Aaron C. Smith, President and Chief Executive Officer of the Offshore Marine Service Association (OMSA), weighs in on top issues facing the U.S. offshore marine transportation service industry, including the Jones Act, liquefied natural gas (LNG) markets and the budding domestic offshore wind industry.
The past few years have been difficult for the offshore sector, to say the least. How has OMSA helped its members to cope with the prolonged industry downturn?
I remember in 2015 when people would say that the market would turn around in 2020 and that seemed so long away. Well, now its 2019, and 2020, still seems so long way.
We at OMSA certainly understand that pain, and while we cannot do anything to increase the price of oil, we can help our members in other ways. For example, we are working to ensure our members know about the opportunities that exist in the emerging offshore wind industry and assist our members in making connections in this area.
We have also worked to ensure that OMSA-member vessels could participate in disaster recovery operations. As you know, a modern offshore support vessel (OSV) is an extremely versatile and capable vessel. That makes it an attractive candidate to perform disaster recovery duties, especially in small, damaged and/or congested ports.
However, there is some rigidity to Coast Guard regulations which prevent these vessels from serving in this capacity despite the fact everyone agrees these vessels can safely perform the work.
To correct this problem, we had the Coast Guard’s National Offshore Safety Advisory Committee (NOSAC) conduct a report on how we could remove this red tape. This NOSAC Subcommittee recently came out with a very positive report full of proactive, achievable and common-sense changes that could be made to regulations to utilize workboats in disaster recovery.
Finally, one of the primary things we have done for our industry has been to protect the Jones Act and work toward correct enforcement of the Jones Act. Ensuring that a level playing field exists in U.S. waters is one of the most important jobs OMSA performs.
You mentioned the Jones Act, OMSA has been heavily engaged in pushing the U.S. government to enforce the Jones Act as written. Can you give an update on where things stand?
As most know, a U.S. mariner, OMSA, and the Shipbuilders Council of America (SCA) filed suit against Customs and Border Protection (CBP) in 2017 and that case is working its way through the court system. We think this is a very easy case, the Jones Act says only U.S.-built, U.S.-crewed, and U.S.-owned vessels can transport merchandise between two U.S. points. CBP’s letter rulings allow foreign vessels to engage in this work, CBP has said as much and has tried to revoke these letters because of that fact.
Outside of this case, OMSA has continued to be impressed with the level of support Jones Act enforcement has within the halls of Congress. We know that some have proposed that Congress should weaken the Jones Act as it relates to energy projects and Congress has repeatedly rejected these proposals.
Additionally, we at OMSA have been pleased to see our international counterparts changing their tune and admitting what we have known all along, enforcing the Jones Act will cause zero disruption to U.S. offshore production. Allow me to explain, during the 2017 revocation process, many of our international colleagues mistakenly told anyone that would listen that enforcing the Jones Act on the outer continental shelf would result in projects being halted because U.S. vessel owners would not have the capacity to respond.
Not only was this not legally relevant, it was not accurate. Domestic vessel owners have invested more than $2 billion building or retrofitting more than 30 U.S.-flagged MPSVs that have capacity to serve the market impacted by CBP’s revocation. After CBP withdrew their revocation effort, we have seen a shift in our colleague’s language, for example one report released in 2018 correctly stated, “several new Coastwise Qualified light construction vessels have entered the market and largely displaced the foreign tonnage. These vessels are quite versatile and can easily interchange between transportation and light construction. This market adjustment is normal and poses no threat to future investment and development in the U.S. GoM.”
OMSA thanks our international colleagues for recognition of this point, we only wish they would have acknowledged it during revocation.
What’s the number one, most pressing issue facing OMSA members today, and what is your organization doing to help address it?
As I said before, the strength of the Jones Act is the biggest concern for OMSA members. In addition to the Jones Act enforcement as related to offshore energy exploration and extraction, we are also seeing significant issues as it relates to the domestic movement of LNG. Some very powerful players are using this as a proxy fight to end the Jones Act.
Specifically, we are seeing some natural gas investors and the think tanks they support attempting to convince this White House that there needs to be a long-term Jones Act waiver for the movement of LNG. It is simply not, there is no market for the domestic movement of LNG, and there is certainly no national security case for a waiver. Which is important because the law states the only reason a waiver can be granted is to further our national security.
First, the energy infrastructure in Puerto Rico—the purported benefactor of the proposed waivers—has no capacity to receive additional or expanded LNG delivery because there are no import regasification facilities available to receive domestic or foreign-sourced LNG. The construction of these facilities may take as long as four years.
Additionally, there are presently two large-scale LNG export facilities in the United States: one at Cove Point, Md. and the other at Cheniere, La. These two facilities’ LNG are fully subscribed, down to the molecule, for the next decade on long-term contracts. Thus, even if Puerto Rico had the ability to take in LNG, there is no domestic LNG to provide, thus no reason for a Jones Act waiver.
Finally, the U.S. maritime industry is doing what it always does, building to the market. In fact, there are at least two OMSA members building LNG-transporting vessels right now and at least one OMSA member that will soon be operating LNG-transporting vessels.
This is what our industry has always done. When it became apparent we needed Jones Act-qualified launch barges, we built launch barges, when we needed domestic multipurpose support vessels (MPSV), we built domestic MPSVs.
Those pushing a Jones Act waiver know these facts. What they are really after is to undercut the entire U.S. maritime and shipbuilding industry. They know if they can get a long-term Jones Act waiver now, they will destroy investor confidence in our market. The financing will dry up and our industry will wither away. Once it does, these entities will argue that the Jones Act has failed to protect the industry and it must be repealed.
We have seen this playbook before. We are ensuring the White House and all those in the Administration know that a Jones Act waiver will do nothing positive, but will negatively impact our ability to build Navy and Coast Guard vessels or domestically man the merchant marine fleet that transports cargo domestically.
On many levels, there’s a clear need for greater collaboration between oil companies and contractors. Is this something your group is working toward? If so, how?
Of course, OMSA works hand-in-glove with our partners in the drilling and production industries. For example, there are number of drilling companies represented on NOSAC, we worked with these members to produce the disaster vessel response report I mentioned earlier. Additionally, we are very active on Louisiana State issues. Often OMSA members take the lead on these issues as we are based in Louisiana and therefore sometimes have deeper connections with those in Baton Rouge. Also, last year I was the Technical Chair for the Marine Technology Society’s Dynamic Positioning (DP) Conference, in this capacity, I worked along side personnel from production companies to further the safety of the dynamic positioning industry. Finally, we intended to have an offshore wind-focused joint event with a production industry-based trade association later this year.
In all of these areas, our goals align. We know what is good for our customers will almost always be good for our industry, thus we look forward to continuing and increasing these partnerships.
What are some of the other ways you plan to improve support to OMSA members?
I think you are going to see OMSA become more visible and proactive. In the past we have been primarily focused on providing information to our members. Of course, we are going to continue these efforts, but we are also going to do more to get out in front of issues and work proactively to help ensure laws and regulations work for OMSA members. Specifically, I think you will see more activities like the NOSAC report and offshore wind activities I mentioned before. In short, we are going to be providing more bang for our member’s buck.
Aaron C. Smith serves as the President and Chief Executive Officer of the Offshore Marine Service Association (OMSA), the national trade association of the owners and operators of U.S.-flag vessels servicing oil and gas infrastructure on the Outer Continental Shelf. In addition to managing the day-to-day operation of the Association, he heads OMSA’s state and federal advocacy efforts.
Smith also serves as the Executive Director for the Offshore Service Vessel Dynamic Positioning Authority (OSVDPA), a role he has served in since the Authority’s inception in 2014. The OSVDPA is an independent 501(c)(6) which has created and updates safety and competency standards for dynamic positioning operators (DPOs) and assess mariners against these standards.
Before starting the OSVDPA, Smith was Deputy Chief of Staff and Legislative Director for Congressman Jeff Landry (LA-03). In this role, he was responsible for Congressman Landry’s maritime, energy, and transportation policy. Prior to that position, he served in similar capacities for three other Members of Congress.
In addition to his work for OMSA and OSVDPA, Smith sits on the Marine Technology Society, Dynamic Positioning Committee’s Guidance and Standards Subcommittee and is the Technical Chair of the 2018 Dynamic Positioning Conference.