Tanker Spills Prevention by Design (1991) / Chapter Skim
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6 Benefits and Costs of Design Changes
6 Benefits and Costs of Design Changes
Pages 158-181
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From page 158... ...
THE ANALYTICAL APPROACH If it were possible to place credible dollar values on all economic and environmental effects, a monetized benefit-cost analysis could be developed to show (1) how the present values of the alternatives' net benefits compare, and (2)
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From page 159... ...
Therefore, the results of the forthcoming cost-benefit analysis are by nature tentative, as they rely upon the use of numbers that could vary significantly given the application of different assumptions. This economic analysis can be viewed from different angles, to gain additional perspective on the various design alternatives.
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From page 160... ...
requirement for double hulls, once implemented, will mean substantial changes in ship construction. Because such implementation has not yet occurred, for purposes of this analysis double hulls will be viewed as simply one of several design alternatives.
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From page 161... ...
Natural Resource Damage and Recovery The major difficulty in assessing natural resource costs is that many of the more subtle effects of oil spills are neither well understood nor well documented. Short-term effects can be obvious; it is widely recognized that a major spill in a biologically rich area will result in the immediate deaths of marine mammals, seabirds, plankton, and fish.
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From page 162... ...
100 80 60 40 20 o _ . _ 2,233 3 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 Policy Years FIGURE 6-1 Major persistent oil spills by tankers annual claims amounts.
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From page 163... ...
An analysis of 38 large spills (Temple, Barker & Sloane, Inc., unpublished data, 1990) found that, in 1990 dollars, claims have clustered at around $28,000 per ton of oil spilled; the startling exception, of course, is the EXXON VALDEZ case, in which costs could reach $90,000 per ton.
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From page 164... ...
Available estimates for spills prior to the EXXON VALDEZ put the average clean-up cost savings in the range of $1,500 to $38,000 per ton not spilled (adjusted to 1989 dollars) .6 The committee believes that past and present estimates of costs probably understate possible future costs of oil spill clean-up.
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From page 165... ...
Therefore, at this time, cost-effectiveness analysis appears more feasible and promising than monetized benefit-cost analysis. Spill Reduction Analysis The extent to which various design alternatives would lessen the risk of oil spills cannot be known with certainty.
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From page 166... ...
The assumption about accident energy levels is just that an assumption because data on actual casualty patterns do not exist. The oil spill data from Table 6-1 now can be combined with the oil outflow reduction percentages from Table 6-2, to obtain an indication of the magnitudes of spillage that these design alternatives could avert.
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From page 167... ...
Cost Analysis: Economic Effects of Design Alternatives A key task faced by the committee was to estimate the cost of pollutionresistant tanker designs. The economic effects can be measured as the increase in oil transportation costs due to changes in tanker capital and operating charges stemming from the structural design enhancements.
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From page 168... ...
Methodology A simple microcomputer spreadsheet model was developed to help estimate these economic effects. The approach involves relating annualized vessel capital and operating costs to the annual volume of oil transported over a given trade lane.
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From page 169... ...
insurance may decline slightly due to more favorable pollution experience with alternative designs. · Fuel consumption is slightly higher for designs involving hydrostatic balance, due to the greater ship size involved.
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From page 170... ...
Double sides, double bottoms, and smaller tanks result in the lowest additional transport cost above the MARPOL design. Vessel sizes and voyage distances then were combined to arrive at an overall indication of the transport cost implications of design alternatives.
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From page 171... ...
· Double hulls, double sides with either mid-height deck or hydrostatic balance, and MARPOL with hydrostatic balance are of intermediate expense, ranging from $710 to $1,100 million per year, or increments of 15 to 24 percent over the base case. This analysis permits an estimate of the impact of design changes on consumers.
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From page 172... ...
Cost-Effectiveness Analysis At this point, the oil spill reduction data can be combined with the cost information to produce a cost-effectiveness analysis of design alternatives. This entails a comparison of the alternatives in terms of cost per ton of oil saved.
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From page 173... ...
In brief, the eight alternative designs and design combinations fall into three groups: · The most costly ways to prevent oil spills are double sides, and double hulls with hydrostatic balance. · Two alternatives could be described, in relative terms, as medium cost: Double sides with hydrostatic balance, and MARPOL ships using hydrostatic balance.
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From page 174... ...
As noted previously, environmental and clean-up benefits from oil spill reductions, in the limited studies now available, range from $12,000 to $68,000 per ton saved. Alternatively, claims experience suggest figures of around $30,000 per ton saved, with the EXXON VALDEZ case possibly hitting $90,000 per ton.9 As noted previously, another way of viewing the cost of design alternatives is the societal insurance approach.
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From page 175... ...
could be surpassed, that the double hull is an attractive alternative, and that the intermediate oil-tight deck with double sides holds promise. POSSIBLE DISLOCATIONS TO WORLD SYSTEM OF OIL TRANSPORT In recommending new regulations for tank vessel design, the effects of the new designs are compared with those of the existing vessel.
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From page 176... ...
But such a change would require energy users to have equipment that could burn coal or natural gas, and heavy use of these fuels would involve a range of different impacts, environmental and otherwise. Moreover, for the design alternatives considered by the committee, the added transportation costs are less than one to two cents per gallon.
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From page 177... ...
Because design changes will increase the difference between U.S. and foreign costs, a possible result would be greater use of foreign-flag tankers to import product (rather than moving product within the United States)
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From page 178... ...
SUMMARY The practical merit of the eight design alternatives analyzed depends on the contribution each could make in reducing oil spills, relative to the impact on oil transportation costs. This chapter illustrates the type of analysis that should be undertaken by policymakers as part of the decision-making process.
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From page 179... ...
The available data suggest that the best of the design changes examined could prevent perhaps half of accident-related oil spills, which in sum comprise about one-fifth of maritime oil pollution. That is, some 10 percent of
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From page 180... ...
How reasonable this cost may be, even for the best design change, cannot be determined in the absence of some judgment about its effectiveness and cost relative to alternative risk-reduction measures, such as improvements in operations or enforcement, which are beyond the purview of the present study. NOTES The total quantity of oil moving in world waters in 1989 was 1,478 million metric tons, including 1,176 million tons crude and 392 million tons product.
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From page 181... ...
1990. Analysis of a Sample of 38 Major Persistent Oil Spills.
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