Transcript: American Bureau of Shipping Advisory Council Remarks

Tuesday, November 15, 2022

REMARKS AS DELIVERED BY

MARITIME ADMINISTRATOR REAR ADM. (RET) ANN PHILLIPS

AT AMERICAN BUREAU OF SHIPPING ADVISORY COUNCIL

NEW YORK, NY

Thank you, Christopher Wiernicki, for the opportunity to join you today to discuss my priorities for the Maritime Administration-and thank you also for the many opportunities we have already had to discuss urgent issues in the maritime industry.

It is the honor of a lifetime to serve as the 20th Maritime Administrator.

This is an extraordinary time at MARAD and throughout the Department of Transportation, as we work to provide to the American people the once-in-a-generation investments in our infrastructure that the President's Bipartisan Infrastructure law is making possible.

We also have many unprecedented efforts underway to grow the U.S.-flagged fleet and to strengthen our organic sealift capacity to meet the many challenges we face in the maritime domain.

As time is short, I will briefly touch on as many of these issues as I can today-and look forward to more in-depth discussions of each of these issues in our ongoing dialogue across the many forums where we will meet!

EMBARC

Let me start by talking about one of the areas where we continue to need the strong support of ABS-and indeed of every single stakeholder in our industry-and that's the EMBARC program.

As our Secretary, Pete Buttigieg, has said, there is no place for sexual assault or sexual harassment in the maritime industry.

At the Maritime Administration, we believe that every mariner has the right to expect mutual respect and dignity. I know you all share this commitment.

Late last year, as you know, we paused Sea Year training at the U.S. Merchant Marine Academy.

During the pause, MARAD developed the "Every Mariner Builds a Respectful Culture," or EMBARC, program, which enumerates policies intended to help prevent sexual assault and sexual harassment, support survivors, and strengthen a culture of accountability.

Carriers must now adopt these policies before cadets can embark on their vessels. And, critically, we intend these policies not only to strengthen cadet safety, but to be the first steps in what must be an ongoing effort to strengthen the a culture of safety for every mariner.

That is why we have required these practices to be implemented in vessels' Safety Management System: to make sure this is a safety priority for every mariner aboard a vessel-and in recognition of the fact that if abusive behavior is occurring on a vessel, it is an impediment to the safe operation of the vessel.

We appreciate ABS' thoughtful work to help carriers understand how they can meet this requirement.

We also deeply appreciate the incredible support we have received from the Coast Guard at every step of the effort to formulate and implement EMBARC-and I thank Rear Admiral Arguin and his predecessor, Rear Admiral John Mauger, for their leadership.

Of course, we also thank the 14 industry partners who have now enrolled in EMBARC-and appreciate the many thoughtful observations they have offered on what is working well and where we can continue to make improvements.

I note that numerous provisions are now pending in Congress regarding these issues. We appreciate Congress' support-and MARAD will move quickly to implement any new provisions that may be enacted.

Mariner Shortage

The EMBARC program also has an important role to play in helping us attract, recruit, and retain the next generation of mariners.

Whenever I meet with industry or labor, the issue of mariner availability is repeatedly raised.

So, on September 23rd, I convened a forum attended by more than 75 industry stakeholders to discuss the mariner shortage.

Like every industry, the merchant marine has been profoundly affected by the COVID pandemic.

And recent studies have found that the hard job of being a mariner is getting harder-and even affecting the mental health of many in the industry.

Fundamental to making any headway in mariner availability is providing better work/life balance to today's merchant mariners-comparable to the quality of work life that workers in other sectors of the economy expect.

We must also ensure that mariners' working environment is safe-and that the maritime industry is a place where every mariner can succeed on the basis of their professionalism and skill.

We must work together to address all these issues-while, as I will discuss, growing our fleet-so that we can ensure that our merchant mariners will be there whenever they are needed.

OFFSHORE WIND

Let me now turn in a different direction and talk for a moment about the historic effort underway to develop and expand our nation's offshore wind industry.

I appreciate ABS' extensive work in this area, including its work to help develop worldwide industry standards.

As you know, the Biden-Harris Administration is committed to reaching 30 gigawatts of offshore wind energy by the year 2030, and this will require the support of a whole-of-government effort.

The Maritime Administration is playing two roles in this effort.

First, we are supporting the construction of vessels to service the offshore wind industry through our Federal Ship Financing Program-commonly called "Title XI"-which provides full faith and credit guarantees to promote the growth and modernization of the U.S. merchant marine and U.S. shipyards.

Since 1993, Title XI has provided $9.3 billion in loan guarantees.

The Title XI statute was amended in 2019 to give MARAD the authority to designate "Vessels of National Interest," which can receive prioritization during the application review process.

I recently designated the vessels that service offshore wind farm facilities as Vessels of National Interest-and these are the first vessels to be designated under this authority.

Several American shipyards have already secured contracts to build vessels to service offshore wind development-and we have had a surge of interest in the Title XI program since we announced the national interest designation for offshore wind vessels.

There is another way that MARAD is supporting offshore wind developments.

As I mentioned earlier, under the President's leadership, we are making a historic investment in our ports and intermodal infrastructure.

As a result of the President's Bipartisan Infrastructure Law, the Port Infrastructure Development Program (PIDP) administered by MARAD will invest $2.25 billion over five years to strengthen ports all across the nation, including ports that will serve the offshore wind industry.

The first round of PIDP funding under the Bipartisan Infrastructure Law totals $450 million-an investment that is almost double the amount provided last year and is the largest single investment in the program ever.

And an additional $234 million dollars was provided for the PIDP program in Fiscal Year 2022 appropriations, bringing the total amount of funding available this year to more than $680 million.

We just announced the 2022 awards a few days ago, and four projects-including projects in Massachusetts, New York, Connecticut, and Michigan-that are directly supporting offshore wind developments received funding.

Over the next few years, as the additional funding provided in the Bipartisan Infrastructure Law is awarded, more such projects will surely follow!

STATUS OF THE MERCHANT MARINE

Let me turn now to our U.S. Merchant Marine.

Today, while approximately 70 percent by volume or weight of our cargoes come to and from us directly by the sea, commercial vessels sailing under the U.S. flag carry less than two percent of these cargoes.

We have 87 foreign trading ships under the U.S. flag. However, this is still a tiny fraction of the number of ships that were sailing under our flag after World War II-and it creates numerous challenges.

MARAD is in its 76th year of maintaining the Nation's reserve of sealift ships, including the Ready Reserve fleet, which is a fleet of 43 vessels that we maintain on a reduced operating status to be ready to sail within five days of activation.

As you know, we are in the process of conducting an urgent recapitalization of this fleet, and in March of this year-and for the first time in nearly 30 years-we announced the purchase of two vessels to continue modernizing the Ready Reserve fleet.

These two ships joined the Ready Reserve as CAPE ARUNDEL and CAPE CORTES, adding more than 432,000 square feet of total sealift capacity and 316,000 square feet of military cargo capacity.

And these vessels were purchased using commercial best practices. In fact, the increasing use of commercial best practices is something I will speak about more in a minute.

COMMERICAL SEALIFT SUPPORT

In addition to operating the Ready Reserve, MARAD implements several critical programs to support our commercial sealift, including the Maritime Security Program and our cargo preference programs.

The Biden-Harris Administration is committed to growing our U.S.-flagged, commercially operated fleet and has several new policy efforts underway to do so. Let me talk about these briefly.

Maritime Security Program

As you know, the Maritime Security Program (MSP) maintains a fleet of 60 modern, privately owned U.S.-flag ships, active in international commercial trade and available on-call to meet U.S. Department of Defense (DOD) contingency requirements.

The current MSP fleet provides cargo capacity that now exceeds 3.4 million square feet-the highest level in the program's history-and it employs some 2,400 U.S. mariners.

However, these ships must also have cargoes-and here is another point at which the elements of our various policies intersect to support our sealift enterprise.

Cargo Preference Programs

Earlier this year, I testified before the House Subcommittee on Coast Guard and Maritime Transportation regarding our cargo preference programs.

One of MARAD's many responsibilities is to ensure that federal agencies meet their obligations to move cargoes on U.S.-flagged vessels consistent with federal law.

To help ensure that they know what is expected of them, I have written to all federal departments and agencies explaining how MARAD can help them ensure they meet their obligations under cargo preference laws and regulations.

MARAD has also been evaluating options for a cargo preference rulemaking, and to lay the foundation for a rulemaking effort that navigates this intersection, MARAD plans to issue a Request for Information (RFI) shortly to seek input from all stakeholders.

3-Year Wait Elimination Proposal

And speaking of preference cargoes, to help attract additional vessels to our flag, the Biden-Harris Administration has proposed that Congress eliminate the 3-year period that vessels entering the U.S. flag must currently wait before they are eligible to carry preference cargoes.

This would ensure that vessels that choose to sail under the U.S.-flag can carry preference cargoes as soon as they enter the flag-and help ensure that more government-impelled cargoes move on U.S.-flagged vessels.

Tanker Security Program

Moreover, in the 2023 Presidential Budget Proposal, the Administration requested that Congress fully fund the new Tanker Security Program (TSP) at $60 million, which would support up to 10 U.S. flagged vessels.

The TSP, which will be modeled on the Maritime Security Program, will be comprised of active, commercially viable, militarily useful, privately owned product tank vessels. These vessels will provide assured access to up to 10 U.S.-flagged tankers available to support the Department of Defense's global operations.

I am pleased to report that MARAD has completed a draft of an Interim Final Rule that is currently in interagency review. And certainly I anticipate that this will spur tankers to enter the U.S. flag, compelling cargoes, and building opportunities to grow our mariner pool.

National Security Multi-Mission Vessels

Finally, let me close with a discussion of the new National Security Multi-mission Vessels (NSMV).

In the Navy, I was the commissioning Commanding Officer of USS MUSTIN, and I know just how complex a ship construction effort is.

It takes incredible organization, attention to detail, and pure grit to keep such work on time, on budget, and with the standard of quality this ship clearly displays.

The construction of the National Security Multi-mission Vessels is proceeding at astounding speed-and the first will be delivered in the spring of 2023!

Without a doubt, the NSMV will revolutionize mariner education at our State Maritime Academies.

These vessels-the first that MARAD has built in decades-are also unique because we are using commercial best practices to design, build, and manage with a private company, TOTE, as our contracted Vessel Construction Manager.

The use of the commercial shipbuilding business model delivered a firm fixed price contract and firm fixed delivery schedule at an average program cost of $322 million per ship.

By comparison, the traditional Government procurement process normally used to build ships yielded cost estimates of as much as $750 million in average costs per ship-PER SHIP-for the NSMV program.

Our highly competitive and streamlined process can be used in the future by other Federal entities to procure ships in a way that reduces risk to the U.S. Government and mitigates the potential for cost overruns and unnecessary delays.

And, these ships are being built to American Bureau of Ships (ABS), Coast Guard, and SOLAS requirements.

Closing

I know that I moved very quickly through a wide range of issues. This reflects the fact that MARAD is punching far above its weight-and is working in many different areas to build new port infrastructure, to grow our U.S.-flagged fleet, and to support and strengthen our merchant marine.

I appreciate and look forward to our continuing discussions and urge you to be in touch whenever the Maritime Administration can be of assistance. Thank you again!

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