Double-Hull Tanker Legislation: An Assessment of the Oil Pollution Act of 1990 (1998)

The committee's conclusions and recommendations regarding the effects of Section 4115 of the Oil Pollution Act of 1990 (OPA 90) on pollution prevention, ship safety, and the composition and economic viability of the maritime oil transportation industry are presented in this chapter. The effects of the corresponding international rules and their interaction with Section 4115 are also addressed.

The passage of OPA 90 was a catalyst for a major change in the structural design of tank vessels; double-hull tankers are now the industry standard. Section 4115 and the MARPOL Regulations 13F and 13G (MARPOL 13F and 13G) differ in their approach and timing, although both sets of regulations require new tank vessels to have double hulls and provide for the gradual phaseout of existing single-hull vessels while the owners of oil tank vessels change or modify their capital plans to reflect new design requirements.

Section 4115 requires vessels operating in U.S. waters to have double hulls by 2015 at the latest; the international fleet governed by MARPOL is expected to be composed entirely of double-hull vessels (or approved alternatives) no later than 2023. Section 4115 restricts oil trade to the United States by vessels without double hulls according to a schedule based on vessel age but does not force such vessels into retirement. The first single-hull vessels reached mandatory phaseout in 1995. MARPOL 13G mandates the retirement of single-hull tankers from international trade at 30 years of age. Existing single-hull vessels are allowed to trade longer than under Section 4115 if they are of acceptable design. Thus, some

single-hull vessels excluded from U.S. waters by OPA 90 may continue in trade to countries other than the United States until forced into retirement by MARPOL.

The U.S. Coast Guard (USCG) issued its final rules on operational and structural requirements to reduce the potential for oil pollution from existing single-hull vessels in July 1996 and January 1997, respectively. Vessels without double hulls operating in U.S. waters are not required to undertake any new structural measures before they are phased out. The operational measures took effect in November 1996. Given the lack of operational experience since the implementation of section 4115, the committee concluded that its impact merits reevaluation in approximately five years. This would permit assessment of the oil transportation industry's experience during the first five years of the mandatory phaseout of single-hull vessels under OPA 90. It would also coincide with the onset of a possible temporary vessel supply-demand imbalance. In the interim, efforts by the USCG to remedy deficiencies in its oil spill and port-state inspection databases would be beneficial for future assessments of the effect of OPA 90 (and other regulations and guidelines) on the protection of the marine environment and the quality of the tank vessel fleet operating in U.S. waters.

On the basis of the difficulties encountered in obtaining reliable oil spill data for the purposes of the present study, the committee identified some opportunities to enhance the USCG oil spill database. First, the USCG should recognize the importance of historical oil spill data as a primary indicator of achievements in the field of marine environmental protection. Adequate resource allocations for data gathering, data entry, and supervisory tasks would help ensure that reporting is complete and consistent throughout the USCG. Second, benefits could accrue if the public were given immediate access via the Internet to a simplified database¹ of all oil and chemical spills that have occurred since 1973 in locations that fall under USCG jurisdiction. If the availability of these data were widely publicized and the public encouraged to report discrepancies, possible errors could be scrutinized and corrections issued as necessary. Third, efforts to resolve discrepancies in historical records maintained by the USCG, the Minerals Management Service (MMS), the Oil Spill Intelligence Report, the International Tanker Owners Pollution Federation, and other entities would be beneficial in eliminating some of the apparent data anomalies of the type encountered by the committee. Agreement among different groups on consistent definitions of terms would be helpful in this regard.

Recommendation. The effects of the implementation of Section 4115 of OPA 90 should be reevaluated by an independent panel, possibly in about five years. The usefulness of such an evaluation will be greatly enhanced if the USCG initiates efforts now to ensure that adequate data will be available for future assessments.

Recommendation. The USCG should ensure that its oil spill database—including information on cause—is capable of facilitating the analysis of trends and the comparison of accidents involving oil spills. This would benefit the development of future regulations aimed at preventing oil spills and would facilitate industry planning.

Recommendation. The USCG should ensure that its port-state inspection database permits meaningful comparisons and analyses of current and future port-state activities, particularly in regard to identification and assessment of trends in the quality of the tank vessel fleet.

During the past five years, compared to earlier five-year periods, there has been a decline in the volume of oil spilled from vessel casualties in U.S. waters, together with an overall reduction in the number of oil spills of more than 100 gallons. The volumes released have been at historically low levels during the period 1991 to 1995. However, this decline in spills cannot be credited to Section 4115 because the mandatory phaseout of single-hull vessels commenced only in 1995, and the final rules on operational and structural measures for existing single-hull vessels had not been issued by the end of 1995.

In the view of the committee, a number of factors other than Section 4115 probably contributed to the recent reduction in oil spills. These include an increased awareness of the financial consequences of oil spills on the part of vessel owners and operators and a resulting increase in attention to policies and procedures aimed at eliminating vessel accidents; actions by port states to ensure the safety of vessels using their ports; increased efforts by classification societies to ensure that vessels under their classification meet or exceed existing requirements; improved audit and inspection programs by charterers; and the increased liability, financial responsibility, and other provisions of OPA 90. All of these actions are in process or emerging, as are vessel design requirements. It is therefore not possible to establish a direct correlation between any individual factors and the observed reduction in oil spillage.

On the basis of an analytical evaluation, the committee concluded that in the event of an accident involving a grounding or a collision, an effectively designed double-hull tanker will significantly reduce the expected outflow of oil compared to that from a single-hull tanker. Comparable analytical results were obtained for oceangoing barges. Inland and oceangoing barges together accounted for approxi-

mately half the total spillage and were involved in the majority of oil spills in U.S. waters between 1991 and 1995.

Since the passage of OPA 90, research on double-hull tanker design has provided significant insights into the impact of vessel design on double-hull tanker operations and pollution prevention capability, as measured in terms of expected oil outflow in the event of an accident. Overall, this research has demonstrated that effectively designed double-hull tankers and tank barges offer a significant improvement in environmental protection compared to that provided by single-hull vessels.

However, recent research—including the committee's probabilistic outflow analysis—has revealed possible intact stability and oil outflow problems with certain double-hull designs, all of which comply with existing design regulations of the International Maritime Organization (IMO) and major classification societies. More than half of the double-hull tankers less than 160,000 deadweight tons (DWT) that have entered service since the enactment of OPA 90 are of potentially problematic design because they have single-tank-across cargo tank arrangements. The tanker industry is entering a period of significant vessel retirements corresponding to the tanker building boom of the mid- 1970s. The committee concluded that there is an urgent need to address double-hull design issues in time to impact the significant numbers of new double-hull vessels likely to enter service within the next few years and to prevent addition to the fleet of numerous vessels of unsatisfactory but approved design with a lifetime of 25 to 30 years.

Although intact stability problems can be avoided if adequate operational procedures are implemented, an unstable condition could still occur if the ship's crew fails to follow such procedures correctly. For this reason, a "design-only" solution has been suggested whereby the design of a double-hull vessel ensures stability at all times during cargo transfer operations. A possible disadvantage of the design-only approach is that it might limit possible options for designs with better environmental and damage stability performance (i.e., it may not be possible to optimize a design simultaneously for intact stability, damage stability, and environmental performance.) In addition, a design-only approach does not prevent the potentially unsafe operation of existing double-hull tankers susceptible to intact stability problems.

A possible approach to optimizing double-hull designs is to use performance-based criteria to evaluate environmental performance and other requirements. Such an approach is less prescriptive than conventional design rules. For example, rather than mandating centerline bulkheads in cargo tanks, performance-based criteria would give naval architects the opportunity to develop potentially superior designs and to address oil outflow performance and intact stability issues

in a variety of ways. Thus, possible difficulties with centerline bulkheads in small tanker and barge designs (e.g., damage stability problems) could be avoided. A disadvantage of performance-based criteria in the present situation is that they are likely to take several years to develop, by which time more double-hull tankers with inferior environmental performance and intact stability problems may well have been built.

IMO has recently acted to address intact stability issues for double-hull tankers. An IMO circular provides guidance on operational measures needed to ensure adequate intact stability of existing vessels during load and discharge operations. MARPOL Draft Regulation 1/25A(2) establishes a design-only requirement for intact stability for new vessels. Outflow regulations are currently under development at IMO.

Recommendation. The USCG should expand and expedite research efforts and cost-benefit evaluations necessary to develop rules appropriate for the design of double-hull tankers and tank barges. The following are of particular importance:

• Probabilistic analysis of oil outflow should be made an integral part of the design and review process for new double-hull tank vessels. Design requirements should ensure that all new double-hull tankers offer environmental performance at least equivalent to that provided by the IMO reference double-hull designs.²
• Design requirements should include an assessment of intact stability throughout the range of loading and ballasting conditions to identify potentially unstable conditions. Following the lead taken by IMO and to provide consistency with anticipated international requirements, adequate intact stability should be achieved by design.

Such rules should be implemented as soon as possible—if necessary in interim form—to ensure that all new double-hull tank vessels entering service do not pose a safety risk because of poor intact stability characteristics and have adequate internal subdivision to take full advantage of the spill-mitigating capabilities of double hulls.

Recommendation. The USCG should develop and implement operational procedures for existing double-hull tanker designs subject to intact stability problems. Such procedures should ensure adequate stability at all times during cargo transfer operations and should include appropriate crew training. Consistency between

procedures for vessels in U.S. waters and corresponding international procedures is highly desirable.

The committee's analysis of the operational makeup of the maritime oil transportation industry indicated an increase in the proportion of double-hull tankers in the world fleet from 4 percent in 1990 to 10 percent in 1994, consistent with the requirements of OPA 90 and MARPOL 13F. Other changes in the world and U.S. trading fleets between 1990 and 1994—notably in trading patterns, age-related features, and vessel ownership—reflected both economic and regulatory factors and in some cases were a continuation of trends that predated OPA 90. These changes could not be definitively attributed to Section 4115 or to MARPOL 13F and 13G.

The committee concluded that the phaseout schedules of OPA 90 and MARPOL have not yet influenced the age of vessels calling on the United States. This is not unexpected because trading patterns observed before the implementation of OPA 90 indicate that few vessels over 25 years of age trade to the United States. However, some changes in the age distribution of the U.S. trading fleet are anticipated, particularly for the largest vessels. Factors contributing to such changes include the OPA 90 lightering zone and deepwater port exemption, the aging of the very large crude carrier (VLCC) fleet, and actions by other nations to discourage older vessels from calling on their ports.

Although the mandatory phaseout schedule of Section 4115 bans all single-hull tankers (without double bottoms or double sides) from U.S. trade after 2010, it is probable that under the deepwater port and lightering zone exemption, large single-hull vessels up to 30 years of age will operate to the United States through 2015. A large number of VLCCs constructed during the shipbuilding boom of the 1970s would have been excluded from U.S. waters between 1999 and 2003 under the normal OPA 90 phaseout schedule. However, the exemption allows them to trade until sometime between 2004 and 2008.³ This situation is in contrast to that in 1994, when there were VLCCs more than 25 years of age in service.

The committee is concerned that in the future, there may be an overall deterioration in the quality of the VLCC fleet trading to the United States as the international VLCC fleet ages and other nations, such as Japan and Korea, introduce age restrictions on vessels calling on their ports. In the view of the committee, the United States needs to take appropriate measures to ensure that the older VLCCs operating under the OPA 90 deepwater port and lightering zone

exemption are adequately maintained and that their operation does not pose an unacceptable risk to the marine environment.

Recommendation. The U.S. Coast Guard should implement a vessel surveillance program to ensure that the physical condition, maintenance, and operating procedures of vessels permitted to discharge their cargo offshore, but barred from non-offshore ports by the phaseout provisions of Section 4115, are held to appropriate levels. For example, the frequency and standards of inspection defined in the Port State Inspection Program and applied to vessels using non-offshore ports might also be applied to vessels using lightering areas and the U.S. deepwater port.

The primary economic impact of the double-hull requirement on the international tanker fleet results from the higher capital and operating costs of double-hull compared to single-hull tankers. The cost to replace the current single-hull world trading fleet⁴ with new double-hull tankers and operate them through a 20-year life cycle was estimated by the committee to be approximately $30 billion greater than building and operating an equivalent single-hull tanker fleet. Some shipowners are expected to take advantage of the lower capital cost of older single-hull tankers and adopt hydrostatically balanced loading (HBL) to extend the life of pre-MARPOL single-hull vessels beyond 25 years. However, such life extension requires expensive special surveys that will raise operating costs for older tankers, and the use of HBL will reduce cargo capacity and revenues.

Section 4115 will have little impact on the retirement of large single-hull tankers (150,000 DWT or more) that use HBL and are suitable for unloading within the lightering zones or at the deepwater port. Smaller single-hull tankers, particularly those for which unloading offshore is not economical, may be scrapped before the end of their economic life. Single-hull tankers of between 60,000 and 150,000 DWT (without double bottoms or double sides) will be excluded from trade to the United States when they reach 23 or 25 years of age, in accordance with the phaseout schedule of Section 4115.

Current shipyard capacity is ample to meet the world demand for new double-hull vessels and conversions. However, freight rate increases are anticipated as the industry transitions to a double-hull fleet. Given higher freight rates, it is expected that sufficient capital will be available to fund the conversion from a single-hull to a double-hull fleet. Therefore, the committee concluded that the international tanker industry is capable of transitioning to double-hull vessels in accordance with the requirements of OPA 90 and MARPOL.

There are no alternatives to tank vessels for the movement of crude oil from Alaska to the lower 48 states. The Alaskan trade currently has sufficient tankers to meet projected demand until sometime between 2000 and 2006; the OPA 90 single-hull phaseout schedule may result in a requirement for double-hull vessels during this same period. If Alaskan North Slope production continues to decline as expected and no additional production is added, the need for new tankers will be short lived—probably less than 10 years.

The supply and demand situation in the coastal products trade is complex, but several logistical factors give rise to considerable uncertainty in future demand for vessels. There are some indications that domestic tank vessels in the coastal products trade are becoming less attractive economically than the alternatives—namely, pipelines and foreign tankers carrying imports of refined products. An increase in freight rates to induce replacement or conversion of single-hull vessels to double hulls might encourage pipeline expansion or an increase in product imports, thereby further reducing the demand for Jones Act vessels.

The impact of the double-hull requirement on the Jones Act tank vessel fleet is expected to be much greater than that on the international tanker fleet. Jones Act tank vessels are typically built with longer life expectancy than vessels in the international fleet and operate for 20 to 35 years (or more). Accordingly, they will generally reach their mandated retirement dates before the end of their economic life. In addition, the anticipated declines in demand in both the Alaskan crude oil trade and the coastal products trade may not provide for sufficient vessel life to recover investment in the double-hull vessels required by OPA 90, thereby discouraging new construction or conversions.

The committee concluded that there is an urgent need to address issues associated with domestic transportation capability—notably the impact on national defense and the ability to meet the energy needs of the Northeast under extraordinary circumstances such as severe winter weather and pipeline or refinery disruption. The effect of uncertainties over the future state of Jones Act market regulations should be included in the assessment.

Recommendation. The policy issues associated with the potential loss of domestic waterborne transportation capability should be carefully examined within the context of the double-hull mandate of Section 4115 and the committee's finding that properly designed double-hull vessels—including barges—are expected to offer enhanced environmental protection compared to single-hull designs. This examination should be undertaken by an independent body and should address the perspectives of all stakeholders, including tank vessel owners and operators, the oil industry and oil consumers, environmentalists, and state and federal regulators. The study should be initiated as soon as possible to ensure that policy determinations are made prior to potential disruptions or inefficient economic decisions.