Joan M. Bondareff and Stefanos N. Roulakis
We are in the middle of the two-year term of the 116th Congress. In 2019, Congress reauthorized and funded several maritime programs, described below. Impeachment and a busy Senate calendar have delayed the 2019 Coast Guard Authorization Act (“CGAA”) until the second session, which began on January 6, 2020.
Coast Guard Bill Delayed by Jones Act Waiver in House Bill
The main delay to finalizing the CGAA is how to handle a provision regarding installation vessels. This provision seeks to affirm that the Jones Act applies to “lifting operations” while instituting a government-run waiver process that may allow use of foreign-flag vessels. (For a complete summary of the House-passed bill, please see our advisory, Potential Impacts of Offshore Legislation on Industry.) In contrast, U.S. Customs and Border Protection (“CBP”) has recently issued a customs bulletin interpreting the Jones Act as specifically not applying to “lifting operations” in addition to creating new criteria for when a Jones Act vessel must be used in transporting items offshore. (For a complete summary of the CBP Notice, please see our advisory, U.S. Customs and Border Protection Decision Makes Substantial Changes Affecting the Offshore Industry.) Procedurally, the Jones Act waiver provision is in the House-passed bill (H.R 3409). The companion Senate bill (S. 2297) lacks a similar provision. As such, proponents of the CBP’s notice are encouraging Congress not to enact the House-installation vessel provision.
The specifics of the House provision would regulate lifting operations offshore. The provision states that until a coastwise qualified (i.e., U.S.-built, U.S.-citizen owned, and U.S.-flagged) lifting vessel is built, “lifting operations” are not subject to the Jones Act. Once such a vessel is built, the bill would charge the Maritime Administration (“MARAD”) with implementing a waiver provision for “lifting operations” requiring crane capacity greater than 1,000 MT. If MARAD determines that a U.S. Jones Act qualified vessel is available, only a coastwise-qualified vessel can perform the lift. As of this publication date, it remains to be seen how the House and Senate bills will be reconciled in conference.
Members of the Senate are also informally advocating to include a mandate that the government would reimburse members of the Coast Guard during a government shutdown. This language did not make it into the final House bill because the Congressional Budget Office scored it too high and there was no offset.
Reauthorization and Funding of Major Maritime Programs
In the meantime, and despite a full legislative calendar, Congress did manage to complete work on several maritime programs during the first session of the 116th Congress.
The National Defense Authorization Act (“NDAA”) reauthorized several programs managed by MARAD, including the National Security Multi-Mission Vessel Program, the Port and Intermodal Development Program, and the Maritime Security Program (“MSP”), as well as the U.S. Merchant Marine Academy and the state maritime academies. Congress also modified the title XI loan guarantee program by directing the administrator of MARAD to establish a process for the expedited consideration of low-risk applications. The NDAA also established a “military to mariner” transition assistance program. Further, the MARAD title of the NDAA requires the General Accounting Office to report to Congress on whether the United States has sufficient vessels to address the growth in the offshore wind industry. Until we know the answer to this question, any legislation banning foreign-flag heavy lift vessels from doing this work is certainly premature.
Originally, the bill created a new Voluntary Tanker Assistance Program (“VTAP”) for Military Sealift Command. The reason for this provision was due to a documented shortage of vessels to move petroleum products to support military operations. The VTAP would have been funded along similar lines as the MSP. The enacted version of the NDAA reduced the VTAP to a report by the secretary of defense on the capabilities of the United States to maintain adequate U.S.-flagged fuel tanker vessel capacity to support the full range of anticipated military operations through 2030. Depending on the results of the report, Congress could consider a similar provision in the future.
One other item of note in the NDAA enacted in 2019 was the establishment of new sanctions against the Nord Stream 2 pipeline. The pipeline is intended to supply gas from Russia to European nations. Senator Ted Cruz (R-TX) was the original sponsor of the sanctions, which did end up in the final NDAA. As a consequence, the company laying the pipe for the project agreed to stop work on the project.
MARAD Program Funding
The amounts authorized for MARAD in the NDAA were subsequently modified by the congressional appropriation for these programs (in Pub. L. 116-94), as indicated below. Congress ultimately provided a total of one billion dollars for MARAD’s programs, including:
- $300 million for the Maritime Security Program;
- $225 million for the Port Infrastructure Development Program;
- $300 million for the third National Security Multi- Mission Vessel;
- $20 million for assistance to small shipyards;
- $9 million for Marine Highway Grants; and
- full funding for Kings Point and the six state maritime academies.
Of relevance to the above, on February 15, 2020, Secretary of Transportation Elaine Chao announced the recipients of the FY2019 Port Infrastructure Development Grants. (See FY 19 Port Infrastructure Development Grant Announcement.) The Department of Transportation just announced the next round of Port Infrastructure Grants, which are due by May 18, 2020, although there is no word yet on the 2020 small shipyard grants. (See Notice of Funding Opportunity for Department of Transportation’s PIDP under the Further Consolidated Appropriations Act, 2020.)
Additionally, MARAD just awarded $7.5 million for Marine Highway Grants. (See DOT Awards $7.5 Million in Grants for Marine Highway Projects, WorkBoat, January 7, 2020). In June 2019, MARAD awarded the 2019 Small Shipyard Grants. (See Small Shipyard Grant Awards Announced, WorkBoat, June 18, 2019.) We anticipate that with new funding for 2020, notices of funding opportunity for port infrastructure and marine highway grants will be issued sometime this spring, with awards by the end of the year. Of note, the Small Shipyard Grant Program application was issued on January 9, 2020; applications were due on or by February 18, 2020.
Coast Guard Program Funding for 2020
While the Coast Guard Authorization bill remains in limbo, Congress has appropriated funds to keep Coast Guard programs running through 2020. These funds came from the second omnibus, the Compromise National Security Spending Package, enacted as P.L. 116-93. The final bill provided $12 billion to the Coast Guard with $1.77 billion set aside for Coast Guard procurement, or $475.8 million less than FY2019. Included in the procurement budget is:
- $312 million for offshore patrol cutters;
- $260 million for fast response cutters;
- $160.5 million for national security cutters;
- $150 million to sustain the MH-60 aircraft; and
- $135 million for a second polar icebreaker.
Although Congress has not provided the policy direction for these and other Coast Guard programs, the funding will certainly keep these programs operational for 2020.
Conclusions and Outlook
Congress took care of the major maritime programs for FY2020 by funding them. Other work remains to be finished. The maritime community has time to weigh in on the final CGAA, submit applications for Small Shipyard and Port Infrastructure Development grants, among other grants, and begin to format requests for FY2021 appropriations.
Looking ahead, we anticipate Congress enacting another NDAA by the end of the year with a new MARAD title, enacting FY2021 appropriations, reauthorizing the Water Resources Development Act, and at least beginning to work on a new surface transportation (or highway) bill. All these bills will have maritime elements, including for ports and shipyards, and should be on company watchlists.