OMSA - Newsletter

As we complete the first quarter of 2002, and look forward, it is clear that our industry faces numerous challenges that will begin to crystallize, for better or worse, before this year closes.

Recently, the offshore maritime industry dodged one particular bullet when the U.S. Coast Guard recognized that even though many mariners had not yet completed STCW gap closing requirements, nor was the Coast Guard prepared to process the necessary documentation for those who had done so. In fact, this was only one of many problems that had surfaced with respect to the orderly and effective implementation of the STCW (Standards of Training, Certification and Watchkeeping Convention). And, there will be other problems to appear before the year is out. Between now and then, our industry must wake up and do its part to give constructive effect to the transition July 31, 2002 and Feb. 1, 2003 are critical dates by which OMSA companies must efficiently and successfully complete the STCW training of our personnel who hold licenses, and begin more serious efforts to train and qualify personnel who entered the offshore marine industry after August 1, 1998.

On another front, we have seen more serious and, in some cases, successful efforts to penetrate U.S. cabotage trade in the offshore sector. Protection and enforcement of the Jones Act is critical to the success and longevity of our industry. Norway, in particular, is actively seeking to expand foreign flag activity on the OCS.

It is important to note that there are varied special services that can be performed, legally, by foreign flag vessels and crews, operating on the Outer Continental Shelf. Discerning when or, indeed, if a foreign flag vessel is operating in violations of the Jones Act (cabotage laws) can be very complicated. The key elements in making a determination depend upon whether a vessel is, first, transporting merchandise or personnel, and whether that transportation occurs between two points that are considered, under U.S. law, to be "points within the U.S." Establishing which are, in fact, "points in the U.S." can be very complex. We are working extremely hard, with a coalition of other parties that support the Jones Act, to persuade our representatives in Congress, and related U.S. government agencies, to "clarify" the intent of the U.S. Congress with respect to protecting national resources and security. Accordingly, we must strive to tighten up loose, adverse interpretations by U.S. Customs, and persuade other U.S. agencies, i.e. U.S. Trade Representative's office, and the USCG, respectively, to keep maritime services out of WTO negotiations, and prevent foreign owners from abusing the intent and scope of PL 104-324, which was to broaden the sources of capital for owners of U.S. vessels engaged in coastwise, Jones Act trade. Today, the Jones Act flank is potentially exposed and vulnerable in both of these areas.

A third example of a problem within our industry reaching critical mass before year end is the matter of attempts by labor unions to organize our industry. The unions have not been successful to date in their initiative to organize the offshore sector. Therein, possibly, lies the problem. Our industry may be becoming dangerously complacent. Current information leads us to believe that depending on the outcome of several distinct but related legal contests between local and international unions, U.S. corporations that have become their targets, this summer will bring new, intensified efforts to organize the offshore industry. (It is interesting to note that the U.S. based labor group, the OMU, which is attempting to organize offshore mariners, and ultimately, other offshore workers, are acting "in solidarity" with NOPEF, the Norwegian Labor Federation.) The Norwegian government supports the weakening of the Jones Act so that Norwegian operators and labor will gain entry to the U.S. offshore market via expanded maritime services which the Norwegians are seeking to include within a broader definition of "energy services." under the ongoing WTO (fast track) trade negotiations with the U.S. Trade representative's office. So, ironically, the U.S. labor organizations insist that they want to protect the Jones Act. To give U.S. labor credit where do, they generally do support the Jones Act. Yet, their foreign labor counterparts support activities that are designed to weaken the Jones Act and, ultimately, threaten the jobs presently held by U.S. mariners. Labor apparently tries to have it both ways. This is not possible.

The above are but three examples, important though they may be, of the many critical issues we, in the maritime sector will be facing, over the coming months. There are others. These include an unsettled energy market, unpredictable prices for oil and gas, the rising expense of doing business offshore, the pressure from customers for contractors to reduce rates, the introduction of new business techniques such as on line bidding designed by end users to reduce their costs and, in the process, the profit margins of suppliers, a weak and embattled government energy policy, incompatible industry safety, and other compliance standards, for field operations.

There are remarkable efforts underway to meet each of these challenges, and to resolve each of them in the most constructive way possible. However, it seems, at times, that we add gratuitously, and dramatically, to our own difficulties. We do this as a result, most often, of short sightedness and the practice of reaction rather than proactive initiatives. Our industry, as a whole, must become more introspective and work more closely together in the future.

We hope, at our next meeting of the Board of Directors and of the OMSA general membership, to identify and confront these issues, and to come to an agreement that firm, aggressive measures must be undertaken with respect to the actual and evolving issues.

Andy Brauninger, President of Seabulk Offshore, Ltd., has been elected Chairman of the Board of the Offshore Marine Service Association (OMSA) and Milton Rose, President of SEACOR Marine, Inc., has been elected Vice-chairman of the association. OMSA's new Secretary/Treasurer is Minor Cheramie, Jr., President of L&M Botruc Rentals, Inc.

Also elected to the OMSA Board of Directors are: Van C. De Witt, Vice-president/COO of Sea Mar Management, Inc.; Hank Danos, President and CEO of Danos & Curole Marine Contractors, Inc.; Marilyn Muchowich Stanley, President of Offshore Oil Services, Inc.; Janson Graham, President of C&G Boat Works, Inc., and Robert M. Thompson, Sr., CEO of the Cross Group Ltd.

Remaining board members with unexpired terms are Otto Candies, Jr., President of Otto Candies, LLC, James Holleman, Vice President/COO of Superior Energy Services, Inc., Jim Dore, Senior Vice President/Diving and Special Services of Global Industries, Ltd, Todd Danos, Secretary/Treasurer of Galianno Tugs, Inc., Tom Fairley, President/CEO of Trico Marine Operators, Inc., Dr. Laney Chouest, Senior Vice President of Edison Chouest Offshore, LLC, Marshall Ballard, Vice President of ENSCO Marine Co.

Outgoing board members are: OMSA Chairman of the Board, Al Gonsoulin, President of Sea Mar Management, Inc., and Chairman of the Board of Petroleum Helicopters, Inc.; Secretary/Treasurer Brian Cheramie, President of Gilbert Cheramie Boats, Inc.; Karl Beier, President of Frank L. Beier, Inc., and Vance Breaux, President of Breaux Brothers Enterprises, Inc.

The 12th Annual OMSA April Fool Golf Classic is scheduled to take place at Chateau Golf & Country Club, 3600 Chateau Blvd., Kenner, LA. This year, we have two hotels providing accommodations. The Hilton Garden Inn at 4535 Williams Blvd., (504) 712-0504 in Kenner, LA is located minutes from Chateau Golf & Country Club with rooms at $79 (single/quad occupancy). The Hilton New Orleans Riverside at Poydras & the River (504) 584-3999 will be the site of the OMSA 2nd Quarterly meeting the day after the tournament. Rooms are available at $189 for classic single/double rooms and $239 for towers.

A special thanks - a very special thanks to our wonderful Associate and Regular Member SPONSORS who make this Tournament possible. Please call if you are interested in sponsoring, providing ditty bag items or a drawing prize. Winners of drawing prizes must be present.

Golfer registration has been fantastic. The morning and afternoon tee times (8:00 AM and 1:30 PM) SOLD OUT. A waiting list has been formed in the event of the inevitable last minute changes.

Volunteers are needed and will be enthusiastically welcomed! Please contact Mitzi Ray at (504) 734-7622 or by e-mail, mitzi@offshoremarine.org for more details. Below is a list of sponsors, prizes and volunteers at press time.

OMSA APRIL FOOL
2002 GOLF CLASSIC
SPONSORS

BOLLINGER SHIPYARDS, INC.
Hole #1, Longest Drive Hole,
Fishing Trip for Four

GULF COAST CATERPILLAR DEALERS
(Louisiana Power Systems, Mustang
Power Systems, Thompson Power Systems,
Puckett Machinery and Caterpillar, Inc.)
Hole #13

GULF COAST CATERPILLAR DEALERS
(Louisiana Power Systems, Mustang Power Systems, Thompson Power Systems,
Puckett Machinery, and Caterpillar, Inc.)
Cochon de Lait

GULF COAST CATERPILLAR DEALERS
(Louisiana Power Systems, Mustang Power Systems, Thompson Power Systems,
Puckett Machinery and Caterpillar, Inc.)
Breakfast, Lunch,Cocktails & Dinner

GULF COAST CATERPILLAR DEALERS
(Louisiana Power Systems, Mustang
Power Systems, Thompson Power Systems,
Puckett Machinery, and Caterpillar, Inc.)
Flight Prizes

OMSA APRIL FOOL 2002 GOLF CLASSIC
SPONSOR LIST - SPECIAL EVENTS/DRAWING PRIZES/AWARDS

SOUTHWEST AIRLINES
Kenner, LA
Two Open Date, Open Destination
Airline Tickets

NEW ORLEANS HILTON & RIVERSIDE TOWERS
New Orleans, LA
Deluxe Accomodations for two nights

JOHN-HENRY ENTERPRISES
Metairie, LA
Pressure Zone ES 2000 Pressure Washer
3 Gal. a minute, 2000 PSI,
5 HP Honda GC160

L & M BOTRUC RENTALS, INC.
Golden Meadow, LA
Edwin Watts Gift Certificate ($150)

CANAL BARGE COMPANY
New Orleans, LA
"Shoulda Gone Fishin Award"
Rod & Reel Combos for four

ALARIO & ASSOCIATES, L.L.C.
Harahan, LA
Dinner Gift Certificate to Eleven79

JOHNNY'S PROPELLOR SHOP
Morgan City, LA
Edwin Watts Gift Certificate ($50)

ABDON CALLAIS OFFSHORE, L.L.C.
Golden Meadow, LA
Large Igloo Ice Chest, T-Shirts,
Pens, Koozies, Mugs

OMSA
Harahan, LA
OMSA Golf Shirts
Edwin Watts Gift Certificate
Emeril's Restaurant Gift Certificate

OMSA APRIL FOOL 2002 GOLF CLASSIC
DITTY BAG CONTRIBUTORS

Bollinger Shipyards
Stewart & Stevenson
OMSA
American Bureau of Shipping
Baker Lyman & Co.

If you are interested in being a volunteer please contact Mitzi Ray at OMSA (504) 734-7622 or by e-mail, mitzi@offshoremarine.org

TO ACCESS THE MOST CURRENT INFORMATION ON LEGISLATION LISTED IN THIS SECTION GO TO THE THOMAS LEGISLATIVE WEB PAGE AT HTTP://THOMAS.LOC.GOV/ AND ENTER THE BILL NUMBER IN THE ARTICLE

Rep. James Oberstar (D-MINN.), joined by Chairman Don Young (R-Alaska) of the House Transportation and Infrastructure Committee. Introduced legislation to amend U.S. tax laws in an effort to revitalize the international competitiveness of the U.S.-flag merchant fleet. H.R. 3262, the Merchant Marine Cost Parity Act, would substitute a tonnage tax for income taxes presently paid by shipowners. It also would extend to merchant seamen in the international shipping trades the same exclusion from taxation on the first $80,000 in income granted to other U.S. citizens working overseas. In order to address vessel costs, H.R. 3262 would exempt vessels from unique Coast Guard vessel design standards as long as the vessel meets safety standards imposed by the International Maritime Organization. H.R.3262 would also address higher insurance costs imposed on vessel owners by allowing vessel owners and employee representatives to agree upon an insurance policy that would compensate mariners for injuries aboard ship.
Source: Maritime Update November 16, 2001

A House-Senate conference approved the Commerce Justice State spending bill for Fiscal Year 2002. The bill includes $224.7 million for the U.S. Maritime Administration, which is $123.7 million above the Bush Administration request and $8.6 million more than last year. The conferees funded the Title XI shipbuilding loan guarantee program at $33 million, with $7 million that rolls over, that adds up to funding for about $800 million of shipbuilding.

While $33 million is not the $100 million that the Senate recommended for Title XI, it's a lot better than the zeroing out of the program recommended in the original Bush budget blueprint. Less comforting news on Title XI is that the Department of Transportation's Inspector General is initiating an audit of the program. The audit is in response to requests from the Senate Committee on Commerce, Science, and Transportation and the House Appropriations Committee.

The fallout from the American Classic Voyages, Co. (AMCV) bankruptcy filing on October 19, 2001 on its Title XI loan guarantees is an examination of the Title 11 program. "AMCV presently has approved loan guarantees totaling over $367 million that are now at risk," says a memo from the office of the Inspector General to MARAD. "We will determine what immediate actions, if any, the Department of Transportation and MARAD can take to better protect the interests of the United States." "We will also perform a comprehensive review of the Title XI program," continues the memo. "Specifically, we will determine (1) if procedures for submission, review, approval, and monitoring of selected XI loan guarantees comply with applicable laws and regulations; and (2) if these procedures are adequate and effectively implemented in order to protect the interests of the United States." The audit will be conducted primarily at MARAD Headquarters, but auditors will also visit selected companies that have received approved Title XI loan guarantees and shipyards where their ships are being built.
Source: Marine Log December 2001

Automatic Identification System - Section 8 requires that all vessels built after December 31, 2002, be equipped with a position indicating transponder and an appropriate situation display for accessing the information made available by the transponder system. After December 31, 2004, all vessels built before December 31, 2002, must carry this equipment.

In early June Vice Admiral Thomas Collins will be promoted to succeed Admiral James Loy to serve as the 22nd Commandant of the United States Coast Guard.

Vice Admiral Thomas H. Collins assumed duties as Vice Commandant of the U.S. Coast Guard on the 9th of June 2000. His other Flag Officer experience includes: serving as Chief, Office of Acquisition at Coast Guard Headquarters from 1994 to 1996; Commander, 14th Coast Guard District in Honolulu, HI from 1996 to 1998; and a recently completed two-year assignment as the Commander Pacific Area/Commander Eleventh Coast Guard District in Alameda, CA.

Vice Admiral Collins' pre-flag experiences include tours in a wide variety of operational and staff assignments. He began his Coast Guard career in 1968 as a deck watch officer and first lieutenant aboard the Coast Guard Cutter Vigilant. Following this assignment, he served a two-year tour as Commanding Officer of a 95- foot patrol boat, Cape Morgan, in Charleston, SC. From 1980 to 1983 he served as Deputy Group Commander, St. Petersburg, FL, and commanded Coast Guard Group and Captain of the Port, Long Island Sound, located in New Haven, CT (1987 to 1990).

Vice Admiral Collins graduated from the Coast Guard Academy, New London, CT, in 1968 and served as a faculty member within the Humanities Department from 1972 to 1976. He earned a Master of Arts degree in Liberal Studies from Wesleyan University in 1972 and a Master of Business Administration from the University of New Haven, CT, in 1976.

OMSA's Board and Members wish to extend congratulations, and best wishes to Vice Admiral Callais.

The Oct-Nov issue of the Coast Guards Proceedings magazine is dedicated to the end of the STCW transition period. You may be interested in reading the Coast Guard perspective on the issue and can download the magazine at http://www.uscg.mil/hq/g-m/nmc/pubs/proceed/index.htm.

The Coast Guard is seeking applications for membership on the Towing Safety Advisory Committee. The notice was posted in the November 23, 2001 Federal Register and the deadline for application is May 17, 2002. You can also access the notice at the DOT Docket Management web site. (USCG-2001-10982).

SPILL CONTACT AND REPORTING INFORMATION
Oil Spill Notification List
(Call in this Order)
1. National Response Center ("NRC") 1-800-424-8802
2. Local Coast Guard District (504) 589-6277 or 6298 - If no response from NRC
3. Local EPA Region (214) 655-2222 - If no response from NRC or USCG
4. LDEQ/State Police Hotline (225) 342-1234 or 1-888-763-3908 - If spill exceeds one (1) barrel

The Occupational Safety and Health Administration has introduced new forms for recording on-the-job injuries and illnesses for use by employers and safety professionals. Bringing to a close an effort launched during the late 1980s to simplify the recordkeeping burden while providing more detailed information on how accidents and illnesses occur, new forms 300 and 301, as well as a new summary form. The forms will replace OSHA 200 forms that date back to the early 1970s when the agency made its first attempt to require employers to log injuries. Injury logs are reviewed by OSHA compliance officers when they conduct inspections, and, in addition, employers are encouraged to review their own logs to determine whether specific types of hazards are injuring workers or making them ill in the workplace. The forms are available for download from the OSHA website at www.osha-slc.gov/recordkeeping/index

Bob Alario represented the offshore vessel industry at the Coast Guard three-day workshop on maritime security on January 28-30, 2002 at the Grand Hyatt in Washington, D.C. The workshop focused on security procedures, programs and capabilities within marine transportation systems. Discussions centered on identifying possible security measures, standards, and responses to threats and acts of crime and terrorism. The workshop was in addition to a public meeting held by the agency on January 3, 2002 to discuss a proposed United States submission on maritime security to the Maritime Safety Committee of the International Maritime Organizations (IMO).

The Coast Guard has set the calendar year 2002 minimum random drug testing rate the same as in all previous years at 50 percent of covered crewmembers (66 FR 67616-67617). An evaluation of the 2000 Management I nformation System (MIS) data collection forms submitted by marine employers determined that random drug testing on covered crewmembers for the calendar year 2000 resulted in positive test results 1.81 percent of the time.
Regulatory updates courtesy of Regulatory Compliance Partners (RCP) www.your-rcp.com

The USCG 8th District has made a change to the acceptance and administration of Oaths for merchant mariners. If there are any questions please contact Lloyd H. Gorman, CWO3, USCG MSO Regional Exam Center, 9820 Lake Forest Blvd., Suite P, New Orleans, LA 70127-3077; Voice: (504) 589-6183 ext. 237; E-mail address: lgorman@msoneworleansrec.uscg.mil. The Regional Exam Center New Orleans web page can be found at http://www.uscg.mil/d8/mso/nola/Departments/Rec/recnola.htm. The Eighth District Marine Safety Division web page can be found at http://www.uscg.mil/d8/Divs/M/ccgd8M.htm.

OMSA President Bob Alario and staff member Ken Parris represented OMSA members at the recently completed Merchant Personnel Advisory Committee meetings held on the grounds of the Marine Engineers Benevolent Association (MEBA) Union Training School. MERPAC advises the Coast Guard on licensing issues affecting all merchant mariners. Of particular importance to our members was this session's Task 31 in which the Coast Guard proposed to use an IMO manning model to set manning standards for all vessels. Through artful suggestions by the OMSA staff the committee determined that the suggested model was too unwieldy and that manning for each vessel type should be based on a variable manning model developed by industry experts. A future task will be to develop an industry specific manning model, at which time we will be asking for your participation.

The issues below are other "buns in the oven" which OMSA is watching very closely:

1. Issue: The Coast Guard Authorization Act of 1996 authorized the Coast Guard to develop, appropriate alternate convention tonnage as measured under 46 USC Chapter 143. To date the Coast Guard has only proscribed 3 equivalent alternate convention tonnages.
Status: The OMSA Alternate Tonnage subcommittee has reduced its proposed list of regulations for the assignment of alternative tonnages from over 1300 to about 600 in an attempt to provide the Coast Guard with a list of regulations that they clearly have the authority to implement the necessary change. We can only hope that action will be taken in the near future. OMSA has been working with other organizations effected by the failure to proscribe alternative tonnages in the hopes that the Coast Guard will take action based on multiple requests.

2. Issue: The ability of the Regional Examination Center (REC) to meet the needs of industry in regards to timeliness, quantity and accuracy of services rendered is not keeping pace with the needs of industry for those same services.
Status: OMSA has provided the Coast Guard extensive documentation of the current and future need of its licensing and documentation services. In response the Coast Guard has changed the work hours of REC personnel, allocated extensive overtime pay and is hiring additional staff for the regional exam centers.

3. Issue: All vessel types except for OSV's have been authorized for underwater inspections in lieu of drydocking (UWILD).
Status: OMSA continues to work with the staff of the Eighth Coast Guard District and local inspections offices to gain acceptance of UWILD as a satisfactory methodology for examining the underwater hull of an OSV at alternating inspections.

4. Issue: Whether or not the requirements for a vessel to be securely moored during oil or hazardous materials transfers is met by a properly functioning dynamic positioning system.
Status: OMSA along with the Offshore Operators Committee has submitted to the Coast Guard a series of proposals regarding the minimum equipment requirements for dynamic positioning systems. keeping.

5. Issue: Crew fitness for duty is important to the Coast Guard and industry. Both the Coast Guard and industry desire to reduce mariner fitness for duty as an issue in vessel operations.
Status: OMSA is continuing its work with the Coast Guard on the development of a mariner fatigue reference guide for use by vessel personnel.

6. Issue: Sea Service Credit for Liftboat Crews.
Status: OMSA and its liftboat committee are continuing to work with the Coast Guard to develop a policy on computing the sea service of personnel working on liftboats that properly credits the work that they perform. Until the new policy is developed sea service will be calculated as it traditionally has been.

7. Issue: OMSA continues to work diligently with the NMC to finalize requirements under the STCW convention for mariners aboard OSV's, and other small, similarly sized and equipped vessels. We are pleased that through hard work and the good faith cooperation between industry and the Coast Guard, courses have been approved to cover all domestic OSV operations.
Status: OMSA has submitted all domestic programs for renewal and should be receiving our initial approval for Rating Forming Part of the Engineering Watch soon. There have been some delays in the submission timetable for our route extension program for Master, Mate and Engineer (OSV) from Domestic Near-Coastal to Oceans, and for upgrading the tonnage restriction on licenses from 3000 to 6000 Gross Tons (ITC). We continue to aggressively seek a solution re the Oceans route extension.

These articles are intended as a summary of issues, for general information purposes only and are not intended to be a substitute for legal consultation with respect to any specific matter. For such opinion or advice, you should contact legal counsel. See your OMSA membership directory for the names of member firms.

In January the Supreme Court ruled on two cases that may impact you. In a pivotal decision the court ruled that OSHA, not the Coast Guard, has jurisdiction over the occupational safety and health of employees on uninspected commercial vessels. The case, Chao v. Mallard Bay Drilling, revolved around which Federal agency held the primary responsibility for the occupational safety and health of workers on uninspected commercial vessels. OSHA clearly has jurisdiction over the safety of shoreside workers. All of your office, shop, yard and dockside workers fall under OSHA jurisdiction. Working conditions for these employees must comply with OSHA rules. Injuries and illnesses to these employees must be recorded and reported according to OSHA rules. All of your inspected vessel crewmembers, that is the assigned crew of your vessels with a Coast Guard Certificate of Inspection fall under Coast Guard jurisdiction. Working conditions for crewmembers must comply with Coast Guard regulations and work related illness or injury must be reported in accordance with Coast Guard rules. The new wrinkle that the Mallard Bay case brings is that uninspected commercial vessels now fall under the jurisdiction of both agencies. OSHA jurisdiction covers all areas where the Coast Guard does not have a specific regulation. In the case of your uninspected towing vessels issues such as hearing protection, hazardous communications and walking/working surfaces fall under OSHA rules and lifejackets fall under Coast Guard jurisdiction. There will inevitably be conflicts between the two, for example both agencies have very different and very specific rules on the reporting and recording of workplace injuries or illness. The best advice today is that you should now fully comply with both sets of rules. Your towing vessel subcommittee has taken on the task of analyzing the potential effect of this new jurisdiction to your business. Several OMSA member law firms have held seminars to inform members of the potential effect that this ruling will have on our businesses. Unfortunately it is still too early to gauge the full effect. The most likely immediate effect is that disgruntled employees, plaintiff's attorneys and the unions will attempt to use OSHA as a battering ram against you.

Another recent Supreme Court decision that may affect you is Chao v. Transocean. In this case the issue was whether or not OSHA has jurisdiction over nonvessel crew members who are working on an inspected vessel. As was discussed before, OSHA and the Coast Guard had a well established agreement that the Coast Guard had jurisdiction over the working conditions of crew members on Coast Guard inspected commercial vessels. In this case OSHA inspectors attempted to board a Transocean drilling rig undergoing dockside repairs at a shipyard to inspect the working conditions of the shipyard workers. Transocean refused the OSHA inspectors admittance to the vessel citing Coast Guard jurisdiction vs. OSHA. The lawsuit over OSHA access eventually made it to the Supreme Court, where the Court ruled that OSHA has jurisdiction over non vessel crewmembers working on the vessel in the shipyard, and that their workplace on that inspected vessel fell under OSHA jurisdiction. As in the Mallard Bay case it is too early to tell the full ramifications of this case, but a possible outcome is that the workplace of service personnel working on your inspected vessels may now fall under OSHA rules. There is still some debate on who is responsible for the workplace and OSHA compliance regarding the workplace of service technicians, contract mechanics or third party employees on your vessels, and you may now bear some liable for injuries that occur where their workplace did not fully comply with OSHA rules.

A Texas drilling services contractor is responsible for the off-duty negligence of an employee who fell asleep while driving home after working the graveyard shift on an oilrig, a state district court jury decided Nov. 16 (Escoto v. Nabors Drilling, Tex. Dist. Ct., No. 01-81, jury verdict 11/16/01). A jury for the 197th Texas District Court, Willacy County, ordered Nabors Drilling USA Inc., headquartered in Houston, to pay $5.95 million to the families of four individuals killed when the pickup truck driven by rig worker Roberto Ambriz, 19, collided with another vehicle in March 1998. The workers were traveling to their jobs in onion fields near Raymondville, Texas.

Ambriz died two days after the collision. He had worked for Nabors for four months, two of which were in the company's training program. Laboratory tests showed that Ambriz was not under the influence of alcohol or drugs when the accident occurred. This was the first case to go to trial in Texas where a drilling company was charged with negligence after one of its employees caused a wreck because of fatigue following work on a graveyard shift, plaintiffs' attorney Ray Marchan told BNA.

The suit, which sought $36 million, was filed under general negligence law. The plaintiffs were not permitted to submit evidence of the previous claim made against Nabors after a tired worker allegedly caused a highway death. Jurors said the defendant driver was 57 percent responsible for the accident while the drilling company was 43 percent responsible for the accident because of its failure to adequately train employees about fatigue caused by working nights, Marchan said. The plaintiffs were found to be innocent.

"This verdict is a reflection of society's recognizing the problem of fatigue after working the graveyard shift," Marchan said. In the 24-hour period before the accident, the defendant driver had been awake for 20 hours. Twelve of those hours were spent performing heavy manual labor to repair the rig. Marchan said evidence was presented in the three-day trial that materials were available from the federal government about worker fatigue and sleep.
Source: BNA

This decision falls on the heels of the drilling industry's recent settlement for $75 million of claims of wage fixing. An employee who alleged that leading U.S. oil and petrochemical firms routinely swap data on managerial, professional, and technical employees' salaries in order to hold down their pay levels has stated an antitrust claim under Section 1 of the Sherman Act, the U.S. Court of Appeals for the Second Circuit held Dec. 20 (Todd v. Exxon Corp., 2d Cir., No. 01-7091, 12/20/01).

Such information exchanges within an industry are not always anti-competitive, Judge Sonya Sotomayor acknowledged. But in this case, the alleged exchange involved confidential data concerning fungible jobs and an inelastic labor supply in a concentrated market, with a resultant anti-competitive effect. Those allegations are sufficient to withstand a motion to dismiss, she said.

The class action suit was brought on behalf of current and former employees of Exxon Corp. Roberta Todd, the named plaintiff, alleged that 14 oil and petrochemical firms accounting for 80 percent to 90 percent of industry revenues and employees conducted biannual surveys comparing the pay of nonunion managerial, professional, and technical (MPT) employees. Using certain jobs at Chevron Oil as benchmarks, the other companies would submit detailed information on their most comparable jobs so that the data could be matched. The information was compiled, refined, and distributed to participants by a third-party consultant, Towers Perrin, with the data broken down into subsets of as few as three companies at a time.

The data exchanges allegedly were accompanied by mutual assurances that the data would be used in setting MPT pay. In addition, human resources personnel of the participating companies allegedly met at least three times per year to discuss and exchange salary data. The purpose and effect of the data exchange, Todd alleged, was to artificially depress MPT salaries by reducing the companies' incentive to bid up salaries in order to attract or retain affected workers.
Source: Daily Labor Report January 3, 2002

State and federal labor and employment laws define what conduct is proscribed, such as employment discrimination based on certain protected classifications, but these laws and regulations generally do not offer guidance on way employers can avoid liability for legal claims. The information contained in this and following Tip Sheets is designed to offer practical guidance for employers to avoid, or at least minimize, the risk of liability, by discussing the facts of various employment cases and the lessons that have been learned.

1. Consider Fairness of Actions
How many times have parents preached to their children, "the world is not always fair"? Even in the courtroom, judges instruct juries that, when they deliberate, they are not to consider the fairness of the employer's actions but, rather, whether the employer's actions were illegal or discriminatory. Nevertheless, it is a known fact that juries often tend to inject fairness in deliberating whether an employer violated the law. This is because every juror can identify with an employee. As such, jurors generally find it difficult to disregard evidence which, although not indicative of illegal or discriminatory conduct, tends to show poor business judgment or mistakes on the part of supervisors or employers.

While it is not possible to be "fair" to everyone all of the time, it is wise to consider the following "fairness" questions before taking adverse employment actions. Not only may this exercise thwart a lawsuit, but it will strengthen employee morale.

Glenn McKinney, President of McKinney Towing Inc.; McKinney Towing Inc.; McKinney Harbor Towing Inc.; and Slidell Towing Inc.; all of Baton Rouge, La. Were sentenced on Nov. 21 for violating the Clean Water Act and the Oil Pollution Act by pumping a mixture of oil and water into the Mississippi River. McKinney Towing has agreed to pay a $400,000 fine and $80,000 in restitution to be equally divided by the Louisiana State Police Right to Know Fund and the Southern Environmental Enforcement Network. McKinney Towing will also be placed on probation for 24 months and will publish an apology in the Baton Rouge Advocate. The other two companies will each pay a $10,000 fine and also serve 24 months probation. Glenn McKinney will serve six months home confinement and pay a fine of $2,00. The defendants are engaged in the business of providing tugboat services on the Mississippi River. Between 1995 and 2000, the defendants knowingly allowed their tugboats to discharge oily bilge water into the river several times a week. The case was investigated by EPA's Criminal Investigation Division, the U.S. Coast Guard Investigative Service, the Louisiana State Police and the Baton Rouge Police Department with the assistance of EPA's National Enforcement Investigations Center.

The Environmental Protection Agency (EPA) stated that a restaurant, its president, and an employee have been sentenced on charges of conspiracy to violate the Clean Water Act (CWA) and illegal dumping in violation of the CWA. The restaurant operated from a converted tow vessel moored on the Mississippi River. On several occasions, the defendants discharged sewage from the vessel into the river and adjoining ditches rather than pay for proper disposal. The restaurant was ordered to pay a $90,000 fine. The president was sentenced to 90 days in prison, a $90,000 fine, and 100 hours of community service. The employee was sentenced to 30 days in prison, a $10,000 fine, and one year of home confinement.

The Environmental Protection Agency (EPA) stated that the ex-owner of a ship repair facility pleaded guilty in Federal court to violating the Clean Water Act. The company renovated and painted ships by pressure washing and sand blasting the hulls. The owner allowed grit and paint from his operation to be discharged into a River. When sentenced, the owner faces a maximum sentence of up to three years imprisonment and a fine of up to $250,000.

Trog Swinton was employed at a manufacturing plant in Washington. He was the only African-American among 140 employees and was regularly subjected to racially offensive jokes by a supervisor as well as offensive comments by co-workers. According to Swinton, his boss witnessed the supervisor's offensive conduct and did nothing about it. Swinton did not report the harassment through the company's formal complaint procedure, but instead quit, arguing that he did not report the conduct because his boss had witnessed it. At trial, his boss admitted this and the jury responded with damages.

The Ninth Circuit upheld the jury award $1 million in punitive damages under plaintiff's 42 U.S.C. § 1981 claim. In so doing the Court affirmed the district court's ruling excluding evidence of remedial action taken by the company - diversity training 7 months after the plaintiff quit - because "proof of anti-harassment training 7 months after plaintiff quit would have done little, if anything, to undermine the uncontroverted evidence that, even after everyone in management became fully cognizant of plaintiff's allegations, no one...was even fired, demoted or in any way discipline..."

The court also ruled that the Ellerth/Faragher defense was not available to the company because the harasser was not the plaintiff's supervisor and the plaintiff alleged negligence. To prevail on his negligence claim, the plaintiff was required to show both that the employer had knowledge of the harassment and that if failed to take reasonable corrective action. Thus, "employers are at no less of an advantage in being denied the affirmative defense in the negligence setting because the threshold is lower in establishing a prima facie case with vicarious liability..."
Swinton v. Potomac Corp., d/b/a Crescent Cardboard Co. d/b/a Crescent/U.S. Mat, 9th Cir., No. 99-36147 (10/24/01).

Hull v. Fluker Farms, 787 So.2d 535 (La. App. 1st Cir. 2001)
Hull was employed as a warehouse laborer by Fluker Farms. He allegedly sustained neck and back injuries in two unwitnessed on-the-job accidents. He subsequently filed a claim for worker's compensation benefits. In investigating the claim, Fluker interviewed and statementized Hull concerning his medical history. At that time, Hull misrepresented and failed to fully disclose information concerning his history of accidents and prior neck and back injuries. Meanwhile, Fluker developed medical evidence revealing Hull's extensive treatment for earlier neck and back injuries and a more extensive history of accidents involving injuries to his neck and back. Fluker also obtained surveillance and other evidence which contradicted Hull's claims of serious and disabling neck and back injuries from his work related accidents. In addition to denying his claim for benefits, Fluker demanded restitution for the attorney fees and other expenses it incurred in defending the claim.

Under La. Rev. Stat. §23:1208, it is unlawful for any person to willfully make a false statement or misrepresentation for the purposes of obtaining or defeating worker's compensation benefits. The statute also expressly provides for the imposition of criminal and civil penalties and restitution. The workers' compensation judge, and later the appellate court, found that the record established that Hull had engaged in a pattern of willfully made false statements and misrepresentations for purposes of obtaining worker's compensation benefits. In addition to dismissing the claim, the worker's compensation judge ordered hull to make restitution to Fluker in the amount of $24,000.00 for the costs it incurred in investigation and litigation his claim. The award was upheld on appeal.
Source: Mouledoux, Bland, Legrand & Brackett - For The Record

When most people think about employment law, what first comes to mind are federal and state statutes prohibiting employment discrimination, labor laws, wage and hour laws and, of course, employment related litigation - topics which are usual subjects of our newsletter. In the spirit of Halloween, however, we've decided to highlight a handful of somewhat obscure Louisiana employment laws that every employer should be aware of. As you can see, our list contains both "tricks" and "treats" for employers - but, of course the real treat is that awareness of these laws can help keep your company our of potential legal disputes.

1. Trick: While employees may be eligible for up to 12 weeks of unpaid leave for the birth of a child under the FMLA, Louisiana law requires that an employer provide up to 4 months of unpaid leave when an employee is disabled on account of pregnancy, childbirth or a related medical condition. La. R.S. § 23:342.

Or Treat: Louisiana law protects employers giving job reference information (regarding current or former employees) to prospective employers from civil liability unless the information disclosed is "knowingly false and deliberately misleading." La. R.S. § 23:291. In order to ensure that accurate information is disclosed, we recommend that employers designate a particular individual within the organization to handle all reference requests.

2. Trick: Employers may loan their employees money, but they may not charge employees an interest rate in excess of 8% on the funds loaned. Violations may result in a fine of $25 to $100 and imprisonment of up to 3 months. La. R.S. § 23:691.

Or Treat: The same statute provides that a hiring employer who relies on reference information given by other employers is immune from civil liability for negligent hiring or other causes of action based on the hiring of an employee unless further investigation (such as a criminal background check) is required by law (for example, certain positions involving the care and supervision of children or the elderly require criminal background check). The bottom line - it pays to follow up on applicant references.

3. Trick: Louisiana employers are prohibited from assessing fines and penalties against their employees. An exception is made where an employee willfully or negligently damages the goods or property of the employer or where the employee has been convicted of theft. Such fines may not exceed the value of the damage done or property stolen. Violations of the statute may be punished by fines of $25 to $100 or imprisonment of 30 days to 3 months. La. R.S. § 23:635 - 636.

Or Treat: Employers can require employees who resign within the first 90 days of employment to reimburse the company for the cost of pre-employment physicals and drug screens, but only if the employee agrees to such reimbursement in writing at the time of hire. La. R.S. § 23:897.
Source: Personnel Points of Interest - Lemel & Kelleher, L.L.P. Fall, 2001

In Torres v. M/V FUIONO, 141 F.Supp.2d 1028 (S.D.Cal.2001) plaintiff and a fellow crewman on a fishing vessel, were involved in a work-related argument. Plaintiff followed his co-worker below deck and brandished a knife. The crewman punched plaintiff, knocking him to the floor, but plaintiff was still conscious. Then, bracing himself against a handrail, the crewman stomped on plaintiff's face causing plaintiff serious injury. Plaintiff sued the vessel and her owners alleging that the presence of the assailant on board made the vessel unseaworthy, that the hiring of the assailant constituted Jones Act negligence, and that his employer had willfully failed to pay maintenance and cure.

US oil and gas operations in the Gulf of Mexico occur in one of the world's largest exploration and production basins and involve nearly 4,000 production facilities, over 15,000 wells, 175 drilling rigs, and as many as 25,000 workers offshore at any given time. The region produces over one-half billion bbl of oil annually and nearly 6 tcf of natural gas, which constitute about one-fourth of domestically produced petroleum supply.

These statistics are no more impressive than the outstanding safety record the US offshore industry has achieved, while operating in a challenging environment with a diverse operator base. The industry has achieved this record by meeting some of the worlds most rigorous and comprehensive safety standards. By virtue of their effectiveness, they have become de facto standards for offshore oil and gas operations around the world.

The record demonstrates that the US offshore oil and gas industry is operating safely. According to government statistics, our offshore industry, despite the challenging environment and complex equipment involved, is safer than many other industries and among the safest among all US oil and gas industry sectors.

According to 1998 Bureau of Labor Statistics (BLS) figures and Minerals Management Service (MMS) survey data, the recordable injury and illness rate was 6.7% for the entire US private sector (6.7 injuries or illnesses/year/100 full-time workers), 4.4% for the petroleum industry as a whole, 4.1% for all exploration and production, and only 3.4% for US offshore operations.

Further, in 1999 the offshore rate decreased to 2.3%. Additionally, MMS survey data show that recordable injury and illness rates for all offshore categories - production, drilling, and construction - also have been in decline. Together, these BLS and MMS statistics demonstrate that the processes and procedures employed by the operators and contractors who work in the US Gulf are effective in protecting employees and the environment. Offshore safety and anti-pollution standards and recommended practices have played a key role in enhancing safety performance, environmental protection, and asset protection. These API and industry standards cover the design, installation, and/or implementation of various safety systems and procedures for offshore production and drilling facilities. Both the MMS and the US Coast Guard have incorporated many of these standards in their regulations, as have various non-U.S. government agencies.

In 1993, API issued RP75, "Recommended Practice for Development of a Safety and Environmental Management Program (SEMP) for Outer Continental Shelf Operations and Facilities." This recommended practice is a fit-for-purpose tool for integrating safety management into a variety of offshore operations. As the first comprehensive safety and environmental management standard of its kind in the world, RP75 reflects the contributions of many industry offshore safety and operational experts with hundreds of years of experience in the oil and gas industry; government agencies, such as MMS and the Coast Guard; and industry trade groups, including API, the Offshore Operators Committee, the National Ocean Industries Association, the Independent Petroleum Association of America, and the International Association of Drilling Contractors. The program was created to cover activities, procedures, and operating hardware. It was designed to be flexible and responsive and to be a permanent part of a company's culture, objectives, and operations. Many offshore operators and contractors, including all API oil company members, have created safety and environmental management programs that follow the recommendations in RP75. A SEMP program starts with an assessment of operating and design requirements and a hazards analysis. It requires establishment of safe operating procedures, work practices, management-of-change procedures, and associated training. It calls for procedures that ensure that the design, fabrication, installation, testing, inspection, monitoring, and maintenance of equipment meet safe (minimum) standards. In addition, it recommends periodic auditing of safety programs - and requires emergency response and incident investigation to help mitigate harm and prevent future mistakes.

Government oversight and regulation have also contributed to the industry's safety performance. Operators must obtain numerous federal permits and comply with many sets of federal and state regulations to operate on the federal OCS, including the Gulf of Mexico. Agencies that regulate offshore companies include MMS and the US Coast Guard, along with other federal, state, and local government entities. The industry has closely cooperated with government regulators to ensure that their rules are implemented in a way that encourages improved safety performance.

For the US offshore oil and gas industry, safety is a top priority and one of its proudest achievements. It has developed safety programs and standards that are second to none and that have helped achieve a safety record envied by many other industries. And yet, just as the US industry will certainly set more records for deepwater drilling and production, it will also continue to improve its safety performance, raising the bar for all offshore operators around the world.

Source: P. K. (Peter) Velez, Chairman, API Executive Committee on Drilling and Production Operations;
Manager, Regulatory Affairs and Incident Commander, Shell Exploration and Production Co.

The ISM Code goes into effect for all cargo ships and Mobile Offshore Drilling Units 1 July 2002, and unlike the recent deferral in enforcement of the STCW Code, there will be no deferrals for the ISM Code implementation date. In 1998, the ISM Code became mandatory under SOLAS. The ISM Code entered into force on 1 July 1998 for passenger ships, including passenger high-speed craft; and oil tankers, chemical tankers, gas carriers, bulk carriers and cargo high-speed craft of 500 gross tonnage and above. It applies to other cargo ships and mobile offshore drilling units of 500 GT and above not later than 1 July 2002. The Code establishes safety-management objectives and requires a safety management system (SMS) to be established by "the Company" who has responsibility for operating a ship. If you operate vessels subject to SOLAS and are not well on your way to ISM compliance, contact your classification society immediately. The ISM Code is a top to bottom system of management programs and oversight. If you do not currently operate any SOLAS vessels, but plan on building some in the future, contact you Classification Society about ISM certification before you begin the construction of your first SOLAS vessel.

So, what is happening to President Bush's much ballyhooed energy initiative? In a meeting with business leaders at the White House, the President declared, "We need an energy plan for America. Under the leadership of the Vice President, we drafted a comprehensive, common sense plan for the future of this country." With the furor over Enron and the potential influence peddling on energy issues, this proposal faces stiff opposition. On October 9, Senate Energy & Natural Resources Committee Chairman Jeff Bingaman, at the request of Senate Majority Leader Tom Daschle, said he was suspending any further mark-up of energy legislation for this session of Congress. The most contentious issue in energy policy is, of course, drilling in the Artic National Wildlife Refuge.

On October 25, Senator Bingaman clarified his position a little further. His comments seemed to be setting the stage for demands that development in the Gulf of Mexico precede before approval is granted for drilling in the ANWR. He attacked oil companies for pursuing drilling in the environmentally sensitive ANWR while they have not developed all their leases in the Gulf first and are simultaneously spending huge sums to develop foreign oil production. "We need...to start focusing on this curious phenomenon and find out why we aren't exploring and producing the domestic leases that are already out there. "In the area of natural gas, we are about to make a major policy mistake of becoming, as a nation, dependent on imported natural gas brought in on tankers for a substantial part of our natural gas consumption. The countries on which we would rely are prone to political instability and are in the early stages of forming an OPEC-like organization for natural gas exporters..." In somewhat related events, legislators from California are trying to work a deal, where the oil companies could trade undeveloped leases off the California coast for tracts in the Gulf of Mexico. This has the potential of accelerating GOM.
Source: Marine Log

Joe Pratt, PhD, a University of Houston professor, is compiling the history of the offshore industry, with the first volume to cover the industry from its birth to about 1965. This volume is expected to be available in September 2002, with subsequent volumes scheduled. The OEC is seeking people who can provide details and historical information and experiences from the earliest days of the offshore oil and gas industry. If you are interested in sharing your experiences for this historical look at the industry, please contact Dr. Pratt at 713-464-0510, or via e-mail at oecstar@aol.com.
Source: Offshore Energy Center 3rd Quarter 2001

The U.S. Gulf rig count has continued its fall from the fourth quarter of 2001 into 2002, bringing with it a drop in both the utilization rates for GOM support vessels and the length of contracts. OMSA vessel utilization statistics show a three-year low in vessel utilization across-the-board. The Gulf of Mexico Newsletter predicts that many Gulf of Mexico offshore support vessel owners will retrench in anticipation of a tough winter. No surprises here: With the Gulf of Mexico jackup count in free-fall due to weak U.S. natural gas prices, OSV owners are not seeing a lot of new activity. Many companies report very few requests for bids coming in, and new term work is virtually non-existent. As would be expected given the current rig market, the smaller vessels that service the jackup fleet are taking the brunt of the market's slide. While larger vessels continue to work steadily, the number of vessels under 200 feet in length that are idle has increased significantly since last month. With few work prospects, owners are cold-stacking some vessels or using the opportunity to catch up on required drydockings. Day rates reflect the weakening market. Rates for vessels under 200 feet in length range from $5,000 to $7,000 per day this month. Depending on their capabilities, larger vessels are picking up new work at rates ranging from $8200 to $12,500 per day, although some large units on older term contracts are still earning up to $18,000 per day. On the good news side the total AHTS fleet greater than 3,900hp remains under contract.
Source: Gulf of Mexico Newsletter October 22, 2001 & OMSA statistics

Lehman Brothers completed its Original E&P Spending Survey and found that U.S. exploration and production expenditures for the coming year will experience a sharp decline. The report is compiled through surveys of 357 oil and gas companies and their budget plans for 2002. In total, U.S. E&P spending is projected to drop from a 2001 estimate of $36.0 billion to a 2002 estimate of $29.6 billion, representing a drop of 17.9 percent. While spending by majors is estimated to fall 9.4 percent from $14.6 billion in 2001 to $13.2 billion in 2002, the steepest decline is projected to be among independents. An estimated $21.5 billion in 2001. Lehman Brothers estimates that independent oil and gas companies will spend only $16.4 billion in the coming year, a 27.3 percent reduction.
Source: Gulf of Mexico Newsletter - December 17, 2001

The Alternate Compliance Program (ACP) is continuing to evolve and will soon be available to many OSV Owners operating ABS classed vessels. ABS and USCG to give wider delegation to the class society to issue statutory certificates while reducing direct vessel inspections by the USCG initially jointly developed the ACP. This program has allowed the USCG to devote more resources to inspection of foreign flag vessels and to deal with other issues such as National Security.

The Alternate Compliance Program is defined by 46 CFR 8.4 and further described in NVIC 2-95 ch.1. Vessels enrolled in the ACP Program are not inspected to the CFR. Instead, the class Rules, IMO Regulations and the ABS U.S. Supplement are used to determine vessel compliance with class and International requirements as interpreted for U.S. flag vessels.

Authority granted to ABS under ACP, in addition to the classification function, includes:
a. SOLAS Certification (except for Safety Radio Certificates)
b. MARPOL Certification
c. Load Line Certification
d. Tonnage Certification
e. International Ship Management Code (ISM) Certification.

The Coast Guard continues their involvement with the vessel by performing in an auditing capacity over the work of ABS. The USCG also retains direct authority over crew licensing as well as:
a. All manning issues
b. Drydock extensions
c. Load line exemptions
d. Excursion permits
e. Changes of employment (vessel)
f. Critical Area Inspection Plan (CAIP) enrollment and examinations
g. Approval of a vessel's participation in the UWILD program

The ACP is only available to U.S. flag vessels that are certified for international voyages and classed by a society recognized under ACP. Also, a U.S. Supplement must be approved for the vessel type. Vessel types that can now use the ABS version of ACP are types covered by 46CFR Subchapter D, H and I. At present, vessels types covered by subchapter U and L do not have U.S. Supplements and so are not included.

It is important to recognize that vessels in U.S. Domestic Service only, which are not issued SOLAS certificates, cannot meet ACP requirements. These include vessels covered by subchapters T, K and L.

Also "multi service" or I/L vessels will be restricted from ACP enrollment until a U.S. Supplement is completed by ABS for subchapter L. Such vessels, for the present, will continue to be inspected and have SOLAS Safety Equipment certified by the USCG.

For the sake of completeness, it should be mentioned that neither uninspected offshore tugs, nor older OSV's (less than 500 GT by definition) inspected under subchapter I, are eligible for ACP. The former because they or not USCG certified and the latter because they are not required to be SOLAS certified. However, new uninspected tugs with ITC gross tons > 500 may be issued IMO certificates by ABS independent of the ACP Program.

Of particular interest to many owners contemplating new construction is the current status of the ACP and subchapter L. The Federal Register dated 23 October 2001, announced the Direct Final Rules to allow ACP on eligible subchapter L vessels as of 22 January 2002.To be eligible means that such vessels are intended to be IMO certified for international service. No class society is automatically authorized, as a U.S. Supplement must first be developed. ABS is currently modifying the U.S. Supplement to the ABS 90 m Rules to include subchapter L. It is expected that the ABS modifications to the Supplement will be completed on about 22 January 2002.

The anticipated future requirements for "L" vessels to be allowed to enroll and ACP are as follows:
1. Must have ITC gross tons over 500
2. Must have length over 150 feet.
3. Must have IMO certification
4. Must have electrical plant greater tha