Krepp Comments on GSA Storis Auction

Denise Rucker Krepp, former Maritime Administration Chief Counsel who currently advocates on behalf of the U.S. domestic ship recycling industry, issued a statement at the Coast Guard Shipping Coordinating Committee Meeting March 12, 2014, in Preparation for the April 2014 Maritime Environment Protection Committee Meeting. Below are her comments.

Good morning. My name is Denise Krepp and I am representing EMR-Southern Recycling.

As I mentioned last year, EMR-Southern Recycling is the premier metal recycling operation in the U.S. Gulf Coast region and the largest volume marine ferrous producer in the United States. The company was established in 1900 and currently employs over 600 individuals in Texas, Louisiana, Mississippi, Alabama and Florida. These hard working, highly skilled men and women, many of whom spend their entire careers with the company, earn good salaries with benefit packages including health insurance and a company 401k match. Other domestic competitors to EMR’s marine ferrous operations, which include SIMs Metals ESCO facility and Scrap Metal Services All-Star facility, directly and indirectly employ several thousand more.

At last year's public meeting, I asked for assistance from the U.S. government. I requested a meeting with the Coast Guard, Environmental Protection Agency, Maritime Administration (MARAD), and State Department officials and other ship scrapping company representatives to discuss the U.S. government's position on the Hong Kong Ship Recycling Convention. EMR-Southern Recycling wanted to learn whether or not the U.S. government supported this treaty and how the government was going to implement it domestically. The Administration was non-responsive.

In addition, I stated at last year's public meeting that EMR-Southern Recycling wanted to work with the U.S. government to ensure that U.S. built ships are recycled in the United States instead of being reflagged for foreign dismantlement. Foreign recycling facilities are not held to the same high and necessary standards as those in the United States. Our ships should be taken apart in the same careful and protected manner as when they were put together.

The Administration declined Southern Recycling's offer. Instead, the Administration allowed the General Services Administration (GSA) to auction on June 27, 2013, the historic Coast Guard cutter Storis, which had been laid up at the Suisun Bay Reserve Fleet (SBRF). The winning bid was little over $70,000 and GSA approved this bid even though it was less than the reserve price. (See http://gsaauctions.gov/gsaauctions/aucdsclnk?sl=41QSCI13425001)

After winning the auction, the new buyer tried to resell the Storis for $250,000 to national preservationists while the vessel sat for months in the SBRF. (See http://www.timesheraldonline.com/news/ci_24432274/will-historic-coast-guard-ship-escape-scrap-heap). When the national preservationists refused to pay the buyer's exorbitant asking price, the buyer sent the Storis to Mexico to be scrapped.

The scrapping of the Storis in Mexico violates Section 3502 of the 2009 Duncan Hunter National Defense Authorization Act which requires all U.S. government vessels to be scrapped at U.S. metal recycling facilities. (See http://www.gpo.gov/fdsys/pkg/PLAW-110publ417/pdf/PLAW-110publ417.pdf). The GSA sale also violates 40 U.S.C. 548 which mandates that MARAD be responsible for disposing of vessels greater than 1500 gross tons. (See http://www.gpo.gov/fdsys/pkg/USCODE-2011-title40/pdf/USCODE-2011-title40-subtitleI-chap5-subchapIII-sec548.pdf). The Storis was over 2000 gross tons and it should have been auctioned off by MARAD to domestic ship recyclers.

Several individuals have FOIAed the government for information on the Storis' debacle, as well as copies of Memorandums MARAD has with the Coast Guard, Navy, GSA, and other federal agencies concerning the disposal of obsolete vessels. GSA charged one individual almost $10,000 for the GSA files on the Storis auction. MARAD charged another individual over $400 for a five-page 1998 Inter-Agency memorandum that is publicly posted on the web. According to the government, it wasn't in the U.S. taxpayer's interest to release this information for free. Both charges have been appealed.

At last year's meeting I also requested that the Coast Guard publish meeting notes associated with all IMO Shipping Coordinating Committee meetings on its website. I posited that publishing the meeting notes would help improve the transparency of the process. The Coast Guard didn't publish the meeting notes and there is no reference to my earlier comments on the Coast Guard website.

The Coast Guard's refusal to publish the meeting notes on its website violates the President's 2009 and 2014 good government directives. (http://www.whitehouse.gov/the_press_office/TransparencyandOpenGovernment and http://m.whitehouse.gov/sites/default/files/microsites/ostp/open_gov_plan_guidance_memo_final.pdf). In these documents, the President directs agencies to detail plans by which they are proactively disclosing information to advance transparency, accountability, and the presumption of openess. Refusing to publish meeting notes impedes transparency and creates the perception that the government has something to hide.

The lack of transparency is further compounded by the U.S. government's refusal to communicate with U.S. metal recycling companies on IMO related matters. EMR-Southern Recycling had repeatedly notified the U.S. government over the past year that it wanted to provide input on implementation of the Hong Kong Convention. The U.S. government never responded to EMR-Southern Recycling's request. Instead, the U.S. government communicated solely with foreign governments leaving U.S. companies completely in the dark.

The U.S. government isn't looking out for the interests of the U.S. industry – it's trying to bypass the domestic recycling and steel production industry and scrap vessels abroad. The White House website continues to reference a plan which the MARAD Ship Disposal Program developed in 2006. See http://www.whitehouse.gov/sites/default/files/omb/assets/omb/expectmore/detail/10004010.2006.html.

According to the MARAD, “(t)he ship disposal program must balance concerns about safety and environment, a growing inventory of aging vessels, and the lack of suitable ship recycling facilities.” (See http://www.marad.dot.gov/documents/Ship_Disposal.pdf) These claims are false. The U.S. ship recycling industry is the safest and most environmentally rigorous in the world. There are currently five qualified companies and at least 11 qualified slips at the disposal of the federal government agencies; and there are new facilities awaiting qualification. These facilities should be fully utilized instead of being ignored.

Therefore, I ask again that the U.S. Executive Branch agencies meet with the domestic ship recycling industry to discuss domestic implementation of the Hong Kong Convention. I also request that the U.S. government work with the domestic ship recycling industry to prevent U.S. vessels from being scrapped in foreign facilities that are not held to the same standards as their U.S. counterparts. Lastly, I ask that the U.S. government publish the meeting notes for all IMO Shipping Coordinating Committee meetings on its website.

I am making these requests on behalf of EMR-Southern Recycling's over 600 employees. These taxpayers provide a valuable service to the U.S. government. Their efforts should be supported not undercut by those who would rather ship their jobs overseas.

About the Speaker: Krepp began her career as an active duty Coast Guard officer in 1998. After September 11, 2001, Krepp helped create the Transportation Security Administration. She also served as Senior Counsel on the House of Representatives Homeland Security Committee. Krepp is a professor at Pennsylvania State University, a member of the Board of Directors for The Infrastructure Security Partnership, and a commentator on Backroom Politics, a weekly radio show.