Will the U.S. Join the Green Wave?

Since we cannot know all that there is to be known about anything, we ought to know a little about everything.

Blaise Pascal (1623-1662)

This month I look at the new administration’s first proposed bill that affects the oceans and shipping, an intro to  a new cargo carriage idea that is not so new, and how diesel exhaust scrubbers are currently doing in the marketplace.  

Whether one believes that global warming is due to man-made greenhouse gases (GHG) or that it is all a political or money based scam, this train has left the station.

The Paris Agreement of 2016 was the United Nations’ move to limit GHG and global warming. Of the four major emitters of GHG: China, the United States, EU27, and India (in that order), only the EU countries have reduced their emissions, although not yet by the targeted amount.

The U.S. withdrew from the Paris Agreement in 2020 joining the major GHG emitting countries of Iran, Turkey and Iraq, which had never ratified the agreement.

Previously, in October 2020, the House of Representatives put forth House Bill 8632, Ocean Based Climate Solutions Act of 2020 (OBCSA). In 2021 the U.S. rejoined the Agreement.

This bill covers a lot of territory. Among its goals is expanding scientific ocean research to better understanding coastal problems and solutions for better coastal barrier protection, prevention of algae blooms in south Florida, and research on how water temperature changes will affect the valuable U.S. coastal fisheries.

Much of the bill was copied from the EU version and in line with the U.N.’s Paris Agreement. With the International Maritime Organization (IMO) being a part of the U.N., the Paris Agreement emission rules are applied to ocean transportation. My many blog subjects over the past year have been about the changes in ship design and operations that have been forced by the emission standards set up by the IMO. I have commented several times that while the U.S. has not been a direct part of these regulations, domestically, U.S. ships and U.S. manufacturers of ships and ships equipment used in international commerce must comply with the laws that are being enforced in other countries. With the passage of OBSCA the U.S. will be enforcing these laws.

Of course the bill will not pass in its original form but I do believe that the portions applying to shipping will be close to the original form.

For the big picture, here are the aims of the bill:

  • Reduce greenhouse gas emissions;
  • Increase carbon storage in blue carbon ecosystems;
  • Promote coastal resiliency and adaptation;
  • Improve ocean protection;
  • Support climate-ready fisheries
  • Tackle ocean health challenges; and
  • Restore U.S. leadership in international ocean governance

For the maritime general interests:

Subtitle A—Oil and Gas Leasing in the Outer Continental Shelf
Sec. 301. Prohibition of oil and gas leasing in all areas of the Outer Continental Shelf.

Subtitle B—Offshore Renewable Energy
Sec. 311. Sense of Congress on the importance of offshore wind energy.
Sec. 312. National offshore wind goals.
Sec. 313. Removing roadblocks for data sharing.
Sec. 314. Increasing funding for scientific research.
Sec. 315. Extending collaboration with industry.
Sec. 316. Developing strategies to protect wildlife.
Sec. 317. Offshore wind for the Territories.
Sec. 318. Marine energy research
Sec. 319. Increasing funding for coastal conservation and resilience

There will probably be some fighting over some of these points.

And for most of the readers of this blog:

Sec. 404. Fuel efficient fishing vessels.

Sec. 1401. Greenhouse gas emissions from shipping.
Sec. 1402. Quiet Seas and Clear Skies Vessel Speed Reduction Award Program

This last section fits in with the general thrust of the IMO emissions regulations with the goal of establishing monitoring, reporting, and verification requirements of greenhouse gas emissions applicable “to all vessels of 5000 gross tons or more calling at, leaving, or transiting between, or at berth at, ports in the United States, regardless of flag”. (Sections 1401-1402).

If you want to see the detail that the devil brings, look at Bill 8632, Title XIV, pages 309-310.

This is not a “game changer” as most international shipping has already been trying to comply with the IMO emission rules, but it will add some weight to the greening of marine transportation and the flow of investment dollars.


I try to stick with subjects closely related to the jobs and interests of the readers, but this piece of proposed new technology amazes me.

Stena Bulk has come out with a ship design called the InfinityMAX concept. It is the old LASH (Lighter Aboard SHip) and the Sea Bee cargo handling systems adapted by using current and possible future technology.

LASH came out in the late 1960’s and was used successfully by American and Russian operators. The concept was the use of floating “containers”, i.e., barges. Standardized 60’ x 30’ x 13’ deep, rectangular steel or fiberglass hopper barges would be loaded anywhere on an inland river system and moved in a river/canal tow to a major hub port. There the barge, with a capacity of 380 metric tonnes, would be loaded on a specially designed ship. LASH ships had the deck house forward and the rest of the length of the ship had cargo holds with cells, similar to container ships. A large gantry crane could move the length of the ship and over the stern. A tug would move a LASH barge under the crane which would lift it and place it in one of the holds. For discharge the process would be reversed with a tug taking a barge from under the crane where the barge could then be moved to its destination on an inland waterways system.

This worked perfectly between the waterways of the United States, mostly through the port of New Orleans, and the waterways of Europe, mostly through Rotterdam.

The Sea Bee system worked similarly and was designed and operated mainly by the American Company Lykes Brothers Steamship starting in the early 1970’s.

The Sea Bee barges were larger, at 850 metric tonnes, and were lifted at the ship’s stern by means of a Syncrolift elevator. But the business plan and service were similar to LASH with the Sea Bee ships also have special wing tanks to carry liquid cargos in smaller parcels.

The Stena ship is all of the above. But instead of the ship carrying up to 75 LASH barges or up to 38 Sea Bee barges, it may be set up to carry multiple floating “modules” which can be dropped off outside a port and moved by tugs. The future fit of the idea is that these will not just be dry cargo hopper barges. These modules will be customized to carry any cargo. There will be modules that will be, in effect, a dry cargo barge, but others will be chemical, LNG, ammonia, methane, edible oils, or even CO2 from carbon capture. Each one of these modules will be self-sustaining, with power from solar or even their own gas bleed off.

My 60 years in the business tells me the devil is in the details, and there are a whole lot of safety and regulatory details involved here. But it is a great concept.


[Occasionally I will be looking at technical and regulatory subjects I wrote about in past blogs and bringing us up to date on where they have gone (or not gone)].

In December 2020 I opined on the status of scrubber installations and the point that the price spread between High Sulfur Fuel Oil (HSFO) and Low Sulfur Fuel Oil (LSFO) was small enough to make the payoff time for scrubber installation to be a possibly unwise financial decision. In the latest statistics from BIMCO and Clarkson’s, scrubber installations are continuing.

Clarkson notes that they are more popular in larger ships, the ones that burn more fuel. As of March 12, 3947 ships had scrubbers installed which is 3.9% of the number of ships in the world fleet. But measured by the world fleet tonnage this is 20.8%, one fifth. BIMCO breaks scrubber installations down to 15.9% of all container ships, 11.4% of bulkers, 24.5% of crude carriers, and 4.2% of oil product tankers. But if you measure these numbers by cargo capacity (TEUs/DWT), the percentages go up, also indicating scrubber use in the larger ships. But with the current price spread between LSFO and HSFO in the range of $100 to $110 USD and the belief that the spread has to be around $150 USD to justify a payoff within a reasonable time, a decision for scrubbers may be puzzling.

Moving with the times is a challenge. We old hands wrestle a bit with Excel but realize what a great help it can be in handling appraisal assignments involving a large number of assets in a fleet. New software and “the cloud” allows us to put together excellent reports, including photos and tables, from almost any location. But still the basis for what we do and what we teach the younger staff, is what we learned building DLS with the guidance we got from merchant mariner and marine survey mentors like Bob Stickney and Leo Weisgerber.

P.S. As a Tulane fan I couldn’t help myself when choosing a title for this edition.

-Norman Laskay

If you’d like to keep this conversation going, send me an email at nlaskay@DLSmarine.com.

LNG Is Here: How Is It Impacting The Industry?

Where is LNG as the fuel of choice for the maritime industry? DLS Marine Surveyor Norm Laskay discusses the current switch to LNG, its impact on air cleanliness, and the ever-important roles of crew members, surveyors, appraisers and classification societies…

Reading the various maritime newsletters and commentary about the future fuels that will be used in the industry, I’m reminded of the old joke framework where a subject is laid out like an announcer calling a horse race.

“LNG is out in front closely followed by its stablemate Bio-LNG. Two lengths back, but gaining, are Ammonia and Methanol. Trailing, but looking strong, is Hydrogen Cell.”

The winner depends on where one places the finish line. 2030? 2050?

Many experts, and a lot of money, say it is LNG at the 2030/2035 line. LNG is available now and suppliers in major ports have built and continue to build a supporting infrastructure of bunkering spots and LNG bunkering barges and bunkering tankers.However, while LNG is cleaner than Heavy Fuel Oil, it still, when burned, creates significant Green House Gases (GHG) and its production is not particularly clean. But it is a good start towards mandatory clean air goals that must be reached. Dual fuel engines exist and vessels can be (relatively) economically retrofitted to use LNG. And LNG can be “cut” with cleaner bio-LNG and liquid synthetic methane (LSM) as facilities come online to economically produce these new fuels. This is called layered technology.

The hope for operators, and lenders, is that the LNG fueled vessels being built now and in the next few years, will be able to bridge the current scientific and economic gap and be operated under pertinent IMO/Port State air cleanliness levels over a 15- to 20-year operating life until the next generation of cleaner fuels are readily available at reasonable cost.

It is important to note that a vessel’s cleanliness performance involves its level of emissions. Thus, an owner can do any combination of things to bring the vessel’s emissions at or below the mandatory levels. While GHG emissions come from burning fuel, they can be reduced not only by burning cleaner fuel but by burning less fuel. Solutions being tested, and in some cases in commercial use, are many. Just as in a car, the faster you drive the more fuel you use, ships have been doing what is called “slow steaming”. By carrying out a voyage at slower than normal speeds they save on fuel. On one side this slows down the movement of goods and affects the Just-in-Time delivery of goods and parts business model. The other side is that this puts more vessels in transit and therefore can help vessel supply/demand and day rates.

Other fuel saving steps are improved use of weather routing to enable a voyage to be carried out along the shortest route with the most favorable weather conditions, and redesign of a vessels hull, rudder, and propeller design and location, all steps to reduce drag.

But the goal is cleaner fuels. Worldwide, there are constant new ideas for innovation in new fuel sources. Testing and production are being helped by governments, particularly in Europe and parts of Asia. And more and more investor groups are placing a value on ecological and social improvements which also helps in funding.

A United Nations study stated that the worth of nature’s goods and services should be prioritized over traditional measures of economic activity such as gross domestic product. Companies and governments should account for the benefits of investing in the preservation of natural assets such as plants, wildlife, air, water and soil. Their point being that the cost of inaction greatly outweighs the cost of action.

This rush of new technology in machinery and hull design, and the digitalization of vessel systems is pretty amazing. But operators, lenders and underwriters have to keep in mind that all of this is still controlled by humans. As vessel hardware and software becomes more complex, so can the safety issues. Classification societies are creating regulations for the construction, testing and safe operation of these controls and operating systems. But it is still the crews that will be dealing, daily, hands on.

And it will also be up to marine surveyors and appraisers to stay abreast of these changes and to understand their parameters and safe operation. DLS Marine has already drafted a check- off sheet for the general inspection and layout of LNG systems on board marine vessels and will continue to learn details on their safe operation. Design and safe operation of modern battery banks is the next goal.

-Norman Laskay

If you’d like to keep this conversation going, send me an email at nlaskay@DLSmarine.com.

Do appraisal methods commonly used internationally meet acceptable standards?

“The only function of Economic Forecasting is to make Astrology look responsible.”
John Kenneth Galbraith (1908-2006)

The standards that are taught in academia are the three approaches to value. They each have strengths and weaknesses.

In the absence of comparable sales, and even with comparable sales being available, lenders have gone to the income approach or, Discounted Cash Flow (DCF) method. It is true that the value in a vessel is its intrinsic value, i.e., its ability to generate income over its economic lifetime. Therefore doing a DCF calculation can give you a value of that marine asset.

Lenders are also only too aware of the cyclical nature of the marine industry.

For one to do a DCF there are a number of assumptions to be made. The simplest may be its remaining economic life with the cascade of technological and economic obsolescence factors that arrived, and will continue to arrive this decade, that figure may become fuzzy. There are already comments that vessels may have a physical life of 20-25 years but a technological life closer to 15 due to economic obsolescence. In a previous blog I mentioned the possibility of “stranded assets”.

Not so easy is estimating the future expenses. While such things as maintenance costs, crewing costs, insurance costs, and stores may be estimated 10-to-15 years into the future, fuel cost, the major outlay in vessel operations, may vary greatly over that time period.

As someone who once did DCF calculations for almost 30 container ships, my estimate of fuel costs over the life of these ships, in hindsight, were not particularly accurate. And for the next 10-to-15 years the valuer may not even know what type of fuel, LNG, Ammonia, hydrogen cells, will be in use.

So how do you handle value when future expenses can be based on multiple assumptions, and, in an industry known for the wild fluctuations among vessel types, future income?

After 2009 when there were no vessel sales for comparison purposes the Hamburg Shipbrokers Association, with the assistance of PriceWaterhouse Cooper (PwC) developed what is called the Hamburg Rule, later to be named the Long Term Asset Value Method (LTAV).

Proponents, in one example, say that you use the current charter rate for such a vessel and adjust it up or down to the historical average charter rate for four years, then simply increase that charter rate by 2% inflation over the remaining life of the vessel.

Such a calculation, fully explained in an appraisal report, may satisfy International Valuation Standards (IVS) for transparency, as there are no mirrors. But there is a lot of smoke. And it doesn’t satisfy other aspects of IVS like consideration of the other two approaches to value and using them or clearly explaining why they weren’t used.

Making the assumption that a vessel will have good utilization and a positive cash flow throughout its life is, in my opinion, a bridge to far.

An aircraft evaluation group, ISTAT, has a theory called Base Value. This assume an aircraft’s value in a balanced market apparently ignoring the market conditions on the date of value, similar to the idea behind LTAV. Yes, in a balanced market there should be good utilization and therefore good prices and charter rates. Eventually. Whenever the balanced market returns. So such a view is a grand hypothetical assumption.

But is the Market Approach, i.e. comparable sales, the answer?

Most appraisers can agree that the market approach can be the most accurate measure of value. With the willing buyer and willing seller, both well educated in the market, unmoved by other outside factors, there should be few, if any, unknowns, and their joint opinion of value should be the most accurate.

The problem lies in a market where there are no sales to track as there may be willing sellers but no willing buyers in that market at that time. And another catch that is always there is if the “comparable sale” is really a comparable to your subject vessel. In marine equipment where there are few standard or “production” designs, comparable may be a loose term and need some clarification.

But when sales are available, the standard for decades in international finance has been the Shipbroker’s Certificate of Valuation. This is a one page certificate giving the basic identification of the vessel and a value. This may even be paid for and provided by the entity that is selling the vessel.

There is no question that this type of valuation is in no way acceptable under the International Valuation Standards, RICS Red Book Standards, or the Uniform Standards of Professional Appraisal Practice and would be rejected by any Big Four auditors. Yet these Certificates are accepted by lenders.

A step up from a Certificate of Valuation is the valuation provided online through calculations made via a computerized program. This is a hybrid of market information based on sales and an algorithm that takes into account freight rates and freight market sentiment and calculated with regression analysis.

As with the Shipbroker’s Certificate of Valuation, the opinion of value given by a computer program may be very accurate. But do either satisfy some of the important standards that are the basis for appraisals that are used in international lending and accounting? The computerized program hits some of the required steps via disclaimers, but not all of the steps.

The major required standards for a report, as per IVS, that are omitted by one or both of the above sources are:

  • Clearly including the scope of work that developed the opinion
  • The intended use of the appraisal
  • Explaining the use or non-use of the three approaches to value
  • The key information used in developing the opinion of value
  • The assumptions made

The appraisers at DLS have to cover these standards in our appraisal reports and often cover these items again when the appraisal report is audited by representatives of the lender, or auditors for an accounting firm or taxing authority.

And additionally, the questions of who requested the appraisal, who paid for the appraisal, who are the specified user(s) of the appraisal – these are not always apparent in the other sources.

Why are the above noted “short cut” appraisals accepted by entities that have their own lending and accounting standards that they must follow? Yes, they are inexpensive and expeditious, but they are not acceptable under United States USPAP standards and not acceptable under International Valuation Standards. IVS, while voluntary in many countries, are recognized as standards that are necessary for transparent international commerce.

Unintended Consequences

When doing research, one gets to read some very interesting and enlightening technical papers. Some contain information that branches off from the main line of research, but is interesting in its own right. Such as this…

A conservation group called OceansAsia, based in Hong Kong, estimates that 8-to-12 million metric tonnes of plastic enter the oceans each year. And a recent Maritime Executive article speaks of research indicating large amount of polyester microfibers found in the Arctic Ocean, reportedly the result of laundry discharge water passing through city’s water systems.

The OceansAsia further estimates that of the estimated 53 billion COVID-19 masks manufactured in 2020, as many a 1.56 billion, at least partially made with polypropylene, will end up in the ocean.

So, in order to make things better, we sometimes can make things worse. Base Value and LTAV provide short term answers during poor market conditions, but are they transparent answers or answers that stand up to probing questions of auditors?

The DLS appraisal team works hard to produce competent transparent appraisal reports, each prepared in the thought that what we produce can be reviewed and questioned by auditors and attorneys. And this goes beyond the appraisal work into the work products produced by our hull and machinery surveyors for insurance and consultations and the damage and condition reports done by our cargo group.

No one likes the surprises of unintended circumstances.

If you’d like to keep this conversation going, send me an email at nlaskay@DLSmarine.com or you can find me on LinkedIn.   -Norm Laskay

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