During the past 25 years, the United States, in common with other nations, has become increasingly concerned about oil spills associated with waterborne transportation of oil. Legislative initiatives aimed at reducing oil spills have evolved slowly and have been punctuated by serious tank vessel accidents (Figure 1-1). For the most part, legislation prior to 1990 had been developed under the auspices of the International Maritime Organization (IMO).
The U.S. Oil Pollution Act of 1990 (OPA 90, P.L. 101-380), however, was a major departure from the international effort to address shortcomings in tank vessel design and operation. In promulgating a requirement to change from single-hull to double-hull designs, the United States acted unilaterally. Section 4115 of OPA 90 excludes single-hull tank vessels of 5,000 gross tons or more from U.S. waters after 2010.1 Section 4115 also requires tankers and barges without double hulls operating in U.S. waters to comply with interim regulations defining structural and operational requirements aimed at providing "as substantial protection to the environment as is economically and technologically feasible." The international community, through IMO, subsequently endorsed the goals of OPA 90 by implementing amendments to The International Convention for the Prevention of Pollution from Ships, adopted in 1973 and modified in 1978 (MARPOL 73/78), requiring (1) double-hull vessels or their equivalents in virtually all the world's tanker trades and (2) additional operational and structural measures for single-hull tank vessels.2
In enacting OPA 90, the U.S. Congress recognized that Section 4115 would have broad and potentially unexpected impacts. Congress therefore included language in the act that requires the Secretary of Transportation to review and assess its effects (see Appendix B). The purpose of the present study, requested by the U.S. Coast Guard, is to assist the Secretary of Transportation in assessing the measures mandated by Section 4115 and to ascertain their effects on protection of the marine environment, ship safety, the economics of oil transportation, and the makeup of the maritime oil transportation industry.
U.S. Oil Supply and Demand
Oil is supplied to the United States from both domestic production and foreign imports. The domestic supply comes primarily from crude oil production, supplemented by a small amount of natural gas liquids and a minor amount of other liquids. Foreign oil imports come in three forms: (1) crude oil, (2) unfinished oil materials ready for further processing or blending, and (3) finished petroleum products. The U.S. Department of Energy projects an increase in U.S. oil consumption of 3.5 million barrels per day (MBD) between 1994 and 2015 (EIA, 1996).
Between 1990 and 1994, domestic oil supply ranged from 9.6 to 10.1 MBD, but domestic oil production is expected to decrease by 1.2 MBD between 1994 and 2005, in part because of reduced output from the Alaskan North Slope (EIA, 1996). An increase in domestic supply of 0.9 MBD is anticipated between 2005 and 2015, however, as production from the lower 48 states increases.
Between 1990 and 1994, U.S. net oil imports increased from 7.2 to 8.1 MBD. As a result of increasing demand and decreasing domestic supply, net oil imports are projected to increase from 8.1 MBD in 1994 to 11.4 MBD in 2005. The projected increase in imports thereafter is modest, with imports in both 2010 and 2015 anticipated to be 11.8 MBD (EIA, 1996).
In 1994, U.S. consumption of oil products was about 17.7 MBD. After reducing oil imports by the amount of oil exports, 54 percent of U.S. consumption was supplied from domestic sources. The remainder of supply came from imports, most of which were waterborne, although some were supplied overland, primarily by pipeline from Canada. In 1994, Canada provided the United States with about 1.3 MBD of oil imports. This amount was slightly more than the 0.9 MBD of oil exports in 1994. In earlier years, imports from Canada were less than oil exports. Since 1973, it can be said that U.S. oil exports, on a volume basis, are generally offset by imports from Canada. Thus, a comparison between U.S. production and waterborne imports provides a reasonable basis for assessing the significance of waterborne imports to U.S. oil supply. Imports of crude oil by water grew from about one-quarter of U.S. domestic oil production in 1973 to almost equal domestic production in 1994 (Figure 1-2). This waterborne movement occurs almost entirely (more than 99 percent) in foreign-owned or foreign-registered tankers.
Marine Oil Transportation System
International Oil Transport
The international marine oil transportation system has grown dramatically since World War II (Figure 1-3). More than 1.7 billion tons of oil are transported annually by ship from producing and refining countries to the consuming
countries of the world. The United States presently accounts for about 30 percent of the total world waterborne oil movements. Thus, unilateral action by the United States in the area of tanker regulations can have profound effects internationally. In 1990, international oil movements (both crude oil and products) in U.S. waters totaled 513 million metric tons, and domestic coastal movements totaled 280 million metric tons (Lamb and Bovet, 1995).
As a result of the enormous increase in marine transportation of oil, the size of the largest tank vessels has increased from approximately 25,000 deadweight tons (DWT) at the end of World War II to more than 550,000 DWT today. The world fleet of tank vessels grew from 160 million DWT in 1971 to about 267 million DWT in 1994 (Drewry Shipping Consultants, 1994), having peaked at more than 300 million DWT in the late 1970s before economic conditions caused increased scrapping of vessels and a reduction in new construction (see Figure 1-4).
U.S. Oil Transport
The U.S. maritime transportation of oil and oil products has three distinct segments: the Pacific, Atlantic, and Gulf coasts. The Pacific coast trade is dominated by the Trans-Alaska Pipeline System (TAPS) crude oil trade, although there are increasing crude oil imports as well as a product fleet operating along the coast. The Atlantic coast trade involves significant movement of domestic oil
products from the Gulf coast and from mid-Atlantic refineries to the Northeast; imported products are also an important component of this trade. The substantial traffic in imported crude oil serves primarily the Gulf coast, Delaware River, and New Jersey refineries. In addition to the aforementioned tanker trades, barges operate in the coastal trades along the Gulf, roughly in parallel with coastal tankers but also serving smaller ports in intracoastal services.
Gulf coast traffic, which is greater than that of the other two coasts combined, accounts for 60 percent of all oil imported into the United States. Because larger tankers when fully loaded cannot enter the shallow waters of ports in the Gulf of Mexico to discharge their cargo, a two-phase system has developed to take advantage of the reduced carrying costs of the larger tankers. Vessels can discharge their cargo at the Louisiana Offshore Oil Port (LOOP), located 18 miles off the coast of Louisiana, or in lightering areas where smaller vessels take the oil directly to land-based terminals. About 30 percent of all imported crude oil delivered to the United States comes through the LOOP and lightering areas. The committee's analysis of Energy Information Administration projections (EIA, 1996) indicates that this could increase to about 50 percent over the next 10 years.
The economics of transporting oil by water have changed dramatically over the years. In the early 1950s, marine transportation costs made up almost half the
price of oil delivered to a receiving dock. Since then, the price of oil at the producing location has increased tenfold, while the transportation cost has remained at approximately $1.00 per barrel in unadjusted dollars, or between about 5 and 10 percent of the delivered price. Part of the reason for this low transportation cost is the economy of scale achieved with larger tankers. In addition, a prolonged tanker surplus has led to depressed freight rates. Any increase in transportation costs caused by OPA 90 would be a very small portion of the total delivered cost of oil.
Tank Vessel Design
Prior to OPA 90, there were attempts to minimize oil spillage by means of vessel design, for example, by requiring double bottoms. In the late 1960s, the U.S. Coast Guard (USCG) and the administration initiated efforts to improve tanker design. The USCG led an effort at IMO to implement uniform international requirements to reduce pollution from tankers. This effort ultimately resulted in MARPOL 73, which promulgated the concept of segregated ballast to prevent operational discharges of oil residues in ballast water carried in cargo tanks. The 1978 Protocol modified the concept by requiring that for all new tank vessels of more than 20,000 DWT, segregated ballast tanks be located in a defensive way to reduce the chances that oil would be spilled in the event of grounding or collision. The actions required by Section 4115 aim to mitigate oil spillage by reducing the likelihood of a casualty occurring and reducing the amount of oil outflow given a casualty. The main purpose of the double hull is to reduce the probability of oil outflow following collision or grounding.
At the end of 1994, the world tanker fleet was made up of 1,732 pre-MARPOL tankers, 1,308 MARPOL tankers,3 and 340 double-hull tankers (Tanker Advisory Center, Inc., 1995; see Figure 1-5). The percentage of double-hull tankers is expected to grow rapidly over the next few years as new double-hull vessels replace aging single-hull tankers constructed during the building boom of the mid-1970s.
Clarkson Research Studies Ltd. 1994. Oil and Tanker Databook. London: Clarkson Research.
Drewry Shipping Consultants, Ltd. 1994. The International Oil Tanker Market: Supply, Demand, and Profitability to 2000. London: Drewry Shipping Consultants.
Energy Information Administration (EIA). 1995. Monthly Energy Review, February. Washington, D.C.: U.S. Department of Energy.
Energy Information Administration (EIA). 1996. Annual Energy Outlook 1996. Washington, D.C.: U.S. Department of Energy.
Lamb, B.L., and D.M. Bovet. 1995. An update on the Oil Pollution Act of 1990. Marine Technology 32(2):151-157.
Noble, P.A. 1993. Safer transport of oil at sea: A social responsibility for naval architects and marine engineers. Marine Technology 30(2):61-70.
Tanker Advisory Center, Inc. 1995. 1995 Guide to the Selection of Tankers. New York: Tanker Advisory Center.
U.S. Army Corps of Engineers (USACE). 1973-1994. Waterborne Commerce of the United States. Annual Review. Washington, D.C.: U.S. Army Corps of Engineers.