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Going out on a limb

by Douglas Gould on April 11, 2010

I’m going to go out on a limb. I mean it. Don’t think I won’t, ’cause I will. I am going on a real bender; around the bend. I am going to jump off the cliff.  One giant step for the blogosphere, one small stumble for me.

Oh my god Doug, get to the point — please! See, I can read your mind… If I can do that, maybe I have a point with this next post? Read on…

You see, the thing is, I have too much time on my hands. And it’s tax season; never a good time to contemplate how your tax dollars are spent. It doesn’t matter who you are, or what your political strain is, some of your tax dollars are getting spent someplace that you wish they weren’t, right? And I read the Coast Guard news feed, which during king crab season seems filled with stories of daring rescues up in the Bering Sea. USCG Helos and Cutters and Big Ships and radios and… well, you’ve seen all the drama on Deadliest Catch.

Imagine a different show: Dirtiest Cargo. It’s all about these huge tankers that ply the world’s oceans filled with crude oil, and the crews that run them. This week’s episode is about a huge tanker, the Monolith Oiler, who’s Third Mate tries an uncharted shortcut through Prince William Sound and hits Bligh Reef, splitting her open and dumping a gazillion gallons of Alaska’s finest goo into the bay. Before the first commercial break, we watch as the crew calls the USCG with the bad news. The tension builds as the narrator speculates how long it will take USCG to show up with a fleet of barges, tugs, pumps, oil skimmers, boom boats, eight miles of containment boom, 600 HazMat trained beach-clean-up crew and 100 bird biologists to the scene. Will they get there in time? ….. (insert fried chicken ad here)

After the commercial break, we learn that the Monolith Oiler contacted the USCG as a paperwork formality, and that resources from Alyeska are responding to the scene to. Alyeska is a private company owned by a consortium 5 oil companies:

Alyeska Pipeline spends over $60 million annually to oil spill prevention and response in Prince William Sound, and has dedicated over 300 personnel to this effort, mostly through its Ship Escort/Response Vessel System (SERVS). Created in July 1989, SERVS is considered one of the best oil spill prevention and response forces in the world. The SERVS mission is three fold: prevention, preparation, and response. Each laden tanker is escorted through Prince William Sound to the Gulf of Alaska by response vessels capable of assisting a distressed tanker. Oil spill response equipment has been pre-stationed throughout the Sound for rapid response.

“Created in July 1989″…. It’s not a coincidence that date is just three months after the Exxon Valdez hit Bligh Reef on March 24, 1989. That mess was the impetus for creating SERVS. Alyeska was around before the Exxon Valdez wreck, but their capacity and state of readiness was more on paper than actually on the docks; 10 million gallons of goo got everyone’s attention though, and SERVS was born.

A slight digression here. There is some debate about whether the oil companies continue to shirk their responsibility to maintain a goo-free zone up in Prince William Sound (which is what they agreed to when they were granted permission to build the pipeline). SERVS makes for great press, but just like the oil business, if you dig too deep, you might get a dry well. I don’t want to debate that now. There is no debate, however, about the funding concept. No one thinks that the USCG should spend $60 million annually to mitigate the goo-risk for one small group of very profitable oil companies. Please don’t go to the “goo is harmless so it’s all the tree-huggers fault” argument. Can’t we just agree that 10 million gallons of goo is supposed to stay inside the tanker? End digression.

Are you reading my mind now? There are less than 100 boats fishing for King Crab in Alaska [2009 stats]:

Fish and Game at Dutch Harbor said 93 boats pre-registered for the red king crab fishery, and 62 dropped pots on opening day. The guideline harvest at Bristol Bay is 16 million pounds of red king crab, a drop of almost 22% from 2008. Another 1.2 million pounds of blue king crab can be harvested at St. Matthew Island this year, the first opener there for a decade…. According to the Inter-Cooperative Exchange (ICE), which represents nearly 70% of the king and snow crab caught in the Bering Sea, crabbers approved an advance price of $4.67/lb for red king crab.

Do the math with me…. 16 millions pounds at $4.67/lb = $74.7 million. Divide by 93 boats = just over $800k per boat. That is red crab only. They’ll get another $2.40/lb for blue crab. Figure a gross of $1 million per boat. 93 boats. I guarantee you there are more than 93 tankers going through Prince William Sound every year.

So, what am I proposing? Why don’t the Crab fishermen fund their own rescue agency? How is their business model drastically different from the oil company’s? A few companies taking BIG risks to exploit a resource for profit. Pumping oil or fishing crab; what’s the difference?

But who is underwriting the mitigation of the risk? For the crab fishermen, it’s the taxpayers, in the form of a huge Coast Guard expenditure for SAR in the Bering Sea. How can you argue that those USCG dollars aren’t subsidizing the full costs of running 93 boats?

I know, I’m comparing saving beaches to bodies. But the crab fishermen aren’t taking just ordinary run-of-the-mill risks; they are choosing to go way out on the edge, the fishing equivalent of climbing Mt Everest. If they are going to take those kinds of risk for a profit, then let their rescues be funded out of that profit.

I told you I was going out on a limb.

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No Cure-No Pay for AIG?

by Douglas Gould on March 25, 2009

reunion-vs_640x480Isn’t it ironic that the biggest player in the insurance industry found itself defending the concept of performance bonuses last week in front of a hostile Congress? We’re not talking a few hundred bucks in an envelope at Christmas, either; we’re talking huge, gianormous amounts. Ironic because insurance companies like AIG and Travelers scream to the tops of the highest skyscrapers in NYC when they see a salvage claim of ten or twenty grand for a job that only took a day, or even just a few hours. Outrage is a bitch when it goes the other way, huh guys?

As the anger and shouting about the AIG bonuses calms down, if feels like the entire country is taking a deep breath. Reasonable voices have pointed out that while it is outrageous to reward financiers during a period when their units have lost billions, performance bonuses paid to individuals as a reward for their success remains consistent with our values. Even more on point is the argument that using rewards as an incentive to entice the lucky recipients to find more ways to be successful is not only good for capitalists, but it makes sound public policy too – “We need these people with special skills…”

Has there ever been a better retention bonus contract written than the No Cure/No Pay Open Form? No seriously. The Open Form says “I will work on your behalf during this difficult time. If I do a good job, I expect to be handsomely rewarded.” When insurance companies sign employee contracts like that, it makes perfect sense to them and those contracts are defended all the way to a House Subcommittee. But when the owner of a yacht signs an Open Form, its outrageous! Piracy! Yeah right.

The outrage towards AIG isn’t really about the dollars, we all know corporate executives make a lot of money. The outrage was fueled by the knowledge that these sailors had actually steered the Titanic towards the iceberg. Rather than do something to mitigate the risk, the geniuses  at AIG Financial Products receiving bonuses actually caused the problem in the first place. Now we are in the realm of ultra-irony – if there is such a place – because creating a dangerous situation so that you can collect the savior’s reward is the classic definition of piracy.

At least the rewards that modern salvors get under the concept of No Cure-No Pay require some degree of success.

Maybe we just need a new lingo. Boaters have been so conditioned to avoid the term salvage at all costs, and the underwriters just see a skull and crossbones on any page that says salvage. Here is an idea: take all your salvage forms and change the title to Hull Integrity Retention Bonus Contract.

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Contemplating Values

photo: Ringo contemplates his contribution to the crew of Water Torture… The salvage seminar at last week’s C-PORT conference included some discussion about “fair and reasonable” charges for salvage awards. I will argue about fair and reasonable in another post. Today, I want to correct what I feel was a serious error brought forth by [...]

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February 5, 2009 Read the full article →

What’s in YOUR 401(k)?

This year’s C-PORT convention is over. It was fairly well attended, although it seemed to me like too many yellow shirts dashed for the doors at the conclusion of their conference on Friday, just as C-PORT was getting started. In this photo, John Aydelotte uses his new spyglass to scan the hallways for wayward TowBees. [...]

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February 4, 2009 Read the full article →

North Reef at Night

A few loyal readers have commented that they would like to see more video of my work out here at Block Island. Much of the footage I have isn’t very dramatic, and frankly would bore most of the subscribers to RedRightReturning. But, they don’t call me Captain Hollywood for nothing. I did find some video [...]

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August 30, 2008 Read the full article →

When Good Jobs Go Bad, Part 1

File this story under: “Some days you’re the windshield, some days you’re the bug.” It all began quite routinely, as a thunderstorm approached Block Island on Wednesday. As this cloud passed, it started to rain, and the wind shifted from E @ 6 to W @ 15. The weather caused a three boat raft-up of [...]

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August 17, 2008 Read the full article →