Joe Keefe of Maritime Executive Magazine has kindly given permission to reproduce the following article:
Risk Happens: When Bad Things Happen in the Best of Families
It would be a mild understatement to say that this hasn’t been the best of months for the world of marine transportation. Two allisions, one each on the West and East coasts of the United States, as well as a cruise ship grounding in Virginia and what appears to be a devastating oil spill from the sinking of a tanker (and three other vessels, apparently) in the Black Sea have all made the headlines. Notably, the oil spill resulting from the allision of the Cosco Busan with the San Francisco-Oakland Bay Bridge is shaping up as one of the worst environmental disasters in recent memory. All of it reminds us that the transportation of anything by sea is a risky business.
Form 20F, as recently delivered to the United States Security Commission by one particular tanker company says, in part, “There are a number of risks associated with the operation of ocean-going vessels, including mechanical failure, collision, human error, war, terrorism, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. Any of these events may result in loss of revenues, increased costs and decreased cash flows. In addition, following the terrorist attack in New York City on September 11, 2001, and the military response of the United States, the likelihood of future acts of terrorism may increase, and our vessels may face higher risks of attack. In addition, the operation of any vessel is subject to the inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade.” These are routine disclosures, which should provide caution to an aggressive investor who would try to take advantage of market conditions in the shipping world. These words also remind us that, in the world of shipping, defining risk is a question of “when” and not “if.”
I have a pretty good friend of mine who is, in a nutshell, a full-time investor. He has no other employment or income to speak of and, he does quite well. Once in a while, he calls me to ask what I know about a particular company, especially when it deals with ocean shipping. And, I always tell him the same thing: I don’t knowingly invest in shipping companies because we write about them from time to time and, beyond that, you never know what tomorrow’s maritime news will bring. And the last two weeks are a very good case in point.
According to the U.S. Coast Guard, on November 3, the 76-foot high Ambrose Light suffered substantial damage to its legs, stanchion and the revolving light which was bent and no longer rotating after it was reportedly struck by the Axel Spirit, a 799-foot tanker ship operated by the Teekay Shipping Company. The news underscored the fact that bad things can happen in the best of families. Teekay, in my opinion, is one of best — and safest — shipping firms in the world. If this type of accident can happen to them, then it can happen to anyone. We can take comfort in the fact that Teekay will respond to this challenge aggressively, competently and in a speedy fashion. Of that, I have no doubt.
Almost 28 years ago, the oil majors came to campus at the Massachusetts Maritime Academy — and I suppose every other maritime school, as well — and culled out the cream of the crop to sail on their vessels. Naturally, they didn’t choose me. But the concept was that they always took the best and the brightest, trained them to a high standard and thereby ensured a high level of safety and competency on their tanker fleet. Despite all of that, the American-flag tanker Exxon Valdez had a small accident some time ago which led to, among other things, the Oil Pollution Act of 1990 (OPA 90). Tanker operations, the world over, were inexorably changed by the events of March 24 1989.
There is a notion out there that these types of disasters happen only to marginal players. In reality, nothing could be further from the truth. For example, probably no one in the oil and shipping business has spent more time and money over the past five years to improve their safety process than BP. That effort is still very much a work in progress. It is easy to beat up on the big boys when these events occur, but to a large extent, we are fortunate that some of these crises happen to major operators who are capable of withstanding the financial strains that would take out lesser players and leave the taxpayers to deal with the aftermath.
This week also reminds us that a robust shipping market has put pressure on the manning requirements for the worldwide fleets. According to news reports out of San Francisco, the crew of the Cosco Busan isn’t saying much anymore, especially in the face of a criminal probe being explored by authorities in the Golden State. You can’t blame them. The criminalization of mariners is just one more reason why some of our best people choose to not go to sea, and further raises questions as to the quality of those who man the world’s collective shipping fleet today. For this reason, our efforts to prepare for and respond to these disasters are as important as the efforts of the best shipping companies in the world to make their fleets as safe as possible.
The (now) robust response in San Francisco Bay is something we’ve all come to expect when an ecological disaster occurs in U.S. waters. When it doesn’t, Americans are quick to point that out and make sure that the situation is quickly rectified. This week’s events in California are a perfect example of that metric. I can’t help but wonder whether the same care and attention is being paid to the disaster now (also) ongoing in the Black Sea, in the wake of a powerful storm that resulted in the spillage of as much as 2,000 metric tons of oil and 7,000 tons of sulfur.
The lesson is clear: Risk isn’t just a phrase that we insert into a required SEC document. Risk is real. Risk happens and when it does, we need to be ready. Six months from now, the first two weeks of November will be a distant memory for many in the maritime community. Industry and governments, however, can’t afford that kind of complacency. I don’t pretend to know a lot about how we can better prepare for future disasters, but I do know this will happen again. And, so do you. – MarEx
Joseph Keefe is the Managing Editor of The Maritime Executive. He can be reached with comments on this, or any other article in this publication, at email@example.com.