Maritime Matter of the Week

Shipbuilding Industry is Booming, But is There a Downside?


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Lipcon, Margulies, Alsina & Winkleman, P.A. is comprised of attorneys that are nationally-recognized industry leaders in the field of maritime and admiralty law. Our team of lawyers has over a century of combined experience, has successfully handled over 3,000 cases, and has recovered over 300 million dollars in damages for our clients.

Cargo shipIt has been a roller coaster ride this year in the cruise industry, with a larger-than-average number of accidents and crimes being reported on both the high seas and in port. But despite the rocky start to the year, the maritime industry as a whole is doing particularly well. So well, in fact, that ten supertankers are currently under construction with another 15 waiting to start construction.

Our maritime law firm has learned that the shipbuilding industry is booming following a spike in energy production. The supertankers represent a huge milestone for the industry, considering there are only 75 supertankers in the U.S. currently.

Matthew Paxton, president of the Shipbuilders Council of America, recently spoke with regarding the newly commissioned ships and explained this many ships haven’t been built since the 1970s.

“The movement of more oil has built up a real commercial shipbuilding renaissance,” said Mr. Paxton to the media outlet.

It’s even more impressive to see the shipbuilding industry has resurged given the fact that the economy is still struggling, specifically with fuel costs.  With so many maritime accidents and fuel prices skyrocketing, what accounts for the boom in boat building?

The answer is natural gas.

Aside from the shipbuilding sector, another industry that’s doing extremely well in the U.S. is the natural gas production sector. A record amount of natural gas and oil is being extracted from shale, a fine-grained rock composed of mud and several other minerals, leading many to call the U.S. the “Saudi Arabia of natural gas.” Though much of the fuel is being exported, the vast majority is being distributed domestically. Sounds like a great plan, but an old maritime legislation is what’s really behind the development of the new vessels.

Due to the 1920s Merchant Marine Act, now known as the Jones Act, natural fuel must be transported by rail, pipeline or ship. This law applies to both international and domestic fuel transportation. Furthermore, the Jones Act specifies that if fuel is to be transported by ship, the vessel must be made in the United States and manned by an American crew.  Thus, the spike in commissioned supertankers.

According to Mr. Paxton, an estimated 3.3 million barrels of natural gas will be shipped out from the Gulf Coast daily by 2020. The fuel will be transported along both the east and west coasts of the country. And if the energy industry continues to do this well, perhaps an even greater number of shipping vessels will be commissioned.

Though the fuel itself will hopefully bring the U.S. some much needed profit, it’s not exactly cheap to construct the tankers. The Aker Philadelphia Shipyard recently made an announcement explaining it invested $115 million for the construction of four tankers and plans to commission four more.

But is shale oil better than conventional crude oil? Does it have a more significant impact on the environment?

Unfortunately, the answer is yes. The production of shale fuel has both environmental and financial impacts. Not only can shale oil extraction contribute to water and air pollution, but surface mining shale deposits in the earth can also cause unusual environmental impacts from the unique method of extracting shale, known as open-pit mining, which involves extracting minerals from the surface of the earth through an open pit.

Additionally, the combustion process generates waste materials and emissions that can be harmful to the atmosphere, including carbon dioxide emissions. Every barrel of oil produced from shale leaves behind about 1.2 to 1.5 tons of rock. What will happen to that excess rock? Most likely it will be destroyed, causing even more of a strain on the environment.

Furthermore, the extraction of shale oil is also more expensive overall than the production of crude oil. Are we just paying more because of the prospects of using “natural” gas? Are there more negative effects than positive in the long run?

The natural gas industry may be booming now, but it might face the scrutiny of environmental protection agencies worldwide for its potentially disastrous impact on the earth. The largest oil shale reserve in the world is located right here in the U.S., across parts of Wyoming, Utah and Colorado. It’s certainly enticing to know that the U.S. has an upper hand when it comes to fuel production, especially if shale oil surpasses crude oil as the main source of energy. But is the new trend all it’s cracked up to be?

Only time will tell if the impact on the environment will outweigh the benefits of shale oil extraction. In the meantime, we have a whole new set of supertankers waiting to sail across the country to transport the fuel. Hopefully the shipping industry will at least take greater precautions to prevent leaks and work with an environmentally conscious attitude.

Our firm has reported on dozens of oil spills across the world, many of which have taken months to fully clean up. Who can forget the largest oil spill in history, the BP Deepwater Horizon spill in 2010. Around 572 miles of Gulf waters became polluted, taking years to clean up. We are still feeling the effects of the spill today.

One would think that with a slew of oil leak accidents happening around the world since crude oil was first produced, that greater efforts would be made to protect the environment and marine life. We can only hope that from here on out the industry will take greater care of protecting the environment and will invest in not only expensive and powerful supertankers, but in anti-leak technology to keep the impact on the planet at a minimum.

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