Joan M. Bondareff and Jonathan K. Waldron
While much attention is being paid to the Mueller report and the internal Democratic fight regarding impeachment procedures for President Donald Trump, the 116th Congress and its respective committees are trying to do their regular work in the meantime—including passing both authorization bills and appropriation bills for fiscal year 2020. Here are some key legislative developments relevant to the marine industry.
Maritime Administration Authorization Bill
On May 15, 2019, the Senate Committee on Commerce, Science, and Transportation reported S. 1439, the “Maritime Administration Authorization and Enhancement Act for Fiscal Year 2020,” sponsored by Senator Roger Wicker (R-MS), Chairman of the Committee. S. 1439 hopes to accomplish a multitude of goals, including a 10-year reauthorization of the Maritime Security Program, a U.S.-flagged fleet of commercial ships deemed critical for defense sealift operations; and codifying President Trump’s “military to mariner” executive order (E.O. 13860), aimed at streamlining the transition of active duty and retired military into civilian maritime jobs. Additionally, the bill includes the Port Operations, Research, and Technology (“PORT”) Act, which authorizes $600 million for the secretary of transportation to make grants for port and intermodal infrastructure projects; the Maritime SAFE Act, aimed at combatting illegal fishing; increased funding—up to $40 million for FY2020—for the Small Shipyard Grant Program; and full funding ($33 million) for the Title XI maritime guaranteed loan program to support the maritime industrial base. The bill requires that all components used in grant-funded projects are American-made and American-bought (a Baldwin amendment). The bill also authorizes a program to support infrastructure development at Department of Defense-designated Strategic Ports, and enacts reforms at the U.S. Merchant Marine Academy regarding sexual harassment and assault prevention.
S. 1439 was incorporated as title 85 of the National Defense Authorization Act (“NDAA”) and approved by the Senate on June 27, 2019. There is currently no companion Maritime Administration (“MARAD”) bill in the House of Representatives, but we expect many of these provisions to be adopted into the Coast Guard bill on the House side.
Coast Guard Authorization Bill and Offshore Jones Act Waiver Provision
Both House and Senate staffs are working on bills to reauthorize the programs of the Coast Guard for FY2020. Chairman Wicker, in particular, wants the bill to be noncontroversial, and like the NDAA, passed each year. On the House Transportation and Infrastructure Committee, it will be the first time in a while that Democrats are in charge of the process, so it remains to be seen how policy differences between Democrats and Republicans are resolved.
The House Committee on Transportation and Infrastructure marked-up and approved H.R. 3409, the Coast Guard Authorization Act of 2019 (“2019 CGAA”) on June 26, 2019. Section 305 of the reported bill contained a controversial provision on how the Jones Act applies to installation vessels working in the offshore oil & gas and wind industries. Specifically, it outlines that MARAD would make a determination within 180 days of enactment on whether a Jones Act qualified (i.e., U.S.-owned, -built, -operated) installation vessel exists. The bill would define an “installation vessel” as a vessel with a lifting capacity of 1,000 metric tons (“mt”). As such, the bill would only affect larger lift vessels and would not impact operations by installation vessels less than 1,000 mt. If MARAD determines no coastwise qualified vessel exists, then the CGAA would determine that lifting operations were not Jones Act movements. However, if Congress reduced the crane capacity from 1,000 mt. to a number around 100 mt., this could potentially affect almost all lifting operations offshore.
Subsequently, if an owner of a Jones Act installation vessel advises MARAD that it has a new installation vessel that can perform offshore lifting operations, then any lifting operations by an installation vessel would be prohibited unless MARAD determines that a Jones Act qualified installation vessel is unavailable. To determine whether a Jones Act qualified vessel is available, vessel owners/operators will have to submit an application to MARAD one year before the installation date, including engineering details and timing requirements of the project. MARAD would then issue a notification in the federal register with the relevant information, and request comments within 45 days. If no information is received within 45 days, or if an owner of a Jones Act qualified vessel submits information but MARAD determines that the vessel is not capable, then a vessel can perform the work.
This could create significant impediments to future investment in not only the offshore oil and gas industry, but also to the emerging wind industry. Accordingly, owners and operators of installation vessels and other stakeholders in these industries should not only review the 2019 CGAA to determine how it could affect their immediate operations, but also how the legislation could potentially deter future offshore investment in the United States.
While authorizing committees can create new programs and reauthorize existing programs, it is up to the Appropriation Committees to fund these programs, hence the need to pay close attention to the work of these committees for maritime programs.
Transportation, Housing, and Urban Development Appropriations
Maritime Programs Funded under the Transportation, Housing and Urban Development Bill (“T-HUD”): On May 23, the House Appropriations Subcommittee on T-HUD and Related Agencies approved its FY2020 bill providing $137.1 billion in budgetary resources—a six-billion-dollar increase from the FY2019 level and $17.3 billion above the president’s requested budget. As it relates to the maritime community, the bill allocates $1.1 billion for the Maritime Administration—$395 million above President Trump’s budget request. Included in the $1.1 billion allocation is $300 million for the Maritime Security Program, $225 million for the Port Infrastructure Development Program, $20 million for the Small Shipyard Grant Program, a mere three million dollars allocated to the title XI loan guarantee program, and $300 million to be dedicated to schoolship construction. (MARAD recently selected Tote to manage this contract.)
Additionally, the bill grants $40 million to the Saint Lawrence Seaway Development Corporation.
The bill was favorably reported out of the full House Committee on Appropriations on June 4 and subsequently incorporated in the minibus package (H.R. 3055) that also includes appropriations bills for the Departments of Agriculture; Commerce, Justice, and Science; the Interior; the Environment; Military Construction; and Veterans Affairs. The minibus was then passed by the House on June 25 with a 227 to 194 vote.
Department of Homeland Security Appropriations
Funding for the Coast Guard is contained within the Department of Homeland Security FY2020 Appropriations Bill—most likely the last bill to be passed due to the fight over funding for the border wall. The bill allocates $12 billion to the Coast Guard with eight billion dollars being provided to assist with Coast Guard operations and support. Within those funds are $31 million dedicated for the purchase or lease of 25 replacement passenger motor vehicles and $340 million allocated for defense-related activities. Additionally, the measure provides $1.97 billion for Coast Guard procurement, including $290 million for five Fast Response Cutters, $215 million for two HC-130J aircraft, $135 million for initial materials for a second Polar Security Cutter, and $100 million for a 12th National Security Cutter. This is good news for the Coast Guard, as a February report from the U.S. Government Accountability Office stated that the Coast Guard had a $2.6 billion maintenance and construction backlog.
The bill was reported favorably out of the full House Appropriations Committee on June 11, 2019, containing a few amendments aimed at addressing the migrant crisis on the southern border.
Additionally, a supplemental aid package (H.R. 2157) was recently passed and signed into law by President Trump, allocating $4.59 billion to cash-strapped agencies dealing with subpar conditions and overcrowded shelters along the southern border. $1.34 billion of those funds are directed to be sent to the Department of Homeland Security, $905 million of which will be used to set up temporary facilities for migrants and provide basic essentials such as food and medicine.
Impact of Trade War on Maritime Community
Recently, President Trump made the decision to increase tariffs to 25 percent on roughly $200 billion in goods exported from China, with a plan to impose 25-percent tariffs on the remaining $325 billion in Chinese imports in the future. The ramifications of this decision are being felt across all fields of commerce, including the maritime industry. In a February 2019 study prepared by World Trade Partnership Worldwide, it is shown that a 25-percent tariff on all Chinese imports would result in more than 2.2 million American job losses, a reduction in the U.S. gross domestic product by more than a full percentage point, and a cost to the average family of four the equivalent of a full paycheck—over $2,300—within one to three years after being imposed. For the maritime community specifically, the effects would be felt due to the increased cost of importing and exporting goods via shipping and waterways, directly affecting commerce within the entire shipping industry.
The ongoing tariff negotiations are also causing a decrease in U.S. port infrastructure investment and a slowdown in the creation of new port jobs due to uncertainty and delays in the talks, as well as a significant disruption on supply chains. While a study from The Martin Associates shows that the total economic value of U.S. coastal ports rose 17 percent from $4.6 trillion to $5.4 trillion and the number of jobs supported by cargo moving through U.S. ports increased 34 percent to nearly 31 million jobs from 2014 to 2018, these trends could reverse due to the reorganization of global supply chains, which may cause firms and companies to move their facilities to other locations or find alternative sources of import and export destinations.
Recently, a new exclusion process for the $200 billion tariffs was issued by the U.S. Trade Representative (“USTR”) on June 19, 2019. The USTR began accepting submissions for exclusion requests on Sunday, June 30, and will close their submission portal on Monday, September 30, 2019. The USTR has stated that they expect to receive roughly 60,000 requests, however they do tend to provide decisions most quickly to requests received early in the process. Requests for exclusions can be submitted here on the USTR website.
Status of Infrastructure Programs
BUILD Grants (FY2019)
Previously known as Transportation Investment Generating Economy Recovery (“TIGER”) Discretionary Grants, on April 23, 2019, the Department of Transportation released a Notice of Funding Opportunity for their recently renamed Better Utilizing Investments to Leverage Development (“BUILD”) Transportation Grants Program. BUILD grants are awarded on a competitive basis to projects that will have a significant local or regional impact. In the past, these grants have supported projects that repair bridges, implement safety improvements, connect communities and people to jobs and education, and spur economic revitalization and job growth in communities.
Eligible applicants for these grants include state, local, and tribal governments, including U.S. territories; transit agencies; port authorities; metropolitan planning organizations (“MPOs”); and other political subdivisions of state or local governments. Eligible projects include, but are not limited to, road or bridge projects, public transportation projects, passenger and freight rail transportation projects, port infrastructure investments, and intermodal projects. Final applications are due on July 15.
Port Infrastructure Grants
The port community, represented by the American Association of Port Authorities (“AAPA”), has long requested its own separate grant program, although port projects can and have been funded with TIGER/BUILD grants, above.
Starting in FY2019, ports were successful in having Congress create their own funding line for port infrastructure grants. Included in the appropriations omnibus bill passed by Congress on February 14, 2019, was funding for a new $293 million port infrastructure development grant program to be administered by MARAD. These grants have a set aside of $92,730,000 for the 15 coastal seaports that handled the greatest number of loaded foreign and domestic 20-ft. equivalent units of containerized cargo in 2016, as identified by the U.S. Army Corps of Engineers. The remainder of the funds is available for all other grants. MARAD has not yet published a notice for these new grants. MARAD published a notice of funding availability on June 18, 2019, and grants must be submitted on grants.gov on or before September 16, 2019.
The FY2020 T-HUD bill, on the House side, contains $225 million for this program, thereby continuing this new port infrastructure program.
Broader Infrastructure Package
The chances of Congress passing a broad infrastructure package are looking less likely than ever after a controversial meeting between Democratic leaders and President Trump regarding how to pay for a proposed two-trillion-dollar infrastructure deal ended with President Trump walking out of the meeting. Despite this setback, lawmakers on the Senate Environment and Public Works Committee (“EPW”) stated that they would continue working on their own surface transportation bill with Sen. Tom Carper (D-DE), the ranking member on the EPW Committee, noting that the panel was still on track to approve the five-year highway bill by the end of July.
In the House, Chairman Pete DeFazio of the House Committee on Transportation and Infrastructure remains committed to passing infrastructure legislation. After the failed meeting with President Trump, he stated that “even if a transformative deal with the White House remains elusive in the near term, [he would] continue to use [his] position as Chair of the House Committee on Transportation and Infrastructure to work with Republicans to move individual pieces of legislation that will make a difference, [he would] continue to work on a surface transportation reauthorization bill, and [he would] continue putting in the legwork to make improvements to our nation’s infrastructure that Americans expect and deserve.”
The Fixing America’s Surface Transportation (“FAST”) Act, the current bill that provides federal funding for surface transportation construction and maintenance, expires in October 2020. As the FAST Act creeps closer to expiration, lawmakers will feel more pressure to pass a new infrastructure package—whether it is a reauthorization of the FAST act or a separate long-term infrastructure bill, such as the two-trillion-dollar plan.
Full Utilization of the Harbor Maintenance Trust Fund Act
On April 30, 2019, Chairman DeFazio introduced H.R. 2440—the Full Utilization of the Harbor Maintenance Trust Fund Act—which would unlock and utilize billions in already-collected fees in an effort to maintain our nation’s federal ports and harbors.
Currently, roughly $9.3 billion in revenue collected by the Harbor Maintenance Trust Fund sits idle in the U.S. Treasury while ports and harbors of all sizes struggle to remain competitive in their respective industries. Despite shippers paying into the Trust Fund for congressionally approved maintenance activities, much of the funds have not been utilized for port maintenance. The chairman’s bill would make it easier for Congress to appropriate funds collected for authorized harbor maintenance needs while also enabling the expenditure of roughly $34 billion over the next decade—allowing the U.S. Army Corps of Engineers to dredge all federal harbors to their constructed widths and depths.
According to the Congressional Budget Office (“CBO”), the Trust Fund will most likely collect an additional $24.5 billion in new revenue over the next decade to add to the estimated $9.3 billion in collected but unspent revenues. However, according to the CBO, federal appropriations from the Trust Fund will only total $19.4 billion over the same decade, resulting in the Trust Fund balance reaching $14.4 billion in FY2029. The DeFazio bill was ordered reported out of the full House Committee on Transportation and Infrastructure on May 8, 2019, and is pending final House passage. So far, there is no companion bill in the Senate.
Offshore Wind Developments on the Hill
Included in the House Appropriation Committee’s report of a $690 billion Defense spending bill on May 21, was a requirement that the secretary of defense submit a study to the congressional defense committees no later than one year after the enactment of the bill of “any potential national security concerns with respect to the construction of offshore wind arrays, to include an examination of legacy and new turbines, and any appropriate mitigation measures that should be implemented to address these concerns.” The American Wind Energy Association has labeled the study as “duplicative” of existing statutory authority and the National Ocean Industries Association warned that this development “threatens to derail” the industry. Some analysts believe that this could delay the construction of offshore wind farms and supporters of offshore wind energy are already promising to fight the measure. Rep. Joe Kennedy III, a Massachusetts Democrat who has been a leader in the renewable energy industry, noted that “all proposed offshore wind developments must already consider any national security implications, and to date, none have been raised as New England begins to build turbines off of [their] coast that can power homes and employ a new generation of workers.” We are watchful to see whether this language makes it through the final appropriations process.
Offshore Wind Worker Shortages and Solutions
Despite several wind generation developers entering into partnerships with universities and providing state agencies with training curriculums for offshore wind jobs, the progressive renewable energy industry finds itself with a worker shortage problem as the lack of a workforce with skills for the job is becoming more apparent.
To combat this issue, five members of Congress from coastal states introduced H.R. 3068, the “Offshore Wind Jobs and Opportunities Act.” If passed, the measure would set aside $25 million annually in federal grants for the purposes of training workers for jobs within the offshore wind industry. Sponsored by Democratic Representatives Donald McEachin (VA-4), Bill Keating (MA-9), Joe Kennedy (MA-4), Alan Lowenthal (CA-47), and Donald Norcross (NJ-1), the bill would issue grants to higher education institutions and labor organizations that could use the funds to develop or improve their offshore wind training programs.
While it seems from the media that Congress cannot chew gum and walk at the same time, the committees that authorize and fund critical maritime programs seem to be trying to actually do something constructive this year before the election cycle starts in 2020. We are confident that Congress will enact the NDAA this year; however, enactment of the Coast Guard authorization and funding bills for FY2020 will be problematic unless Congress decides to focus on getting their job done despite the political distractions in Washington for the rest of the year.
Additional assistance with this article was provided by Blank Rome Government Relations LLC Research Analyst Alex Remy.