This is the first time I have had the pleasure of communicating with you through the OMSA newsletter. And I do want to stress that this is a pleasure, just as my four months with the association have been a pleasure. As you probably know, Bob Alario is transitioning into retirement and I am transitioning in to replace him as President on June first.

It should come as no surprise that Bob is a hard act to follow. As I learn the industry and the maze of regulations that apply to it, I am continually amazed at how much of the history of the offshore service sector bears his personal stamp. Time and time again as we work through an issue here at OMSA, Bob will remember some nugget – a policy letter from the Coast Guard or Congressional language – that puts everything in perspective.

So how does one follow in Bob’s footsteps? The answer is simple: Don’t tell any Cajun jokes. Of all the things that Bob has said and done in his illustrious career, his most lasting legacy will be that he is the world’s leading expert on Boudreaux and Thibodeaux. Since I can’t remember them and, if I could, I can’t tell them, the right Cajun jokes will retire with Bob.

To be serious, that is not the only thing that is changing for OMSA and its members. The world around us is changing and it is changing with dizzying speed. The whole point of this column is to ask the question: Do we want to be the leaders of change or do we want to sit by and let change leave us in the dust?

It is worth taking a close look at what is changing and how it may affect us:

Coast Guard – The Coast Guard is in the early stages of a transformation, as it takes on the responsibility for protecting the security of our nation’s coasts, ports and waterways. OMSA members are already experiencing that change as they scramble to meet deadlines for vessel security plans, AIS carriage and other new Homeland Security initiatives. But the transformation going on at the Coast Guard may run far deeper. Some believe that the culture and character of the service is changing, as it transitions into the type of law enforcement agency that can meet the threat of international terrorism. As OMSA, we can’t and shouldn’t try to alter the Coast Guard’s new course. However, we do need to recognize the changes and adapt if we are going to continue to be effective on the safety and security issues that matter to us.

Congress – The turnover in Congress this fall threatens to have a profound negative impact on our association. For so many years, OMSA has been able to rely on the leadership of Senator John Breaux and Representative Billy Tauzin, among others. After years of public service, both will leave Congress by the end of the year. In more recent years the industry has been able to rely on the strong support of Representatives David Vitter and Chris John, both of Louisiana. Now they are locked in a campaign for Breaux’s Senate seat. Win or lose, both will have to give up their House seats next year. Some of OMSA’s other champions will be leaving or moving on to new committees. The bottom line is that OMSA will find a changed landscape in Congress next year and our efforts to protect the industry in Congress will depend on strengthening our relationships with some elected officials and building new relationships with others.

Jones Act – In the old days our job was easy, compared to the challenge we face in defending the Jones Act today. When our opponents attempted a full frontal assault in Congress, they were beaten with relative ease. Now, the attacks are more widespread and subtle. The battlefront includes Congress, the courts and the regulatory agencies. OMSA’s strategy for protecting the Jones Act is starting to pay off, but our future success depends on finding the right mix of strategies and solutions.

Gulf of Mexico – Anyone out there have a crystal ball? The economic fundamentals that drive Gulf activity all seem to be changing, but it is anyone’s guess where is it going and how will it end. At the least, Gulf activity is caught in the doldrums, with the trend towards construction of offshore terminals to import LNG. Vessel operators are facing their own shifting trends. For years, acquisitions among vessel operators were a driving force for OMSA members. As the downturn drags on, retirement of aging stacked vessels may be the new driver changing the face of the industry.

OMSA Transition – Finally, OMSA itself is undergoing a profound transition. No organization loses a long-time leader without facing fundamental change. But that doesn’t have to be a negative. Changes in leadership can present organizations with an opportunity to re-assess, to make sure that the practices that have worked so well in the past still work and to adapt where needed.

That is exactly what we must do now. Faced with challenge and change on all fronts, we need to make sure that our association is still able to meet the expectations of its members. Are we anticipating threats and opportunities? Are we communicating well enough with our members to adequately represent them and to protect their interests? Do we have the resources to fight the battles that lie ahead?

Over the next year or so, we will be searching for the right formula for the future. It will take some work and we can’t do it without your help. As members, you will need to tell us what’s important to you and what priorities you want us to set for your association.

The good news is that OMSA’s members already know about change. This industry has always faced challenges by innovating, by putting new technology to work and by launching into new areas of operation. With your help we will be able to build on yesterday’s success as we prepare for the successes of tomorrow.

Thank you,

Ken Wells

The speaker for the April 27th OMSA Dinner will be Col.Herb Fritts (retired), Center Director of the Carville Job Corps Academy, located in Carville LA adjacent to the Gillis W Long Center. The academy is a new facility in the state which focuses on taking low-income Louisiana residents, ages 16-24, and teaching them critical skills, such as education, vocation, and life skills. It is a part of a growing group of programs being offered at the Long Center, aimed at helping at risk youths turn their lives around and prepare to enter the workforce. Over the past few years, the National Guard has run two programs, Youth Challenge and Job Challenge aimed at training teens. Now the U.S. Department of Labor is in the process of creating an $18.5 million Job Corps site at the facility. When opened later this spring, the Carville Job Corps Academy will employ 85 staff personnel and 200 students. Currently, Bollinger Shipyards is working with Col. Fritts to develop specialized training for shipyard workers and API is creating a special program for oil and gas industry workers. Officials have indicated an interest in working with OMSA members either to develop specialized training or to provide potential crewmember recruits. The jobs programs offered at the Gillis Long Center have been a long-term project for U.S. Representative Richard Baker (R-Baton Rouge) who authored legislation creating the facility and spearheaded the grant process to pay for the Job Corps program in Carville.

At the January 29th General Business Meeting, OMSA members elected a new slate to the Board of Directors.

• The Terms of office for Chairman Milt Rose, Vice Chairman Otto Candies, Jr. and Secretary/Treasurer M. J. Cheramie were extended to December 31, 2004.
• Brandt Dufrene, Oceanic Fleet, Inc., Boysie Bollinger, Bollinger Shipyards, Inc. and Larry Francois, Seabulk Offshore were elected to two year terms to expire Dec. 31, 2005.
• Current Board Members Hank Danos, Danos & Curole Marine Contractors; Todd Danos, Galiano Tugs; Jim Doré, Global Industries, Ltd.; Tom Fairley, Trico Marine Operators and Van DeWitt, Sea Mar Management, Inc. were re-elected to new two year terms to expire Dec. 31, 2005.

The terms of current members Steve Dick, Tidewater Inc.; Laney Chouest, Edison Chouest Offshsore, L.L.C. Milt Rose, SEACOR Marine, Inc.; Otto Candies, Jr., Otto Candies, LLC; M. J. Cheramie, L & M Botruc Rental, Inc.; and Peter Fortier, Superior Energy Services, LLC are set to expire Dec. 31, 2004.

It is with a mixture of regret, concern and pride that we inform you that OMSA Friend, Supporter and Member Rene A. Cheramie has been placed on alert and expects deployment soon in support of the Global War on Terror. Rene, along with the other men and woman of his Louisiana National Guard unit have been called upon by our nation’s president to fight, so that we may live free. We here at OMSA want to thank you and your unit. God speed and good luck.

Vessel operators have developed a new model vessel boarding agreement aimed at preventing spurious third party claims. A number of OMSA members have complained of lawsuits filed by offshore workers in which the vessel is not to blame for the claimed injury, but the vessel owner makes a convenient target for the lawsuit.

The problem is outlined in a legal analysis written by John Peuler of Peuler & Ernst Law Firm:

Third-party claims are the bane of the offshore vessel operator. The typical claimant is a non-seaman Outer Continental Shelf (“OCS”) worker whose employer is immune to a tort claim by its employee due to the exclusive remedy provision of the LHWCA. Most, if not all, in our industry would agree that the employer is in the best position to prevent accidents by its employees and, if an accident occurs, to control the claim. Notwithstanding, under prevailing law, if a vessel is 1% at fault and the OCS employer is 99% at fault, the OCS employee can recover 100% of his damages from the vessel (the rule of joint and several liability). Furthermore, in the typical case, the OCS worker sues the customer for which his employer and the vessel are both working. Most master time charters require the vessel to indemnify its customer for claims not only by vessel employees but for claims by third-parties as well. Since vessel interests are not protected by the anti-indemnity statutes which exist, the vessel operator ends up shouldering both its liability and the liability of its customer. However, if the accident occurs offshore Louisiana, then the OCS employer is protected from any indemnity claim by the customer by virtue of the Louisiana Anti-Indemnity Act. When the accident happens offshore Texas and the OCS employer and customer have complied with the Texas Anti-Indemnity Act, then the employer’s indemnity obligation is either limited to a certain monetary amount or, the employer receives the benefit of reciprocal indemnity protection from the customer. Another problem facing the vessel operator with respect to third-party claims is late notice. In many third-party claim situations, the vessel owner receives its first notice when suit is filed. That’s usually three back surgeries too late. The vessel owner has had no opportunity to control the claim, settle the claim before it gets out of hand, etc.

In sum, the offshore vessel operator is faced with the following with respect to third-party claims by OCS workers:

1. A claim by someone that it does not hire, train, or control;
2. Although the OCS worker may sue other parties in addition to the vessel, due to the enforceability of indemnity provisions in Master Time Charter Agreements and the unenforceability of and limitations on indemnity provisions in contracts between the OCS employer and the customer, the vessel operator is left holding the proverbial bag for everyone;
3. In many third-party claims, the vessel operator does not become aware of the claim until the chance to mitigate the claim is long gone.

The rule of joint and several liability (i.e. the vessel owner can be held responsible for 100% of a third-party’s damages even though it is only 1% at fault when another party more at fault is immune from suit for some reason) is a predominant feature of the General Maritime Law fashioned by our federal courts. Recent attacks in the judicial arena have been unsuccessful. Presumably, the only avenue for change here is via legislation in the United States Congress. With class action abuses and the never ending medical malpractice crisis fueling the flames of tort reform, maybe it is time for our industry to attempt some change here. Indeed, in 1996, the Louisiana Legislature enacted some tort reform measures which included instituting pure comparative fault.

Reference to a recent case brought against a vessel company lays bare the unfairness of the system as it presently exists. The customer specially pushed their contractor to hire a specific type of contractor and the person hired to fill that slot had neither the strength nor agility to make swing rope transfers. The inevitable happened. This worker lost hold of a swing rope and ended up in the Gulf of Mexico between the structure and the stern of the OSV. The crew received accolades from the customer and claimant’s employer for efficiently and quickly rescuing the worker. Of course, no good deed goes unpunished. Although this particular OCS worker sustained nothing more than a few abrasions and a cold bath, suit was filed against the vessel operator and the customer. The customer promptly called upon the vessel operator for defense and indemnity, which we were required to provide pursuant to the Master Time Charter. As the accident occurred at a fixed platform located offshore Louisiana, the claimant’s employer was relieved of its indemnity obligation by the Louisiana Anti-Indemnity Act. To add insult to injury, the LHWCA insurer of the OCS employer then intervened to recoup benefits paid to or on behalf of the allegedly injured worker.

In order to protect vessel operators from these sorts of abuses, OMSA has supported a model vessel boarding agreement. Mr. Peuler’s full analysis and a copy of the model plan will be discussed at the committee meetings on April 27, 2004 (See meeting announcement this issue). For additional information contact Ken Wells or Ken Parris, OMSA.

With this newsletter OMSA is introducing a new service, a joint venture with MaritimeEmployment.com to offer members a world-wide internet based system for job postings and employee searches. The site, accessible directly or linked from the OMSA website is www.OffshoreMarineJobs.com.

This venture represents a great opportunity for OMSA’s members. By participating in this program a company’s Human Resource Department will have access to all the benefits listed below for recruiting maritime personnel:

Unlimited job postings
Simplified crewing recruitment
GOM experienced personnel
24/7 operations to aid in crew searches
Unlimited access to Database with thousands of resumes and growing daily
Full time employee to assist in recruiting & job postings
Automatic notifications of new candidates searching for employment
Internet advertising – Google, AOL, Yahoo!, MSN
Company logos displayed and linked to the company website for additional internet advertising
Rapid Job Posting Deployment – once job posting is activated, can notify OffshoreMarineJobs.com to send out a mass notification to candidates advising them of new job posting

As a result of suggestions, OffshoreMarineJobs.com has added new items geared towards the OSV industry. Such items include required endorsements field, additional comprehensive positions, questions to key you into past experience and a new search by state feature.

OffshoreMarineJobs.com is being offered you at a discount from MarineEmployment’s regular annual rate.

For information contact Ken Parris (ken@offshoremarine.org / phone at 504-734-7622) or Suzi Ward (suzi@oceanwide.biz / phone at 832-309-4590)

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The number of LNG terminals in North America appears poised to take off. A recent presentation by the Federal Energy Regulatory Commission (FERC) hints at just how startling the increase may be. According to FERC, there are currently four existing LNG terminals in the U.S., Canada and Mexico. However, another 40 new terminals or terminal expansions have been proposed. It is unlikely that all of the terminals will be built, but it does give an indication of the high level of interest in the emerging LNG market.

Of particular interest to OMSA members, several of the proposals involve offshore LNG terminals. The Coast Guard has a role in approving offshore terminals. Early this year the agency developed new regulations on deepwater port terminals. At this time, the Coast Guard is considering seven offshore terminal applications, five in the Gulf of Mexico and two off the coast of California. Some have predicted that between five and 20 offshore terminals will ultimately be built in the next ten years.

Planned Gulf facilities include:

• ChevronTexaco plans for the Port Pelican LNG Terminal off the coast of Vermilion Parish.
• McMoran Exploration Co. plans for a $440 million terminal off Venice, Louisiana.
• Shell US Gas and Power plans to build a $700 million plant called the Gulf Landing off the coast of Lake Charles.
• Exxon is investigating offshore terminal sites after signing an agreement to ship 15.6 million tons a year of LNG (2 bcfd) from Qatar to the United States for an expected period of 25 years.
• Sempra Energy plans a $700 million facility off Hackberry, Louisiana.

In discussions with OMSA concerning requirements for standby or rescue vessels at the offshore facilities, Coast Guard officials indicated that the applicant for offshore terminal approval will include its planned safety and security measures as part of the application process and the Coast Guard will determine whether the plans are adequate.

Recent trends in the Gulf of Mexico – decreases in local drilling and a move toward LNG terminals – are closely tied to the world energy market and the increasing role of natural gas in that marketplace. Specifically the demand for natural gas and the ability to transport gas through liquefaction and conversion are having a global effect. A recent speech by John Glass, the President of ChevronTexaco Global Gas brings those tends into focus.

ChevronTexaco formed its Global Gas organization within the last year in order to combine all of the functions of the natural gas value chain, such as marketing, transportation and power generation, under one roof. The following are excerpts of Mr. Gass’ speech to an event sponsored by Cambridge Energy Research Associates on February 11, 2004:

In the years ahead, natural gas will redefine a significant part of energy’s marketplace, creating new commodity markets and weaving a tighter fabric between buyers and sellers. Natural gas is already redefining our companies. Natural gas is even redefining itself. And finally, and most importantly, natural gas is redefining the geo-political world in which all of us live.

In Europe, natural gas demand is projected to grow 2 to 3 percent per year for the next 20 years, from roughly 45 to 65 billion cubic feet a day. In North America, where producers are having to drill more and more wells just to stay even, gas demand is projected to grow roughly 1 percent per year, from 70 to 85 billion cubic feet a day, over the same period.

Then, the second force: lower cost LNG as the global enabler of natural gas. New metallurgies, economies of scale and improved design have cut the costs of LNG facilities and tankers by as much as 30 percent just in the past few years. These impressive savings are hastening the globalization of natural gas.

In fact, through 2020, on the way to replacing coal as the world’s second most important primary fuel, gas is expected to grow twice as fast as oil. In the United States alone, demand for LNG will be eight to ten times what it is today, according to calculations by many people. Natural gas will lead the way as the world shifts to lighter fuels and enters a whole new era of energy.

Today, economic gains, advances in technology and the emergence of North America as a major LNG importer are helping us break out of that hard-pipe, point-to-point world. Future relationships between customers and suppliers are being redefined, replacing straight line with global web, one that will link buyers and sellers anywhere and everywhere. And that means new and compellingly attractive opportunities for both parties. Customers can look forward to more options, more stable and more competitive prices and more diversity (and indeed security) of supply. Producers can tap previously unopened markets, meet once unattainable environmental goals and commercialize their gas resources.

Remarks by John Gass
President, ChevronTexaco Global Gas
Global Gas Plenary – CERA Week
Houston, TX Feb. 11, 2004

The U.S. Minerals Management Service has expanded on its royalty relief program for companies drilling deep wells in shallow waters. Two years ago, MMS offered relief on new wells drilled to pockets of natural gas deep under shallow waters of the Gulf of Mexico. Generally these involve drilling in water less than 656 feet for gas found more than 15,000 feet below the shelf. Drilling under those conditions is expensive and creates extreme technical difficulties. Now MMS has extended the relief to wells that were already in place prior to 2001, allowing operators to expand existing wells. To some extent this is seen by analysts as benefiting independents who have continued to show interest in shallow waters while the majors have focused on deepwater prospects.

The royalty relief may have had a hand in the latest lease sale held by MMS. The agency described the bidding as “robust” with $368,763,482 in high bids coming from 83 companies for oil and natural gas leases in the Federal waters of the Gulf of Mexico. MMS noted that 60% of the bids were on the shelf. MMS Director Johnnie Burton said “We believe this reflects definite industry interest in deep gas in shallow waters in response to royalty relief offered as part of MMS’s Deep Gas Initiative.”

A number of energy companies report that their estimated reserves are coming under close examination from the U.S. security and Exchange Commission (SEC). Royal Dutch/Shell made the biggest headlines when it revealed to investors in January that it had overstated proven reserves by 20 percent. Following that announcement both Chairman Phil Watts and oil and gas division chief Walter van de Vijver resigned from Shell.

However, other companies have come under the SEC’s magnifying glass. In mid-January, Exxon received a series of questions from the SEC concerning the reserves it reported in its 2002 annual stockholder report. At the beginning of April, Chevron Texaco and ConocoPhillips also confirmed receiving similar questions from the SEC. Additionally, El Paso Corp cut its reserve estimates by 41 percent and both Forest Oil Corp. and BP have cut their estimates by small amounts.

In part, the increased scrutiny reflects a decision by the SEC to be more aggressive in investigating reserves. In 1999, the SEC hired two petroleum engineers. In 2002, the SEC questioned reserves from deepwater Gulf of Mexico fields. Reports from analysts say they do not expect the SEC investigation to uncover a systematic overstatement of reserves by energy companies, but this may force those companies to turn to outside independent auditors to review estimates.

Each month the LWCC e-newsletter brings several stories written especially for Louisiana employers to help manage a company’s workers’ comp program. The website archives at www.lwcc.com contain additional information. For example this month’s e-news had the following stories:

Safely Employing Students
Three quarters of all lost time claims among young workers occur in the first 30 days of employment, so it is important to train your student summer workers immediately upon hire.
Preventing Heat Stress at Work
Warmer weather is on the horizon. Did you know that working in hot environments can lead to a higher accident frequency than working in more moderate conditions because it lowers mental alertness and physical performance?
Who Gets to Choose the Doctor My Employees Goes to See
Employees have the right to choose one doctor in each specialty; however, in some cases the employer can select a physician to perform second medical opinions.
Louisiana Supreme Court Extends Course and Scope of Employment to Include Special Missions
The Louisiana Supreme Court recently recognized the extension of workers compensation coverage to an employee who, after attending a work-related meeting, resumed his normal route home and had a subsequent accident.
When Accidents Occur During Company-Sponsored Recreational Activities
Many employers provide their employees with opportunities for recreation and socializing with their fellow workers. However, at what point does an accidental injury during a recreational event give rise to a workers' compensation claim?

The email newsletter can be requested at www.lwcc.com. To be added/removed from this list, email them at information@lwcc.com.

The European Parliament’s Temporary Committee on Safety at Sea is preparing a series of recommendations aimed at increasing maritime safety. The committee was formed after the Prestige accident and resulting oil spill off the coast of Spain in 2003. It is preparing to make a series of recommendations to the full Parliament this spring, including increasing vessel inspections, creating a worldwide database of inspection histories of vessels and perhaps the creation of a unified European Coast Guard. The group may also urge revisions in the status of classification societies and flags of convenience.

At hearings this spring, some witnesses stressed the impact of human factors on accidents, stating that only 11 percent of accidents relate to hull failures, but that 50 percent are caused by groundings and collisions and can be traced back to human factors. Professor P.K. Mukherjee of the Malmo World Maritime University urged the group to take a hard look at human elements that contribute to accidents.

A witness from the European Transport Workers Federation attacked flags of convenience as a part of the problem, saying that many flag states do not even enforce minimum international standards. He also alleged that false mariner documents are readily available through the black market and contribute to maritime safety concerns in European waters.

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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.

The Senate passed the Coast Guard Authorization Act of 2004. Negotiations can now commence to resolve differences between this bill and the version adopted by the House of Representatives some time ago.

The major difference between the two bills concern security plans for foreign vessels subject to the ISPS Code. The House bill would, in accordance with language in the Maritime Transportation Security Act of 2002 (MTSA), require such a vessel to submit its security plan to the USCG for review and approval. The Senate bill would deem such a vessel to be in compliance with the security plans provisions of the MTSA if it has a security plan that has been approved in accordance with the ISPS Code and operates in compliance with the plan.

In addition to the proposed amendment to the Maritime Transportation Security Act of 2002 (MTSA), the Senate version of the Coast Guard Authorization Act (S. 733) has other sections of interest. The measure, if enacted, would amend the Oil Pollution Act of 1990 (OPA 90) to require non-tank vessels of 400 gross tons or greater to have vessel response plans (VRPs) similar to those required of tank vessels. It would require the Coast Guard to report on, among other things: (1) the domestic and international implications of changing the phase-out date for single hull tank vessels from 2015 to 2010; (2) the costs and benefits of requiring monitoring systems on tank vessels; and (3) a review of safety issues relating to tank barges. One provision present in the House version (H.R. 2443), but not in the Senate version here, would conform OPA 90 to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) with respect to lender liability. No date has been set for establishment of a Conference Committee to resolve differences between the House and Senate versions of the measure.

Source: Maritime Items, Dennis L. Bryant, Haight Gardner Holland & Knight, http://www.hklaw.com/maritimedev.asp.

The Coast Guard is asking Congress to require domestic towboats which are currently uninspected vessels to undergo safety inspections. Homeland Security Director Tom Ridge provided the recommendation as a part of proposed legislative language for the 2005 Coast Guard Authorization Bill. If approved by Congress, the measure would authorize the Coast Guard to “establish by regulation a safety management system appropriate for the characteristics, methods of operation and nature of service of towing vessels.”

In background provided to Congress the Coast Guard says that the goal would be to “implement mandatory inspection requirements and a safety management system for towing vessels to reduce casualties.” The proposal does not specify how this would be implemented for the more than 5000 vessels that the Coast Guard estimates would be impacted by the regulation. Under one concept which has been discussed, vessels that follow an approved safety management system would be audited for compliance by third parties and the Coast Guard would accept the audit instead of physically inspecting each vessel. If Congress approves of the inspection regime, the Coast Guard will need to hold a rulemaking process before implementation.

It is possible that the new towboat inspection concept will be included in the current year’s Coast Guard Authorization when House and Senate members meet in conference to finalize the bill. OMSA will monitor the process closely and represent its members’ interests on the legislative or regulatory fronts.

President Bush has signed legislation that revises the Soldiers’ and Sailors’ Civil Relief Act of 1940 under a new name—the Service Members Civil Relief Act (SCRA). Among other things, the SCRA provides that the interest rate on loans incurred before the service member enters military service—including 401(k) plan loans—must be capped at 6 percent during a period of military service. Any interest in excess of the 6 percent cap must be forgiven and cannot be added to the principal amount due. The definition of “interest” includes service charges, renewal charges, fees, or any other charges with respect to a debt obligation. To obtain the reduced interest rate, a service member must provide the creditor with a written notice and a copy of the military orders calling the service member to military service. Upon receiving the written notice and copy of the orders, the creditor must reduce the interest rate effective as of the date on which the service member was called to military service.

Source: Client Letter, Volume LIX, No.2, The Kullman Firm

Senator Hollings introduced the Maritime Transportation Security Act of 2004 (S. 2279) for himself and Senators McCain and Breaux. The bill would add requirements for government agency cooperation in data sharing for port security and transportation worker background checks, make any vessel subject to the MTSA liable in rem for any civil penalty assessed under the Act as well as for any reimbursable costs incurred by a valid claimant related to implementation and enforcement of the act.

The Coast Guard issued a Final Rule on February 4, 2004, specifying the information needed to determine the eligibility of a vessel relying on lease financing to engage in the coastwise trade under 46 U.S.C. § 12106(e), and simultaneously issued a joint notice of proposed rulemaking ("JNPRM") with the Maritime Administration ("MARAD") concerning proposed amendments.

Final Rule: The Final Rule defines "primarily engaged in leasing or other financing transactions" as lease financing in which more than 50% of the aggregate revenue of a person is derived from financial transactions and permits the vessel owner, its parent, or subsidiary of its parent to meet this test. The definition of "parent" includes all intermediate holding companies as well as the ultimate parent company, so that a company may have more than one parent company for lease finance purposes. A significant additional requirement is that the shipowner's acquisition of the vessel must be a "financing transaction" and not just a lease for purposes of changing ownership (an intra-group book transfer with no financing component would not qualify).

The Final Rule seeks to restrict use of the statute by non-citizen ship operators by applying several tests separately to each of the owner, the owner's parent, and the owner's group: (1) none of such persons may be "primarily engaged in the direct operation or management of vessels"; (2) none of such persons may derive the majority of their "aggregate revenues from the operation or management of vessels"; and (3) none of such persons may be "primarily engaged in the operation or management of commercial, foreign-flag vessels used for the carriage of cargo for parties unrelated to the vessel's owner or charterer." The definition of "group" encompasses the shipowner, its parent, and all subsidiaries and affiliates of the parent.

With respect to transactions concluded pursuant to the lease finance statute prior to the February 4, 2004, such transactions are grandfathered, subject to certain exceptions.

Second Proposed Rulemaking: The Coast Guard simultaneously proposed to amend its regulations on documentation, under the lease-financing provisions, of vessels engaged in the coastwise trade issued on February 4, 2004 to address several key issues. One proposal addresses the issue of prohibiting or restricting the chartering back of a leased-financed vessel to the parent of the vessel owner or to a subsidiary or affiliate of the program. A second proposal would establish a limit on the length of time that a coastwise endorsement issued before February 4, 2004, would run. The final subject concerns the question of whether applications for an endorsement under the lease-financing provisions should be reviewed and approved by an independent third party with expertise in vessel chartering.

The U.S. Coast Guard and the Maritime Administration (MARAD) held a public meeting in Washington, D.C. on April 2, 2004 to receive comments on their proposed rules relating to documentation of U.S. vessels with lease financing engaged in the coastwise trade. OMSA president Bob Alario presented oral comments on the rulemaking. OMSA will be submitting detailed written comments to the docket prior to the May 4, 2004 deadline.

The U.S. Coast Guard issued a reminder that the collection of information and signage requirements of its new rule regarding handling of Class 1 (Explosive) materials and other dangerous requirements within or contiguous to waterfront facilities will came into effect on March 1, 2004.

The National Offshore Safety Advisory Committee (NOSAC) met in Washington, DC on April 1, 2004. Items on the agenda include maritime and offshore security; liftboat operations; and exposure to H2S. OMSA was represented by president-elect Ken Wells and OMSA staff member Ken Parris. Ken Parris made a presentation to NOSAC on OMSA’s proposed liftboat training program. The NOSAC members present voted to unanimously reactivate the liftboat subcommittee to encourage the Coast Guard to adopt the OMSA training program as the accepted method of licensing liftboat operators.

The USCG National Vessel Movement Center (NVMC) issued a Notice stating that it is releasing the beta version of the XML schema for the Electronic Notice of Arrival/Departure (eNOA/D). This version includes the fields necessary to meet both USCG (33 CFR Part 160) and USCBP (19 CFR Part 4) requirements. The schema is being provided now in order to allow industry developers time to incorporate USCG and USCBP reporting requirements into their business processes, if they so desire. The NVMC is not yet ready to accept submissions based on this schema and the implementation date will be announced in the near future. This and other information is available on their website at http://www.nvmc.uscg.gov/download.html

Effective April 1, 2004, Local Notices to Mariners (LNM) will only be distributed via posting on the Internet. Paper versions will no longer be printed. Retrieve Notice To Mariners at http://www.navcen.uscg.gov/lnm/default.htm

The Coast Guard has developed a Marine Operations Risk Guide that may be of interest to offshore operators. This guide was developed by the Coast Guard and the Prevention Through People Subcommittee of the Chemical Transportation Advisory Committee. It presents a step-by-step methodology to access risk within various sectors of marine operations. The procedures may help identify, reduce, and even eliminate certain risks in operations. Access the guide at http://www.uscg.mil/hq/g-m/risk/risk_101.html

The National Oceanic and Atmospheric Administration (NOAA) stated that since the program’s inception, there have been over one million downloads of Electronic Navigation Charts (ENC). The e-charts are free to the public and may be accessed at http://oceanservice.noaa.gov/mapfinder/products/charts/welcome.html

Acting upon President Bush’s “E-Government” initiative to make information easily accessible to the public, the National Oceanic and Atmospheric Administration (NOAA) has made the set of United States Electronic Coast Pilot books available on the Internet. Provided by NOAA National Ocean Service’s Office of Coast Survey, the set of nine volumes serves as a supplement to NOAA’s Electronic Navigational Charts (ENCs) and paper nautical charts. NOAA is an agency of the U.S. Department of Commerce. The series of United States Coast Pilot nautical books cover the entire U. S. coast, including Puerto Rico, the Virgin Islands, the Great Lakes, the lower Mississippi River, Hawaii, Alaska and the Pacific Islands that are administered by the federal government. All nine volumes are available on the Internet: http://nauticalcharts.noaa.gov/nsd/cpdownload.htm.

The U.S. Coast Guard is revising its chemical drug testing regulations to conform to the Department of Transportation final rule concerning Drug and Alcohol Management Information System (MIS) Reporting. The DOT rule revised the MIS form, which will now be adopted by the Coast Guard. The change came into effect on March 12, 2004. See the February 11, 2004 Federal Register for details.

The U.S. Minerals Management Service is reminding offshore operators of their obligation to protect personnel, contractors and visitors from Hydrogen Sulfide (H2S) exposure. In a presentation to the Coast Guard’s National Offshore Safety Advisory Committee, MMS stressed that facilities with H2S concentration above 20 ppm must have contingency plans and must ensure that training, evacuation and equipment requirements are in place. The requirements apply to facilities and the vessels that call on them. The presentation was sparked by complaints that some operators were not informing vessel crews that they were Entering H2S zones.

Http://www.uscg.mil/hq/g-m/nvic/
NVIC 01-04 announces Coast Guard participation in programs testing experimental ballast water treatment systems.
NVIC 02-04 provides guidelines for assessing a mariner’s competence through demonstrations of proficiency for persons in charge of medical care.
NVIC 03-04 provides guidelines for companies to develop shipboard pollution response plans for Noxious Liquid substance.
NVIC 04-04 provides guidelines for Coast Guard personnel conducting environmental examinations of foreign passenger vessels.

CH-3 to NVIC 11-93 provides updated information on the applicability of a vessel’s tonnage to various national and international standards. While some older vessels may be exempted from some international regulations due to their build date, the NVIC emphasizes that newer international rules such as STCW, ISM and Security have no such exemption and are based solely on a vessel’s ITC tonnage when operating foreign.

http://www.uscg.mil/STCW/mmic-policy.htm
None issued since the last newsletter.

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The Deadline for full compliance with the Security Regulations is July 1, 2004. The deadline is less than 3 months and the Coast Guard has emphasized that there will be no exceptions, exemptions or extensions.

What should companies have done by now:

• Designate a “responsible person.” Each company should have designated a Company Security Officer responsible for ensuring that all aspects of these rules are implemented.
• Submit security plans. You should have submitted each required security plan to the Coast Guard in Washington, D.C. for approval.
• Conduct security classroom training. You should have begun training every vessel employee whether full time, part time, contract or temporary must receive the appropriate level of security training. The training must be documented and recorded.
• Distribute Plans: By now you should have begun distributing the security plans to your vessels.
• Conduct Onboard Security Training. You should have begun training every crewmember in their shipboard security duties. The training must be documented and recorded.
• Conduct Drills. You should have begun conducting onboard security drills. The drills must be documented and recorded.
• ASP Verification Audit. The Coast Guard is required to conduct a verification audit of every vessel using an ASP. Typically this will be done in conjunction with the vessel’s inspection for certification. Every vessel (or at least each company) that is working under a Coast Guard approved Alternative Security Program should attempt schedule a verification audit prior to July 1st. Audits conducted before July 1st is considered “NO FAULT.” What this means is that if the Coast Guard discovers a deficiency you will be given time to correct it. However, for inspection conducted after July 1st a deficiency discovered may result in the termination of vessel operations until corrected. If you do not schedule a verification audit, the Coast Guard may show up unannounced to conduct one.
• ISPS Code Inspection. Each vessel in international service or each that you plan to bid for international service must request a security inspection by the Coast Guard. Upon completion of a successful Coast Guard Security Inspection, the vessel will be issued an International Ship Security Certificate. These documents are required for foreign operations on July 1, 2004. The Coast Guard has issued a schedule of international inspection dates. You must be ready for inspection and request a security inspection during the time they are “in country.”
• Continuous Synopsis Record. Vessels in international service are required to have a continuous synopsis record after July 1st. You should request this document from the Coast Guard National Vessel Documentation Center as soon as possible due to potential lags in processing time. (Note: A valid ISSC is required for CSR issue, but not required for a CSR request)
  

Members of the Coast Guard from New Orleans, Morgan City and Lafayette conducted the first security inspection for the issue of an International Ship Security Certificate on board the Sea Mar vessel Cape Hope. Sea Mar was represented by their CSO Chris Gilmore. OMSA Vice President Ken Parris also attended the inspection. The inspection was a learning experience for everyone involved. The inspection was successful due to several important factors:

1. The VSO (captain) was very familiar with the plan.
2. Sea Mar had deployed the security plan to the vessel several weeks before the inspection.
3. In addition to classroom security training, the crew had been extensively trained and drilled in the plan by the VSO (captain).
4. The crew was complying with all aspects of the plan.
   

The inspection started with a Coast Guard review of the plan. The Coast Guard then quizzed the captain and crew on the plan. The Coast Guard inspected the vessel for compliance with the plan in areas such as restricted area markings and then had the crew perform a few security drills.

The U.S. Coast Guard issued a notice interpreting the phrase “international voyage” for purposes of its maritime security regulations. For purposes of vessel security, the Coast Guard will consider that each voyage of a U.S. vessel originates at a port in the United States regardless of when the voyage actually began. Therefore, each U.S. vessel that otherwise meets the applicable tonnage requirements in SOLAS and is operating in waters of another country must meet ISPS requirements and obtain an International Ship Security Certificate (ISSC). This interpretation is effective immediately, but comments may be submitted on or before July 6, 2004. See the April 6, 2004 Federal Register for details.

SOLAS Chapter XI–1 (adopted by the U.S. as part of the International Ship and Port Facility Security (ISPS) Code) and 33 CFR §§ 101.115(b) and 104.297(a) require that all U.S. flag cargo vessels of 500 gross tons and over on international voyages and all U.S. flag passenger vessels carrying 12 or more passengers on international voyages must be issued and carry onboard a CSR during operations on and after July 1, 2004. Specifically, 33 CFR § 101.115(b) incorporates by reference SOLAS Chapter XI–1, as amended, and 33 CFR § 104.297(a) requires vessels on international voyages to comply with SOLAS Chapter XI–1, if applicable. Regulation 5 of SOLAS Chapter XI–1 prescribes the requirements of the CSR. The CSR provides an onboard record of the history of the vessel with respect to its flag, owner, operator, charterer, classification society, safety management and security activities.

Key elements of Regulation 5 include the following:
—The CSR must be onboard the vessel and available for inspection at all times.
—Vessel masters, owners or operators are required to submit updated to CSR form CG–6038A.

All U.S. flag cargo vessels of 500 gross tons and over on international voyages and all U.S. flag passenger vessels carrying 12 or more passengers on international voyages must have a CSR.

Instructions on applying for and amending a CSR can be obtained on the Coast Guard’s regulatory project web page http://www.uscg.mil/hq/g-m/mp/rules.shtml. You may obtain an Application for CSR form CG–6039 from the Coast Guard by http://www.uscg.mil/hq/g-m/mp/pdf/CG6039.pdf

On April 1st President-Elect Ken Wells and OMSA Vice President Ken Parris met with Admiral Larry Hereth, Chief of the Coast Guard’s Maritime Security Directorate, and his top two officers, Captain Bill Marhoffer and Captain Mike Rand. OMSA requested the meeting primarily because of a concern that the Coast Guard’s aggressive timetable for security compliance and the need for U.S. vessels to compete internationally may be negatively impacted by the Coast Guard’s process and pace for security plan review and approval, and the limited Coast Guard personnel available to conduct the mandated vessel security inspections. Admiral Hereth began the meeting by complementing OMSA and its members on our aggressive plan submission and training programs. He assured OMSA that the Coast Guard is very aware of the problems in the system and that they would do everything possible to ensure that U.S. vessels ability to complete overseas will not be negatively impacted by the Coast Guard’s security plan review, approval and subsequent on scene security verification inspections.

The Coast Guard has created a staff specifically trained to answer maritime security related questions. The Coast Guard touts this as a “one stop shop” for up-to-date information on the implementation of maritime security regulations. The helpdesk website is http://www.uscg.mil/hq/g-m/mp/mtsa.shtml. The Coast Guard Port Security website is http://www.uscg.mil/hq/g-m/mp/index.shtml.

OMSA has been actively involved in helping the industry meet new reporting requirements from the Customs and Border Protection Bureau (CBP), including helping to negotiate a 30-day grace period in the enforcement of the regulations. New regulations, which went into effect at the start of March dramatically, change the way vessels clear customs when bringing cargo into U.S. ports. While most OMSA members are not required to clear customs when working on the Outer Continental Shelf, vessels returning to the United States from foreign jobs may be affected. The regulations may also affect vessels bringing cargo in from free-floating vessels in the Gulf, such as pipe-laying barges, or from foreign-flag rigs which have not cleared customs themselves.

In the past, OMSA members have been able to use an agent to clear customs in these cases. However, new CBP rules that went into effect on March 4, 2004 changed the requirements for reporting inbound cargo. Now, carriers must obtain a Standard Carrier Alpha Code (SCAC) and a bond. They must also report their cargo information to Customs electronically. In the case of containerized cargo or some break-bulk cargo, the reports must be filed with Customs 24-hours prior to lading. Bulk cargo and certain permitted break bulk cargo may be reported at the time of sailing, if the voyage is less than 24 hours.

In letters and meetings with CBP, OMSA has stressed the difficulty in applying the customs regulations to the offshore sector n the Gulf of Mexico, where voyages are only a few hours in duration and customers may not specify cargo information until the vessel is loading. OMSA was able to help convince the CBP to delay general enforcement of the regulations for 30 days, until April 2nd from the original March.

OMSA also asked CBP to clarify which party should be considered as the “carrier” under the new regulations. The carrier is responsible for acquiring the bond and SCAC code and for the physical cargo reporting, but the regulation does not state whether this should be the vessel owner, operator or charterer. By law, penalties would be assessed to the master of the vessel. However, CBP officials have said in the past that the carrier is the party that:

• Determines the ports of loading and discharge;
• Knows the cargo information;
• Issues the bill of lading for the cargo; and
• Furnishes the information necessary for preparing the vessel’s cargo declaration.

OMSA sought a written clarification. In its response, CBP refused to issue a hard ruling as to which party should be the carrier, saying instead that it was a contractual issue to be worked out by the parties. Additional information on the new regulations can be found at the CBP Website – www.customs.gov. Once at the site, click on Trade Act of 2002 - Advance Electronic Information.

The following is a summary of outstanding issues involving the establishment of upcoming carriage requirements for Automatic Identification Systems (AIS).

The deadline for many OMSA member vessels to carry AIS is eight months away. As a part of legislation aimed at increasing security in U.S. waters, Congress ordered the Coast Guard to require the AIS units on vessels. As it stands now, beginning at the end of December of this year, the Coast Guard will require AIS carriage for most commercial vessels operating in VTS zones. The carriage requirements will apply to:

• Vessels operating within VTS zones that are
  o Self-propelled commercial vessels of 65 feet of more in length, except fishing vessels and passenger vessels certificated to carry 150 or fewer passengers;
  o Towing vessels of 26 feet of more in length and more than 600 horsepower; or
  o Passenger vessels regardless of gross tonnage certificated to carry more than 150 passengers for hire.
• Vessels on international voyages that are
  o Self-propelled commercial vessels of 65 feet of more in length, other than fishing vessels and small passenger vessels certificated to carry 150 or fewer passengers;
  o Tankers;
  o Passenger vessels that are over 150 gross tons; or
  o Vessels, other than passenger vessels and tankers over 300 gross tons.

For OMSA members operating domestically, this means that vessels that fall under Subchapter L (OSVs and liftboats), conventional tugboats over 600 hp and vessels 65’ in length or over must carry AIS if they travel within the zones covered by VTS New Orleans, VTS Morgan City, VTS Port Arthur (currently under construction) and VTS Houston/Galveston.

However, the carriage requirement is expected to expand in the future. Congress had ordered the Coast Guard to require AIS in all navigable waterways and allows the Coast Guard to expand the types of vessels required to carry the units. Last year, the Coast Guard asked for public comments on how widespread the requirements should be and should be coming out with a proposed rule on additional areas and classes of vessels later this year. At the public hearing held on the issues in New Orleans, OMSA Vice President Ken Parris testified that with less expensive Coast Guard approved systems just around the corner the Coast Guard should delay the implementation date to allow industry to install these less expensive systems. Unfortunately, the Coast Guard has taken the position that it is bound by law to an implementation date and will not be able to accommodate industry’s initial installation of AIS with less expensive models.

The AIS requirements have been further complicated by a disagreement over the radio frequencies that will be authorized for AIS transmissions. Under a mandate from the International Maritime Organization (IMO), AIS units worldwide are expected to operate on two channels (VHF maritime channels 87B and 88B). However, in the United States, those frequencies were sold at auction to a private company, MariTEL, Inc. MariTEL has petitioned the Federal Communications Commission offering to allow use of the channels, but on a very limited basis which allows MariTEL to charge customers for some uses of the channels. For example, vessels could use the channels while operating within VTS zones, but companies wanting to use monitor AIS from shore for logistics purposes would be required to pay MariTEL. A number of maritime groups have opposed the proposal. OMSA worked with the Coast Guard’s advisory group, the Lower Mississippi River Waterway Safety Advisory Committee, to protest the proposal in writing. A decision from the FCC is still pending. It is not known whether this could delay the deadline for the carriage requirement.

As the December deadline for carriage requirements draws closer, manufacturers are gearing up to supply AIS units to vessel operators. Under the regulations, manufacturers operating in the U.S. must be certified by the FCC. The following companies have met the FCC requirements:

The Coast Guard has a very good website for background on AIS, explaining how AIS works, what vessels are required to carry them and what standards the units must meet to be in compliance. The website address is: http://www.navcen.uscg.gov/enav/ais/default.htm

The Coast Guard and the FBI have announced that they have been involved in a 14-month investigation into national security threats and document fraud involving U.S. merchant mariner credentials. The investigation, called Operation Drydock, uncovered nine individuals who held U.S. credentials had possible terrorist group involvement. In the course of the investigation, the agencies examined records of more than 200,000 individuals. In addition to the individuals with possible terrorist ties, the Coast Guard identified thousands of cases that involved possible fraud or other problems such as active arrest warrants. According to the Coast Guard, about a dozen people were arrested because of outstanding warrants. Additionally, more than a dozen commercial mariners were disqualified from service aboard Military Sealift Command ships because of discrepancies on their merchant mariner documents.

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The New Governor of Louisiana is pledging to protect oil and gas industry jobs in the state, in part by cutting the red tape involved in getting approval for drilling on state lands. Governor Kathleen Blanco met with a group known as the Oil and Gas Cluster, a part of New Orleans, Inc., the regional chamber of commerce. In the March 4th meeting, the Governor and local oil and gas industry executives discussed ways the state can support economic development in the E&P sector.

The Governor stressed the importance of the industry to Louisiana and her concern over the loss of jobs from major international oil companies. She repeated her support for making the oil and gas sector a part of her overall economic development program. As a part of her commitment, she stated that she wants to streamline the regulatory process involved in permitting oil and gas exploration and production on state lands. To that end she announced that she has directed agencies to work together to reduce duplicative regulations.

John Laborde, retired Chairman of Tidewater, Inc., stressed at the close of the meeting that most of the jobs in the oil and gas industry in Louisiana came from service related businesses, such as offshore marine service companies. He stressed the need for the state to focus on keeping those companies healthy and making sure they remain in Louisiana. Mr. Laborde serves along with Bobby Patrick of Seismic Exchange, Inc. as co-chairs of the Oil and Gas Cluster. OMSA President-Elect Ken Wells also serves as a member of the group.

For a number of years, the