Energy bill includes provisions promoting short sea shipping
The energy bill signed into law by President Bush on Wednesday includes provisions promoting short sea shipping of both freight and passengers.
The bill, HR 6, calls on the Transportation Secretary to establish a short sea transportation program and “designate short sea transportation projects to be conducted under the program to mitigate landside congestion” by encouraging the development and expansion of vessels, terminals, shipper utilization and “marine transportation strategies by state and local governments.”
Inclusion of the short sea shipping provision is a major victory for advocates of coastal and Great Lakes shipping, including the Maritime Administration, which has been promoting short sea shipping for many years, most recently under what Administrator Sean T. Connaughton has called the “Marine Highway Initiative.”
“We are very pleased that this happened. It is the first time in recent memory that the Congress has supported the marine highway,” said Brian W. Schoeneman, executive director of the American Maritime Congress, the research arm of the Marine Engineer’s Beneficial Association.
Connaughton has done a good job of promoting the participation of American merchant mariners in the liquefied natural gas business, Schoeneman said, and the law gives him “good footing” to do the same with short sea shipping.
The bill signing was “a very promising note for the future of transportation in the U.S.,” said Paul Bea, chairman of the Coastwise Coalition. “Congress recognizes and highlights that marine transportation makes the most efficient use of fuel in moving people and things. Marine transportation can contribute to easing congestion on our roads by offering long haul marine highway options for freight between American port cities. It can add new route alternatives for trucks and commuters within metropolitan areas.”
“We’re very pleased,” said Robert Kunkel, chairman of the Short Sea Shipping Cooperative Program. “”We’ve been working very hard at this for three or four years and it is finally coming to fruition.”
In a major change, the bill makes it possible for companies to use Capital Construction Funds (CCF) to build container and roll-on/roll-off ships operating between contiguous states or on any Great Lakes and St. Lawrence Seaway ports.
“It is impossible to overstate its importance,” said Clay Cook, a Washington-based attorney with the firm of Seward and Kissel.
Previously, CCF could only be used for foreign, Great Lakes, or noncontiguous domestic trade.
“It’s a huge change,” said Peter Shaerf, a partner at the investment banking firm AMA Capital Partners. “It opens up short sea shipping.”
The CCF program allows companies to defer federal income taxes and deposit money or other property into an account to build, reconstruct or acquire vessels. As of the end of 2006 there were about 185 companies with $2.5 billion in CCF accounts, according to MarAd.
Much of that money may be earmarked for other uses such as paying debt service on Title XI loans or held by companies such as oil majors that have little interest in building container or ro/ro ships, but want to uses those funds for new tankers or supply boats.
But Kunkel said there could be as much as $400 million in CCF accounts that might be used for short sea shipping.
“There are a lot of companies sitting on pretty heavy chunks of change,” Schoeneman said.
For example, Cook said leasing companies like General Electric or GATX may have funds in CCF and be willing to build vessels and lease them to operators.
An earlier version of the bill had proposed that up to $2 billion in funds be provided for government-backed construction loans for short sea ships, but it was not included in the final law.
“When combined with pending legislation that would provide Harbor Maintenance Tax relief for coastwise trade, we believe that the outlook for short sea shipping, and the accompanying job creation and environmental relief, is very positive and deserves the attention of the maritime and environmental community,” said Horizon Lines in a statement.
And while the funds for loan guarantees for short sea shipping were dropped from the energy bill, Horizon noted that contained in “omnibus appropriations legislation passed by Congress is $5 million in new funds for the Title XI ship building program. The program has a 20-1 guarantee structure that will effectively provide $100 million in loan guarantees for new ship construction.”
“This represents a reinstitution of funding for the Title XI program after years of zero funding and bodes well for the future,” Horizon said.
However, short sea shipping may have to compete with a wide range of projects for that Title XI funding. ' Chris Dupin