Shipbuilding firms battle over language in appropriations bill

A provision in the House's $90 billion fiscal 2005 Transportation-Treasury spending bill that would delay funding for a program created last year to help finance construction of five U.S.-built tanker vessels has pitted the nation's largest shipbuilding firms against small- to mid-sized shipyards vying for the contracts.

Inserted by Transportation-Treasury Appropriations Subcommittee Chairman Ernest Istook, R-Okla., the provision would kill administration regulations issued Feb. 20 to allow winning bidders to contract with foreign shipyards for construction of up to 10 percent of a vessel's total steel weight.

House Armed Services Chairman Duncan Hunter, R-Calif., and Sen. Trent Lott, R-Miss., created the program as part of the fiscal 2004 defense authorization law, arguing it would reduce the Pentagon's reliance on foreign-flag oil tankers and provide incentives for U.S. firms to compete in international commerce. Winning bidders would be eligible for subsidies of up to $50 million per vessel. The program could prove a major windfall if their success translates into future orders for double-hulled tanker vessels, which must replace single-hulled ships by 2015 under the 1990 Oil Pollution Act.

The Istook provision would "stop dead in its tracks a critically important national security program" that "will create thousands of seagoing, shipyard, and shoreside American jobs," stated a coalition of shipyards, ocean transport firms and maritime unions in a letter to Istook July 21. Backers of the administration rules argue they need foreign assistance with complicated ship components. The rules would allow U.S. companies "to import some technological expertise," said Allen Walker, president of the Shipbuilders Council of America, which represents small- to mid-sized firms. "The Koreans build thousands of ships, and we build very few," Walker said.

Istook inserted the provision at the behest of the American Shipbuilding Association, which represents the largest U.S. shipyards, after concluding the rulemaking could harm domestic manufacturers, an Istook aide said. ASA president Cynthia Brown said her group backs the program but supports the Istook language because allowing parts to be constructed overseas would subsidize foreign competitors. "Chinese and South Korean shipyards don't need U.S. taxpayer dollars," Brown said. Travel reports Istook submitted show ASA paid for Istook and his wife to go to Naples, Fla., in December 2003 to "discuss policy and legislation to rebuild our sea services and the shipbuilding industry."

Istook's move caught a number of lawmakers by surprise, including House Appropriations Chairman Bill Young, whose Florida district is home to two firms that oppose the Istook provision. Young "will take another look at this in conference," a spokesman said.

The oil transport firms in Young's district that could benefit from the program, Maritrans GP, Inc., and Seabulk International, Inc., were signatories on the July 21 letter urging Istook to remove the funding prohibition. Also signing the letter was Tampa Bay Shipbuilding & Repair Co., Inc., where construction work would be done if a bid by Mobile, Ala.-based Bender Shipbuilding & Repair Co., Inc. -- another signatory -- is accepted, according to Walker.

Senate Transportation-Treasury Appropriations Subcommittee Chairman Richard Shelby, R-Ala., whose home-state shipyards are among those that oppose the Istook language, is expected to try to strip the provision as well as add funding for the program Istook did not include.