Tuesday, April 04, 2023

'Everything is on the table' if prices don't come down following Rogers-Shaw acquisition: Champagne

Daniel Johnson , BNN Bloomberg

Industry Minister François-Philippe Champagne said the publicly available conditions that allowed Rogers Communications Inc. to acquire Shaw Communications Inc. give Canadians a seat at the negotiation table.

“For the first time, I think in Canadian telecom history is that now you have a contract with Canadians, these companies are liable to Canadians with 21 conditions [and] huge penalties. I think [this is] unprecedented in Canadian history,” Champagne said in an interview with BNN Bloomberg Tuesday.

“All of that was driven with one objective and one objective alone, to bring down prices in Canada.”

On Monday, Rogers announced that the deal had been closed.

In a news conference in Ottawa last Friday, Champagne announced regulators would allow the acquisition to go through. The announcement capped off a two-year process that began in March of 2021 when the companies agreed Rogers would purchase Shaw for $20 billion.

Champagne’s approval of the deal was based on the condition of Shaw selling its Freedom Mobile wireless business to Quebecor Inc.’s Videotron. In June 2022, Rogers and Shaw agreed to the $2.85 billion sale of Freedom Mobile, which was finalized Monday.

“What Videotron brought to the table is that ability to push prices down across Canada. The only objective I have is to make sure that we do that…but I wanted a contract,” Champagne told BNN Bloomberg.

“What we have seen, [the] evidence is there, prices in Quebec are 20 per cent lower than in the rest of Canada,” Champagne said.

In total, Champagne outlined 21 conditions that Rogers and Videotron would have to abide by. He said that if he does not see prices coming down, he will seek more power from Parliament.

“In Canada, in our context, you need a strong fourth national player. So these conditions, which you find in these agreements which we made public is to drive that,” Champagne said.

Regarding the prospect of bringing foreign competition into Canada’s telecommunications market, Champagne said that if he does not see prices moving downward “everything is on the table” and he thinks the “message is being heard.”

Some of the conditions applying to Rogers included a series of connectivity investments that the telecommunications company could be fined up to $1 billion for violating.

This included Rogers creating 3,000 jobs in Western Canada and maintaining the positions for a minimum of 10 years while establishing a Western headquarters in Calgary that must be open for the same time period.

Other conditions for Rogers included allocating $1 billion to increase broadband internet access and 5G mobile connectivity in places it is not available, investing $2.5 billion to enhance 5G in Western Canada and investing $3 billion in network expansion initiatives.

Champagne also said last Friday that Rogers and Videotron entered into a network-access agreement, intended to help Videotron expand and compete.

Some of the conditions for Videotron, outlined by Champagne, included that it offer plans similar to those available now in Quebec as well as offering plans at least 20 per cent cheaper than existing plans from major providers. Additionally that Videotron keeps its Freedom Mobile licenses for at least 10 years.

Pierre Karl Péladeau, Quebecor’s president and chief executive officer, said in an interview with BNN Bloomberg Tuesday that the company will focus on gaining market share.

“We're certainly going to be very aggressive, taking place and providing innovative products, better pricing, customer service and what is necessary to gain market share,” he said.

“Our historical footprint for the last 15 years is much smaller than the one that we’re now looking for.”

Rogers Chief Executive Officer Tony Staffieri said in an interview that his company’s acquisition of Shaw took “longer than we would have expected.”

Now, Staffieri said the company will work toward integrating the networks of both companies while eliminating around $1 billion in costs.

“So it’s going to be about, how do we keep this simple and focused on the things that are going to matter most?” he said.

“The sheer size always introduces complexity.”

Ford Gets Outsold By GM In EV Market As The Two Duke It Out For No. 2 Spot

By Julianne Geiger - Apr 04, 2023

GM outsold Ford when it comes to electric vehicles by almost two-to-one in the first quarter of 2023 as production troubles plagued the former No. 2 EV seller behind Tesla.

Ford sold 10,866 EVs in Q1 this year. While that’s up 41% from Q1 2022, it’s about 50% behind GM’s sales of 20,670 EVs. Ford’s lackluster EV performance can be attributed mostly to a factory outage in its Mexico plant that makes its Mustang Mach-E as it attempts to double the factory’s capacity, as well as five weeks of lost production with its F-150 Lightning EV due to a recall stemming from a battery fire issue.

Despite Ford’s plan to spend $50 billion on its EV lineup acro the next three years, it predicts it will lose $3 billion on EV models in 2023. That’s even with jacking up the price of their F150 by 50% in about a year, from $40,000 last January to $60,000 today.

Ford says its demand for the Lightning isn’t the issue—it’s limited in how many it can produce. But that may change after GM’s EV equivalent, the Silverado EV, is introduced—that EV isn’t even available yet.

Ford said on Tuesday that it was adding a third shift of workers to its Kansas City factory to produce its E-Transit van.

Consumer Reports recently predicted that automakers that fail to meet the growing demand for EVs would gradually lose market share as they struggle to find buyers for ICE vehicles. The report referenced what it considered to be pent-up demand for EVs over the next few years, which will eventually displace demand for ICE vehicles. A Consumer Reports survey pointed to a 350% increase in EV demand between 2020 and 2022 but noted that supply will not be able to keep up with demand until 2030.

By Julianne Geiger for Oilprice.com

Iraq Agrees To Hold 30% In TotalEnergies' $27 Billion Iraqi Project
By Charles Kennedy - Apr 04, 2023
The Iraqi government has agreed to have 30% in a major $27-billion project to be developed by supermajor TotalEnergies in Iraq, down from the 40% stake Baghdad had wanted previously, industry sources told Reuters on Tuesday.
In September 2021, TotalEnergies signed multi-energy agreements in Iraq for the construction of a new gas network and treatment units, the construction of a large-scale seawater treatment unit, and the construction of a 1 gigawatt (GW) photovoltaic power plant in the southern Iraqi region of Basra. TotalEnergies signed the agreements with the Iraqi Ministries for oil and electricity, and the country's National Investment Commission.
The French supermajor proposes to invest in installations to recover gas that is being flared on three oil fields and, as such, supply gas to 1.5 GW of power generation capacity in a first phase, growing to 3 GW in a second phase, and also develop 1 GWac of solar electricity generation capacity to supply the Basra regional grid.
The initial investment in the project is estimated at around $10 billion, TotalEnergies said back in 2021.
However, the project has seen setbacks due to the turbulent Iraqi domestic politics and Baghdad's initial insistence that Iraq holds 40% of the project.
The high stake Iraq wanted was one of the key sticking points toward structuring the deal.
Now it looks like a deal has been reached, with Iraq agreeing to take a 30% stake in the project after meetings in Baghdad in recent days, one industry source told Reuters.
A senior official with Iraq's oil ministry told Reuters, "The deal should be activated within days."
Three weeks ago, TotalEnergies CEO Patrick Pouyanné said at the firm's climate investor meeting, referring to the Iraqi project, "We have many discussions: we have expressed our views, we are waiting for the answer."
"So that's where we are, and I hope we'll find a common ground. I worked on it in the last month. But again, we need to have this political answer," Pouyanné added.
Commenting on the potential agreement, TotalEnergies' top executive also said, "Iraq is not the easiest place to invest."
By Charles Kennedy for Oilprice.com

Western Oil Companies Are Not Welcome In Iraq But Russian And Chinese Ones Are

By Simon Watkins - Apr 03, 2023

Last week’s banning by the Baghdad-based Federal Government of Iraq (FGI) of oil sales made independently by the government of the semi-autonomous region of Kurdistan (KRG) in northern Iraq should be seen in the context of the Saudi Arabia-Iran relationship resumption deal done on 10 March. And that context is more easily explained if the deal is written not as the Saudi Arabia-Iran deal, but rather as the Saudi Arabia/OPEC-China/Russia/Shia Crescent of Power deal. The Shia Crescent of Power comprises most notably Iran, Iraq, Syria, Lebanon and Yemen. Turkey (25 percent Shia and still furious at not being accepted fully into the European Union) is on the periphery of this group. The last part of the jigsaw was revealed exclusively by OilPrice.com just after the Saudi Arabia-Iran deal in a comment made by a very high-ranking official from the Kremlin that: “By keeping the West out of energy deals in Iraq – and closer to the new Iran-Saudi axis - the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.” Before the Saudi Arabia-Iran deal, everything the China-Russia axis had been doing in the Middle East had been to manoeuvre itself into a better position to usurp the influence of the U.S. and its allies in the oil and natural gas centre of the world, the Middle East. After the Saudi Arabia-Iran deal, China and Russia are where they want to be, and it is gloves off time. In terms of building up to this moment – that will see all powers of the northern region of Kurdistan gradually subsumed into those of the south to create one unified country again, governed out of Baghdad – Russia was the one who laid down the operational strategy in northern Iraq that was then replicated by China in southern Iraq a little later. More specifically, as analysed in depth in my latest book on the global oil markets, after the overwhelming vote in Iraqi Kurdistan in September 2017 for an independent Kurdish state there were huge protests when the vote was ignored by Baghdad. These were violently subdued by forces from Iran and Turkey (both of which have their own sizeable Kurdish populations) and southern Iraq, at which point of chaos Russia moved in to take over Iraqi Kurdistan’s oil sector. It achieved this by three methods. First, it provided the KRG with US$1.5 billion in financing through forward oil sales payable in the next three to five years. Second, it took an 80 percent working interest in five potentially major oil blocks in the region. And third, it established a 60 percent ownership of the vital KRG oil pipeline running into Turkey through a US$1.8 billion investment to increase its capacity to one million barrels per day (bpd).

It was then Russia that fomented discord between the KRG in the north and the FGI government in the south, principally by exploiting existing discontent on both sides with the budget payments-for-oil deal that had been agreed between north and south Iraq in 2014. This deal – which forms the basis for last week’s banning of independent oil sales from Iraqi Kurdistan - was that the KRG would export up to 550,000 barrels per day (bpd) of oil from the Kurdistan oilfields and Kirkuk via the FGI’s Baghdad-based State Organization for Marketing of Oil (SOMO) in the south. In return, Baghdad would send 17 percent of the federal budget (after sovereign expenses) - around US$500 million at that time - per month in budget payments to the Kurds. This deal never worked properly, and Russia from 2017 sought to exacerbate this to create much greater discord between north and south Iraq through several methods also analysed in depth in my latest book on the global oil markets.

At the end of 2020/beginning of 2021, China decided to use the same strategy in southern Iraq that Russia had used in the northern Kurdistan region. The Russians had used a massive flow of financing, through a huge prepayment deal for oil, as the first step in effectively taking control of the Iraqi Kurdistan oil industry. Mirroring this, China’s Zhenhua Oil signed a US$2 billion five–year prepayment oil supply deal with the FGI in Baghdad. This development was extremely troubling for Washington for three key reasons. First, the deal was obviously straight out of the playbook that Russia had used to gain control over the Iraqi Kurdistan oil industry in 2017, as analysed above. Second, it was clear Russia and China were working closely together in Iraq in a manner not seen before there. Specifically, a key reason why Baghdad had so welcomed China into its southern oil and gas fields was because China had said that it might be able to ease tensions over the budget payments-for-oil deal by liaising with Russia. But it had been Russia since 2017 that had been firing up the Kurds to inflame these tensions. The third reason was that it was that in addition to the military elements that Russia had brought to its activities in the Iraq Kurdistan region, the huge new Chinese deal in the south was being done by Zhenhua Oil, an arm of China’s huge defence contractor Norinco.

For a long time, it suited China’s and Russia’s purposes to keep the north and the south of Iraq in a constant state of economic conflict centred on the 2014 budget payments-for-oil deal, as it was unwinnable from a legal perspective and could therefore be dragged out forever. According to the KRG, it has authority under Articles 112 and 115 of the Iraq Constitution to manage oil and gas in the Kurdistan Region extracted from fields that were not in production in 2005 – the year that the Constitution was adopted by referendum. The KRG also maintains that Article 115 states: “All powers not stipulated in the exclusive powers of the federal government belong to the authorities of the regions and governorates that are not organised in a region.” As such, the KRG argues that as relevant powers are not otherwise stipulated in the Constitution, it has the authority to sell and receive revenue from its oil and gas exports. However, the FGI in Baghdad and SOMO argue that under Article 111 of the Constitution oil and gas are under the ownership of all the people of Iraq in all the regions and governorates. Consequently, they believe that all oil and gas developed across all of Iraq should be sold through official channels of the central Federal Government of Iraq in Baghdad.

Now, though, with Saudi Arabia now firmly added to its sphere of influence after years of building up the relationship with Riyadh, as also analysed in depth in my latest book on the global oil markets, the China-Russia axis feels sufficiently emboldened to signal its true purpose: it is taking full control of the Middle East. Any choice cuts it wants from the best oil and gas reserves from anywhere in the region – across all countries with an allegiance to Sunni Islam leader Saudi Arabia or to Shia Islam leader Iran, which together is every country – are to be offered to Chinese and Russian companies in the first instance. There is no problem shipping or selling any of the oil and gas that China itself does not want, as sanctions currently are only on Iran, not Iraq, and these can easily be circumvented anyway, through methods also analysed in depth in my latest book on the global oil markets.

The ultimate aim of China is as it has been since it began its economic growth spurt in the 1990s – to overtake the U.S. as the world’s largest economy by nominal GDP by 2030 at the latest – despite already being the world’s largest economy by purchasing power parity, the largest manufacturing economy and the largest trading nation. At around the same time, China needs to ensure that it has all the energy resources it needs to withstand any sanctions that may be imposed should it make good on President Xi’s instructions to the Chinese military to be ready to invade Taiwan by 2027. Helpfully as well from its perspective, having watched Russia’s invasion of Ukraine, China knows what not to do. Whether this particular ban of independent sales by Iraqi Kurdistan remains in place or not, China and Russia have laid down the marker that whatever happens now across all of Iraq will only happen with their blessing.

By Simon Watkins for Oilprice.com

EXPROPRIATION BY THE STATE IS SOCIALISM
Seize property to build wind and solar farms, says JP Morgan chief

Simon Foy
Tue, 4 April 2023

Jamie Dimon - Marco Bello/Bloomberg

The chief executive of JP Morgan has suggested that governments should seize private land to build wind and solar farms in order to meet net zero targets.

Jamie Dimon, the longstanding boss of the Wall Street titan who donates to the Democratic Party, said green energy projects must be fast-tracked as the window for averting the most costly impacts of global climate change is closing.

In his annual shareholder letter, Mr Dimon said: “Permitting reforms are desperately needed to allow investment to be done in any kind of timely way.

“We may even need to evoke eminent domain – we simply are not getting the adequate investments fast enough for grid, solar, wind and pipeline initiatives.”

Eminent domain is when a government or state agency carries out a compulsory purchase of private property for public use and compensates the asset holder.

The proposal is unusual, especially coming from the longest-serving chief executive of a Wall Street bank, and could stir controversy as states in the US seek to crackdown on seizure orders.

In Iowa, state legislators on Monday passed a bill that aims to protect private property owners from eminent domain use by carbon pipeline companies.

Mr Dimon said the war in Ukraine was redefining the way countries and companies plan for energy security.

He added: “The need to provide energy affordably and reliably for today, as well as make the necessary investments to decarbonise for tomorrow, underscores the inextricable links between economic growth, energy security and climate change. We need to do more, and we need to do so immediately.

“To expedite progress, governments, businesses and non-governmental organisations need to align across a series of practical policy changes that comprehensively address fundamental issues that are holding us back.

“Massive global investment in clean energy technologies must be done and must continue to grow year-over-year.”

In the UK, reforms to Solvency 2 rules are expected to unleash a wave of investment in renewable energy projects after insurers and pension funds complained that EU-era regulations obstructed their ability to invest in infrastructure.

Mr Dimon’s comments also come as tensions between investors grow about how to tackle climate change.

In December, Vanguard, the world’s second largest asset manager, pulled out of Mark Carney’s global climate change alliance, saying the group’s full-blooded commitment to tackling climate change resulted “in confusion about the views of individual investment firms”.

Mr Dimon said: “Polarisation, paralysis and basic lack of analysis cannot keep us from addressing one of the most complex challenges of our time. Diverse stakeholders need to come together, seeking the best answers through engagement around our common interest.

“Bolstering growth must go hand in hand with both securing an energy future and meeting science-based climate targets for future generations.”

The banking chief also hit out against regulators in the wake of the banking crisis last month triggered by the collapse of Silicon Valley Bank (SVB).

He said the collapse of SVB and the government-engineered takeover of Credit Suisse by its biggest rival risked undermining confidence in the sector.

He added: “Ironically, banks were incented to own very safe government securities because they were considered highly liquid by regulators and carried very low capital requirements.”

Mr Dimon also warned regulators against tightening rules for lenders following the recent market turmoil.

He said: “It is extremely important that we avoid knee-jerk, whack-a-mole or politically motivated responses that often result in achieving the opposite of what people intended.

“Now is the time to deeply think through and coordinate complex regulations to accomplish the goals we want, eliminating costly inefficiencies and contradictory policies.

“Very often, rules are put in place in one part of the framework without appreciating their consequences in combination with other regulations.”

The Case For Nationalizing American Solar Energy Supply Chains

By Haley Zaremba - Apr 04, 2023,

The need for clean energy transition is urgent and requires a massive increase in green energy production capacity and infrastructure.
The current energy crisis in Europe as a result of Russia's invasion of Ukraine highlights the vulnerabilities of global supply chains and necessitates a focus on short supply chains.
Nationalizing solar energy supply chains could reduce emissions and lower energy consumption and pave the way for increased use of renewable power.

Meeting global climate goals will require a massive increase and acceleration of green energy production capacity and infrastructure. The scale of this challenge is unprecedented, and we have a lot to lose by getting it wrong. Changing the basis of the global economy – carbon-based fossil fuels – is scary and will inevitably have hiccups. Finding the right balance between decarbonization and energy security will therefore be essential to a successful clean energy transition.

Right now, the climate for energy security is particularly tricky. Years of volatility from the Covid-19 pandemic have been compounded by Russia’s illegal invasion of Ukraine. Europe’s dependence on Russia to keep the lights on has plunged the European Union into an energy crisis as the war in Ukraine rages on and the flow of energy from the Kremlin (or lack thereof) becomes a strategic bargaining chip.

And in our globalized and interconnected world, a crisis in Europe is actually a global crisis. Both Covid-19 and the current energy crisis have thrown the vulnerabilities of global supply chains into a harsh spotlight, and global geopolitics are shifting accordingly. We are increasingly seeing a move away from globalization and free trade toward nationalism, protectionism, and “friend-shoring,” in which countries limit their economic and trade partnerships to countries with similar values and strong alliances.

There is now a renewed focus on the relative resilience of short supply chains, both in policy and research circles. And some of the arguments for keeping supply lines short and simple are compelling. In one example, a new study from Cornell University finds that nationalizing United States solar energy supply chains would greatly reduce their carbon footprint and energy use.

In a study published in Nature Communications, a team of researchers from Cornell Engineering found that if the U.S. were able to transition to manufacturing all of its own solar panels by 2035, this would cut emissions by 30% and reduce energy consumption by 13%, compared to 2020 when imports were at an all-time high. Producing solar panels on its own hom turd would reduce cost and emissions of shipping the panels from overseas, and will reduce lag times as well. Working within a smaller geographic area with fewer middle men will allow solar panels to get connected to the grid faster. And the timing has never been better for beefing up domestic green energy manufacturing, as Biden’s Inflation Reduction Act has put forward billions of dollars of subsidies and incentives for doing just that.

Fengqi You, a co-author of the study, explained in a press release that “the US will see a larger share of renewable power accounting for primary energy consumption and an overall lower primary energy consumption over the years for solar panel manufacturing.” And lower greenhouse gas emissions in the United States is good news for everyone, everywhere. The United States is the second-largest greenhouse gas emitter in the world, behind China. Together, China, India, and the U.S. contribute 42.6% of total emissions, while the bottom 100 countries (that’s more than half of all countries in the world) account for just 2.9% all together.

The authors also contend that re-shoring solar panel supply chains would help to rectify some of the significant setbacks that the solar industry is currently facing. These hurdles include massive delays thanks to supply chain bottlenecks, trade tensions, bureaucratic red tape, securing sufficient land tracts, and delays in connecting to the grid. Furthermore, the U.S. currently relies on China for at least 80% of its solar panels, which is frightfully reminiscent of the European Union’s reliance on that other volatile authoritarian regime. And we’ve all seen what can happen when diplomatic relations fail and a tyrant holds all the supply chain leverage.

By Haley Zaremba for Oilprice.com

CRIMINAL CAPITALI$M

Three Former Austal USA Execs Indicted on Accounting Fraud Charges

The U.S. Securities and Exchange Commission has indicted three former executives of naval shipbuilder Austal USA on charges of accounting fraud. One was a current employee until the charges were announced on Friday, according to the Australian Financial Review.

The accused include the former director of Austal's Independence-class Littoral Combat Ship (LCS) program, William Adams; former president Craig Perciavalle; and director of financial analysis Joseph Runkel. The company's then-CFO

The three men stand accused of manipulating an accounting metric known as “estimate at completion” (EAC) for multiple LCS ships that Austal USA was building in 2013-2016. According to charging documents, reducing this metric inflated the reported earnings (EBIT) of Austal USA's publicly-listed Australian parent company, Austal Ltd.

The SEC contends that the three executives did this in order to "meet or exceed analyst consensus estimates for EBIT," mislead Austal Ltd.'s shareholders about the U.S. unit's financial performance, and thereby boost or maintain the value of Austal's stock. All three men received performance bonuses tied directly to EBIT numbers.

In mid-2016, at the end of the period of alleged fraud, Austal USA admitted that it had underestimated the cost needed to build the LCS early in the program, forcing it to write down the value of its work in progress. This led to an unexpected full-year loss of $120 million, down from a profit of $86 million the year before.

In February 2021, Austal USA announced that the SEC and Department of Justice had launched an investigation into the 2016 write-down. Perciavalle resigned shortly after, then took up a new role as VP and general manager at a competing U.S. shipyard.

Perciavalle, Adams, and Runkel have each been charged with five counts of wire fraud, two counts of wire fraud affecting a financial institution, and two related conspiracy charges in connection with the accounting scandal. If they are convicted, the charges carry maximum penalties of 20-30 years per count.

Previous investigation found fault at home office

Australian authorities have scrutinized parent company Austal Ltd.'s shareholder disclosures about the costs of the LCS contract during the same time period. Austal USA's naval shipbuilding contracts provided about 80 percent of Austal Ltd.'s total revenue, and the performance of the American subsidiary was key for reportable financial numbers.

In June 2021, Australian corporate regulator ASIC launched enforcement proceedings against Austal Ltd. and its former CEO, David Singleton, for allegedly failing to disclose LCS-related losses to investors for several weeks in mid-2016. In October 2022, Australia's Federal Court ruled that the company had violated continuous public disclosure laws in connection with the 2016 loss, and ordered the firm to pay a penalty of AUD$650,000. The court found that Singleton was knowingly involved and ordered him to pay a fine of AUD$50,000.

"Investors who bought shares in the period of misconduct did not know the unfavorable information about Austal’s FY2016 earnings. This information was likely to have informed their decision to buy or sell Austal shares during the relevant period," said ASIC Deputy Chair Sarah Court last October.

Allision Damage Forces Indonesian Ferry to Intentionally Run Aground

Ferry Mercandia VIII in Helsingor harbor — Mercandia VIII, a sister ship of Labitra Karina (file image courtesy Sinikka Halme / CC BY-SA 4.0)

On Sunday, a ferry struck an anchored ro/pax off the northwestern tip of Java, Indonesia, prompting the crew of the stricken vessel to intentionally ground their ship.

At about 0700 hours on Sunday morning, the ferry Mabuhay Nusuntara approached the ro/pax KMP Labitra Karina (ex name Superflex Mike) as the latter vessel lay at anchor at the port of Merak, Banten province. The crew of the Labitra noticed that the Nusuntara was on a collision course, and they attempted to contact the approaching ship multiple times over VHF, a regional transport safety official told Detik News.

The Mabuhay did not respond to the VHF calls and continued to approach until she struck the Labitra, causing multiple hull penetrations and flooding. Realizing the risk of sinking, the crew of Labitra started the engine, heaved anchor and ran their ship aground in shallow waters off Hotel Marak Beach, the official said. A spokesman for the Labitra's operator confirmed that the master had been instructed to intentionally ground the vessel.

The crew of the Labitra successfully evacuated, except for a small number who stayed behind to manage the casualty response. No passengers were aboard at the time, and no injuries were reported.

It was the second allision involving the Mabuhay Nusuntara in as many months. In February, the ro/pax ship struck a car loading ramp at a pier in Merak, damaging the ramp.

Top image: Mercandia VIII, a sister ship of Labitra Karina (file image courtesy Sinikka Halme / CC BY-SA 4.0)

Captain Lost “Situational Awareness” Causing $7.7M Damage to Ferry

Washington ferry accident — Ferry suffered $7.7 million in damage when the captain lost awareness the structure approaching the dock (Washington State Ferries)

An initial report has been released detailing the July 2022 allision of Washington State Ferries’ vessel that caused an estimated $7.7 million worth of damage after it struck a piling as it approaches its pier near Seattle. The report concludes it was human error but can not provide details because the captain at the helm has refused to cooperate and instead resigned from the company. The Washington State Department of Transportation however proceeded with a series of safety upgrades in advance of separate reports which are still pending from the U.S. Coast Guard and National Transportation Safety Board.

The incident occurred on July 28, 2022, as the ferry Cathlamet was approaching the Fauntleroy Ferry Terminal near Seattle after a trip from the Vashon Island Ferry Terminal. The weather was clear with negligible wind and an ebbing tide when at 8:13 a.m. the vessel struck the south dolphin as it was approaching its berth at the end of an approximately 10-minute trip. There was one minor injury to a passenger, however, one vehicle was extensively damaged in addition to the structural damage to the ferry. The dolphin it hit was sheared off with additional damage to the surrounding structure.

Washington State Ferries launched its internal investigation in addition to the USCG and NTSB. They interviewed the crew and report that in addition to the crew on duty a second captain and crew were aboard who provided additional information. One of the challenges for the investigation was that the vessel at the time lacked a Voyage Data Recorder.

Piecing together the details they report “the Cathlamet had an allision with the south dolphin at FAU dock at approximately 15 knots.” The captain on duty assumed direct control over the maneuvering of the vessel in preparation for the landing at a position approximately 0.5 nautical miles off the terminal which was customary and up to that point all the settings were found to be as they should have been on the equipment and position of the rudder.

“The Cathlamet did not slow its speed as it approached the FAU dock per the Safety Management System and prudent navigation,” WSF writes in its report. After the allision, the Quartermaster reports the captain asked, “what happened?”

The second captain aboard the vessel who was due to take command shortly after the accident was in the cabin at the time of the accident and told investigators, “When the allision happened, I knew immediately that it wasn’t just a bump off a wing wall.” He rushed to the bridge where he found the captain attempting to back the ferry out after it had briefly grounded. The second captain relieved the captain and maneuvered the vessel to the dock.

“It can be concluded that the captain lost situational awareness while standing at the helm landing the vessel,” the WSF report resolved. They have been unable to determine why, noting that the unnamed captain resigned the next day and has not provided an explanation as to what happened. They also found that the Quartermaster was distracted from his primary responsibility of acting as a lookout because he was reading a report and that the captain failed to log actions that were part of the docking procedure.

Drug and alcohol tests were conducted and came back negative and the vessel which was built in 1981 was found to functioning normally with no mechanical issues meaning the cause of the accident is currently subject to speculation. The USCG and NTSB reports expected at a later date might provide additional details.

Washington State Ferries however did find that cost-cutting had reduced some non-mandatory training which shall be reinstated starting in the summer of 2023. As a result of the internal investigation, additional policies and training are under development, while a safety notice reinforcing landing procedures was immediately sent following the event. In addition, “black box” data recorders have been installed aboard the Cathlamet and will become standard equipment on all Washington State ferries.