Page 1


Courtesy of: Royal Caribbean Cruises Intl


Executive Interview: Radio Engines & the Environment: Ahead of the Curve Holland’s David A. Slager

Water Treatment: Technology & Regulations January-February 2010

The Year to Come:

Waterways, Politics & Compliance

Reach your high standards It’s about partnership.

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Photo Credit: Stephen Schauer

His Excellency Dr. Nasser Saif Al Mansoori, Director General National Transport Authority of the United Arab Emirates, COrdIALLy INvITES yOU TO PArTICIPATE IN AN ImPOrTANT INdUSTry EvENT--

The United Arab Emirates in the 21st Century: Working together for a greener maritime world

March 1-3, 2010

Park Rotana Hotel, Abu Dhabi, UAE

Leading experts from around the world will be converging on the UAE to discuss strategies and implications for ensuring a robust and environmentally sound maritime industry. Under the patronage of His Highness Sheikh Hamdan bin Mubarak Al Nahyan, Minister of Public Works and Chairman of the National Transport Authority of the UAE, this event will explore current regulatory issues, public influence, industry response and best practices, market implications and action. A workshop to establish a framework of action will be included.

Summit on: Environmental Vigilance: Taking The Lead In Environmental Protection.

Organized and hosted by the National Transport Authority, United Arab Emirates

In collaboration with:

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Seating is strictly limited. Please confirm your attendance early. To register your interest please email, Capt Saleem Alavi: / Carleen Lyden-Kluss:

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Volume 14, Edition 1



holland America Line

Stein Kruse, President & CEO, Holland America Line and Her Majesty Queen beatrix of The netherlands, at the dedication of ms Eurodam in 2008.

A History of Distinction, Innovation and Growth by tOny MunOz

Cover photo by Len Kaufman

Executive Achievement

by MArEx StAff

Washington Insider

10 | Cruise Industry Sails Into rising Environmental tide by LArry KIErn

MarEx OP-ED: Point/Counterpoint

14 | Point: An Open Market Harbor Pilot System Benefits All floridians by JEnnIfEr nugEnt-hILL

Counterpoint: Safety of florida’s Ports and tourism Industry at risk from Special Interests by CAPtAIn JOE brOWn

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Stein Kruse

Since taking the reins of one of the world’s premier cruise lines over five years ago, Stein Kruse has successfully managed Holland America’s operations through both good times and bad. by tOny MunOz

8 | David A. Slager

Chairman and CEO, Radio Holland Group


Executive Interview:



Case Study:

upgrades and Downgrades

18 | Is It Safe to go back in the Water?

40 | ballast Off a Sinking Ship: the Plot thickens…



MarEx OP-ED:

46 | Wastewater: IMO MEPC. (159)55 Defines the Way Forward

56 | Waterways transportation research: needed now More than Ever by CrAIg PhILIP


by MArEx StAff

48 | Positively Promising: Pressure on Propulsion by MArEx StAff

Contents 34 | getting there Is half the fun: how the Dream, Oasis and Epic Are Launching the next Era of an Industry

52 | Austal’s next-generation ferry Arrives Just in time – And in Style by MArEx StAff

by ryAn WAhLStrOM

2/1/10 10:01:28 AM

Half Page Vert


3:29 PM

Page 1


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

Chris Clarke :: direCtor of sAles - AsiA

Philipho Yuan :: AdVertising sAles MAnAger: sCAndinAViA

Harald Husø :: internet serViCes MAnAger



Steven Gonzalez :: Y

CirCulAtion MAnAger


Caroline Stephenson :: MY


The Maritime Executive, LLC (ISSN 1096-2751) 3200 S. Andrews Avenue, Ste. 100 Fort Lauderdale, FL 33316 Telephone: +1 954 848 9955 Toll-Free: 866 884 9034 Fax: +1 954 848 9948



For subscriptions please visit The Maritime Executive (ISSN 1096-2751) is published bi-monthly 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.

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1/29/10 1:44:32 PM




Joseph Keefe Editor in Chief



Joseph Keefe can be contacted at 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.

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there is much to think about as we speed right through the first quarter of 2010. Thanksgiving will be here before you know it. In the meantime, however, maritime operators everywhere have to continue to “sweat the small stuff.” The New Year promises a better financial picture, to be sure. It also brings with it some of the most onerous legislative, regulatory and environmental pressures ever brought to bear on the collective waterfront. Nowhere will that pressure be felt more strongly than in the cruise and passenger ferry sectors of the market. Here’s why. As a market sector, cruise and passenger vessels toil necessarily under the brightest of spotlights. There is an old joke about the veteran air cargo pilot who was asked why he didn’t fly for one of the big-name passenger airlines where he could probably make a bit more money. He answered bluntly, “Freight doesn’t b---h.” On the other hand, passengers certainly can and do b---h. Some even carry cameras and video gear to prove their point. Under these conditions – and with the full understanding that the safety and comfort of the paying customers is of utmost importance – passenger vessels have to get it right every time. Or else. There is no end to the pressure being exerted. Our Washington Insider columnist Larry Kiern outlines far better than I could the nuances of EPA efforts to improve environmental compliance, including stack emissions, sewage and gray water discharges. Kiern also leaves his readers with the caveat that “Green marketing has proven useful for commercial purposes, but substantial reductions of discharges and emissions will be required to make ‘greener’ operations of the cruise industry a reality in the eyes of environmental advocates.” Indeed. It is hard to miss this edition’s cover photo of Stein Kruse and his high-flying Holland America brand. Five years after taking the reins of one of the world’s truly premier cruise lines, Kruse has Holland America poised to take its signature style of hospitality to a new level. Along the way, he has not forgotten what it will take to do that in this challenging era of tightening regulatory oversight and enforcement. Our Case Study (starting on page 22) provides a blueprint for others to mimic the unique environmental initiatives of possibly the greenest cruise line on the planet. There is also the bottom line to contemplate. Although 2009 wasn’t the best of years, the future seems a bit brighter, starting with some recently improved financials and reinstated dividends – clear signs of growing financial strength as the economy rebounds. Ultimately, the pressure to balance the books and deliver solid financials will trump everything else. This edition also includes a hard-hitting “point-counterpoint” Op-Ed on one of the most hotly contested domestic issues of the year and one which impacts cruise lines on a daily basis: state-sanctioned harbor pilots, fees, and everything in between. It turns out there are two sides to every story. Adding to the weight of regulatory pressures will be the coming federal ballast water treatment (BWT) standards now in the final stages of formulation by the U.S. Coast Guard. Important to all marine operators, BWT in particular affects those cruise lines whose main bread-and-butter is the U.S. coastwise market – in other words, a large percentage of the world’s cruise line operators. Inside you will find the definitive word on BWT regulations, testing and technology as well as a primer on which equipment might be best suited for which size and type of vessel, trade routes and a myriad of other variables. You won’t find this anywhere else. The pressure is relentless. Lurking over the horizon is new cruise vessel safety and security legislation which has stalled as a proposed passenger fee to pay for the associated enforcement costs is being considered. The bill ultimately would mandate that safety and security information be provided to passengers. Meanwhile, other (arguably) important legislation languishes that would require large cruise ships to report serious crimes to U.S. authorities and meet new design and construction standards, such as higher shipboard rails, video surveillance systems, and stateroom peepholes. If and when any of this comes to pass, the job of running the modern cruise liner will have gotten just a little harder. Nobody ever said it would be easy. That said, the future looks bright for those operators who can combine service, value, safety and environmental compliance into one tightly scripted package. That’s what I call pressure. Mar Ex

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By MarEx Staff

Chairman and CEO, Radio Holland Group Leading the Way in Equipment, Connectivity and Service

David A. Slager DaviD Slager iS probably not yet a household name in north america. Similarly, his journey to the top of radio Holland group is perhaps as eclectic as the changes that have permeated his firm’s core business over the past few years. Slager’s roots in the maritime industry are as deep as radio Holland’s penetration into the same sectors and equally diverse in terms of geographic areas served. Knowing your clientele – and potential future customers – is key to any successful business venture. and from that standpoint, Slager has “been there and done that.” long before his name became synonymous with radio Holland, Slager attended the University of rotterdam where he earned a bachelor’s degree in economics and Statistics. the Dutch national also completed a business Management degree at oxford and then another in Marketing Management at the University of Capetown. the diverse and international nature of his education would set the stage for a career that has spanned two continents and a wide range of commercial experience, starting with Shell and texaco and leading to Managing Director positions with Stalt Holding b.v. and thermo eurotech n.v. For the last 11 years he has served as an executive at radio Holland. Quickly rising to the top of that company, he also serves as Deputy Managing Director of the imtech Marine group, radio Holland’s parent.

Making the Connection

today, radio Holland group (rHg) is a specialized company in the supply, installation, integration and service of maritime electronics and is also well known as a connectivity provider. Under David Slager’s guiding hand, rHg has evolved from a traditional supplier of equipment to a provider of connectivity and servicing agreements as well. When asked to explain the shift in focus, Slager candidly told Marex in January, “We chose, four or five years ago, not to give up on the traditional radio Holland busi-

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ness but also that ‘connectivity’ was the huge growth area. Why? twenty years ago, many assumed that to say everybody would be walking around using a mobile telephone would be farfetched. the same can be said for ship’s communications – emails and data transmissions from 2,000 miles out to sea. Well, it’s happening now.” Slager goes on to describe just how big the market has grown: from voice, to email, and now to complex data transmission. Slager insists, “We haven’t seen the tip of the iceberg yet. and so while this is a market (connectivity) we definitely want to be in, we also know that we have lots of competitors. but there’s not one single competitor in the world that has such a big network as we have. and therefore we are able to offer service agreements to our customers.” it is here, perhaps, that Slager’s approach to the business diverges from the industry standard. employing 1,000 people worldwide in more than 60 strategically located, wholly owned branches, rHg today represents a wide range of internationally renowned manufacturers and continually focuses on electronic and functional innovations in communication, navigation and automation equipment. already known for its “24-hour on-the-spot service,” the firm enjoys a broad-based service and repair business – boasting worldwide iSo 9001 certification – with a myriad of customers engaged in deep sea transportation, coastal and inland shipping, dredging, government and navy service, megayacht shipyards, fisheries, and more. Slager therefore intends to increase his penetration into the connectivity market by offering service agreements – with one key difference: He will do the service with dedicated rHg employees. He explains, “you have to do the service yourself. as soon as you start subcontracting, you lose control. that’s why we continue to expand our network with our 63 offices. very soon we will have 70. Ultimately, we need to have somewhere between 70 and 90 to provide the global service that our customers deserve.”

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EXECUTIVE ACHIEVEMENT Focus on Emerging Markets

navigation system service provider, but also selling HVAC from another Imtech division. And we’ll start doing the maintenance on that as well.” The potential upside for the Imtech Marine Group, therefore, by coordinating with Radio Holland, is simply tremendous – especially with the experienced and well-rounded David Slager running things. Mar Ex




In the meantime, he is aggressively pushing ahead with expansion plans in such hot markets as Brazil and India and augmenting an existing presence in Vietnam and China. In keeping with his connectivity theme, Slager adds, “For each and every service job, you previously had to physically go on board, detect and solve the problem. Now, the remote diagnostics to do that are available through the connectivity of broadband. For this reason I believe that broadband is going to grow faster than anything else.” Where some CEOs are merely looking to survive the current economic downturn, Slager and RHG are seeking to expand. And for Radio Holland that involves more than a few emerging markets. The Middle East in the past year – and despite some country-specific financial difficulties there – has been what Slager characterizes as a “huge growth market.” And “China is still booming for us – because of our unique approach. Unlike other equipment and service providers, we’ve concentrated our efforts on the shipyards themselves – just the yards. And our order backlog is bigger than it has ever been. There is plenty of opportunity. It is a matter of navigating the logistics of getting the business, servicing the customer and doing that locally.”Perhaps the biggest challenge for any technology related outfit in today’s market is keeping its personnel up-to-date and trained in the latest equipment. Slager addresses this issue pragmatically: “We don’t have a central training facility, but we’re looking at that aspect of our business. On the other hand, the training courses are usually organized by the manufacturers. That said, our representatives have no problem getting their training through manufacturers – sometimes they send their people to us. But we need more technicians. Some will accept the shortfall – we don’t.” Slager adds that RHG is actively looking at more formal training solutions in both the Philippines and the Netherlands. While the recession is certainly affecting the newbuild markets, it has also been something of a boon to the service and repair sectors. Slager explains, “Operators are postponing the replacement of equipment. We’ve seen in 2009 that over-the-counter sales of products have dropped, but the service has actually gone up, despite the fact that there are fewer ships on the water right now.” In this environment, RHG has steadily increased its market share. Maintenance contracts, promoted heavily over the last four years, are now yielding handsome dividends. Beyond that, says Slager, there are simply more electronics on board these vessels now than there were just twenty years ago. Call that a happy accident or call it savvy management. Either way, it translates into a growing bottom line for Radio Holland in the most unstable of times.

Expanding the Product Line

Using David Slager’s formulae for success, RHG appears to have positioned itself well for further expansion into still more technical aspects of the global maritime markets. Still, the question remains: Is there room for even more growth in service centers and technical personnel? Slager is adamant that RHG can grow tremendously in this “opex period.” He explains, “There is a lot of competition on the capex side, but not so on the opex, which is far more interesting from a margin point of view.” To this, he adds a new twist: “We will not be just a communication and

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washington insider

Written by Larry Kiern, Winston & strawn LLP

washingtoninsider JAnUARy/FEbRUARy 2010

Cruise industry sails into Rising Environmental tide



For a decade, a network of environmental advocates has pressed the environmental Protection agency (ePa) for tougher regulations on cutting pollution from the cruise industry, particularly discharges and emissions from large cruise ships operating in U.S. waters. these efforts have met with little success on the federal level, but the obama administration could prove a more willing regulator. additionally, heightened sensitivity to the threat of global warming will likely focus regulatory attention on vessel emissions, including those from cruise ships. together, these developments present a rising tide of environmental regulation. the industry’s challenge is to engage proactively in the search for practical solutions and thereby advance both its own interests and the goal of enhanced environmental protection.

Environmental Petition Promises increased Clean water act Regulation

In response to a lawsuit filed against the ePa by Friends of the earth (Fote) in

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May 2007, the ePa published a detailed report on cruise ship pollution in U.S. waters in december 2008, the Cruise Ship Discharge Assessment Report. the report concluded that these ships routinely dump large volumes of undertreated sewage and contaminated graywater in U.S. coastal waters. the lawsuit followed a period of seven years without apparent progress by the Bush administration ePa on a March 2000 Fote petition to assess pollution discharged by cruise ships in the U.S. that petition asked ePa to identify and take regulatory action on measures to address pollution by cruise ships. as a result of the Fote lawsuit, ePa reported that cruise ship discharges contain concentrations of pollutants far exceeding federal effluent and water-quality standards. the report estimated that cruise ships produce an average of 21,000 gallons per day of sewage and 170,000 gallons per day of raw graywater that can contain as much bacteria as sewage. Based on this report, on april 28, 2009, Fote petitioned ePa to set new sewage discharge standards for cruise ships. according to the petition, “the current regulatory program for the treatment of sewage from these and other large vessels is woefully inadequate and has failed to keep up with both the growth of the industry and the development of sewage-treatment technologies.” the petition argued the industry should adopt more effective technologies costing only about seven dollars per passenger. In the face of mounting pressure, the cruise Lines International association (cLIa), representing 97 percent of cruise industry capacity in north america, emphasized the industry’s self-interest in protecting the environment, its compliance with international standards, and agreements by member companies to adopt voluntary cLIa

environmental standards that exceed international standards. there appears little doubt about the ability of the industry to improve environmental performance. the question remains how best to accomplish that goal. environmental advocates are pressuring ePa for tougher mandates while the industry favors voluntary measures. the ePa has yet to rule on the Fote petition. But considering the evidence of pollution and the straightforward steps to reduce it, ePa will likely grant the petition or initiate a rulemaking to update the sewage-treatment standard for vessels. Importantly, the ePa report showed that measures already applied to cruise vessels operating in alaska provided material reductions in pollution. the technology for advanced waste-treatment systems has moved far beyond the obsolete ePa standards set for marine sanitation devices in 1976, and the new treatment systems have proven effective in practice. additionally, years of experience show that the operational restrictions on cruise ship discharges in alaskan waters are workable and protect the environment by avoiding inshore discharges and diluting offshore discharges conducted with ships sailing at a speed of at least six knots. If ePa initiates this regulatory process, the industry will face its first comprehensive, effluent-based federal water-pollution initiative in decades.

the Clean Cruise ship act

on october 21, 2009, Senate Majority whip dick durbin (d-IL) and senior congressman Sam Farr (d-ca), joined by 27 cosponsors in the House of representatives, introduced legislation proposing a comprehensive statutory regime for managing pollution discharges from cruise vessels in U.S. waters. the legislators highlighted what they described as the large volume of sewage, graywater, garbage, and hazardous wastes discharged by cruise vessels and the resulting environmental harm. Moreover, they pointed to

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the success of the program established by Congress for Alaska in 2000, along with additional state-enacted measures. The regime proposed by the legislation would build on the permitting process of the Clean Water Act to regulate the industry comprehensively. That is, cruise vessels would first have to obtain a permit to operate in U.S. waters. The legislation would prohibit discharge into the navigable waters of the U.S., the contiguous zone, and the exclusive economic zone of any hazardous wastes, sewage sludge, and incinerator waste. It would also prohibit discharges of sewage, graywater, and bilge water within 12 miles of U.S. shores. Beyond 12 miles, these discharges would only be allowed if they conformed to effluent limits achievable with the best available technology and the vessel sailed at a speed of at least six knots. The legislation proposes minimum fecal coliform effluent limits and comprehensive recordkeeping and reporting requirements. The EPA, in consultation with the Coast Guard, would be required to promulgate implementing regulations, and both agencies would be empowered to inspect cruise vessels to ensure compliance. Again citing the Alaska experience, the legislation proposes a new “cruise observer” program featuring enforcement personnel hired by the Coast Guard to provide constant observer coverage on each cruise vessel underway. Additionally, it adopts the controversial “whistleblower” reward provision used to prosecute violations of the Act to Prevent Pollution From Ships in the U.S. Finally, the federal government’s cost of implementing the legislation would be financed by a Cruise Vessel Pollution Control Fund derived from a passenger fee. While it is difficult to predict how the legislative process will address this proposal, the recent legislative successes of cruise victim advocates who pressed for cruise vessel safety and security reform legislation suggests that environmental groups may adopt a similar approach. And, as occurred in the context of passenger safety and security, the cruise industry may see the wisdom of shaping an acceptable legislative compromise. Otherwise, it may have to deal with the same agenda through the regulatory process, where its arguments and political

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allies may have less influence.

EPA’s Endangerment Finding – A Precursor to Greenhouse Gas Regulation

On December 7, 2009, the EPA issued its new “endangerment finding” under the Clean Air Act (CAA). This finding followed the Supreme Court’s 2007 decision requiring the EPA to determine if greenhouse gases (GHG) caused or contributed to air pollution. In short, the EPA found the projected concentration of six key greenhouse gases in the atmosphere threatens public health and welfare. While most media attention has focused on potential EPA limits on GHG emissions from large industrial facilities, e.g., power plants and refineries, EPA’s actions regulating vessel emissions confirm its position that CAA authority extends to foreign-flag vessels, including cruise ships, calling in the U.S. Importantly, the EPA’s endangerment finding concluded that emissions from mobile sources, which constitute almost onequarter of total U.S. GHG emissions, contribute to adverse environmental effects. Once EPA concludes that GHG emissions from ships cause or contribute to the concentration of GHGs in the atmosphere, then it will likely contend that it can regulate these emissions. Considering existing scientific studies to this effect, the conclusion seems likely, notwithstanding industry arguments that vessels represent the most fuel-efficient and least harmful atmospheric emission source of any form of transportation. Petitions to the EPA by the state of California and a coalition of environmental advocates requesting regulation of GHG emissions from ships have been pending for over two years. The California petition argued that “Vessels form one of the world’s most polluting source categories per unit of fuel consumed.” Moreover, the petition cited the Supreme Court’s decision in Spector, et al. v. Norwegian Cruiseline, Ltd., 545 U.S. 119 (2005) for the proposition that the U.S. has jurisdiction over foreign-flag vessels calling in the U.S. and that unilateral regulation of GHG emissions does not violate international law. The petition by environmental advocates urges GHG regulation of shipping by EPA to avoid

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washington insider a “piecemeal” approach. Therefore, it appears that the issue is squarely presented to the EPA.


ocean acidification impacts Under the Clean water act also in Play

the Road ahead

Increased EPA regulation of pollutants from cruise vessels operating in the waters of the U.S. seems likely. Additionally, environmental advocates will continue



Immediately following the arrival of the Obama Administration in January 2009, the EPA agreed to review how ocean acidification should be addressed under the Clean Water Act (CWA). This decision granted a petition by the Center for Biological Diversity (the “Center”) and was widely applauded by environmental advocates particularly concerned about the impact of carbon dioxide and nitrous oxide emissions on the oceans. Nevertheless, on May 14, 2009, the Center also filed a lawsuit against the EPA in U.S. District Court in Seattle alleging that the agency failed to recognize the impacts of ocean acidification on waters off the state of Washington. The suit, brought under the CWA, is the first to address ocean acidification directly, and it

represents a realization by environmental activists that EPA regulation of GHG under the CAA is not the only route for them to pursue their agenda. The current EPA criterion, adopted by most states, requires a finding of impairment if waters deviate more than 0.2 pH units from natural variation. This standard, adopted in 1976 before ocean acidification was recognized as a threat, is at issue. The Center argues that ocean acidification is occurring so rapidly on the U.S. West Coast that Washington State’s waters already exceed this standard. California’s petition to the EPA on global warming expressly cites that state’s exposure to ocean acidification. Environmental advocates have thus succeeded in opening a new front in their offensive to protect the environment.

to press Congress for comprehensive environmental regulation of the industry. Therefore, the industry should focus on steering this regulatory current constructively. “Green” marketing has proven useful for commercial purposes, but substantial reductions of discharges and emissions will be required to make “greener” operations of the cruise industry a reality in the eyes of environmental advocates. Mar Ex

Larry Kiern is a part-

ner 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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point counterpoint


MarEx OP-ED:

An Open Market Harbor Pilot System Benefits All Floridians

Safety of Florida’s Ports and Tourism Industry at Risk From Special Interests

By Jennifer Nugent-Hill, Tropical Shipping and Board Member, Florida Alliance of Maritime Organizations

By Captain Joe Brown, President, Florida Harbor Pilots Association

For decades harbor pilots and ship operators have stood as partners to ensure the safe passage of large vessels into our ports. Freight and passenger vessel industries appreciate the essential services provided by the pilots. however, a modernization of the harbor pilot system in the state of Florida is greatly needed. the Florida alliance of Maritime organizations, which is comprised of cargo and cruise companies, supports change that would introduce an open market system to the sunshine state’s harbor pilot structure. We are seeking competition and job growth in what is a monopoly-like system. our reform efforts are not about doing away with pilots or deregulation of the system; we are working to reform a broken system. Florida needs a balanced system that permits men and women who have the qualifications to be pilots to become pilots. harbor pilots remain imperative, and we believe there should be more opportunities created for men and women who want to join this profession. a reasonable approach would be to allow other qualified harbor pilots to offer their services to the thousands of vessels that dock in Florida ports each year. this would be a “win-win-win situation” for Florida consumers, state and local governments, and those looking for work in related industries. in Florida, the vast majority of ships are required to obtain the services of a state-licensed harbor pilot when entering or leaving any of the state’s 14 seaports. First enacted in 1974, chapter 310 of Florida statutes tasked the department of business and professional regulation (dbpr) with regulating the state’s approximately 90 harbor pilots. instead of being competitively based on supply and demand, the pool of eligible pilot licenses has his-

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Florida’s Waters are typically calM this tiMe of year with the end of hurricane season and no real weather threats on the horizon, but in coming months the main threat for Florida’s 97 licensed harbor pilots will be from a group called the Florida alliance of Maritime organizations (FaMo). FaMo is a front group for foreign cruise and shipping interests that want to increase their bottom-line profits and do away with professional harbor pilots in Florida. the Florida harbor pilots association (Fhpa), together with all of the pilot associations from the panhandle to the Keys, has been battling back the relentless attacks from these foreign entities for the last year. initially, these foreign entities asked the legislature to stop a state review board, created by the Governor and legislature, from holding rate hearings even though the process is impartial and was set in statute at their request years before. When that failed, they asked the legislature to examine the harbor pilots’ profession and then sought to influence the legislature’s independent study by releasing an economic study they paid for and manipulated. FaMo has attempted to shop around this flawed study in Florida, but their study has been quickly dismissed because of its biased conclusions, reckless claims and inaccurate data. Many have recognized this “third-party study” as inaccurate, pointing out that it was paid for by the groups that have been trying to harm the Florida pilots for months. FaMo’s study is not only an insult to the Florida pilots but an insult to all professional pilots in the U.s. From FaMo’s erroneous numbers and irresponsible conclusions to the obvious lack of any data collected from a professional pilot or pilot association in Florida, their study is an attempt to manipulate the facts and lawmakers in Florida.

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point counterpoint



nugent-Hill (cont.)

Brown (cont.)

torically been kept low and not subject to free market conditions. Licenses and compensation are set by two DBPR boards, one of which includes pilots. Essentially, the pilots – whose services are required – determine who joins their small group. Under this noncompetitive system, thousands of vessels have no other choice than to utilize this group of approximately 90 pilots, whose average annual income has ballooned to over $368,000 annually. According to a new study by the Washington Economics Group of Miami, this greatly exceeds what ship captains, airline pilots or even air traffic controllers make in a year. The study concluded that in 2008, approximately $50 million in pilotage fees were paid by cargo and passenger vessel operators whose ships frequent the state’s ports. Those costs, in turn, are borne by consumers who purchase goods transported through Florida’s ports or by vacationers who cruise through state waters. The Washington Economics Group found that setting Florida harbor pilot fees to levels comparable to the incomes of air traffic controllers – a job with similar stress and responsibilities – would result in as much as $35 million in direct annual savings. Nearly 5,000 new jobs in related industries would be created. This issue is not a debate about safety. Safe navigation is a top priority as traveling in and out of Florida’s ports without incident is critical to our ability to do business. Opening the harbor pilot system to allow market competition among a larger pool of adequately trained professionals would in no way undermine safety, which is an utmost priority for the entire maritime industry. New pilots would and should be subject to stringent professional and experience standards. Moreover, due to heavy maritime investment in the 36 years since the harbor pilots’ regulatory framework was enacted, there have been dramatic advancements in navigation, weather, radar and communications technology, allowing ships to be driven and docked with high degrees of safety and precision. As such, our industries do not support a removal of pilots – their extra set of eyes adds another layer of safety. With our own trained captains and bridge teams, a larger pool of qualified harbor pilots, and the deployment of various new shipboard technologies, port navigation is already very safe and getting safer each year. Each layer of safety is valued by ship operators, which is why we appreciate the extra pair of eyes and knowledge that harbor pilots provide. The reality, however, is harbor pilot compensation has grown unreasonably high and is among the highest in the maritime industry and perhaps in the entire state. Opening the system to competition is an overdue, pragmatic step necessary to keep Florida ports competitive for the long term. Mar Ex

To compare harbor pilots with airline pilots and even point to the salaries of air traffic controllers and firemen is not logical or fair – they are comparing apples to oranges. To be clear, this is not meant to be an insult to these professions, but rather a need for a distinction between their duties and ours. Comparing our maritime training, job duties and physical demands to that of an air traffic controller who sits high in a tower reading technological equipment is further evidence that their study was never intended to fairly or logically “study” the rigors or dangers of our profession. Florida’s 14 deepwater ports are at risk if FAMO is successful in its attempt to lessen the qualifications and statutory procedures in piloting. According to Chapter 310, Florida Statutes, piloting is of such paramount importance that its continued existence must be secured by the state and not left open to market forces. In addition, the statutes regulate Florida’s harbor pilots by requiring that they must have extensive maritime qualifications and sit for competitive boards and exams to be fully licensed, allowing for only the best-of-the-best maritime pilots to guide mammoth ships and tankers into Florida ports. FAMO will claim that if more pilots are allowed to seek licenses, it will drive down pilotage rates and the private earnings of our professional pilots. But logic dictates that if an impartial state rate review board is in place, which it has been since 1994, rates will be fairly set and regularly reviewed for maximum efficiency. FAMO will also claim that Florida’s licensed and privately-paid pilots make too much money – a laughable claim from cruise lines that make billions in profits from Florida alone. But what they fail to point out is pilot earnings are based on their workload and rates set by the state at levels that are amongst the lowest on the Eastern seaboard. What FAMO won’t say is their goal is to lessen the expenses of foreign cruise lines and increase their bottom line by doing away with the requirement to have a Florida pilot who is versed in the channels and local ports. What they also won’t tell you is that if they cannot have absolute control over their ships in Florida ports, they would want to increase the “pilot pool” so they will have a harbor pilot who will be beholden to them and will bring their ships in regardless of dangerous conditions, which puts our state’s public welfare and environment at risk. FHPA will continue to stand up to these foreign interests who have wrapped themselves in a false banner of impartiality and fairness. Our harbor pilots are Floridians who have decades of local experience and expert training and take the safety of our jobs and Florida waterways seriously. We know what can happen if a port or channel is compromised, and we know what such a tragedy would do to Florida’s economy, the safety of Florida’s Mar Ex ports and the tourism industry of the Sunshine State.

JENNIFER NUGENT-HILL is currently Assistant Vice President for Government and Public Affairs for Tropical Shipping. She is a member of the Board of Trustees for the Caribbean Central American Action and a member of the Board of Directors for the Florida Alliance of Maritime Organizations. Mrs. Nugent-Hill has in the past worked as a management consultant to small businesses and has received numerous public and civic awards and commendations for services provided in both the private and public sectors.

CAPTAIN JOSEPH “JOE” BROWN has been a state licensed St. Johns River pilot in Jacksonville, FL for 15 years and has served as president of the Florida State Pilots Association since 2007. After graduating from New York Maritime College with a Bachelor of Engineering in Electrical Engineering, Brown rose to the rank of master mariner. Captain Brown also holds numerous federal pilotage endorsements. He has served as president of both the St. Johns Bar Pilot Association and the Jacksonville Marine Transportation Exchange and is a member of the Nautical Institute. On the Web:

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Upgrades Downgrades Is It Safe to Go back in the Water? 2009 was a difficult year for the capital link Maritime Capital Link Maritime Index (Jan. 1, 2009 – Jan. 8, 2010) economy. it was a banner year for invesindex, which tracks the tors. like dickens’ A Tale of Two Cities, “it 41 publicly listed u.s. was the best of times. it was the worst of maritime stocks, shipping times.” while the global economy tanked equities barely broke even and unemployment skyrocketed, stock in 2009, rising just 0.3 permarkets around the world soared. investors cent (yes, that’s less than who kept the faith and persevered through one percent). this marks the March lows were amply rewarded – the second consecutive especially if they were smart enough to year that these stocks have invest after the March lows (readers of this underperformed. Might as column were no doubt among the few who well put your money under economies of scale are important in this did). for the record, the dow was up 19 a mattress or – better yet – percent in 2009, the s&P 500 22 percent, business, and carnival enjoys superior into technology, which rose 63 percent on and the Nasdaq a whopping 44 percent – a operating margins because of its size. it the year, or basic materials, up 62 percent. stunning turnaround from 2008’s dismal should continue to do well this year. Carnival Looks Like a Winner performance, when markets dropped a royal caribbean (Nyse: rcl) is the combined 38 percent. there were some bright spots, however. other big player in the cruise industry. for shipping enthusiasts, alas, it was cruise companies were one of them. carits five brands – including royal caribnival corporation (Nyse: ccl), parent another year of disappointment. despite bean, celebrity and azamara – and 38 of Holland america line – featured on sharp increases in oil and commodity ships carried roughly 25 percent of the the cover of this edition of MarEx – saw prices (normally a good thing for comworld’s cruise passengers. Between them, a 30 percent increase in its stock price royal caribbean and carnival account panies that transport the stuff), shipping was among the stock market’s worst in 2009 and continued to pay an attracfor three-quarters of all cruise line traffic! TTS_MaritimeExec_86x51 6:17 Page it1cut costs and lowered tivepm dividend. performing sectors. as measured27/4/09 by the rcl rose an impressive 84 percent in prices to keep its 2009, due in part to the launch of the ships operating world’s largest cruise ship, the Oasis of at close to full the Seas. the media splash created by this TTS Marine Inc. capacity. with 11 one vessel generated enormous passenger brands – including demand and enabled royal caribbean carnival, Princess, to charge a premium for tickets. it, too, For all your equipment servicing requirements on: HamworthyKSE | costa, cunard and should continue to do well as the economy Hydralift | Kocks | Kvaerner Ships Equipment | LMG | TTS Holland america – improves and consumers feel better about and 91 ships, it is themselves and their pocketbooks. cruisby far the biggest ing remains one of the great bargains in fish in the sea, the travel industry, and there is a huge carrying almost untapped reserve of potential customers Call +1 954-493-6405 Or visit half of all global who have never taken a cruise. cruise passengers. another winner in 2009 was a com-

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Shipping stocks underperformed the market in 2009. Will 2010 be any different? pany mentioned in these TOP PERFORMERS IN 2009 pages before – Aegean Navios Maritime (NM) + 92% Marine Petroleum (NYSE: Royal Caribbean Cruises (RCL) + 84% ANW), whose stock gained Aegean Marine Petroleum (ANW) + 62% 62 percent last year and Genco Shipping & Trading (GNK) + 51% continued climbing in the Hornbeck Offshore (HOS) + 43% new year. Aegean is an Athens-based bunkering Carnival Corporation (CCL) + 30% company, selling marine fuel Claymore/Delta Global Shipping ETF (SEA) + 25% and lubricants from its fleet Sources: Wall Street Journal, Barron’s of double-hull vessels located in most of the world’s major ports, including Singapore, Rotterpercent on the year and continued to rise dam, Gibraltar and Piraeus. Like the ship in 2010. They are surprising when you chandlers of old, Aegean takes its services consider that the major oil companies directly to customers, enabling them to slashed their exploration and producrefuel while at sea or anchored offshore. tion (E&P) spending by 15 percent It is the biggest in the business and last year. Yet the debate over Peak Oil continues to acquire small mom-and-pop continues, and companies are finding it operations at an impressive rate, thereby increasingly difficult (and expensive) to spurring growth in sales and earnings. replace depleted reserves. For this reason Unlike other shipping companies, which and others, the workboat companies constantly worry over the price of bunker prospered in 2009 as the search for new fuel, Aegean profits no matter what the reserves – primarily in the inhospitable price. It is an anomaly, albeit an attracoffshore and deepwater regions of the tive one, in the maritime industry, and world – continued, and they look poised deserves a close look. for additional gains in 2010. According to Barclay Capital’s global E&P survey, the Workboat Stocks Did Well Too most authoritative and comprehensive of We talked about these companies in the its kind, spending in 2010 is projected to last issue of MarEx, and they continue to reach $439 billion, an 11 percent increase outperform. Often overlooked, they are from last year. This bodes well for the not even included – with the exceptions workboat companies, whose earnings are of Tidewater (NYSE: TDW) and Seacor almost entirely dependent on the level of (NYSE: CKH) – in most maritime or spending by Big Oil. stock indexes. Instead they are lumped under the Oil Services category and play The Rest of the Field second fiddle to the big international The traditional mainstays of the maridrillers like Transocean (NYSE: RIG) time world, tankers and bulkers, fared and Nabors (NYSE: NBR). Yet they poorly. As measured by the Capital Link had a good year, in line with the marindexes, the stocks of these companies on ket averages, with Hornbeck Offshore average fell six percent and four percent, (NYSE: HOS) and Bourbon (GBB:FP) respectively. The world’s biggest tanker leading the way. Hornbeck, because of its company, Frontline (NYSE: FRO), fell 11 focus on the Gulf of Mexico deepwater percent; and the poster child for the drymarket, where activity and rates remain bulk sector, DryShips (Nasdaq: DRYS), robust, rose 43 percent on the year, while declined 45 percent on top of its 86 Bourbon – the world’s number two player percent collapse in 2008 and now trades behind Tidewater and a dominant force at around 6. Can you believe that this in the lucrative West African market – stock once sold for 130 and was seriously gained 39 percent. considering a three-for-one split? DryShips exemplifies, more than any other These results are not surprising when you consider that oil prices rose 78 company, the highly cyclical nature of the

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Lessons Learned

To make money in shipping in 2009 you had to look outside the traditional tanker and drybulk sectors or be an extremely good stockpicker. Otherwise, you were better off sitting on your riches. The sectors that did do well, namely cruise lines and workboat companies, should continue to prosper in the year ahead as

the global economy mends and economic growth resumes. It is also hard to see how tanker and drybulk companies could suffer through another down year, given the steady rise in commodity prices and recent signs of reviving world trade. What is clear, based on the experience of the last two years, is that maritime stocks in a collapsing market – such as we had in 2008 – tend to fall faster and harder than almost everything else, and in a rising market – such as we had last year – they seem to recover more slowly. Only in a raging bull market, such as we had from 2002-2007, do they dramatically outperform. One way to stay invested in shipping and avoid the pitfalls – and headaches –of picking individual stocks is through an exchange-traded fund, or ETF. ETFs have grown enormously in popularity of late and resemble mutual funds except they are even more focused, investing in specific industries or commodities or even countries. Want to invest in Turkey? There’s an ETF for you. And yes, there is also one for shipping. It’s called the Clay-



maritime business and the risks attendant upon investing therein. Even a wellmanaged and conservative company like Tsakos Energy Navigation (NYSE: TNP) fell 20 percent in 2009 despite making money and paying an attractive dividend. Gives you pause for thought. But it was not all darkness and gloom in the shipping world. Among the drybulk companies, Navios Maritime (NYSE: NM) managed an impressive 92 percent year-over-year gain and Genco Shipping & Trading ((NYSE: GNK) was up 51 percent. On the tanker side, you had Teekay (NYSE: TK), which recorded an 18 percent gain.

more/Delta Global Shipping Index, and it trades under the convenient symbol of SEA. Designed to track the Delta Global Shipping Index, it launched in 2008 and had a 25 percent gain in 2009. As the name suggests, it is globally oriented and not limited to those companies that trade on U.S. exchanges, thereby giving investors access to shipping equities that trade on European and Middle Eastern bourses. SEA is also small cap-oriented, like the industry itself, providing the potential for outsize gains – or losses. If you’re thinking of going back in the water – on the theory that a rising tide lifts all boats – this might be a good way to do it. MarEx

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.

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Holland America Line A History of Distinction, Innovation and Growth By Tony Munoz

ngraved on a tablet within the pedestal on the Statue of Liberty are the famous words of Emma Lazarus’s poem: “‘Keep ancient lands, your storied pomp!’ cries she with silent lips. ‘Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!’” Between 1880 and 1920 more than 20 million immigrants entered the United States, making up nearly 15 percent of the country’s total population. By 1900, New York City had more Italians than any city in Italy except Rome, more Poles than any city in Poland except Warsaw, as many Irish as Dublin and more Jews than any other city in the world. As European immigrants flooded into America, Holland America Line with its yellow and white funnels ringed with green stripes would transport more than 850,000 of them to the New World. Founded in 1873 as the Nederlandsch-Amerikaansche Stoomvaart-Maatschappij N.V. (“NASM”), it quickly became known as Holland America Line (HAL) due to its services between Rotterdam and the Americas. Passenger transportation and cargo were its primary sources of revenue, though during the summer of 1895 the steamer Rotterdam II initiated a short round-trip vacation cruise from Rotterdam to Copenhagen through the Kieler Canal, a foretaste of the modern Holland America Line. In 1910, HAL of-

MarEx-36-HA-CS-Int-012910.indd 22

fered its second cruise, this one from New York to the Holy Land, and other services began from Baltimore and South America. From the inception of the steamship line and throughout its storied history, extending to today’s highly competitive cruise market, HAL has well earned the reputation of being the “spotless fleet” due to the impeccable maintenance and housekeeping on all its ships. HAL’s ambiance has always been Old World grace and luxury combined with superior service, first-class interior appointments and world-class artwork throughout the public areas and staterooms of each ship.

What’s in a Name?

The vessels of Holland America also reflect the firm’s history through their names. In the beginning, HAL’s ships carried both passengers and cargo. The suffix indicated the ship’s primary function - “dam” for passenger service, “dijk” for cargo. The majority of the earliest ships were primarily passenger vessels and

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HOLLAND AMERICA LINE 2,104-guest ms Eurodam.




carried the “dam” suffix. When business began to shift toward a greater focus on cargo - beginning with the company’s 23rd ship - the suffix “dijk” became common. The first vessel with the “Zuider” name, for example, was launched in 1912 and christened Zuiderdijk to indicate its primary service of transporting cargo. From the earliest days, the ships often were named after various towns and villages in Holland. In the same spirit, the four ships in the Vista-class series are named after the points on the compass (Noordam, Oosterdam, Westerdam and Zuiderdam). And the latest Holland America ship ms Nieuw Amsterdam will be the fourth ship in the company’s history to bear this name.

Surviving Hard Times

The first great wave of immigration ended with the advent of World War I, during which HAL would lose six ships and 13 employees. Its newest ship, Statendam II, sitting in a Belfast building dock, was taken by the British government as a troop carrier and

MarEx-36-HA-CS-Int-012910.indd 23

renamed Justicia. It was torpedoed and sunk in 1918. In 1921 the company started rebuilding its fleet and commissioned four passenger-cargo ships, Edam IV, Leerdam II, Maasdam III and Spaarndam II, which were deployed in the Cuban service. After the war came the second great wave of immigrants, who soon became scapegoats for the hard times in America. Responding to public outcries, the U.S. government initiated a tight national origins program in 1921, limiting annual immigration to three percent of a country’s U.S. population as determined by the 1910 census, with a cap of 350,000. The Johnson-Reed Immigration Act of 1924, or National Origins Act, further limited immigration to two percent of a country’s U.S. population and reduced the cap to 150,000 per year. The new U.S. restrictions profoundly impacted the passenger business during the 1920s. However, Prohibition tipped the balance in favor of foreign companies over their “dry” U.S. counterparts, and the trans-Atlantic and cruise businesses remained profitable.

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In 2006, Holland America Line was certified to ISO 14001, the international standard for environmental management systems. In 2008, HAL was awarded the Virgin Holidays Responsible Tourism Award…Today, HAL is one of the greenest cruise lines on the high seas.


The Crash of 1929 ushered in the Great Depression and brought hard times to all countries and industries in the decade that followed. HAL battened down the hatches and sold 12 ships for scrap, closed or consolidated its offices throughout the world and reduced its staff by 35 percent, with the remaining employees taking a 10 percent cut in wages. Despite all the hardship, the company never stopped looking into the future and in 1938 took possession of its new flagship, the elegant Nieuw Amsterdam II. When World War II began the following year HAL had 22 ships, and Nieuw Amsterdam II found a new role transporting nearly 400,000 troops a distance of more than half a million miles. By the end of the war, the company had only ten ships left in its fleet and had lost approximately 265 employees.

“It’s Good to Be on a Well-Run Ship”

It was slow going in the aftermath of the war, a time for rebuilding and refocusing. In 1951 HAL began offering tourist-class passages on its two new “Economy Twins,” Ryndam II and Maasdam III, which gave ticketed passengers run of the ship except for the first-class deck. Throughout the 1950s, the company’s new advertising slogan was “It’s Good to Be on a WellRun Ship.” The company started its Grand World Voyage from

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Hoboken Pier in New Jersey, and in 1959 its new flagship, Rotterdam V, entered service. During the 1960s, as traditional freighters moved from breakbulk to containerization, HAL sold its World War II–era tonnage and with several others organized Atlantic Container Line. During this period, the company generated cruise-only revenues from Nieuw Amsterdam II, Rotterdam V and Statendam IV, and began employing hotel management procedures on those ships. The company also adopted the multiselection Lido style of dining. But times – and tastes – were changing, and the public became enamored with air travel, which delivered them to Europe and other destinations in hours instead of weeks. The glamour of the cruise industry faded as jetting around the globe became the desired mode of travel. By 1969 HAL had only 13 trans-Atlantic sailings, and the company renamed its passenger business Holland America Cruises. In 1971, the company replaced its original house flag of “NASM” on the green-and-white-striped Rotterdam city flag with an orange flag inset with three swaths of aqua, white and aqua. In the same year, the “Darling of the Dutch” – the 1938-built Nieuw Amsterdam II – closed out the company’s 98 years of trans-Atlantic services and was redeployed to Port Everglades in Fort Lauderdale for 10-day-plus cruises to the West Indies. The era of grand steamship lines sailing the Atlantic came to a less than spectacular end.

During the 1970s the company began new services as it recreated its identity with a distinctly Old World flavor to differentiate itself from the competition. First, it reflagged its ships to Dutch registry, ensured its deck crews were Dutch and painted its passenger ship hulls their modern midnight blue. HAL sold its cargo transport division and the last of its cargo ships. Soon it began hiring skilled Indonesians to work in the deck and engineering departments and, eventually, Filipinos in the kitchens, bars and lounges. The acquisition of Westours, an Alaska tour operator, signaled an important new direction in Holland America’s evolution. The head of HAL at the time was Nico van der Vorm, who had watched the company’s fortunes steadily decline during the 1960s and 1970s. In 1978 he moved the firm’s headquarters from Rotterdam to Stamford, Connecticut, to get closer to the company’s financial and customer base, and he introduced a new company flag – orange for the Dutch Royal color together with HAL’s blue half-moon logo in the center. Westours, based in Seattle, had become extremely profitable under the leadership of its then-president, A. Kirk Lanterman, as passengers filled its ships for cruises to the wilderness frontier of Alaska. Sensing an opportunity, van der Vorm asked Lanterman to relocate to Stamford to manage the company’s entire operations.

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ms Oosterdam visits the Hubbard Glacier.

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Signature of Excellence® – A Commitment to Premium Cruising

Although Lanterman knew he could restore HAL’s profitability, he told van der Vorm that the company’s headquarters needed to move west. In the fall of 1983, HAL relocated to Seattle and Lanterman was named President of the combined cruise and tour company. Mr. van der Vorm remained chairman of the company as Noordam II, the sister ship to Nieuw Amsterdam III, joined Rotterdam V on the increasingly profitable Alaska summer cruise circuit, and the reintroduced World Cruise program became a big hit with customers. HAL’s expanded operations and increased success was attracting notice and, in January 1989, the world’s biggest cruise operator, Carnival Corporation & plc, announced that it had completed the acquisition of Holland America-Westours Inc. One of Carnival’s first moves was to appoint A. Kirk Lanterman as the company’s president and CEO. Newly reinvigorated and with access to Carnival’s supply of capital, HAL almost immediately added a fourth luxury liner to the Alaska summer trade and announced a newbuilding program to construct four more vessels with Italian builder Fincantieri. In 1993 the new Statendam V entered service and, for the first time since dropping it more than 20 years earlier, HAL reintroduced service to Europe. By 1996 the company was operating eight ships and had expanded to include Caribbean, Canadian and New England cruises. Lanterman was named chairman and CEO the next year and, by the end of the decade, HAL purchased a 2,400-acre private island in the Bahamas called Little San Salvador, now named Half Moon Cay. The company also announced plans to build two (later expanded to four) Vista-class ships to usher in the new millennium.

See the Possibilities

As the company entered the 21st century, the “spotless fleet” of 19th-century fame had emerged from two world wars and the financial rollercoaster of the 20th century with a fleet of modern ships reminiscent of the golden era of trans-Atlantic cruising. The company embarked on an aggressive vessel-building program and officially changed its name to Holland America Line, Inc. and, in 2003, announced its $225 million Signature of Excellence initiative to enhance its five-star ships. Today, sailing on a Holland America ship is like blending modern technologies and lifestyles with the elegant amenities of a bygone era when the rich and famous socialized on the first-class deck on a leisurely cross-Atlantic voyage. The Signature of Excellence enhancement program encompasses every aspect of the guest experience. Highlights include luxuriously appointed staterooms, five-star dining, award-winning service, extensive enrichment programs and activities and compelling worldwide itineraries. The initiative continues to expand, and to-date enhancements have topped $525 million. Delivery of the new Vista-class vessels began in 2003 with the 81,769-ton, 1,848-guest ms Zuiderdam, which was soon joined by her sister ship, ms Oosterdam, christened by Her Royal Highness Princess Margriet of the Netherlands, and then ms Westerdam. In 2003 Stein Kruse was named president and chief operating officer and in December 2004, president and chief executive officer. In January 2006, the fourth ship to be named ms Noordam – and the fourth Vista-class vessel – was delivered by Fincantieri

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Hydrotherapy pool, ms Eurodam.


Holland America Line’s award-winning Half Moon Cay.

Noordam Atrium with Waterford Crystal piece.



ms Noordam passing through Venice.

shipyard. That same year in June, Noordam rescued 22 refugees in the waters between Turkey and Greece. That operation earned the crew recognition from the United Nations, U.S. Coast Guard, U.S. Navy, and several international refugee organizations.

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As the popularity of cruising soared, so did environmental concerns. Ship emissions, in particular, began grabbing headlines around the world, and HAL was quick to respond. In 2006, Holland America Line was certified to ISO 14001, the international standard for environmental management systems. In 2008, HAL was awarded the Virgin Holidays Responsible Tourism Award for Best Cruise or Ferry Operator in recognition of their outstanding efforts in one of the fastest growing sectors of the travel industry. HAL was also among the first to retrofit ships – Westerdam and Oosterdam – to use shore power at the Port of Seattle. In April 2007, Zaandam sailed from Vancouver featuring a new emissionsreduction technology, and the company – in cooperation with several U.S. and Canadian regulatory agencies – deployed a technology to demonstrate the feasibility of using seawater to scrub engine emissions on seagoing ships. Today, HAL is one of the greenest cruise lines on the high seas, and it’s a distinction that very much

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pleases its president and CEO, Stein Kruse (see interview). With its Dutch roots still a major part of its DNA, HAL opened a new Rotterdam office in 2007 near its historical headquarters on Wilhelmina Pier. The new facility manages the hiring of seagoing personnel, purchasing, and European sales and marketing. In 2008, Her Majesty Queen Beatrix of the Netherlands christened the 2,104-guest, Signature-class ms Eurodam in front of the original headquarters. In 2010, Holland America Line will mark the 137th anniversary of its founding and has now carried more than 10 million guests on its ships. As HAL moves towards its second centennial, it will take possession of its second Signature-class ship, ms Nieuw Amsterdam, in late June 2010. It is the fourth ship to bear the historic name, and its interior design and art collection will reflect the glamour and history of New York City. In today’s harried world, Holland America’s gracious whitegloved stewards will still escort you to your stateroom. Welkom aan boord! MarEx

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Executive Interview

President & CEO, Holland America Line

By Tony Munoz

Since taking the reins of one of the world’s premier cruise lines over five years ago, Stein Kruse has successfully managed Holland America’s operations through both good times and bad. Follow along as we hear his insightful views on a wide range of topics impacting the industry. MarEx: Holland America’s history stretches over 137 years. Please give our readers a brief history of the company. Kruse: Holland America was founded in 1873 in Rotterdam. Today, we are part of the large, publicly traded Carnival Corporation & plc. However, our roots remain firmly tied to the Netherlands, and the company recently opened a new European headquarters in Rotterdam that will be the center for operations for recruitment, sales and procurement. All the company’s 14, soon to be 15, vessels fly the Dutch flag and have Rotterdam on their sterns to signify their homeport. During our 137 years in continuous operation, the company has survived two World Wars, the Great Depression and other global economic crises as well as the changes that came with the dawning

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of the jet age in the 1960s and 1970s. While much has changed throughout our long history, the company has always remained close to the Netherlands and to the Dutch monarchy. In fact, the current queen’s grandmother, mother and sister have been godmothers to some of our ships. The queen herself is godmother to the last ship we launched, our Signature-class ms Eurodam. Our current marketing strategy is to leverage our premium product and feature our Dutch heritage in our onboard experience, which is embodied in our Dutch officers, artwork and architecture. MarEx: As the modern cruise business took hold during the 1960s and 1970s, HAL was owned by a Dutch company. When did Carnival Corporation & plc get involved and how did that transition take place? Kruse: Years ago, when HAL moved its headquarters from Rot-

2/1/10 6:37:52 AM

STEINKRUSE I was hired to be the head of fleet operations and to oversee the newbuild program …It was my mandate to ensure the legacy and tradition of the company were maintained and to install more process-oriented management procedures. Kruse: A. Kirk Lanterman was the CEO when I joined the company in 1999. HAL had been under Carnival’s umbrella for about 10 years and there had been an aggressive shipbuilding program in place. I was hired to be the head of fleet operations and to oversee the newbuild program and it was a very interesting time as we were in the process of taking delivery of the R-class series of ships, ms Rotterdam, ms Amsterdam, ms Zaandam and ms Volendam. We were also in negotiations for a contract to build what would become our Vista-class series of ships. It was my mandate to ensure the legacy and tradition of the company were maintained and to install more process-oriented management procedures. MarEx: Tell us more about yourself. Are you a mariner? Kruse: I’m Norwegian and grew up in Norway. After I completed my compulsory military service in the Norwegian Navy, I came to the U.S. to go to university. When I was about to graduate I had no firm plans, and was not sure if I would return to Norway or seek opportunities in the United States. About this time a venerable old Norwegian passenger shipping company named Norwegian America Line had just been acquired by Leif Hoegh Company, a large Norwegian commercial shipping company. My father mentioned he knew someone at Leif Hoegh and suggested that perhaps I could get an interview. Well, I did get the interview but didn’t hear back for quite a while, so I worked on finishing up my Bachelor of Science degree at Purdue Univer-


terdam to Stamford, Connecticut, the company was owned by a prominent Dutch family named van der Vorm. At the time of the relocation, HAL’s fortunes and operations were shrinking, and management began looking for new opportunities. One was found in a company that had chartered a few vessels for cruises to Alaska. Charles “Chuck” West was a WWII pilot who returned home to Seattle and started a travel company he named after himself - Westours. Alaska was a territory of the U.S. at the time, and Westours carved out a niche by offering tours to the last great American frontier. HAL foresaw the future of Alaskan cruises, bought Westours and made its executive vice president, A. Kirk Lanterman, President. A few years later, Carnival Corporation, which was becoming a force in the industry, went public and became Carnival Corporation & plc. With various brands, Ted Arison, Chairman, and his son, Micky Arison, who was in charge of corporate development, began looking for new opportunities within the cruise industry. Holland America Westours fit its business model and became its first significant acquisition in 1989. Almost immediately, Carnival began transforming HAL from a small operator of four ships and embarked on an aggressive building program, starting with our four S-class ships, ms Statendam, ms Maasdam, ms Ryndam and ms Veendam. MarEx: When did you join the company and what was your original mandate?



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…he was offering me an opporsity. One day, shortly before graduback to my Japanese bosses with our ation, I received a phone call from a ideas and proposals. About five months tunity to enter the company at Harvard Business School-educated later the two companies we headed up a senior level with the possibilNorwegian working in New York merged and became Radisson Seven ity of succeeding him. I felt that City at Leif Hoegh’s Human ReSeas, now Regent Seven Seas. the stars had finally aligned and I sources department, and I was hired By creating the merger, I essentially as the first (and only) management engineered myself out of a job, but the joined the company in 1999, betrainee at their new subsidiary Normanagement at K-Line had gained an came President and Chief Operat- appreciation of my efforts and sent wegian America Line. ing Officer in 2003 and President Except for three years as CFO me to Harvard Business School to go for K-Line America, I have never rethrough the Advanced Management and CEO in 2004. ally deviated from being in the cruise Program. From there I headed up the industry. I have worked all over the world and on ships as an offinance operations at K-Line North America for three years. Durficer. I speak several languages and have been trained in operations ing that time, I received a couple of calls from A. Kirk Lanterman and hotel management. I moved around in the cruise industry for asking if I’d like to work for him and HAL. He finally intrigued a while and ended up being hired by K-Line, the Japanese cargo me enough to meet with him, and I realized he was offering me operator, which had an investment in a small cruise line that was an opportunity to enter the company at a senior level with the posstruggling, Seven Seas Cruise Line. sibility of succeeding him. I felt that the stars had finally aligned I feel I did a pretty good job, but there was not a lot of opportunity and I joined the company in 1999, became President and Chief for growing the business unless we acquired more ships, built ships Operating Officer in 2003 and President and CEO in 2004. I’m or merged the company. A business associate and friend named married to Linda - we’ve been together 25 years - and we have two Mark Conroy, who was President at that time of a company called wonderful children, Victoria (16) and Alexander (14). MarEx: The global recession has had an impact on every aspect of Diamond Cruise, was in basically the same situation. He and I were the transportation industry. Consumers are demanding much more at a meeting in New York, and we stopped in a bar to commiserate for their vacation dollar. What are the cruise lines doing to keep their but ended up sketching out some ideas on a napkin about what could ships full and make cruising a better option? be done to improve both our businesses and revenues. He went back Kruse: As I said, I have been in the cruise industry for quite a while to his principals, the Carlson Companies in Minnesota, and I went now, and what is remarkable is that our industry is one-hundred percent dependent on the discretionary dollar - people don’t need a cruise - but we have been very resilient during all the recessions I’ve been through. HAL creates and delivers a value proposition that is unparalleled. Moreover, during the almost 30-year period that I have been in the industry, the quality of the ships, the cruise product, the service delivery, our accommodations, food, enterCost-effective access to high-speed data services. tainment and destinations are so much improved and truly worldn Simultaneous voice and IP data up to 432kps class in every way. n Global coverage There was a lot of swagger thirty years ago, when we were a n Unrivalled reliability young and very entrepreneurial industry. But we have continued n Easy IP network integration to deliver and improve on the value proposition while building a n Highly cost-effective product that just keeps getting better and better. The offerings are n Completely secure global, from overnight cruises to around the world in 114 days; and there is a product out there for everyone - whether you’re single, a couple, traveling with kids, multi-generational or whatever. So, even in a down economy, we are able to deliver a quality product for the right price. Unfortunately, on the delivery side we are hurting a bit as our pricing came down, but the consumer is truly benefiting. As an industry, we know our satisfaction ratings are higher than any other travel product and, at HAL, we track every customer response because we want to ensure we are Delta Wave is a mobile satellite services provider. delivering a consistently excellent product. Our mission is simple Products and Services include: -“Through excellence, we deliver once-in-a-lifetime experiences, ® ® Inmarsat , Iridium , Asset Tracking, every time.” Systems Integration MarEx: You mentioned that when Carnival took over HAL it had four Delta Wave CommuniCations, inC. vessels. How many are in the fleet today, and what is the name of the “When Only the Best Will Do” vessel being built at Fincantieri? Kruse: HAL has 14 ships today and the 15th vessel is being built at Call: (985) 384-4100 | Toll-Free: (800) 706-2515 Fincantieri Shipyard in Marghera, just outside Venice. It will be chrisemail: | tened ms Nieuw Amsterdam, with much Dutch history surrounding

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this name. The Dutch East India Company in the 1500s and 1600s had a fleet of ships larger than the combined size of the Spanish and British navies. This company was enormous, wealthy and expansionary. It sold commercial opportunities, and a British sea captain named Henry Hudson sailed one of its ships to the New World to found what is now New York, the city he named Nieuw Amsterdam. HAL built a well-known and much loved ship called Nieuw Amsterdam II in 1938 (referred to as “The Darling of the Dutch”). Shortly after she was delivered, World War II broke out. After the U.S. got into the war, Nieuw Amsterdam was used to transport American GIs to Europe because she was big and fast. In fact, she was the largest carrier of troops during the war. The name Nieuw Amsterdam has tremendous importance and symbolism to the city of New York, which is one of our homeports. There will be a New York theme on the ship, which is close to 90,000 tons and can carry 2,106 guests. We will take delivery of this remarkably beautiful ship late June, with her inaugural sailing July 4th, 2010. She is the sister ship to Eurodam in our new Signature-class series. MarEx: Recently the industry has dealt with passenger safety issues and has received some negative press. U.S. Senator John Kerry has authored the Cruise Vessel Security and Safety Act of 2009, which will require new reporting procedures for alleged crimes and video surveillance systems to document crimes. What has HAL done to provide a higher level of safety and control on its ships? Kruse: Honestly, there are few modes of travel that are safer than being on a cruise ship. After 9/11, the U.S. Coast Guard singled us out for our ability to respond to Marine Security (MARSEC) Levels. There has not been one significant incident involving a cruise ship when it comes to maritime security, which is a sign of our maturity and cognizance of safety and security on our ships. Considering the number of people coming aboard our industry’s ships, there really have been very few incidents and our safety record speaks for itself. One of the great perils at sea is fire, and the ones we have had on cruise ships have been pretty benign and injuries have been held to a minimum. The Kerry bill is not law yet, but as it passes we will support it as an industry. Parts of this bill involve reporting requirements that we are already doing on a voluntary basis to the USCG and FBI. We have publically supported the Kerry bill and we will continue to be aggressive and proactive about customer security and safety. Overall, the industry has a safety record that we can be very proud of, and we’ll hold it up against anyone else’s. And I must add that our security people are highly skilled and highly trained. HAL’s head of security, for example, is the FBI’s former special agent in charge for the Pacific Northwest. MarEx: CLIA, the cruise industry lobbying group, will reportedly review and offer its comments on the EU’s recently published public health standards, which are similar to those issued by the U.S. and Canada. Are these regulations necessary? What has HAL done about health standards on its ships? Kruse: The U.S. Public Health Service and the Centers for Disease Control have been active in monitoring cruise ship health and sanitation for a very long time. The standards for cruise ships are higher than for any land-based public facility. There is no question it is good to have high standards and we have never had a problem meeting those standards. We welcome these organizations’ interest

1/29/10 12:06:42 PM



We cannot put a cost on health or life. If emissions reductions improve health and life, then I am all for it. I believe we owe it to our kids and future generations. There is nothing more beautiful than taking a ship through the Alaskan glaciers, and I would like to ensure we can do it again next year and thereafter.



in our operations and acknowledge it’s a collaborative process. The Canadian standards are similar to the U.S.’s. The cruise industry is working closely with the European Union to try and get consistency between their standards and those in North America as it is very difficult to operate ships to conflicting standards. There are significant issues that remain to be resolved with the EU. At the end of the process, there is no doubt that the standards in both the European Union and North America will be very rigorous. I only wish every industry were held to the same high standard as we are. MarEx: The U.S. has strict environmental standards for all commercial vessels plying its waters. However, with multiple jurisdictions in multiple regions of the U.S., how are your deck officers and engineers dealing with these various and different standards? Kruse: No question U.S. environmental standards are complex, multifaceted and multi-jurisdictional. Our compliance group at headquarters stays on top of all the rules and regulations and synthesizes them down to a common set of rules that we promulgate as Operational Directives. These Directives are then incorporated into our marine regulations (MRs), which are electronic and searchable. The Senior Vice President of Fleet Operations sends the directives to the fleet. While the Masters’ regulatory books keep getting larger, it’s the job of professional mariners and officers to be in compliance with the MRs and the Master’s standing orders. Is being in compliance with overlapping jurisdictions easy? Certainly not, but we can and do follow the letter of the law on all our ships. I only hope in the future that MRs and the reporting requirements can be uniform. The Alaskan environmental standards are some of the strictest in the U.S. We comply with them and would be willing to do so throughout the country if the federal government established them as a uniform standard. The problem now is that there is no uniformity, which makes it very difficult for our people. MarEx: Ship emissions are a global concern, and the IMO and other governmental organizations are reviewing compliance guidelines. The North American Emissions Control Area is moving 12 to 200 nautical miles offshore. What is the impact on the cruise industry of this sea change in emissions regulations? Kruse: Currently there is not a lot of technology available that will allow operators to take emissions down to some of the most aggressive levels, particularly sulfur. In the immediate future, the best way to do it is by blending the fuel to a given level. It will be the easiest way to meet these standards for now. We cannot put a cost on health or life. If emissions reductions improve health and life, then I am all for it. I believe we owe it to our kids and future generations. There is nothing more beautiful than taking a ship through the Alaskan glaciers, and I would like to ensure we can do it again next year and thereafter. The issues surrounding environmental concerns need to be balanced and rational. Climate concerns are an opportunity for businesses to get involved and meet the challenges. The world is and will be dependent on fossil fuels for the foreseeable future. Therefore, regulators and bureaucrats need to have an open dialogue with businesses that are directly impacted by the laws being proposed. The Europeans have had fuel cells for at least 30 years along

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with other technologies to deal with these problems. But there have to be incentives to move forward. Fuel cells and the science of hydrogen can be turned into real business opportunities. Greenhouse gases are a serious issue facing humanity today, and capturing carbon can be a real answer to this overwhelming problem. In Rotterdam, there are some of the largest greenhouse facilities in the world. Currently they are capturing carbon dioxide and pumping it into the greenhouses, and plants are consuming the CO2. And greenhouse businesses are booming there. Right now in the North Sea, the natural gas and oil cavities are being filled with carbon dioxide and sealed. Now that is innovative. MarEx: The U.S. Coast Guard’s Ballast Water Rule will establish two treatment thresholds: Phase 1 by 2014 and Phase II by 2019. What is the ultimate impact of these regulatory standards on the cruise industry? Kruse: I think we can deal with it. The technology needs to be there for us to deal with water treatment. Otherwise, deep-sea ballasting is an option and it’s doable, but there are some inherent challenges. Certainly no one wants to compromise the safety of the crews and passengers. All of the environmental regulations coming down the pike, whether for wastewater treatment, garbage, emissions or ballast water, are reasonable. There is no opposition from anybody within our industry. Let’s just make sure we understand the science and technology and work on solutions together. MarEx: Has the cruise industry and its regulatory representatives been consulted about the time frames and impacts of environmental regulations? Kruse: Not to my knowledge, but when we are asked to participate, as we were ten years ago when Senator Frank Murkowski introduced one of the most stringent environmental acts in the world, our industry worked well with Congress. MarEx: Finally, regarding consumer confidence and discretionary spending, what is HAL’s plan to ensure the customer keeps coming back to enjoy cruising on some of the most modern and luxurious vessels in the world? Kruse: During the current recession, we have continually maintained the high quality of our product and provided outstanding accommodations, dining, entertainment, destinations and service. Additionally, we have continued to invest in enhancing our ships through our Signature of Excellence program, which now totals over $525 million and delivers the latest innovations and amenities to our guests. Moreover, our cruises offer great value for our customers. We continue to market our brand and invest in our ships, but we operate prudently. We try to do more with less and, while we have not laid personnel off, we have had a hiring freeze. We have leveraged our assets to become more productive. It is amazing what we’ve accomplished during these last twelve months. I believe we’ll emerge stronger, open new markets and broaden our international reach. Our Rotterdam office is doing well, as is our sourcing in the U.K. and Australia. HAL has universal appeal that transcends borders. Our ships are elegant, tasteful and timeless. Holland America has a long, rich history and guests keep coming back because the quality is there for all to see and experience. MarEx MarEx: Well said. Thank you.

1/29/10 12:06:43 PM

marex-rhc-deepsea_203x276mm.pdf 23-9-2009 15:07:25













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next era

Getting There Is Half the Fun:

By ryan Wahlstrom


How the Dream, Oasis and Epic Are Launching the next Era of an Industry



CRySTAL BLuE wATERS gENTLy LAp AgAINST ThE sandy shore in rhythmic timing to soft calypso music. A friendly ship waiter flashes a smile while delivering brightly colored drinks to passengers relaxing under beach umbrellas on a private Bahamas out island. The date? June 3, 1980, and you are sailing Norwegian Cruise Lines’ newly rechristened SS Norway, the world’s largest cruise ship, with 2,000 passengers. The “Ship Amongst Ships” is no longer with us, but still strongly in place is the spirit of responsibility among cruise industry leaders to build floating foundations for an industry’s future and the enjoyment of millions of consumers worldwide. In 1970, about half a million North Americans took sevenday cruises. By 1984, that figure had risen to 1.7 million with a 52,000-berth fleet. In 1984, cruise industry analysts were expressing concern about overcapacity. After all, three new ships were launching that year and three more were due for delivery the next. Too many new cruise ships, it was said, were contracted prior to the recession of 1981-1982. Nevertheless, by 1989, the number of cruisers had grown to three million.

1989 also ushered in a new holder of the world’s largest title, Royal Caribbean’s Sovereign of the Seas, at 2,852 passengers. Again, industry watchers expressed concerns: “The veritable armada of giant ships due to follow in the wake of Sovereign of the Seas could produce overcapacity in the industry and a shake-out sometime in the next few years…. the cruise industry has embarked on a shipbuilding binge.”1 “Of more concern to many analysts is that the optimism expressed by Mr. Arison and some competitors may open the industry to overcapacity.”2 Fast-forward approximately ten more years to 1996 and the Carnival Destiny became the largest passenger ship in the world. That record was short-lived, as in 1999 the first of five 3,840-passenger Voyager Class ships was launched. By 1999, well over seven million passengers worldwide took cruises. Another decade later, we find an industry that will carry an estimated 18.4 million passengers in 2010 and generate $26.8 billion in revenue. On the heels of the 3,650-passenger Carnival Dream and Royal Caribbean’s 5,400-passenger Oasis of the Seas, a total of 13 new ships (including the 4,200-guest Norwegian Epic) will be added to the fleet in 2010. In 2011 and 2012, another 13 cruise ships will be introduced.

“We Went Slower and Had Fun Along the Way” That simple response by Ted Arison to rising fuel costs in the 1970s led to the installation of casinos, Vegas- and Broadwaystyle entertainment, pools, running tracks, spas and a litany of onboard amenities. Saving fuel by going slower started a trend

Stephen Koepp, Wendy Cole and Don Winbush. “all The Fun Is Getting There.” Time Magazine, Jan 11, 1988. 2 “Pacesetter for Cruise Industry.” New York Times, July 25, 1987. 1

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that continues to transition the cruise ship from a means to arrive at a destination to a destination in and of itself. The successful shipbuilding formula has met every historical challenge of overcapacity with: » Continued economies of scale and improved onboard spending to compensate for flat ticket pricing (a seven-day summer Caribbean cruise aboard the SS Norway in 1980 could be had for as little as $630; amazingly, this compares to $631.95 for an inside cabin for seven days on the Carnival Dream with a May 1, 2010 departure date). » Further market segmentation, discovering new cruisers and generating a “buzz” in the marketplace.

economies of Scale Make It Affordable

Megaships like the Dream, Oasis and Epic can be more economical because they let cruise lines stretch fixed costs across a larger base of customers. In a recent Globe and Mail interview, Richard Fain, Chairman and Chief Executive Officer of Royal Caribbean Cruises Ltd., stated, “The Oasis will cost 40 percent less to operate per passenger than older ships.” They also incorporate technological innovations that reduce costs by saving energy. The Oasis, with a high-tech electric propulsion system powered by diesel generators, uses nearly 30 percent less fuel per passenger. Additional savings come from installation of solar panels, compact fluorescents and LED lighting. Interestingly, designers and engineers understood the height and width of a ship the size of the Oasis would require more energy to illuminate and air-condition. Their innovative solution was to “split the hull” with eight passenger decks rising on each side of an open-air courtyard. This allows natural light to filter in, and a tropical garden of 12,000 plants, trees and flowering greenery

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next era



ship might be “boring.” Active young cruisers and their families will be attracted to the idea of “floating cities” as some people find the experience new and exciting, but also safe and familiar. Mall of America is the most visited shopping destination in the world – attracting more than 40 million visitors annually. The mix of indoor theme park, underwater adventures, hotels and shopping mall is a successful combination of entertainment and consumerism. TerraMar Travel Inc. agent Jani Doctor says, “Megaships are geared to a particular subset of cruisers as they offer many choices of venues all hours of the day and night. This group will tend to be younger and more interested in ‘a variety of experiences’ rather than the idea of being ‘at sea.’” Because it is truly about market segmentation, the onboard experience versus the destination argument of cruise traditionalists is not relevant – but actually makes the case. “Each line


Mergers, Acquisitions, Divestitures & Auctions Are you ready to sell your business or are you ready to expand your business through a merger or acquisition? We presently have investors and buyers that are seriously interested in all types of marine and marine related companies worldwide.

Market Segmentation

The more pressure on filling capacity, the more innovative cruise marketing executives get. Megaships address head-on one of the traditional excuses given by non-cruisers – being enclosed on a

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act as a natural coolant. Megaships also create an excellent environment for increased onboard spending. According to Herbert Soanes, a cruise industry watcher for DVB Bank, “For all cruise lines, onboard spending has risen 25 percent over the past decade, while ticket prices have actually declined.” Today, approximately 25 percent of cruise line revenues are generated from onboard spending. The decades-old adage of “going slower and having fun along the way” provides opportunity to mine for increased onboard revenues. On the Oasis, for example, these can include Botox treatments, teeth-whitening, and dozens of shops (including a tattoo parlor), boutiques, cafés, casinos, bars and restaurants. The affordability and value of cruising compared to shoreside vacations have served the industry well, drawing in economyminded families and couples. The added capacity of the megaships does, however, add to pricing pressure during economically challenging times. While this can reduce short-term margins, lower prices also act as a catalyst to consumers as pricing specials provide incentives to get onboard. Moreover, the addition of the new megaships allows industry executives to spin off older ships to other overseas brands, generating additional revenues and further penetration of less-mature overseas markets. Globalization will be an industry watchword in the next decade. DVB’s Soanes notes, “The annual passenger growth rate in North America over the ten-year period from 2001 to 2011 is expected to be slower than that of Europe and the rest of the world.”

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Phone 251-626-0713 Cell 504-650-5000 Fax 251-447-0423 E-mail

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next era



has developed a ship portfolio,” says cruise industry consultant Rod McLeod of McLeod Applebaum & Partners. “It is analogous to golf clubs in a bag. Each bag consists of a driver, putter, irons and wedge, any of which can be taken out and used based on a particular need.” Cruisers who want exotic, quaint or remote ports of call seek out luxury lines such as Seabourn or Regent. Cruisers who want to relax and get away from the day-to-day pressures of being around too many people seek out more moderate-sized ships. A group on a family reunion wants an active day of onboard activities for each generation of family members. In the cruise business, there’s something for everyone.

enough Market “Buzz” to Float All Boats

The market talks to each other. The more people who have cruised, the more who will tell others, and the more who will want to cruise too. “The new ships are a shot of Red Bull,” says Rod McLeod, “It gets cruising back to front and center so people can think ‘maybe that would be fun.’” This helps chip away at the edges of the “hard core” resistors, those 55 percent of the core U.S. market who have never cruised.

The new megaships bring attention to cruising, creating interest and bookings of first-time cruisers on all ships. As large as the Dream, Oasis and Epic are, they still represent a very small segment of total industry capacity but hold a much larger share of “voice.” “The entertainment approaches the best of Vegas,” says Bob Utne, owner of EWA Travel, about the Oasis. Indeed, the Epic will feature performances by the Blue Man Group. The Las Vegas analogy also serves as an interesting comparison to cruise industry shipbuilding. All the cruise ships in the world filled to capacity

The Flagship Maritime Trade Fair in Northeast Asia


26-28 October 2010 Dalian World Expo Center, Dalian, Liaoning, PRC Shiptec China, the upgraded edition of Shiport China which had been serving the industry since 1998 till 2008, will carry on its obligation to present revolutionary innovations in areas such as shipbuilding, ship repairing, ship auxiliaries, port and logistics, marine services, marine technology and offshore engineering from 2010 on. The market that Shiptec China will serve includes Japan, Korea, Russia and two major shipbuilding bases of China in Around Bohai Sea Area and the Yangtze Delta where the shipyards hold most of the world’s shipbuilding orders.

Shiptec China’s Objectives in 2010: - 700+ exhibitors from all over the world - 30%+ international exhibitors - 15,000 of professional visitors - 30,000 square meters of gross exhibition area - 10 national pavilions Hosted by: China Association of the National Shipbuilding Industry China Shipowners’ Association The Chinese Society of Naval Architects & Marine Engineers Dalian Municipal People’s Government Organized by: Dalian Xinghai Exhibitions Co., Ltd.

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next era

all year long still amount to less than half the total number of visitors to Las Vegas – that single city in the desert.3 Las Vegas saw the openings of the Mirage in 1989 and Excalibur in 1990, followed by the Luxor and Treasure Island in 1993. The new hotels and casinos did not cannibalize each other’s business. Rather, each added to the creation of an even bigger overall Las Vegas statistics courtesy of Bob Potts, assistant Director, Center for Business and economic research, University of Nevada, Las Vegas. Cruise statistics from and the CLIa.



No doubt recent conditions have been challenging. Analysis of ticket pricing shows discounting has continued into early 2010. But positive signs are emerging. The Oasis continues to garner premium-pricing power and will likely continue to do so. Silversea President Amerigo Perraso was recently quoted in Travel Weekly as saying, “There are now three new luxury ships on sale and, if we can sell as we are, it shows there’s a big market and a

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destination. Each generated more buzz, which in turn spawned more new people traveling to Las Vegas. The number of rooms in Las Vegas has increased at a compound annual growth rate (CAGR) of four percent since 1990, while annual visitor volume has increased by 3.3 percent. If cruise passenger growth were to slow to a CAGR of four percent from 2011-2020, over 26 million passengers would be carried in 2020. To achieve that would require an additional 177,000 passenger berths (assuming today’s 7.1 day average cruise duration). That is three times the number of berths currently on order and would still fall 10 million passengers short of Las Vegas’ 2009 visitor numbers.

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next era



lot of confidence.” He said Silversea achieved more than 70 percent of its 2010 revenue plan by the end of 2009 and reported it could take up an option on another ship. Showing additional support for the future, Carnival announced in December the order of an additional Dream Class ship, scheduled for delivery in 2012, following the 2011 delivery of the Carnival Magic. Industry leaders have a responsibility to shareholders to navigate challenging economic environments and produce returns for investors, but they also serve as stewards for the industry’s future. Cruise industry analysts in each of the past three decades have questioned the timing and quantity of new shipbuilds. While some 80 cruise lines have fallen by the wayside since 1970, the number of cruisers has continued to grow annually for three decades by nearly double digits. Exposure continues to increase in less-mature overseas markets, and new niches continue to be tapped in North America. The Dream, Oasis and Epic represent not only potential return on investment for shareholders and unique cruise experiences for cruisers but also wisely calculated assets for the next decade of an industry. And for those involved in the process, getting there will be half the fun. MarEx


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ballast water treatment



ballast Off a Sinking Ship:

The Plot Thickens… By Joseph Keefe

Alfa Laval’s Pureballast 2500 serves aboard Stena DrillMAX ICE.

As individual states bicker over a myriad of different ballast water management protocols and the federal government inches forward in its quest for a national standard, the influx of invasive species continues. A unified global standard is possible before the end of 2010. Will it happen and – more importantly – if it does, will the balkanized U.S. approach to the problem end? two steps Forward, one back…

Midway through the first quarter of 2010, the pace has quickened noticeably in the national battle to control and eradicate invasive species and prevent still others from reaching U.S. waters. In the continued absence of an approved federal standard, as many as a dozen individual states have enacted or are actively contemplating their own statutes. Add to that mix the proposed federal standard announced by the U.S. Coast Guard in August 2009 and some industry observers are predicting a resolution of the issue before the end of the year. Good news, indeed, right? Not so fast… The absence of a federal ballast water treatment (BWT) standard has been a nightmare for more than a decade. Frustrated by inaction on the federal level, individual states have separately enacted their own standards. The collective result has been a hodgepodge of balkanized state rules that – often in close proximity to one another and sometimes other countries – have had little or no effect on the effort to stem the tide of invasive species.

shotgun solutions: killing commerce, not Fish

In some cases, local rules have discouraged vessels from calling in particular states because owners are unwilling to install expensive abatement equipment that might not be approved when the final BWT rules are eventually established. In Michigan, for example, where the local economy has been on life support for a decade, a local BWT statute did little to stop the ingress of invasive species from adjacent waters and accomplished nothing beyond hindering local commerce at a time when the Great Lakes state could

MarEx_36.indd 40

ill afford it. As MarEx went to press for this edition, environmentalists were pushing Wisconsin officials to get tougher on vessel ballast water in their state. Wisconsin already calls for controls on oceangoing vessels that are 100 times more restrictive than the International Maritime Organization’s (IMO) standards, which the Coast Guard hopes to mimic – at least in phase one of its proposed solution. If the technology isn’t available to meet that, the vessels must abide by IMO limits. That’s just not strict enough, says the National Wildlife Federation. Yet the technology to test equipment and ballast water to that lofty standard does not yet exist. To say that the competing standards are confusing and wideranging would not give justice to the actual situation in play right now. And, according to the EPA, Ballast Water treatment standards with compliance schedules are incorporated by at least 8 states (California, Illinois, Indiana, Ohio, Michigan, Minnesota, New York, Pennsylvania). Furthermore, standards range from IMO equivalent (IL, IA, MN) to California and Pennsylvania (zero detectable organisms above 50 microns), and include the “Michigan Approach” (must use select treatment approaches; e.g., hypochlorite). Some states require exchange without deviation allowances (e.g. New York). Some states are requiring Atlantic Nearshore Exchange and Flushing (e.g., Massachusetts and New York). Connecticut requires use of a treatment system if installed for any reason (e.g., STEP, to meet IMO conditions, or to meet 401 certification conditions for any other state). Perhaps no state is approaching the issue more aggressively than California. Calling for a standard which is virtually 1,000 times more restrictive than the IMO’s, the Golden State is, in reality, moving toward a standard which would eventually prohibit the discharge of any ballast by any vessel. In the same breath, CA regulations also warn that “Nothing in this provision relieves the master, operator, or person in charge of a vessel of the responsibility for ensuring the safety and stability of the vessel or the safety of the crew and passengers, or any other responsibility.” That the previous two sentences are at loggerheads with one another does not seem to enter the thought process of California regulators.

sitrep: 1Q 2010

The August Coast Guard announcement of proposed standards (

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ballast water treatment

Table 1: Comparison of Ballast Water Limits (Courtesy of EPA)

Mark Note – the “100 x” and “1,000 x” refer only to the “≥ 50 µm” and the “< 50µm, but ≥ 10 µm” size groupings.

Size: ≥ 50 µm

Size: < 50µm, but ≥ 10 µm



< 10 living organisms per m3

< 10 living organisms per ml

Vibrio cholera: < 1 CFU per 100 ml E. coli: < 250 CFU per 100 ml Intestinal enterococci: < 100 CFU per 100 ml

“100 x IMO”

< 0.1 living organisms per m3

< 0.1 living organism per ml

Vibrio cholera: < 1 CFU per 100 ml E. coli: < 126 CFU per 100 ml Intestinal enterococci: < 33 CFU per 100 ml

“1000 x IMO” 1

< 0.01 living organisms per m3

< 0.01 living organism per ml

Vibrio cholera: < 1 CFU per 100 ml E. coli: < 126 CFU per 100 ml Intestinal enterococci: < 33 CFU per 100 ml

“CA Interim Standards”

0 detectable living organisms

< 0.01 living organism per ml

Vibrio cholera: < 1 CFU per 100 ml E. coli: < 126 CFU per 100 ml Intestinal enterococci: < 33 CFU per 100 ml < 103 bacteria per 100 ml

< 104 viruses per 100 ml

“CA Final Standards”

0 detectable living organisms

0 detectable living organisms

0 detectable living organisms

0 detectable living organisms

NPRM_082809.pdf) for BWT, an effort that was as many as ten years in the making, drew mixed reviews from industry, environmentalists, manufacturers of BWT equipment and the people who ultimately test and certify these devices. Long awaited by a host of maritime stakeholders here and abroad, the first phase of the proposed rule falls short of certain local standards but provides general agreement with an IMO standard that has been in place since 2004. Nevertheless, the Coast Guard proposal represents progress and provides clear guidance to shipowners who were previously reluctant to do much of anything in the absence of any standard on this side of the pond. The Federal Register entry includes feasibility studies and the


possibility of revising the standards to a stricter benchmark in the future. The technology to test with certainty to the stricter phase two standards (which many states want to set as the benchmark) does not yet exist. Furthermore, it is unclear as to when, if ever, this will be possible. Last month, at the Maritime Environmental Resource Center (MERC) on Maryland’s shores, Dr. Mario Tamburri told MarEx, “All in all, the Coast Guard’s proposal represents a reasonable and logical approach.” Tamburri, MERC’s Director, has been involved in the study of invasive species and the testing of BWT devices for more than ten years. There is more good news: The phase-two standard also includes a “grandfather clause” for those vessels that install tech-



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ballast water treatment



nology that has been type-approved as meeting the phase-one standard prior to January 1, 2016. Although it is unclear whether the proposed grandfather clause would survive or even be further extended (through the input received in the comment period), it does provide immediate hope that those shipping companies who choose to install equipment will not be bitten on the back end DR. MARIo TAMbURRI by a stricter standard. The Coast Guard’s comment period on the proposed measures is now over. Over the course of as many as six public hearings on the matter, more than 400 comments were received. Next on the Coast Guard’s plate – beyond approving the proposed standard – will be to develop a testing protocol and, finally, proceed with the certification of technology/equipment that meets the standard. It is entirely possible that certification of individual pieces of equipment will take the form of accepting “equivalencies to IMO and/ or other flag-state approvals.” When Michigan lawmakers jumped the gun two years ago with their own localized statutes to combat invasive species, they achieved little except to balkanize an already complicated process. In the rush to eradicate one set of pests, local laws failed to consider the ramifications of six or seven ships simultaneously discharging, for example, hundreds of thousands of tons of

deoxygenated water into a small harbor. Add other variables such as chlorine, UV, ozone, and every other treatment program now under consideration, and the environmental impact of these solutions alone have rightly given many pause. The process, therefore, rightly went through the necessary EIA and NEPA reviews required by the system. Dr. Rich Everett of the Coast Guard’s Environmental Testing Division told MarEx, “We are coming to the end of that process.” He adds, “These are necessary steps, required by the system. Procedures need to be followed and there are good reasons to do just that.” The process, perhaps the most far-reaching ever attempted by the Coast Guard, may be coming to an end – or, perhaps, as Winston Churchill might have put it, “the end of the beginning.”

real solutions, readily available

The methods being used to attack invasive species in ballast are many. The options being considered, with some already approved by regulatory bodies, include: » Mechanical methods, including filtration and separation; » Chemical treatment methods (biocides, chlorine, etc.); » Physical treatment methods such as sterilization (ozone, electric currents, UV light and heat), and » Various combinations of these methods. MERC’s Tamburri provided advice (see Table 2) on individual technologies and manufacturers who are already one step ahead of the game as a U.S. standard nears finalization. The eight

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ballast water treatment

Table 2: Approved BWT Technology/Equipment (1Q 2010)

Source: Maritime Environmental Resource Center (based on information gleaned from IMO).


Treatment Name

Treatment Type

Type Approval Certification

Alfa Laval (Sweden)


Filtration + Oxidation


Hamann Degussa (Germany)

SEDNA System

Hydrocyclone + Filtration + Peracetic Acid (Peraclean)



forward to install a particular piece of equipment. As Hyde Marine (USA) Hyde Guardian Filtration + UV UK the director of a facility that has NEI Treatment Systems (USA) Venturi Oxygen Stripping Deoxygenation + Cavitation Liberia, Malta & Marshall Islands demonstrated the NK-03 (USA/Korea) NK-O3 BlueBallast System Ozone Korea capability to test Oceansaver AS (Norway) OceanSaver BWMS Filtration + Cavitation + Nitrogen Norway and benchmark Supersaturation + Chlorination this new technoloOptiMarin (Norway) OptiMarin Ballast System Filtration + UV Norway gy, he says, “There Techcross (Korea) Electro-Cleen Electrochlorination Korea is likely no silver bullet. What works manufacturers listed use almost as wide a menu of technologies for one ship type, size or trade route might not be appropriate for as the list of approval certifications. another.” Indeed. The list of approved devices includes technoloThere is one thing that we do know for sure: The technology gy that treats ballast water using filtration, hydrocyclone, peracetic to meet the IMO standard exists today. And that’s good news for acid, UV-treatment, deoxygenation and chlorine. One device even the eight equipment manufacturers who have already met IMO incorporates almost all of these technologies or, as one observer or flag-state standards and as many as ten more literally knocking put it, “everything but the skin diver with a spear.” Approvals also on the door. As the maritime industry recovers in parallel with come from a myriad of sources, including Norway, Germany, the the world’s financial markets, the installation of this soon-to-beUK, Liberia- and Marshall Islands-flag, Malta and Korea. required equipment will probably add some juice to the rebound. There is no one perfect solution for all vessel types, operations or routes. In general terms, certain technologies may be better no silver bullet: suited for certain trade routes, ship size and the service involved. Choosing the right system for the Suffice it to say that all of the approved technologies have their right ship and trade route place in the mix. And while Table 3 is not meant to contain the Tamburri provides a word of caution for those who would move definitive list of what technology works best with which ship, early




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ballast water treatment Table 3: Possible BWT Considerations for Vessel Trade, Routing, Size, etc.


Type of Technology



Filtration/UV testing results have given rise to certain trends, realities and common-sense Deoxygenation discoveries that operators might want to consider: Filtration + Electochlorination Other variables include maintenance issues, how Deoxygenation/Filtration-UV and/ or other chemical treatments complicated the device might be to operate, and Filtration/UV the materials (chemicals, etc.) that might be needed for a particular technology. For example, a newbuilding vessel which installs a BWT device using chemicals might be fitted from the outset with seals, piping and valves designed to handle that mix. The long-term effect of chemicals on seals, valves, coatings and lubrication for an older vessel which retrofits that same type of equipment is as yet unknown. With as many as 50 players vying to provide BWT equipment, a myriad of factors needs to be considered before opening up that checkbook, including but not limited to: » Service area of vessel – fresh, brackish, or salt water; » Length of trade route – time of ballast in tanks (settling/ treatment considerations); » Where ballast is loaded – muddy, clear, or high concentrations of sediments; » Deballasting speed – important for tankers and bulkers on time and spot charters; » Tolerance for sediment in tanks (effect on DWT capacity, cargo ops, etc.);

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Cruise/Military Applications

Typically involves lower flow rates, no chemicals, and speed of ballasting OPS not typically a major issue.

VLCC/ULCC/Large Bulkers

Flow rate of ballast water is a critical variable – large volumes handled make in-tank treatment desirable.

Midsize Vessels/Containers

A combination approach might work best.

Fresh Water or Brackish Service

Brine needed for electrochlorination.

Short Transit Time/Coastwise OPS

Perhaps not enough time for deoxygenation and/ or chemical treatments.

Viability of BWT manufacturer – financial strength, staying power, international reach (maintenance). The flag-state approval of a particular technology will not end the debate. For example, the chlorination of ballast water certainly is a viable BWT method, 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. 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. »

what’s next

No state owns the patent on impatience when it comes to solving the BWT problem. But, like another five or six states working on similar protocols, their collective efforts might just be what prevents swift (that’s a relative term here) implementation of an amicable standard. The fly in the ointment will therefore come at the state level in America. Just as many of these individual states acted out of frustration over the lack of federal standards in the first place, it is also possible that the less-strict standards contained in phase one of the Coast Guard proposal will cause them to dig in their heels even further. The proposed rules do not prevent individual states from imposing stricter standards. On the other hand, no one has yet demonstrated an ability to test with certainty to assure compliance with phase-two levels. For his part, MERC’s Tamburri says, “I hope the states will recognize this on the federal level and embrace this fundamental approach.” He goes on to say, “Working with the international community, this starts solving the problem now. The stricter standard should be the ultimate goal, but the IMO standard is a great place to start.” In 2003 U.S. Coast Guard Admiral Ronald F. Silva told MarEx, “The problem of invasive species is the highest priority marine environmental issue for the U.S. Coast Guard.” Seven years later the Coast Guard finally put some teeth into those claims by publishing – although not without controversy – a logical set of proposed rules to deal with the problem. The maritime community’s quandary over what – if any – BWT system it should install or retrofit onto its oceangoing fleets may be nearing its painful conclusion. That said, this will without a doubt be predicated on the stakeholders – local, federal and international authorities, along with environmentalists – embracing the proposed standard. That’s a variable, unfortunately, that can’t be predicted with any marEx certainty. At least not yet.

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By MarEx Staff


IMO MEPC. (159)55 Defines the Way Forward



Zodiac’s Evac provides the means to reliable and economical biological wastewater treatment for highly concentrated shipboard black and gray waters. As IMO’s adoption of its Resolution MEPC.159(55), providing for revised guidelines on the implementation of effluent standards and performance tests for sewage treatment plants, became effective on January 1 of this year, the implications were farreaching. The ominous – but now in force – test standard and discharge requirement applies to all sewage treatment plants installed on all vessels of 400 grt and above and on ships of less than 400 grt which are certified to carry more than 15 people. One company has geared up to meet the challenge. According to Ken Postle, Executive VP and General Manager at Evac North America, biological wastewater treatment is the most reliable and economical way of treating highly concentrated shipboard black and gray waters: “There is tremendous global activity for upgrading marine vessels not only to the new IMO MEPC.(159)55 regulation but for more stringent current and proposed regional regulations such as Alaska and the Baltic Sea.” In response, Evac, part of Zodiac Marine & Pool, has introduced an advanced wastewater treatment system, the Evac MBR, for cruise, ferry and naval ships. Already a leading supplier to the market for vacuum sewage systems, including collecting units and toilets, the Evac MBR represents a logical extension for the firm. The new Alaska regulation includes an ammonia limit (2.9mg/l) that requires a nitrification stage to be included in the


process to remove the ammonia. Ken Postle explains, “The Evac MBR is readily nitrifying with additional total nutrient reduction consisting of nitrogen and phosphate removal.” Evac’s MBR system is based on flat sheet micro-filtration membranes developed specifically for wastewater treatment. Evac has an exclusive right to use Kubota’s micro-filtration membranes for marine applications and has in-house development capabilities for the biological technology. Sewage wastewater and air are collected by gravity or sucked into the vacuum mains and transported to a collecting tank. From there the sewage is discharged to the wastewater treatment plant via a pre-screening unit for

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further treatment. As the soluble organics cannot be reliably removed by filtration or any other particle-removal method, the organic material is turned into carbon dioxide, water and biomass in an aeration tank. After this, clean water is extracted from the liquid by filtration in a separate membrane tank with a varying number of membrane modules. The pressure difference is created by either a slight vacuum or by a gravity head. The membranes do not require any backflushing. Chemical cleaning is only periodically needed. The biomass concentration is automatically monitored, and sludge removal is also automated. The sludge rate is typically between one and three percent of the entire wastewater flow. “One advantage of using the Evac membrane system is that the customer can purchase a combined vacuum system with MBR or use a gravity toilet system for treatment only,” stated Shirley Frederick, Sales Manager for Evac North America. “Using Evac gives the customer one warranty to work with and we take responsibility for the complete sewage system.” The Evac MBR has models which range from MBR 8, 16, 24 and 32 to higher-volume models that include the MBR 40, 80, 120, 160 and 240. Standard models handle from eight to 630 passengers with custom plants capable of handling the largest cruise vessels. Evac’s membrane



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Positively Promising



Positively Promising: Pressure on Propulsion The urgency to achieve a cleaner carbon footprint is perhaps felt more strongly in the highly visible passenger vessel sector than anywhere else. Fortunately, it turns out there’s more than one way to reach the Promised Land. Baseline

Compliance with the International Maritime Organization’s (IMO) new standards governing SOx emissions from ships affects both ship design and operation. The IMO isn’t the only regulator in the game, of course. Local Emission Control Areas (ECAs) also muddy the waters. Meeting SOx emission regulations is, therefore, no longer a lofty goal to strive for; it’s the law. Shipowners do have options. Compliance can be achieved by using low-sulfur fuel, utilizing more efficient engines or by cleaning exhaust gases using SOx scrubbers. Beyond this, regulatory compliance is only one part of the puzzle. Proving that a particular power system meets emissions standards will be quite another.

the Case for scrubbers

SOx scrubbers have been used, with great success, for shoreside power plants for

MarEx_36.indd 48

many decades. Now – and in response to growing pressure from environmental regulations – these devices are being specifically designed for the requirements of ship’s power. And where engine design and lowering sulfur content for marine fuels prove insufficient to meet global and local emission standards, scrubbers can be the ticket to compliance. Simply stated, a scrubber is an aftertreatment technology for cleaning exhaust gases of sulfuric oxides. SOx scrubbers can be installed both for newbuildings and as a retrofit to existing ships. Combustion units can be diesel engines of any make, type, or application, 2-stroke or 4-stroke. The working principle of freshwater scrubbers is based on a closed loop system. Within the process sulfur oxides in the exhaust gas stream are captured and neutralized by scrubbing water. The scrubbing water is based on freshwater

By marEx staff boosted with alkali, typically sodium hydroxide (NaOH). As a result of the chemical process, sulfur oxides from the exhaust gas are neutralized to sulfates in the scrubbing water. The IMO and other regulators will gradually limit the sulfur content in marine fuels. The most common fuels used in marine diesel engines are heavy fuel oils with sulfur contents typically of 1.5 to 3.5 percent. Such engines can readily burn low-sulfur fuel oils as well, though the associated problems are known and suitable operating guidance is available. Scrubbing exhaust gases is an environmentally friendly and cost-effective alternative for reducing SOx emissions down to 0.1 percent. A list of current SOx ECAs includes the Baltic Sea, North Sea and English Channel. In the future, this will expand to North America and most likely to other sensitive areas. Beyond this, the IMO Marine Environmental Protection Committee adopted “Guidelines for Exhaust Gas Cleaning Systems,” IMO Resolution MEPC.184(59), in July 2009. The guidelines include rules for certification, verification and documentation of scrubbers and regulations for monitoring and discharge of washwater.

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Positively Promising

After performing successfully in a series of tests, the Wärtsilä SOx scrubber has been granted the Sulfur Emission Control Area (SECA) Compliance Certificate by the classification societies Det Norske Veritas and Germanisher Lloyd. Wärtsilä’s solution is the first marine scrubber to be awarded this certification. The use of scrubbers as an efficient and cost-effective alternative to low-sulfur fuel for reducing SOx emissions from ships has long been questioned. In response, Arnauld Filancia, Director of Marketing Services at Wärtsilä, insists, “This certification

MarEx_36.indd 49

Caterpillar Marine Power Systems, headquartered in Hamburg, has quietly emerged as a real force in the propulsion game for larger cruise ships. Starting from a minor position in a market long dominated by others, Cat has shown an impressive track record in providing power solutions to the big cruise ship builders. The noticeable move for customers who are gravitating to Caterpillar’s MaK-branded engines did not happen by accident. Under the MaK label, Cat introduced in the late 1990s a 1000 kW/cylinder engine, which was finally made available as a Vee-type version in 2005. This in-line engine, called M43C, is a bestseller for ocean-going ships, outpacing any other brand in its power range with more than 800 units sold so far. Notably, Caterpil-



the Wärtsilä scrubber solution

Caterpillar Marine Power systems: suddenly a Force in the larger Cruise ship Markets

lar claims to have reduced the number of parts by more than 40 percent compared with its predecessor. Built to meet demanding emission standards, this product fits nicely into the power envelope of today’s cruise ship designs. Cruise customers like Carnival and NCL seem attracted by Cat’s simple, rugged design: straightforward with fewer multifunctional components that last longer and need less maintenance. The basic long-stroke concept of the MaK engines provides a clean combustion process by design. MaK engines in today’s cruise ships are equipped with FCT (Flexible Camshaft Technology), which allows adjusting valve and injection timing for improved emissions and efficiency. As a result, the M43C can be started up and operated under any load condition without producing any visible smoke. Ship operators – spurred on by an onerous regulatory process – are setting demanding targets, which will be met by different makers with different technical solutions. At Cat, the general philosophy is, “There is still a lot to invent in engine room and ship design.” Focusing on the larger ocean-going cruise ships built for the main operators, Cat envisions these ships being powered with the MaK M43C line of marine engines. Ships are currently under construction or in service for Costa (Vista Class), Holland America (Signature Class), AIDA (Sphinx Class) and Norwegian (F3 Class), as well as Cunard’s new Queen Elizabeth. In addition, Cat-branded engines are powering cruise ferries and some river cruise vessels. Caterpillar Motoren is working on a huge investment program costing more than $300 million to optimize production processes and increase capacity up to 2012. A range of projects has already been launched at the German manufacturing sites in Kiel and Rostock and in Guangdong in China. These efforts will result in a doubling of the annual production of MaK marine engines to as many as 1,000 units – up from only 200 just a few years ago.


In the ocean-shipping game – and certainly the past 18 months have been difficult – the bottom line is everything. Hence, the cleanest ship in the world is of no value unless it can also turn a profit. With more stringent regulations approved by the IMO, SOx-scrubbing will be an increasingly attractive way of minimizing operational costs by using heavy fuel oil in an environmentally friendly way. In SOx ECAs, the cost savings will be immediate, increasing this year as the price premium for low-sulfur fuel is expected to increase. In 2015, the cost savings will potentially be dramatic, with ROI on unit installation achieved within as little as one year.

demonstrates very clearly that the Wärtsilä scrubbing technology works well and is an efficient solution in marine applications.” The full-size SOx scrubber test plant was installed on board the MS Suula and was used to clean exhaust gases from the ship’s 4-cylinder, in-line Wärtsilä 20 auxiliary diesel engine. This Neste Oil-owned product tanker operates mainly in the SECA Baltic Sea area, where regulations governing SOx emissions are stringent. Testing was performed with both high (3.4 percent) and low (1.5 percent) sulfur heavy fuel oils and verified that the Wärtsilä system efficiently removes SOx from the exhaust gases. The measurements, which were part of the certification process and made by an accredited independent body, demonstrated a sulfur dioxide removal efficiency rate exceeding 99 percent in all operating conditions, even when using high-sulfur fuel. This high level of efficiency was consistent throughout the load range and with all fuels. The efficiency of nitrogen oxide removal was three to seven percent. The removal of particulate matter was in the range of 30 to 60 percent. The Wärtsilä SOx scrubber system complies with the new IMO guidelines, adopted in July 2009, for cleaning exhaust emissions from all 2- and 4-stroke engines, including main and auxiliary units, as well as from oil-fired boilers, in both retrofits and newbuildings.

yet Another Approach: MtU engine With sCR Meets stringent emissions standards for a California Ferry

A pair of the nation’s greenest ferries has recently been launched by the Water

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Positively Promising



friendly, it features the highest horsepower in its class. A pair of these powerful engines helps each ferry meet WETA’s demanding 25-knot speed requirement. Deciding what type of pollutiontreatment system would be paired with the MTU engines to bring emissions down to the required level was Job One. The firm had previous experience equipping a ferry with a system for selective catalytic reduction (SCR), an after-treatment that uses aqueous ammonia in the form of urea to convert smog-producing NOx in diesel engine exhaust into harmless nitrogen gas and water vapor. “An SCR system can be thought of as a catalytic converter for a diesel engine,” Mossey explains. When used to treat diesel exhaust, SCR can reduce NOx in excess of 95 percent and allow combustion optimization for lowest fuel consumption and particulate matter emissions. Long in use to reduce pollution from stationary sources, the size and weight of SCR systems have made them impractical for many mobile applications. “For stationary applications, space and weight aren’t a concern. But on a ship, they’re important factors,” Mossey notes. Nevertheless, Pacific Power decided that SCR would be the best pollutiontreatment option to package with the MTU engines. But the WETA ferry application would require a custom-designed treatment solution that would be less bulky and lighter than conventional SCR equipment. Accordingly, a “Compact SCR” system – about one-fifth the size and weight of systems developed for stationary pollution sources – was designed. Extensive dynamometer emissions testing ensured that the system was feasible. Later, acceptance testing done by WETA confirmed that the MTU engine/SCR package did the job—and then some. Actual emissions were nearly 97 percent below EPA emission standards for Tier 2 marine engines. What’s more, no particulate filter was required to reach the emissions Telephone (757) 873-6800 target due to the Facsimile (757) 873-3632 exceptionally; email: running MTU 700 Thimble Shoals Blvd. Ste 109 • Newport News, VA 23606-2575 engine. The MTU

Emergency Transportation Authority (WETA), California’s agency responsible for developing and operating a waterborne transit system in San Francisco Bay. The vessels feature an eco-friendly propulsion system that includes a compact pollutioncontrol unit and a powerful but cleanrunning marine engine from MTU. The vessels were originally opposed by local environmentalists who contended they would generate more pollution per person than other means of transportation. Studies conducted on three ferries in the Bay Area proved that the diesel engines actually generated less pollution than projected. As a compromise, WETA agreed to a strict pollution specification, requiring cruise emissions to be 85 percent below the EPA’s Tier 2 marine requirements at a vessel speed of 25 knots and 85 percent load—an emissions level one-tenth that of any other ferry operating in California waters. The emissions specification was placed in the contract WETA offered for four new ferries. After the contract was awarded, the task of meeting the requirement fell to local MTU distributor Pacific Power Products Company in Ridgefield, Washington. “Pacific Power was confident that an environmentally friendly MTU marine engine could do the job with an assist from an accompanying pollution-treatment system,” says Bill Mossey, Corporate Sales Manager for Pacific Power. Pacific Power chose the MTU Series 2000, which can operate on a blend of biodiesel and ultra-low-sulfur diesel fuel. Even without a pollution-treatment system, the MTU engine exceeds EPA Tier 2 marine emission requirements. “The Series 2000 engine was a key part of our solution to this tough emissions problem,” says Mossey. But beyond being environmentally

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engine/SCR package proved to be clean enough to meet the WETA requirement even if the engine were burning low-sulfur No. 2 diesel fuel rather than the ultra-lowsulfur diesel fuel mandated by California. The testing results equate to net tailpipe emissions that would approximate EPA Marine Tier 4 standard levels, which go into effect beginning in 2016. Tier 4 requires a 70 percent reduction in NOx emissions and a 90 percent reduction in particulate matter from current Tier 2 requirements. With the MTU engine/SCR pollution-control package approved for duty, two of the ferries ordered by WETA, Gemini and Pisces, are now in operation in San Francisco Bay. The other two should be plying the same waters by the middle of this year. Delivered by Kvichak Marine Industries, the vessels are excellent examples of what Kvichak does best: producing “green” boats in the US and internationally. Kvichak’s most recent projects not only include the four WETA passenger ferries, but three all weather fast Dutch Pilot Boats, as well. Notably, the pilot and patrol boats built by Kvichak include materials, construction techniques, and weld designs that allow the vessel(s) to survive the most severe conditions.

ensuring Compliance and Proving it too: WRsystems Refines the Art of Continuous emissions Monitoring

Emissions compliance is only half the battle. Proving adherence to the rules is just as important. In fact, MARPOL Annex VI Maritime Emissions Regulations mandate strict emissions reporting, compliance, and enforcement beginning July 1, 2010. In direct response, W R Systems, Ltd. (WRSystems) will soon begin marketing its patent-pending Continuous Emissions Monitoring System (Emsys™), a new technology that collects and measures exhaust-stack emissions to help vessels reduce pollutants and meet new environmental regulations. According to Dave Edwards, Director of WRSystems’ Engineering Services, Emsys™ is the first technology integration of its kind. The laser-driven single enclosure device can continuously monitor emissions and provide automated analysis and data recordings from multiple stacks

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Positively Promising

at-sea testing. According to WRSystems management, certification by the American Bureau of Shipping (ABS) is projected for February 2010. Expected to go on the market worldwide shortly thereafter, the projected price for Emsys™ is under $140,000 each. WRSystems is not new to emissions monitoring and sensor systems.For more than a decade it has been developing sophisticated, high-reliability critical sensor systems for the U.S. Department of Defense. Recently, the firm landed a Navy contract that – if all options are exercised – could grow from $27 million to $140 million. WRSystems has also provided high-reliability monitoring systems to the public transit industry.

steaming Ahead: A Clean Wake in Choppy Waters

The future of energy production on board will probably be less spectacular than we

all may wish: The combustion engine will be around for the time being. Regulations and public pressure will eventually lead to zero-emission solutions. To this end, engine makers and others are working to provide the optimum solution, which will not only meet emission requirements but do so economically. With fuel prices expected to escalate in the long term, the fate of engine technology manufacturers will ultimately be tied to the profitability of shipowners. Hence the regulatory pressure on marine propulsion systems eventually promises to yield the positive results from industry that we’ve all come to expect. In fact, you can count on it. MarEx On the Web: Wärtsilä: Caterpillar: WRSystems and Emsys™: MTU: Kvichak Marine Industries:

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sEpTEMbER/oCTobER 2009

Austal’s NextGeneration Ferry Arrives Just in Time – And in style By MarEx Staff



New Offering Based on Solid History

Riding high on a 21-year history of delivering more than 200 vessels worldwide, Austal recently launched its next-generation, 102-meter, high-speed trimaran vehicle/passenger ferry at the company’s Western Australia facility. With a customizable seating arrangement for up to 1,165 passengers, capacity for 245 cars and a speed of up to 39 knots, the all-aluminum vessel is scheduled for completion in February 2010 and is currently available for sale. She will now undergo final fit-out prior to the commencement of sea trials. The new trimaran is an evolution of Austal’s landmark 2005 trimaran ferry, Benchijigua Express, optimizing performance, seakeeping, fuel efficiency, passenger comfort and payload to deliver a truly next-generation transportation solution. The hull form is also the basis of the U.S. Navy’s 127-meter Austaldesigned and built Littoral Combat Ship LCS 2 Independence, which was commissioned on January 16.

New Technologies – New Efficiencies

The vessel utilizes Austal’s patented trimaran technology, combining the softer roll of monohulls with the low resistance, stability and Austal’s 102 m Trimaran at a Glance: PROPULSION Main Engines


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Gearboxes Waterjets Germanischer Lloyd Length overall Beam (molded) Hull draft (maximum) Passengers Vehicles Heavy vehicles Speed Deadweight Range

3 x MTU 20V 8000 M71L 9,100 kW @ 1,150 rpm 3 x ZF 53800 Wartsila LJX 1300 100 A5, HSC - B OC3 High Speed Passenger /Ro-Ro Type, MC, AUT 102.0 m 26.8 m 4.2 m 1 43/190 254 cars 190 lane m for trucks & 145 cars 40 knots 700 tons 630 nm

carrying capacity of catamarans, to open up new markets beyond existing fast-ferry designs. A lower roll speed means lower accelerations experienced by passengers – significantly reducing seasickness. Compared to other high-speed craft, this technology allows greater speed for the same installed power, the ability to maintain higher speeds in waves, and improved fuel consumption at the same speeds. It also can operate in higher wave heights and reduce waves created behind the vessel, minimizing environmental impact. Unique to the vessel is a patented three-engine layout that combines with the trimaran’s hydrodynamic hull to deliver fuel efficiency across a range of operating conditions. Each of the three MTU 20V 8000 M71L diesel engines produces 9,100 kW at less than 1,200 rpm and offers the world’s highest power-toweight ratio in their range. The head of Austal Design, Dr. Tony Armstrong, said, “A three-engine layout saves weight over the traditional four-engine layout, delivering improvements in fuel consumption and daily running costs.”

A New Standard for Comfort

A seating layout that draws on Austal’s 20-year experience with a wide range of customer requirements can be customized to seat between 950 and 1165 passengers. The extensive range of highquality onboard facilities includes two bar areas, a food preparation and service counter, and a boutique gift store. Amenities are designed to maximize accessibility and include wheelchair-accessible toilets, a lift and four independent passenger entry points. Passenger-friendly seating density ensures rows are limited to no more than two or three seats, increasing comfort and accessibility, which is important during longer journeys. An outdoor seating area is also available.

Payload – And Fuel Economy Too

With flexibility in mind, the mezzanine deck is a mixture of fixed and hoistable decks that allow the carriage of up to 132 cars with a clear deck height of 2 m. When hoisted there is a height on the main deck below of 4.3 m and 2.3 m when lowered. A cavernous vehicle deck has space for 245 cars or 190 truck lane meters plus 145 cars. The stern is reinforced to accept a stern ramp if required.

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A speed of 40 knots (@ 90% MCR) allows a range of more than 600 nm and fuel consumption of only 4.78 tons/hour.

sEpTEMbER/oCTobER 2009

Timing Is Everything

passenger comfort. The trimaran design addressed this drawback by going back to the monohull design, making it long and thin for efficiency, then adding side hulls (called amahs) in order to provide the necessary stability. These amahs were specially designed to give the vessel a far more comfortable roll. Using data on sea conditions at three different locations in the Taiwan Strait, Austal has determined that although the Austal 102 m trimaran cannot operate every day, it can operate between 60 and 90 more days than larger-size catamarans. Spanish operator Fred Olsen S.A., which currently operates Austal’s 127 m trimaran ferry, Benchijigua Express, has seen seasickness almost completely eliminated along routes that had previously been served by less-comfortable, wave-piercing catamarans. Underscoring the need for passenger comfort across the Taiwan Strait, Austal’s Armstrong insists, “If direct services had been allowed five years ago, then the market would have had only limited choices in terms of hull type. Today, by a quirk of fate, the opening-up of the Strait coincides with the maturing of the trimaran hull form. The Austal 102 m trimaran is ready at a very opportune moment. She can be in service as early as March 2010. A second could be ready in 2011.” MarEx On the Web: A0208_Ad.pdf 11/1/10 21:03:48



Initial interest in the new vessel has been particularly strong in China due to its suitability for the Taiwan Strait. With direct freight and passenger service initiated between the People’s Republic of China and the island of Taiwan, demand across the Strait is expected to rapidly increase as business people on both sides find it suddenly much easier to travel between production/ distribution locations. Direct aviation links are also opening up across the Strait, meaning these new marine links will need to be fast in order to be attractive to passengers who could otherwise, albeit at a higher fare, go by plane. Nevertheless, the high-speed sea-link often provides for faster door-to-door times as well as much larger baggage allowances than aircraft. The Taiwan Strait is a stretch of water that at times suffers from very rough weather with a predominantly northeast wind. As such, vessels will typically operate in beam or quartered seas. Before the advent of Austal’s trimaran technology, the high-speed ferry industry had relied mostly on catamarans, whether they were the wave-piercing type or the more advanced bulbous-bow, round bilge designs of Austal. Although catamarans were highly stable, this was also a drawback in that the high stability came with a “stiff” roll action, something which can be detrimental to









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oped PhiliP

Marex op-ed:

By Craig philip, Chairman, National Waterways Foundation

Waterways Transportation Research: JAnUARy/FEbRUARy 2010

Needed Now More Than Ever


Many industriEs and organizations coMMit time and resources to conducting research as a way to solidify their strategic direction and help people better understand their mission. solid research is even more important for the inland waterways system, which is often out of sight and out of mind to most americans. the national Waterways Foundation, of which i serve as chairman, develops the intellectual and factual arguments for an efficient, well-funded and secure inland waterways system. its work helps protect america’s waterways through research studies, education and training programs, grants, forums, and similar activities that help people better understand how to maintain our waterways system, enhance its capabilities and promote its critical value in the future.


Fuel-Efficient, Green and Safe

the importance of this work is aptly demonstrated by the Foundation’s most recent project. Working with the u.s. Maritime administration and the texas transportation institute’s center for Ports and Waterways at texas a&M university, the Foundation released a 2008 study comparing selected societal, environmental, and safety impacts of inland river barge transportation with highway and rail transportation. “a Modal comparison of Freight transportation Effects on the general Public” was peer-reviewed and conducted over more than a year. it produced astounding data points that surprised many who’d spent their entire careers in the industry. the Foundation also released an addendum in 2009 addressing the carbon footprint of the three modes. to recap the key points of the studies, one common 15-barge river tow has the same capacity as 1,050 trucks and 216 rail cars pulled by six locomotives. in terms of fuel efficiency, barges move a ton of cargo 576 miles on one gallon of fuel (trains get 413 and trucks 155 “ton-miles per gallon”), while at the same time generating fewer emissions of hydrocarbons, carbon monoxide and nitrogen oxide than rail or truck. as far as safety is concerned, after adjusting for differences in cargo quantity moved by each mode, for each person injured in a barge accident, 125 are injured in rail accidents and 2,171 in truck accidents. While we are truly an intermodal society, this researched comparison of rail, truck and inland waterways transport modes offers an important perspective on the real benefits of moving cargo by water. Barge transportation is clearly the greenest, most fuelefficient and safest way to move our nation’s cargoes.

Who Benefits, and Who Should Pay?

the national Waterways Foundation’s next study will address waterways system beneficiaries. While the barge and towing

MarEx_36.indd 56

industry is the only beneficiary that is taxed to pay for locks and dams, there are many other beneficiaries of these structures, including recreational users, consumers of clean drinking water obtained from river pools, electric utilities that use water in power generation, and numerous communities that benefit from flood damage reduction as well as improved health. the Foundation is keenly interested in the new recommendations made by the inland Marine transportation system investment strategy team to the inland Waterways users Board (iWuB) in december 2009. the team, comprised of key corps of Engineers personnel and members of the iWuB, met for nearly a year to draft a 20-year capital development Plan to prioritize navigation projects across the entire system, improve the corps of Engineers’ project management and processes to deliver projects on time and on budget, and recommend an affordable funding mechanism to meet the system’s needs. these recommendations are significant and, if adopted, would set a future course for continuing investment in our nation’s inland waterways infrastructure. a critical part of the team’s proposal would preserve the existing 50/50 cost-sharing formula for new lock construction and major rehabilitation projects above $100 million, while adjusting the current model to provide that dam construction and smaller rehabilitation projects be 100 percent federally funded. these adjustments would partially restore the original exclusion under the Water resources development act of 1986 of major rehabilitation projects from cost-sharing and recognize the value derived by other beneficiaries of dams and the pools created by dams. importantly, the team also recommended a cap on all new lock construction projects that would protect the inland Waterways trust Fund and the industry from having to pay for significant cost overruns. these new funding parameters will likely necessitate an increase in the current fuel tax but would be worth the investment as a solution to the future of america’s inland waterways system. it is now up to congress to decide and for industry to support. the late, great astronomer dr. carl sagan said, “somewhere, something incredible is waiting to be known.” the national Waterways Foundation’s research is a path to revealing the incredible value of inland water transportation for the benefit of the nation. MarEx For more information, visit Craig Philip was elected Chairman of the National Waterways Foundation in October 2009. He also serves as CEO of Ingram Marine Group in Nashville, Tennessee. He appeared on the cover of MarEx in 2003.

1/29/10 1:49:40 PM

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Courtesy of: Royal Caribbean Cruises Intl


Executive Interview: Radio Engines & the Environment: Ahead of the Curve Holland’s David A. Slager

Water Treatment: Technology & Regulations January-February 2010

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The Maritime Executive Magazine - January/February 2010  

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