Saturday, July 26, 2014

THE U.S. OFFSHORE DRILLING INDUSTRY HAS BEEN SOLD OUT BY THE CONGRESS AND FEDERAL AGENCIES


Oil Drilling Platform
Photo by Andrew Schmitt  http://www.publicdomainpictures.net/view-image.php?image=7554&picture=oil-drilling-platform

We first published these observations back in October of 2012. The subject is worth revisiting because it remains a vital interest. It is a real and present danger as long we ignore it.  Unfortunately our do nothing Congress has not acted as of 9/14/2015.


OFFSHORE DRILLING CONTRACTORS ARE NOW MOSTLY FOREIGN CORPORATIONS

It didn't Start Out That Way But If Senator McCain Has His Way It Will Remain That Way. Follow The Money.

 We chose this weekend to update this story because on Friday President Obama announced his intentions to make it more difficult for basically American companies to "internationalize" in order to protect corporate profits from American taxes. The offshore oil industry shouldn't need any additional laws since this activity was protected before it was popular to export American jobs, by the Jones Act. But over the years the act wasn't vigorously enforced by the U.S. Coast Guard or Custom service and the poor enforcement performance was pretty much ignored, if not outright encouraged by Congress. A leading proponent of such exporting of U.S. offshore oil search related jobs by allowing foreign flag vessels to participate in the game has been Senator John McCaine (R), Arizona.


The famous "BP OIL SPILL IN THE GULF OF MEXICO" was obviously the product of BP AKA British Petroleum, the holder of the then U.S. Minerals Management Service offshore lease. When most people think of offshore oil development they think in terms of "bottom founded" artificial islands like the one depicted in the Andrew Schmitt photo above. But in fact much of the new offshore exploration and even production work is done from Mobile Off Shore Drilling (or production) Units (MODUS).

This "MODU" is actually a vessel. The "legs are really "cassions" that connect to "sponsons " or pontoon like hulls under the water. The center of buoyancy is below the wave action and the waves pass through the leg like "cassions" producing very little motion. These "rigs" work in water far too deep for building platforms. These are vessels. This type of vessel was invented by Texas offshore operators and were first built in the United States.

Obviously the BP oil disaster was brought to our Gulf Coast by British Petroleum a foreign oil company which held the lease and hired the various contractors to develop it. The contractors however, were as Congressional hearing would demonstrate  foreign corporations some with long histories in Texas and American sounding names but headquartered in Switzerland. The MODUs involved and the over whelming majority of working MODUs on the Gulf Coast today are built and registered in foreign countries, usually "open registry states", generally with very lax safety enforcement programs. How did this happen.  Representative Gene Taylor (D- Mississippi) was able to squeeze out the answer from one of the witnesses in the Congressional hearing.  It seems that a number of drilling contractors that originally pioneered the MODU concept made  fortunes on the U.S. Outer Continental Shelf Lands (OCS). Then in order to avoid U.S. taxes and costs, reorganized as foreign corporations , often Swiss. Then they built the next generation of MODUs in places like Korea. The only thing keeping them off of our OCS was the Jones Act. They applied for exceptions because"there weren't enough U.S. flag MODUs to meet the need." Of course there weren't  because that's how they planned it. The supposed watch dogs over the OCS, the USCG which admits to not knowing a moon pool from a drill collar  simply affirmed to Congress that yes there was a shortage. The Customs Service which apparently doesn't know port from starboard, seconded the motion . One witness reluctantly admitted that it had over 50 MODUS on the U.S. OCS and not one was registered in America. The company was originally founded in Houston, Texas. 

 The Congressional subcommittees overseeing the Coast Guard appeared angry at the end of the BP hearings and determined to reverse this contrived situation in violation of the Jones Act. But so far there has been little action to return MODU building and ownership to the United States.   Now these big MODUs like the earlier legged rigs need lots of logistic support from offshore service vessels (OSVs). These little ships journey from coastal ports in the United States to platforms or MODUs in our OCS waters , a domestic move even more clearly protected by the Jones Act than the MODU activity. We have dozens of operating companies working such vessels and thousands of these OSVs. You can see a number of OSVs in the foreground of this picture of the BP rig afire.

File:Deepwater Horizon offshore drilling unit on fire 2010.jpg  

 It was discovered in the course of the Congressional hearings on the BP disaster that some companies were either gaining legal exceptions or illegally bringing in foreign flag OSVs to support some of these foreign flag MODUs in violation of the Jones Act and offering head to head competition with U.S. OSV operators. At lest verbally one of the Coast Guard congressional subcommittees "ordered the USCG to eliminate all foreign OSVs from the U.S. OCS within two years. There has been no visible movement in that direction.  What is pictured above is highly predictable when the Jones Act is ignored because the entire purpose in ignoring the Jones Act is escaping U.S. regulation. Why would U.S. Senators and representatives advocate for exactly what was being done the day this happened? Why wouldn't Senators and representatives from land locked districts at least let the coastal state representatives work this out  without proactive interference in favor of the those who brought on this event by avoiding and evading the Jones Act ? FOLLOW THE MONEY! 

 Don't follow the party because opposition to the Jones Act has been mostly by Congressmen and Senators of both parties over time from arid states. For Senator McCaine , a U.S. Naval Academy graduate and former Navy Officer to oppose the protections of our domestic Merchant Marine he has to go directly in opposition of the teaching of Alfred Thayer Mann. Mann was the articulate advocate of American "sea power" as a concept that encompasses the total seafaring capabilities of a nation both naval and commercial. Every Midshipman who ever passed through the Naval Academy is thoroughly familiar with his doctrines as a matter of formal instruction.  McCaine has to go against everything that he was taught. But being from Arizona he has no constituency with a direct economic interest in the issue. Thus Democrat or Republican, what we find when we look at the history of representation of the arid states is support for eliminating the Jones act that crosses party lines and immediate successors to office, even when parties change. In the 33 states serviced by coastal and riverine  navigation, support for the Jones Act crosses party boundaries because large numbers of the electorate are concerned with the issue. FOLLOW THE MONEY. Among the lobby for  repeal or dilution of the Jones Act look for the American affiliates of Italian, Japanese, and French owned grain exporters, and the American affiliates of those former American owned drilling contractors. The influence is so subtle it will be rare to see an easily recognizable direct foreign interest. But that's where the economic interests are and can only mean damage to the U.S. economy and U.S. working families. FOLLOW THE MONEY! 

 By contrast the campaign money to supporters of the Jones Act comes from American ship and barge builders and their organizations. American domestic shippers like legitimate offshore service vessel operators and tow boat and barge operators, organized American maritime labor in short a vast and important American industry committed to safety and environmental responsibility on American waters as well as "efficiency" in shipping. More importantly the lobby for the Jones act is made up of real Americans with a right to lobby their Congress. These real Americans are lobby their representatives who have a right, duty, and obligation to at least consider their arguments. The opponents of the Jones act are taking money from thinly disguised foreign interests including what we might call "turn coat" American companies. The taking of money from such interests may not be illegal but we feel certain that it is disloyal and will be viewed as such even by the electorate of the arid states once fully revealed in detail. We hope this is being read by serious professional investigative journalists who aren't afraid to receive information from organized maritime labor and American industrial trade associations. The enemies of the Jones Act often attack such groups as some how unpatriotic and self serving, while doing the bidding of foreign interests themselves. Get over it! Americans have the right to petition their representatives , foreign corporate interests and governments do not.   



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