges, the design simplifies component removal and replacement. Damaged sections, rather than the entire camshaft, can be repaired or replaced. Another design feature of the L250 is the inclusion of a PTO (“power take-off”), mounted on the engine, that can be used to drive fire pumps, bow thrusters, mud pumps, and a whole

host of other devices that otherwise would require a separate engine for power.

Multiple applications

The first of these new engines have been shipped for use in three projects. Crescent Towing of New Orleans will install L250s in two of its 91-foot tugs being built by C & G Boat Works in Mobile, Alabama. Both of the 5,100-hp tugs will employ an azimuth steering drive system. While these are the first L250 engines that Crescent Towing has installed, 16 GE V-configured engines are in 11 of the company’s towboats. GE is also supplying a pair of V250 diesels to Crescent to repower the tug Mississippi. Crescent Towing offers ship-assist and other services in the New Orleans, Mobile and Savannah areas. As noted earlier, the L250 engines are a sound choice for repower projects, and the first application of this kind involves the installation of two L250s in Cross Town Ferry Services’ John H, the largest ferry to be classified for Coast Guard Subchapter T operation. The engines will be supplied to GE distributor MSHS of Fort Lauderdale, Florida and will be installed by the Thames Shipyard in New London, Connecticut. The sixcylinder L250s are rated at 1,826 hp each at 900 rpm. The third project is further evidence of the versatility of these new engines. It involves the installation of a six-cylinder L250 as a genset in a new dredge that Dredging Supply of Reserve, Louisiana is building for the Port of New Orleans. “This is a design/build project for the Port of New Orleans,” said Charlie Johnson, Director of Sales for Dredging Supply. “We will be using a six-cylinder L250 as main power and another as a standby unit,” he added. The 24-inch suction dredge features a 100-foot ladder that will allow the dredge to excavate up to 60 feet below the surface. The dredge will be diesel-electric with power from the GE

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L250 driving a generator that will service all of the boat’s electrical needs. The new dredge will replace the aging suction dredge Bleakley in September 2009. “These mark the launch marine orders for the new L250 inline, medium-speed diesel engine,” said John Morrison, Manager of GE Transportation’s Marine & Stationary Power business in Erie, Pennsylvania. “We are delighted that this engine has been selected for diverse applications including two newbuild tugs, a ferry repower project, and a new dredge vessel.” All seven of the engines will be produced at GE’s Grove City, Pennsylvania plant. “By the time the L250 is available to customers in 2009, GE will have invested over $4 million at our Grove City plant to build a new L250 assembly line and to enhance the engine’s test cell capabilities,” Morrison added.


The L250 will offer fuel consumption savings of up to nine percent when compared to the GE V228 series of medium-speed diesel engines. Many of the features of the new L250 engine reflect the V250 family of engines. Camshafts, fuel system components, exhaust manifold, power assemblies, bearings, and turbocharger for the L250 are similar to those on the V250 that has over 3,000 engines in service. GE has long maintained its leadership role in diesel engine manufacturing. Recently it supplied a pair of GE V228 engines to Conrad Industries of Morgan City, Louisiana via GE distributor NREC Power Systems in Houma, Louisiana for the new, 264-foot Galveston Ferry. This double-ended ferry will have a V228 engine mounted centerline at each end of the hull. It will be able to carry 500 passengers and 70 cars. “Continuous output of the GE V228 engine is 1,308 hp,” said Chico Rivera, application engineer with NREC Power Systems. “We supply a lot of GE engines to the workboat market, including a pair of engines for both the Harvey Spirit and Harvey Supplier for Harvey Gulf International Marine of Harvey, Louisiana,” Rivera added. The L250 and other GE engines, as well as service and support capabilities, are available through GE’s global distribution partners. Mar Ex

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By Joseph Keefe

inVasiVe species upDaTe:

end Game in sight? cape Washington, Marad vessel used for testing.

The Maritime environmental resource center introduces Meaningful Third-party Testing and the credibility to bring solutions to the Table Old problems: new initiatives

Tucked away on Maryland’s picturesque shores is an initiative that provides test facilities, information, and decision tools to address key environmental issues facing the international maritime industry. Aptly named the Maritime Environmental Resource Center (MERC), the facility’s selfdescribed initial focus is “to evaluate the mechanical and biological efficacy, costs and logistical aspects of ballast water treatment systems and to assess the economic impacts of ballast water regulations and management approaches.” If you think you’ve heard it all before, then this would be an appropriate time to tune in and listen. Unlike endless other government programs and initiatives that have become bogged down in the regulatory and political gauntlet, MERC and its leader, Dr. Mario N. Tamburri, have no skin in the game and no axe to grind. Instead, the Center has just three main objectives: » Provide technology developers/vendors with facilities and expertise for pilot-scale and shipboard evaluations of treatment systems and provide agencies with stan-

dardized third-party data on system performance; » Provide ship builders and shipping lines with information and decision tools to select the most appropriate treatment options for particular sizes and types of vessels used along various shipping routes; and » Remove as much uncertainty as possible from emerging markets for treatment systems in order to encourage buyers and sellers to engage with one another and make the necessary investments to accelerate the adoption of treatment technologies.

real commitments: substantial support

Dr. Tamburri, the Director of MERC, and his Chief Engineer and Program Coordinator, Ross Kanzleiter, are already testing commercially produced technologies on board Maritime Administration vessels and plan to ramp up that schedule markedly in the current year. Tamburri has been involved with invasive species testing, research and policy for more than ten years. Kanzleiter, a U.S. Merchant Marine Academy graduate (and valedictorian), has J a n u a r y / F e b r u a r y 2 0 0 9 | 35

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a Master’s of Science in Environmental Process Engineering from Johns Hopkins University. The pair of scientists has begun to accomplish what no one else before could quite figure out: a way to combine the esoteric world of academia with the hands-on, Dr. Mario Tamburri, Director of Merc industrial realities of commercial shipping in a focused effort to bring an end game to the nightmare of invasive species. MERC is a collaborative effort, supported primarily by the University of Maryland, Maryland Department of Transportation, Maryland Port Administration and the Maritime Administration. About 80 percent of MERC’s funding comes from MDOT and the Port Administration, but MARAD and NOAA have also provided resources. With an eye toward the classification societies, which eventually will be involved in the certifications of ballast water treatment systems, MERC has also embarked upon a partnership with ABS. Tamburri says, “We hope to grow that relationship to where we could field-test for them as they look at class approvals, that sort of thing. We do not want to write reports for vendors or answer to them.” Although ballast water treatment testing has been ongoing in the private sector for at least ten years, MERC’s program will provide an independent and credible review. Tamburri adds, “We aren’t developing the technologies, so we don’t have an agenda. We work on a basis that our results will be published, irregardless of the results – good or bad.”

real Work: a Track record and Much More in the pipeline

This year will be a busy one for MERC, which is finishing the testing of MSI’s UV filter system and will soon begin similar testing on three other technologies from different sources. MERC’s Year 2 (2009) testing will include: 1 Completion of MSI (filtration + UV); 2 Siemens SiCURE BWMS (filtration + electrochlorination); 3 Severn Trent De Nora (filtration + electrochlorination); and 4 NEI Treatment Systems (Venturi Oxygen Stripping). MERC is also planning to test a series of filter systems designed specifically for ballast water. A call for applications will go out in February. What will eventually come out of all this testing is real data. Says Tamburri, “The NEI system was tested on a commercial bulker. We also deal with MARAD very well. And because they are very interested in this is-

sue, they’ve given us access to their vessels so that we can install the equipment right on board.” But beyond its efforts in proving these emerging BWT systems, MERC is also involved in other programs. Thoroughly familiar with the Coast Guard’s two programs to evaluate treatment technologies – the Shipboard Technology Evaluation Program (STEP) and the Environmental Protection Agency’s (EPA) Environmental Technology Verification (ETV) program – Tamburri has helped with their testing and, of course, gotten some metrics out of both. Tamburri explains, “The Coast Guard’s facility in Key West was set up to establish testing standards and protocols. The data mined there has absolutely helped us in decisions based on what they’ve learned.” The STEP program is intended to promote the development of effective ballast water treatment technologies by incorporating the approved vessel into an experimental system and offering incentives to vessels for engaging in the development and use of experimental treatment technologies. On the other hand, the EPA’s ETV program is not specific to ballast water treatment; therefore it is being used in a partnership with the USCG as a tool — not an approval process — to create and evaluate standardized testing procedures for use in determining if ballast water treatment systems are working effectively. Tamburri understands the value of both programs but candidly asserts, “We take a very different approach. Developing the protocols is fine, but someone needs to step up and start getting things done. We’re funded to get these applications on board ships, onto land-based facilities and get the data.”

important Work: interesting Findings and preliminary advice

The performance of treatment technologies in treating ballast water intended for discharge in U.S. waters must be approved by the Coast Guard. Only then can these emerging technologies be used in lieu of ballast water exchange or prior to ballast water discharge. Indeed, Rep. Elijah Cummings, (D-MD), Chairman of the House Transportation and Infrastructure’s Subcommittee on Coast Guard and Maritime Transportation, said recently, “Given that ballast water exchange isn’t completely effective, I strongly support requiring ships to treat ballast water before releasing it.” Nevertheless, anyone foolish enough to install equipment without first obtaining this approval – and it is not yet here – risks flushing as much as $1 million down the drain if their choice is not among the final, approved technologies. MERC and Mario Tamburri strive above all things to remain independent. You won’t hear him endorse a particular system, nor are you likely to hear him discount any commercial systems. On the other hand, he has seen enough and done enough testing along the way to say, “There just

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water. Plankton is naturally buoyant so sometimes they escape through a spinner or a filter – and treating high volumes is difficult.” What is quickly becoming apparent to MERC researchers is something that commercial shippers have always suspected: The size and type of vessel, trade routes, volume of ballast to treat, flow rate of that ballast, and a myriad of other factors will ultimately determine which system is best for a particular ship. One size does not fit all. And testing – perhaps leading to approvals – will not end the debate. For example, the chlorination of ballast water certainly has a chance to succeed, but implicit with that system is the cost of chlorine. On the other hand, filtration or UV systems come with other costs: fuel and electricity expenses. As operators begin the process of choosing which system to employ, they’ll have dozens of variables to plug into the equation, not the least of which will be the cost of installation. Mario Tamburri says flatly, “The fewer the moving parts and components, the better.” And from a mariner’s point of view, a single, simpler approach can make more sense – if it works.

isn’t one magic solution. Many manufacturers are starting to go to a ‘combination’ solution. All have their limitations and there is no silver bullet. There isn’t one treatment system that is going to work perfectly on every ship and on every trade. So that’s why you have UV, deoxygenization, biocides, filters, chlorinization, and all the rest.” Testing to determine how many or which organisms are alive, Tamburri cautions, is not perfect. In the world of invasive species, the micro-organisms are just as important to kill, so as to prevent introduction of “blooms” into other areas. Tamburri insists, “This isn’t as obvious as the zebra mussels but it is equally as important. To test, sampling is very important – getting a volumetric average is the key.”

Commercial Application: Important to MERC, Important to You

The MERC mantra of “encouraging buyers and sellers to engage with one another and make the necessary investments to accelerate the adoption of treatment technologies” will have no teeth unless all of that testing is done with an eye toward tying it into the realities of running commercial merchant ships on a tight budget. As a prime example, the MERC crew already understands that removing sediment out of ballast tanks – allowing ships to carry more cargo – also helps with invasive species. Says Tamburri, “It’s a good first stage. A large majority of BWT systems include primary filtration, but we are also learning that plankton don’t act like inert particles when it comes to filtering ballast

End Game? Serious Work Continues at MERC Independent of Legislation, Balkanized Rules, Lawsuits, and a Paucity of Standards

Last January Dr. Rich Everett of the Coast Guard’s Environmental Testing Division stated, “We are coming to the end of the process.” Unfortunately, the Coast Guard’s promise to publish a BWT standard in 2008 has, of course, come and gone. When a definable standard is finally introduced, industry is clearly ready to benchmark any number of solutions against that standard. To be fair, there are many layers to this onion. The primary delays involve the required environmental reviews. Here in the United States, that means the necessary EIA and NEPA reviews. Everything else is probably background noise. A bill introduced by Representative Mark Kirk (R-IL), instructing the Director of the U.S. Fish and Wildlife Service to conduct a study of the feasibility of a variety of approaches to eradicating Asian carp from the Great Lakes and their tributaries and connecting waters (H.R. 51), is a perfect example. And then there is the EPA’s report, entitled “Predicting Future Introductions of Nonindigenous Species to the Great Lakes,” which followed a (failed) industry challenge to the so-called Michigan Ballast Water Statute. Michigan and California, in particular, have defined the word “Balkanization” as it applies to the labyrinth of U.S.-based, local invasive species statutes. The failure of industry to defeat Michigan will only embolden others to enact similar, but nevertheless different, measures. To its credit, the UN’s IMO has weighed in, too. But its standard falls well short of what the U.S. will some day call for. It J a n u a r y / F e b r u a r y 2 0 0 9 | 37

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is, in a word, a disaster. Back at MERC, Mario Tamburri soldiers on. “I think there are reasonable solutions out there that are very close – and can make a big difference in solving the problem. Get them on ships. For us to wait for the perfect solution is foolish – it is a mistake. You can quote me on that.” Tamburri’s philosophy is borne from years of hands-on, “dirt-under-the-fingernails” sweat equity. Formerly employed at the Monterey Bay Aquatic Research Institute, he came across a project in Japan on deoxygenating ballast water with nitrogen gas. The effort involved bubbling nitrogen into ballast tanks to reduce corrosion. It reduced corrosion by 90 percent and – not surprisingly – it also killed most of the organisms in that ballast water. Tamburri thus started out in this field almost ten years ago with a simple paper saying that deoxygenization could be one those “win/win” situations that saves industry money by reducing corrosion and also helps the environment by reducing invasive species. Funded several times by NOAA’s Ballast Water Program, he has also been underwritten as a third-party evaluator of treatment performance. Today, the Maritime Environmental Resource Center’s main focus is to provide information and evaluate ballast water treatment systems. Mario Tamburri and Ross Kanzleiter are hoping to expand beyond that narrow window, looking at a variety of technologies for commercial shippers – things like oily water separators, gray water treatment and air emissions. Without a doubt, the scientific help that maritime interests have long sought is now at hand. Job One, however, is ballast water treatment systems. After that, the sky is clearly the limit. Mar Ex

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saTcOM cs sovereign is a multi-role Dp2 vessel capable of undertaking both cable maintenance and installation projects. Her open deck enables her to deploy a variety of subsea vehicles.

By Patricia Keefe

Making the connection With broadband and VsaT LeIsURe LIneRs HIT THe ROI TRIFeCTa BY sLasHInG COnneCTIvITY COsTs, BUILDInG neW RevenUe sTReaMs anD BOOsTInG CReW MORaLe HARD AS IT MAY BE TO BELIEVE IN 2009, we still have a surprising number of vessels, big and small, wandering the coastlines and crossing the seven seas without adequate, modern communications capabilities. In some cases, you could say these ships are taking the old admonition to “run silent” just a little too literally. Indeed, according to the May 2008 Maritime VSAT report from COMSYS, a London-based satellite consultancy (, the broadband VSAT industry has so far penetrated a mere 10 percent of the potential seagoing market. Meanwhile, “You’ve got these $100 million ships that have virtually no communications, and virtually no IT, and it makes no kind of sense at all,” exclaims COMSYS’s senior consultant Simon Bull. Except that there are reasons, of course. Like the heartstopping cost of what was once the industry standard – narrowband, L-band satellite connectivity. According to Bull, there are stories of people who accidentally let their Inmarsat terminal run for a month and wound up with a huge bill. Match that up to the inherent cheapness of many privately owned shipping companies and, until fairly recently, limited demand for ship-to-shore communications – emergency situations aside – and you get the picture. But those rationales have steadily eroded over the last decade, particularly over the last five years, thanks to several driving factors: » The emergence of cheaper, wider band C and KU-band VSAT technologies, along with smaller, stabilized antennas and software capable of automatically smoothing out latency issues and bridging the gaps between satellite footprints. » The arrival on board of technologically tricked-out passengers willing to pay for “always on” access to the

Internet, email and digital voice services. Those revenues are nothing to sneeze at: According to SeaMobile account manager Brent Horwitz, Norwegian Cruise Lines (NCL) went from using very expensive Inmarsat dial-up connectivity as sparingly as possible to turning what was a $3 million cost center into a $5 million revenue center by selling VSAT-enabled services to the passengers and crew. » The growing difficulty in recruiting and retaining top-ofthe-line crew and the ensuing competitive struggle over the available bodies still willing to go to sea. And typically, once the connectivity is in place, serving the needs of passengers and crew, it begins to dawn on owner/ operators that the same service could be used to enhance ship-to-shore communication and services in a number of areas. The end goal in this case is not so much to create revenue as it is to cut time, if not costs, while enabling better, faster decision-making. While difficult to quantify, the ROI here is quite real and can translate into more efficient and cost-effective operations, according to users at NCL and Global Marine Systems. An important factor in enabling those improvements is the ability to remotely monitor, diagnose, and fix both the ship’s computer equipment and its mechanical operations. The value of executing these repairs remotely, versus having to send trained personnel half way around the globe to effect a fix, can not be overestimated.

permission to come a-port?

Lastly is the pressure exerted by a host of regulatory requirements and security issues, ranging from delivery of ship manifests to securing cargo to encrypting confidential business documents. “The way the U.S. is moving and Europe J a n u a r y / F e b r u a r y 2 0 0 9 | 39

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saTcOM too, unless you report your manifest ahead Operational Communications High-Speed VSAT Connectivity of time, they will not let you dock. They Connectivity to shore-based Onboard a Cruise Ship might not even let you in coastal waters,” operations warns COMSYS’s Bull. Real-time weather data That would be disastrous for perishable Remote diagnostics or time-sensitive cargoes or a cruise liner Vessel management Passenger and Crew full of passengers ready to hit port. With Communications Telemedicine Mobile phone service the new regulations regarding the submisHigh-speed Internet access sions of electronic manifest data to the Email U.S. Department of Homeland Security, VPN access NCL’s Vice President of Infrastructure VoIP and Operations, Jeff McVay, says VSAT Fax links enable the cruise liner to comply with Video conferencing stringent requirements for submitting this data upon departure and arrival. However obvious the advantages may seem, the 10 percent adoption rate indicates the industry provided by SeaMobile for 18 years, and iDirect hardware has a ways to go in getting its story out. It has saturated one and software since 2003, when it was introduced by MTN in market though – and that’s the cruise industry. These leisure a bid to improve the circuit performance. liners quickly hit the ROI trifecta with broadband VSAT The ship runs all its data traffic over a C-band circuit communications, slashing connectivity charges, building new that is up 24/7/365, which McVay notes is the most comrevenue streams by better serving passengers, and boosting mon type of circuit in use in the cruise industry. Since the crew morale. More recently, they’ve been expanding their use company contracts for a specific amount of bandwidth, it has to make sure it can divide that bandwidth to serve multiple of those services into shipboard operations and IT support. Among the pioneering adopters of broadband VSAT uses. This is where IP compression/acceleration devices and was NCL, which has been using broadband VSAT services adaptive coding and modulation innovations from partner


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saTcOM two services: They can go to a café, log in, pick from a variety of service/time options and bill it to their rooms, or go through the same steps on their own laptops after logging into the service. Cellular service is provided on a non-competing pipe, and it’s a revenue-generation service. Wireless access points provide wireless Internet access.

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While passenger services are typically priced to generate revenue, such is not the case when it comes to the crew, where the focus today is on keeping them happy. The old days of going out to sea for months and effectively cutting off all communication with family and the outside world is no longer acceptable. Today’s crews are computer-savvy and are under huge pressure from family to have some connectivity, says Bull. “Crew recruitment and retention has been a real problem. The more capable you are, the more likely you are to get a job somewhere else doing something else. Therefore, the ship owners are losing the very people they want to keep, and it’s having an impact on the merchant shipping industry. The biggest single area of improvement in terms of quality of life is through communications,” says Bull. LAN

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iDirect and other suppliers come in, allowing customers to accommodate increasing service demands without having to invest in additional bandwidth. “To give an example, a 256K circuit, which is one sixth of what you used to have at home with DSL, could run $8,000 to $10,000 a month. Where the provider can really help us out is by trying to maximize that bandwidth by squeezing more into the pipe, by accelerating or compressing IT packets,” McVay explains. Passengers on board have access to the Internet through

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saTcOM Typical crew connectivity options include Internet cafes, wireless access, low-cost cellular phone services or prepaid phone cards, email access and instant messaging. Video and some audio streaming, however, are banned in many cases because they are bandwidth “hogs” and have the potential to saturate the circuit McVay, (consuming all available bandwidth), Jeff Vice president, ncL says McVay. Most of these services are provided to the crew for a nominal fee. According to McVay, since most cruise ships provide the same amenities or close to it, there is a fairly level playing field when it comes to recruiting and retaining crew. Increasing demand for Internet access from the crew has led NCL to adjust its bandwidth allocation to not only provide better performance but also to enhance the crews’ Internet café. “We are sensitive to the performance of the services we provide our crew and we make every effort to make sure that the services are performing as optimally as possible. We also have to remain competitive among the other cruise lines by making sure that our rates are fair and reasonable,” McVay added. In terms of facilitating better operations – both on the ship and from ship to shore and back – McVay ticked off a number of benefits he attributes to having VSAT’s continuous connection: » “One very identifiable benefit to having a dedicated circuit is our ability to update our onboard Property Management System with new information from our shoreside reservations system. The circuit allows for the transfer of data within mere minutes from shore to ship.” » Greater efficiencies are gained in the timing of ordering parts and planning for the delivery of parts. “The dedicated communications path is a tremendous help in the ordering and delivery of items.” » SMS servers on the ship are linked to the central office data center, enabling IT to see, in real time, the status of all servers and workstations. Workstations can receive and confirm security patches, anti-virus and other updates in real time. A remote management capability can troubleshoot any server anywhere on the globe, reducing travel costs and providing much faster and less expensive problem resolution. “It’s a tremendous asset. We can control and monitor data flow and traffic in and out of the ship all the way down to Internet content filtering, email, and spam.” » “We are able to transmit real-time financial transaction data from ship to shore that we can consolidate shoreside, thus allowing us to have up-to-the-minute financial information regarding onboard revenue and costs. This data is voluminous in nature and could not be achieved without a dedicated VSAT circuit.” The future for broadband VSAT lies in three areas. First is ever more tweaking of the technology to make it

smaller, more bandwidth efficient and more affordable. This includes creating better ways to squeeze ever more data into the same pipeline and creating newer satellite bands, like KA-band, which promise a significant expansion in bandwidth size. Second, affordable, bandwidth-efficient video is the next big thing in a technology (satellites) that was created primarily to carry video signals. The key here is two-way video, which will play a significant role in applications like telemedicine, video conferencing, and distance education, says iDirect’s CTO Dave Bettinger. Lastly, there’s the coming market expansion into new marine sectors, from the global merchant fleets to tankers, bulkers, ROROs, and cargo ships, etc., where the payoff from cheaper connectivity is more about landing the best crew, cutting costs, saving time, and making more accurate decisions. Another growing market is the yacht and superyacht sector, says Bettinger. In the meantime, the space to watch is the commercial shipping sector, which is beginning to come to the realization that they have to buy broadband or they will not have a crew. So they are in fact starting to buy, according to Bull. “Once these guys are forced kicking and screaming to put broadband on the vessel, they may come around to proactive engine management. Maybe we’ll see this in a year or so – Mar Ex the potential at least is there.









patricia Keefe is a freelance writer, editor and blogger,

specializing in all aspects of the high technology industry, including the business of IT and the application of technology for strategic advantage. Formerly Editorial Director for Computerworld newspaper, she has written for a number of publications, including Computerworld, InformationWeek. com, and Teradata Magazine.

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MCKASSONKLEIN By Neil Klein, McKasson & Klein

requests for“ports of refuge”by Vessels in Distress – Considerations for u.s.ports “ports of refuge” captured the media’s attention in november 2002 with the sinking of the tanker prestige off the coast of spain. the spill was over 20 million gallons of fuel oil, which occurred after spanish authorities decided to tow the vessel out to sea rather than bring it into port. the disaster highlighted the tension between the economic, environmental, and political interests of coastal states versus the consequences of a ship deteriorating and breaking apart at sea. It also showed there was a legal and regulatory vacuum regarding the responsibilities of coastal states to mitigate environmental catastrophes.


Consider this: The oil tanker Outrageous steams down the U.S. West Coast after loading oil in Alaska, on its way to Chile. The vessel is owned by a Malaysian company, time-chartered to a South African company, and “insured” with a Protection & Indemnity Club in England. There are complicated contractual arrangements between several other parties. The weather becomes treacherous, approaching gale-force proportions. By the time the Outrageous is off the coast of San Diego, the Beaufort scale is a solid 12, i.e., hurricane strength, with wave heights of 50 feet or more. The vessel is difficult to maneuver. The Master is concerned since he knows the vessel is old and in danger of breaking up. So he calls the owners and requests urgent assistance – he wants to put in to a U.S. port and ride out the storm before the vessel breaks apart and causes a major oil spill. By now, the South African charterers are in the loop and do not want to pay for time in a non-scheduled port. The Chilean buyers do not want the vessel to deviate from its scheduled voyage as the cargo is set for immediate discharge

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The vessel owner does not want to be responsible for an oil spill. And the P&I Club has already contacted lawyers to liaise with the U.S. Coast Guard and activate oil spill response teams. The Coast Guard contacts the closest port and demands that the Outrageous be allowed to enter the harbor and wait out the storm. By now, the vessel is leaking oil. to a petroleum company, which in turn must immediately deliver to a government entity. The vessel owner does not want to be responsible for an oil spill. And the P&I Club has already contacted lawyers to liaise with the U.S. Coast Guard and activate oil spill response teams. The Coast Guard contacts the closest port and demands that the Outrageous be allowed to enter the harbor and wait out the storm. By now, the vessel is leaking oil. Time is of the essence. How should the port respond to the Coast Guard request and calls from the vessel owner, charterer, cargo owner, P&I Club, immigration authorities (there may be stowaways on board) and a battery of lawyers?

No Absolute Precedent

Oil spill catastrophes highlight the need for a decision-making framework to evaluate requests by a vessel for a port of refuge. Unfortunately, there is a notable absence of U.S. law on the subject of a port’s rights and obligations regarding a vessel in peril. On the one hand, relevant statutes, case law, and secondary materials do not disclose an absolute legal duty on a U.S. port to grant refuge to a vessel in peril. On the other hand, since port operations impact a multitude of federal, state, and local interests in the economy, environment, commerce, health, and safety of the community, a port cannot really argue it has an absolute right to deny a request for refuge. Instead, a “confluence of interests” requires the port to balance various factors on a case-by-case basis to determine if granting the request is the best course of action.

Ultimate Decision-Maker

The ultimate decision-maker is the U.S. Coast Guard, acting as “Captain of the Port” (COTP). It has federal authority to order ships within U.S. territorial waters in and out of ports, harbors and bays to protect the public, the environment, and maritime commerce. Further, it can enlist the “aid and cooperation” of federal, state, county, and municipal agencies. A port can therefore play an advisory role in the decision on whether to grant or deny refuge to a vessel. There does not appear to be legal precedent on whether a port can legally refuse the Coast Guard’s determination that a vessel should be granted refuge in a port. The closest example involved the 2004 Athos I oil spill

in the Delaware River’s main channel outside the Port of Delaware. The vessel remained anchored for 14 days due to a stalemate between the vessel and a shipyard over potential liability from repairs. The Coast Guard considered several options, including whether to order the facility to accept the vessel. Ultimately, the stalemate was resolved before any option was elected, but it is believed that any Coast Guard order to the facility to accept the vessel would have been challenged in court. If the Coast Guard decides to order a vessel into port, but the port is strongly opposed with factual evidence to support a refusal, the port would probably have to file an urgent application in court to challenge the order.


Organizations have begun the arduous task of compiling “guidelines” for use by coastal states in evaluating requests for refuge. Following the Prestige disaster, in 2003 the International Maritime Organization (IMO) adopted Resolution A.949, Guidelines on Places of Refuge for Ships in Need of Assistance (IMO Refuge Guidelines). Then, in 2004, the Pacific States/British Columbia Oil Spill Task Force developed its Plan Annex for Places of Refuge. Although they lack the force of law, these guidelines have been used by maritime organizations and government entities to create a framework for decision-making in port-ofrefuge scenarios. For example, specific guidelines have been incorporated into the U.S. government’s “Regional Contingency Plan.” The guidelines below are equally relevant to a port’s evaluation of a request for refuge.


The IMO attempted to balance the interests of a vessel in peril against those of a coastal state (and thereby a port) in the protection of its coastline. The IMO Guidelines are voluntary: A coastal state is not obligated to grant refuge, but should weigh all relevant factors in a balanced manner and grant refuge whenever reasonably possible. Specifically, it should: »» Enact vessel procedures to mitigate danger and establish a “Maritime Assistance Service.” »» Assess and take preparatory measures, i.e., (i) enact procedures for requests for refuge; (ii) with port authoriJ a n u a r y / F e b r u a r y 2 0 0 9 | 45

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portsofreFuge ties, identify advantages and disadvantages of granting refuge, taking into account environmental and social factors, natural conditions, contingency planning, and potential consequences; and (iii) implement a communications system. Âť Conduct an “event-specificâ€? assessment of objective factors, including a vessel’s seaworthiness; cargo and bunkers on board; distance to place of refuge; whether the vessel is insured; cooperation by vessel and its owner with a coastal state’s requirements for refuge; financial security, and the advantages and disadvantages of granting refuge. Âť Designate experts to board the vessel and evaluate the emergency and risks posed by leaving the vessel in place or bringing it into a coastal shelter, breakwater or port, taking into account safety, community, and environment at place of refuge, environmental threat, and disruption of port operations. Âť Weigh all factors/risks in balanced manner and give shelter where reasonably possible. Âť Where refuge is granted in a port, obtain security to cover costs for the port’s operations. Note: The IMO Guidelines are silent on the issue of liability and compensation for damage flowing from a decision to grant or decline refuge.

paciďŹ c states/british Columbia oil spill task Force

The Task Force completed its Plan Annex in 2004, which was largely adopted in 2005 and incorporated by the U.S. Coast Guard into the Federal Region 9 Regional Contingency Plan. The Plan Annex defines a “place of refugeâ€? as where a vessel can stabilize its condition and reduce the hazards of navigation (including a port). It emphasizes that decisions are case-specific, as they “encompass a wide range of environmental, social, economic, and operational issues that vary according to each situation,â€? and the initial decision should be based on “assessment of the risk factors involved and the exercise of sound judgment and discretion.â€? The Plan Annex also identifies the parties (stakeholders) with jurisdiction: Âť The U.S. Coast Guard & COTP, which has authority to protect federal government interests in U.S. navigable waters and (as COTP) may order ships in and out of ports, harbors or embayments to protect the public, the environment and maritime commerce. Âť The State, which has authority to protect its interests along state-owned shorelines and in waters to the three-mile limit; the state designates a “State On-Scene Coordinator.â€?

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portsofreFuge Âť Local & Port Authorities, with authority over nearshore waters in ports & harbors; a local government or port authority representative acts as â&#x20AC;&#x153;Local On-Scene Coordinator.â&#x20AC;? Âť The Master, with control of the vessel and responsibility for requesting a place of refuge from the COTP. Âť Government Resource Agencies & Tribal Leaders. The COTP has final decision-making authority regarding a request for refuge; if time permits, it will implement a â&#x20AC;&#x153;Unified Commandâ&#x20AC;? to evaluate the request and consult with federal, state and local stakeholders (e.g., a port). If there is not enough time, the COTP is directed to make the decision without input from other stakeholders. Note: The Plan Annex is silent regarding any dispute between COTP and a port to grant refuge.


First, to evaluate a request for refuge, a port should: Âť Obtain information on the status of vessel and crew, assistance sought, anticipated needs at refuge, and mitigation by the vessel. Âť If time permits, activate a Unified Command and consult with stakeholders. Âť Evaluate risks to human health, safety, and the environment.

Âť Determine response and salvage/repair resources. Âť If the risks weigh in favor of granting refuge, point out the best location for refuge (port, anchorage, or breakwater area), and prepare for firefighting and repairs. Second, the port should appoint a â&#x20AC;&#x153;communications directorâ&#x20AC;? to interact with federal and state agencies, media, COTP, immigration, customs, and security. The need for good public relations and damage control due to political impact cannot be overestimated. Third, due to multiple and competing interests, and the consequences of an oil spill, the port should create and have in place a â&#x20AC;&#x153;contingency response planâ&#x20AC;? to deal with an urgent port-of-refuge request. Having a plan in place will facilitate â&#x20AC;&#x153;lines of communicationâ&#x20AC;? and provide a framework to deal with the Coast Guard, P&I Clubs, federal and state agencies, as well as with local resources and clean-up companies. And it will allow a reasoned response to the parties and their lawyers. Mar Ex

John McKasson and neil Klein formed McKasson & Klein in 1998 after working together as co-counsel on a case against a foreign government. The firm is based in Costa Mesa, California and focuses on maritime law, general business litigation and business transactions, intellectual property, employment, real property, and insurance. Marcella Chambers, an associate lawyer at the firm, contributed to the article.

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night-Vision systems shift threat Detection to threat assessment By Randall foster and Page Siplon

new technologies prove Clarity Is King When protecting ports and Waterways

With millions of containers passing through our nation’s ports monthly, port operators face numerous challenges associated with securing their property. There are also challenges related to the surrounding environment. For instance, ports generally operate around the clock and must monitor expansive areas on a 24-hour basis. Because the areas around ports are accessible by the public as well as cargo vessels, there’s an added element of difficulty in tracking who is in the vicinity and who is permitted to enter a port. To further complicate the situation, numerous entities are involved in protecting the waterways, the cargo on vessels and the port facility itself. This complex relationship among government, law enforcement agencies, cargo owners and port operators results in a blurring of responsibilities – or worse, significant security lapses. Facing increasing pressure from all sides, ports must find ways to efficiently and cost-effectively secure themselves. Fortunately, new and powerful technologies are available that – when properly selected and implemented – can advance this effort. Long-range, day/night vision surveillance equipment is one such technology that efficiently and effectively improves the security of waterfront facilities. Moreover, long-range surveillance can integrate with other security solutions to elevate overall security efforts from basic threat detection to a more comprehensive threat-assessment posture.

security tightly anchored to port operations Ultimately, security, operational and logistical challenges are closely interrelated in what the Logistics Innovation Center refers to as the “Three Vs of Logistics – Volume, Velocity and Visibility.” These factors are critical in efficiently running a port. Ports in Georgia, for instance, have experienced an average of 16 percent growth since 2001, with annual peaks as high as 28 percent. With an increase in volume comes a jump in velocity or the pace at which a port operates, which mandates additional security efforts. But the speed and efficiency of port operations can’t be hampered by security and must be conducted in a manner that is increasingly cost-effective, faster and more efficient. In this context, increased visibility – the third “V” – is critical. Properly identifying approaching ships is closely tied

to the ability to successfully address increases in traffic by being prepared with the right personnel and equipment at the dock immediately upon the vessel’s arrival. While security used to be synonymous with preventing theft, it is now more broadly associated with thwarting more serious threats and compensating for conditions dictated by port operations. Cargo tampering, a speed boat potentially loaded with explosives entering the waterway, and unauthorized vehicles pulling up close to the dock are among the situations that must be addressed by a complete security solution. Ports must meet these threats by detecting potential problems early, responding with the appropriate resources and taking recovery actions as warranted. An effective security system should also override the complicated operational conditions created by having multiple parties responsible for specific areas. Given all of these complexities, threat detection immediately followed by effective threat assessment can mean the difference between securing a critical asset and a serious breach of security. A key part of this metric involves the integration of various long-range surveillance capabilities to enable security personnel to more easily identify vessels and other targets not only during the day but also at night, and particularly at distances of more than 2000 meters.

shedding Light on surveillance technologies

Ports seeking solutions for round-the-clock security must carefully weigh their options and understand how different technologies may or may not address their needs. For instance, thermal imaging provides the ability to sense objects in situations where no light is available by converting heat contrasts to a screen image. While such systems are often adequate for the detection of objects at ranges of 1000+ meters, they do not provide sufficient detail to read text, discern faces or see through glass. Thermal IR also uses non-optical components that generally only accommodate a single or dual fixed-focal-length lens and rarely support continuous zoom magnification. This significant limitation often frustrates users and overcomplicates integration of thermal imaging with other technologies such as radar systems. Another technology, continuous wave laser illumination, utilizes highly controlled, relatively far-reaching, nearinfrared active illumination to provide a reflected image in complete darkness. This approach to night surveillance

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NIGHTVIsIon offers ports a versatile, more realistic visual assessment tool than conventional thermal systems. By producing its own invisible energy source, this long-range day/night surveillance technology delivers near-optical contrast imagery, in which markings can be read and people can be recognized from zero light to full daylight. With high-magnification capabilities of up to 60 times through the use of a continuous optical zoom lens, operators can view ship identification numbers as well as easily monitor distant perimeters at night. Because a long-range day/night surveillance solution employs active illumination, users can easily view any type of target in any type of lighting, regardless of the amount of heat emitted. This versatile technology produces high-resolution, court-admissible video, requires minimal training and has low maintenance costs. Such systems effectively enable visual assessment at all ranges between 50 and 3000+ meters. In addition, the video resolution of these systems is much higher than typical thermal systems.

building a Complete security solution

Coupled with technologies such as radar or other solutions that identify and detect threats or motion around a border or perimeter, long-range laser day/night surveillance technology allows security personnel to rapidly assess potential breaches, enabling them to conduct threat assessment at longer ranges than conventional products. For vessels equipped with an automated identification system (AIS), long-range day/night surveillance technology provides a higher level of detail beyond simply supplying an alert regarding the arrival of a vessel. Security personnel can better understand a ship’s precise location as it arrives and potentially see what type of cargo the ship is carrying. More importantly, this can help port operators gain additional information about vessels that don’t have AIS by furnishing visual details. By integrating a long-range day/night surveillance system with other systems already in place at the port, operators can leverage existing assets and strengthen their threat assessment capabilities by being able to visually assess targets detected by ground and marine radar, alarms and AIS.

operating With Consistency 24/7

As ports continue to accommodate traffic at night to address increases in volume, many existing security tools are rendered useless. But using an active laser-enabled longrange day/night surveillance system overcomes such issues. For instance, radar may indicate that a vessel is approaching a port at night. The unidentified barge, though, is not equipped with AIS. To complicate matters, there is already a container ship potentially blocking the large vessel from passing. While a radar error could make the barge appear larger than it actually is, there isn’t enough time to send out a boat with security personnel to assess the situation. Such a measure would also be expensive. However, a long-range night surveillance system would

this is a screen shot of sensorii, Vumii’s software platform that allows the user to maintain situational awareness at the same time as it reviews highly magnified images at long ranges. the photo in the upper right corner is from a thermal imaging technology for comparison purposes.

allow a port’s security team to visually identify the barge and understand there were no issues with its passing the container ship. If the barge’s identity were recognized, security personnel could radio the captain and get a more complete understanding of whether there were any issues. Under the same scenario, a thermal night vision solution would provide fuzzy, difficult-to-read images at limited distances, preventing an operator from understanding the complete situation and reacting quickly.

responding With the right resources

Visually extending the perimeter of a port beyond its traditional borders to see farther allows operators to better respond to situations with the appropriate means. Maritime domain awareness – the ability to know where traffic is as it sits offshore and approaches a port and who is operating a particular vessel – becomes a reality with a long-range day/ night surveillance system. Such a tool can help a port operator determine if a ship sitting offshore has business in the port and what resources are required to unload its cargo. This awareness can result in greater efficiencies and lead to lower operational costs as equipment and crews are best utilized based on a particular scenario, including knowing how many ships are waiting to enter a port and how much time a ship may spend in port. Security personnel also have insight into other traffic around the port. If a small boat gets too close to a cargo ship, it may pose a danger to itself or even raise concerns about potential terrorist activities. Port operators can respond accordingly.

Implementing Cost-effective solutions

Long-range, night-vision solutions have the added benefit of generating cost savings in several areas. Thanks to the technology’s ability to see clear images at long ranges, it serves as a “force multiplier” for security teams, who gain extra sets of eyes to monitor activities in and around a port. The ability to make more informed assessments before sending security personnel to respond to a perceived threat J a n u a r y / F e b r u a r y 2 0 0 9 | 49

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NIGHTVIsIon reduces costs associated with false alarms. Seeing farther often means covering the same area with fewer surveillance cameras. This means reduced infrastructure and maintenance and lower overall operating costs. By maximizing the use of tools already in place, longrange night-vision solutions quickly recoup their initial investment. This technology also represents a sound investment for ports trying to integrate systems that allow different players to collaborate more closely. The Coast Guard may use it to detect rogue vessels in the waterways; port operators can more effectively prepare to unload vessels; and landbased security may better protect the corresponding border. Having an easy-to-use-and-interpret image pays off as multiple parties can benefit without the training and eyestrain associated with thermal IR solutions. With the appropriate security solutions in place, a port operator can protect valuable assets, property and people without making a huge financial outlay or investing in the complex training often associated with the deployment of technology. Additionally, such a system can help a port operate more efficiently and cost-effectively by providing greater awareness of activities occurring around perimeters, borders and contiguous waterways. Finally, the ability to assess and respond to a threat and thereby avoid a major security breach can save lives, reduce the need for redundant resources, put a stop to crippling

losses and prevent further disruptions. Because this technology enables security personnel to thwart a terrorist attack such as the bombing of the USS Cole, the return on investment is invaluable. Mar Ex randall Foster, CEO, President and Co-Founder, Vumii, is an accomplished business leader and entrepreneur who has helped introduce key technologies and services to customers. He can be reached at

page siplon is the Executive Director of the Logistics Innovation Center, a unique partnership of private industry, academia, and federal and state authorities working together to develop, apply and promote new technologies, identify unique applications for existing technology and create best practices for safe, efficient and more secure supply chains. He can be reached at

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Major u.s. Insurance provider ready as IMo bunker Convention enters Into Force

By MarEx Staff

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WQIS Stays Ahead of the Curve, Provides Coverage at No Charge With All Existing and New Policies, and Remains the only U.S. Insurer Approved by a Majority of 27 IMo Member States to Provide the IMo Bunker Convention Certificate

When the IMO Bunker Convention entered into force on November 21, 2008, the international statute (International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001) established shipowner liability and compensation to affected parties for spills of oil when carried as fuel in ships’ bunkers. As its requirements

became law for all vessels for the waters of the signatory nations and for all signatory flag vessels, one U.S.-based insurance outfit was ready and began writing coverage almost immediately. In fact, the Water Quality Insurance Syndicate (WQIS) has been preparing for this event since 2007 when the last of the required 18 member states

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adopted the Convention. All ships over 1,000 gross tons for the waters of the signatory nations and for all signatory flag vessels must carry and produce a certificate certifying that the ship has insurance or other financial security to cover the liability of the registered owner for pollution damage in an amount equal to the limits of


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WQIS liability under the applicable national or international regime. This addresses a significant gap in compensating victims of oil spills, as existing international regimes covering oil spills do not include bunker oil spills from vessels other than tankers. To date, 27 IMO Member States have recognized its importance and have ratified the Convention. U.S.-based WQIS is now authorized by the majority of the flag states to provide the certification of financial guarantee that vessels need to produce. This is also provided without charge to WQIS policyholders. This is particularly important, as States Party to the Convention (as of December 5, 2008) include the Bahamas, Bulgaria, Cook Islands, Croatia, Cyprus, Denmark, Estonia, Germany, Greece, Hungary, Jamaica, Latvia, Liberia, Lithuania, Luxembourg, Marshall Islands, Norway, Poland, Russia, Samoa, Sierra Leone, Singapore, Slovenia, Spain, Tonga, the United Kingdom, and Vanuatu. In essence, vessels flying these

flags and/or passing through the waters of the signatory states must obtain a “blue card” from the flag state. Notably, the United States addresses these issues under its own particular statute and thus is not a signatory. The U.S. Coast Guard has issued a statement confirming that the country is neither a signatory nor party to the Convention and “has no present intention of ratifying this instrument. As such, the U.S. cannot issue certificates relating to the bunker convention, nor will the U.S. enforce the Convention on foreign ships visiting the U.S.” Nevertheless, WQIS, as the second or third largest issuer of COFRs in the world, is perhaps the only U.S.-based insurance company – along with some international P&I clubs – authorized to write the business. Richard Hobbie, CEO of WQIS, adds, “With more than half of the vessel spills resulting from incidents involving ships not carrying oil cargo, this protocol is an important addition to further protect the world’s

waters. We’re pleased to participate in its actualization.” Operators who do not obtain coverage risk having their vessels banned from entering participating countries’ ports. This could result in costly delays and/or unexpected liabilities while at sea. Richard Hobbie, who sat in on the 2001 diplomatic conference that launched the Convention, says, “We realized that, long term, this would be a major need for our insured parties.” Hobbie’s WQIS, already the largest underwriter of pollution liability insurance for marine vessels in the U.S., has increased its business substantially with the new Bunker Convention. More than 37 years after entering the industry, WQIS remains dedicated to providing broad coverage and creating the most responsive organization to serve the needs of its clients. The new IMO Bunker Convention – and the WQIS response to its inception and ultimate ratification – is just one more Mar Ex example of that metric.

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By MarEx Staff

Crew Comfort takes Center stage sLoWIng eConoMy FInDs oWners retroFIttIng anD repoWerIng; InterIor renoVatIon May be Just as IMportant

shifting gears in Choppy Waters: It’s not Just the economy

Some are calling it the shipping market’s “Perfect Storm.” While it remains to be seen how deep the current economic downturn will cut across all sectors of ocean transportation, it is a fact that the shipping market is in a state of flux. This leaves owner/operators to carefully assess the availability of financial backing and the cold reality of slackening charter demand before embarking on capex projects. Some operators, therefore, have turned to retrofitting their older platforms to conform to today’s regulatory – and crew comfort – standards. It is a decidedly good time to achieve “economy of scale” in all phases of business. Smart operators are also looking toward interior renovation at the same time they repower to Tier II and Tier III requirements. For others, the temporary loss of business may lead to temporary amnesia when it comes to making sure that the platforms they own and operate are desirable work destinations for their marine employees. Those in the latter camp are (arguably) making a serious mistake.

accommodations: pressing the “easy” button

One of the main complaints from passengers onboard cruise ships and cruise-ferries relates to the noise generated by the flushing of vacuum toilets, which can cause considerable disturbance, especially at nighttime. Helsinkibased Evac Oy, which supplies around 75 percent of toilets onboard cruise ship newbuildings worldwide, has come up with a solution to this problem with its recently launched Evac 910 vacuum toilet. The unit’s patented, quick-relief valve cuts discharge noise by around 4dB(A) and peak noise by approximately 8dB(A). As such, the Evac 910 vacuum toilet is much quieter than previous-generation vacuum toilets. According to Markus Peltola, Director, European Sales, “We are very pleased. Evac 910 is now clearly the quietest vacuum toilet available to marine customers, with a sound level comparable to gravity toilets.” The Evac 910 has also been designed to facilitate easy on-

board maintenance and repair. Cost-conscious operators will like the fully pneumatic flush mechanism, which minimizes water consumption. This robust unit has been constructed to withstand the rigors of use at sea and, according to its manufacturer, has already been tested for a lifecycle of 300,000 flushes. It also conforms to ANSI Z124-5 requirements. Although suitable for all types of vessels, the Evac 910 is targeted mainly at the passenger ship market but may have commercial applications in the workboat or merchant vessel markets as well. The first deliveries were made in November 2008, and more than 4,000 Evac 910 toilets will be delivered to STX Shipbuilding in Finland to equip the Allure of the Seas, the second Genesis Class ship for Royal Caribbean Cruise Lines. Located in Finland at Mankkaa in the City of Espoo, Evac Marine has more than 30 years of experience in the marine business. Additional information about the company is available at

Crew Comfort: the Missing Link to Crew retention

The concept that a comfortable sailor is a happy sailor is not a new idea. Successful industry heavyweights – Larry Rigdon and naval architect Guido Perla, for example – have long understood that a quieter, more comfortable vessel can be an inexpensive way to upgrade the value of tonnage. Perla’s diesel-electric designs for auxiliary power (bow thrusters, for example, as a means to reduce vibration and associated noise) are now industry standards in the workboat market. Inside the vessel, however, there is still much

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CREWCoMFort work to be done – and other ways to get there. Marine & Offshore Supplies, Inc. is a worldwide supplier of modern and new marine and offshore equipment, including joiner and accommodation systems, marine windows of all classes, watertight doors of all sizes, and much more. Holger Reins and his Marine & Offevac 910 shore Supplies group represent, among others, R&M Marine Products in Rostock, Germany. Within the U.S. and Canada, R&M recently expanded its horizons by opening a new manufacturing facility in Brooksville, FL. For the conversion and repair markets, Reins has a large inventory in New Orleans, which consists of wall liner and partition panels, ceiling panels with all relevant trims, and related products. All R&M products have certificates from every major classification society. Holger Reins also has his own ideas about achieving crew comfort and how to get there. His philosophy on the subject transforms an otherwise apparently unremarkable part of ship construction into required reading. Here’s why: » Reins suggests using a prefabricated wet unit (bathroom module) on each vessel. These modules install and connect easily to existing onboard plumbing and electrical outlets. Fully equipped with all amenities, they are easy to maintain and keep clean. The amenities are fully serviceable through one duct and accessible through hallway service hatches. » For vessels operated in cold climate zones (Alaska, etc.), Reins recommends the installation of electrical floor heaters with wall-mounted thermostats. Moderately priced at around $150 each, the units enhance the comfort of the module.

» Reducing noise levels within the cabins involves the use of highly efficient, sound-absorption partition panels, which reduce noise levels by up to 45 db. The use of A60 fire-rated floating floor panels above the main deck, particularly above the engine room, is another must. While some operators may be content to comply with fire-rating requirements only, these floating floor panels reduce noise levels up to 55 db. and also ensure that the deck meets regulation fire-safety standards, thereby saving time and money by eliminating the need to insulate beneath the deck. » With regard to A-class fire doors, all doors should be equipped with a four-sided gasket within the doorframe. This roughly $30 item also reduces the noise level emanating from A/C, electrical and recreation rooms. The minor expense further enhances crew comfort without breaking the budget.

spending smart: preparing for the next boom

Notwithstanding a tough economy, shippers have come around to the notion that things like good pay, broadband (Internet/email), and better training go hand-in-hand with an ultimately fatter bottom line. The fourth leg to that chair is the comfort experienced by mariners who may spend upwards of six months on board a particular platform. As late as 1982, this writer sailed on a chemical tanker that employed a “wringer” washing machine in the officers’ laundry. Those days, obviously, are over. But much remains to be done in terms of improving the standard of living aboard many vessels. And when the economy begins to recover – and it will – the question of recruiting and retaining top-notch seagoing talent will again become paramount. Holger Reins and his Marine & Offshore Supplies group outfit more than 40 vessels annually on a worldwide basis. His Tampa-based business and the full array of his products can be accessed on the Web at Mar Ex

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LEGALDIRECTORY Blank Rome Maritime Blank Rome Maritime, the largest Maritime law practice in the United States, serves the global business needs of our ship owning and operating clients.

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With the experience of 20 years, 150 experts, and 30,000 cases, Robson Forensic is a highly credentialed group of engineers, architects, scientists and fire investigators. With specialty areas that include: trucks & buses, highway safety, motorcycles, commercial driving, racing, materials, product failure, meteorology, and crash reconstruction, our experts have the depth of knowledge & practical experience required to assist in the resolution of disputes & litigation through investigations, reports, & testimony.

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The Maritime Executive Magazine January/February 2009  

The Maritime Executive Magazine, Articles, News and Pressreleases relating to the Maritime Industry

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