Horizon Lines is in the preliminary stages of converting two of its Jones Act-qualified, steam-powered containerships to the use of dual fuel… at a foreign shipyard!
Tim Colton over at Colton Company on Wednesday obtained a preliminary determination from the U.S. Coast Guard that grants Horizon Lines permission to hire a foreign shipyard for the convertion two of the company’s 33-year-old LASH ships, Horizon Reliance and Horizon Spirit, from steam propulsion to dual-fuel LNG/diesel propulsion.
So how can Jones Act-qualified vessels undergo such a major conversion and still be eligible under the Jones Act?
You see, 46 C.F.R. § 67.177 establishes a two-part test to determine if a vessel is “rebuilt foreign”, or not.
The first test, known as “major component test”, looks to determine if “a major component of the hull or superstructure not built in the United States is added to the vessel”. The second test, known as the “considerable part test”, looks determine if “work performed on its hull or superstructure constitutes 7.5 percent or less of the vessel’s steelweight prior to the work,” in the case of vessels made of steel. If the work done on a vessel fails on one or both of these tests, the vessel is deemed “rebuilt foreign” and therefor ineligible for U.S. coastwise trade.
In May, Horizon Lines sent a letter to the U.S. Coast Guard requesting a “Preliminary foreign rebuild determination”, for the work which is to be carried out. In their response, the Coast Guard states:
[Horizon Lines'] letter and its enclosures have provided extensive detail, including narrative descriptions, architectural drawings and weight calculations, concerning the work proposed to be done. In short, however, Horizon intends to replace the Vessels’ steam propulsion and auxiliary plants with geared medium speed diesel dual (LNG and liquid) fuel engine plants in order, as stated in your submission, to improve the fuel efficiency and environmental performance of the Vessels.
And after going into lengthy details about the results of the aforementioned tests, the letter concludes:
For these reasons we conclude, and confirm, that performance of the work as described to the Vessels outside of the United States will not result in either Vessel being deemed to have been rebuilt foreign and, consequently, will not adversely affect either Vessels’ eligibility to engage in the coastwise trades of the United States.
So there you have it… You can read the full letter HERE.