[Federal Register Volume 62, Number 7 (Friday, January 10, 1997)]
[Rules and Regulations]
[Pages 1622-1637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-471]
[[Page 1621]]
_______________________________________________________________________
Part III
Department of Transportation
_______________________________________________________________________
Coast Guard
_______________________________________________________________________
33 CFR Part 157
Structural Measure to Reduce Oil Spills From Existing Tank Vessels
Without Double Hulls; Final Rule
Federal Register / Vol. 62, No. 7 / Friday, January 10, 1997 / Rules
and Regulations
[[Page 1622]]
DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Part 157
[CGD 91-045c]
RIN 2115-AF27
Structural Measures to Reduce Oil Spills From Existing Tank
Vessels Without Double Hulls
AGENCY: Coast Guard, DOT.
ACTION: Final rule.
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SUMMARY: This final rule represents the last phase in the Coast Guard's
three-phased effort to establish economically and technologically
feasible structural and operational measures to reduce the threat of
oil spills from tank vessels without double hulls, as required by the
Oil Pollution Act of 1990. No structural measures are contained in this
final rule because the Coast Guard has determined that there are no
interim structural measures that are both technologically and
economically feasible for existing tank vessels without double hulls.
DATES: This final rule is effective February 10, 1997.
ADDRESSES: Unless otherwise indicated, documents referenced in this
preamble are available for inspection or copying at the office of the
Executive Secretary, Marine Safety Council (G-LRA/3406), U.S. Coast
Guard Headquarters, 2100 Second Street SW., room 3406, Washington, DC
20593-0001, between 9:30 a.m. and 2 p.m., Monday through Friday, except
Federal holidays. The telephone number is (202) 267-1477.
FOR FURTHER INFORMATION CONTACT: LCDR Suzanne Englebert, Project
Manager, Project Development Division, at (202) 267-6490.
SUPPLEMENTARY INFORMATION:
Regulatory History
Section 4115(b) of the Oil Pollution Act of 1990 (OPA 90) directs
the Coast Guard to develop structural or operational requirements for
tank vessels of 5,000 gross tons (GT) or more without double hulls that
will serve as regulations until the year 2015. After 2015, all tank
vessels operating in U.S. waters will be required to have double hulls
under section 4115(a) of OPA 90 (46 U.S.C. 3703a). Regulations issued
under the authority of section 4115(b) must provide as substantial
protection to the environment as is economically and technologically
feasible. A detailed review of structural measure issues, as they
pertain to the Congressional mandates of OPA 90, appears in the
supplemental notice in proposed rulemaking (SNPRM) entitled
``Structural Measures to Reduce Oil Spills from Existing Tank Vessels
without Double Hulls'' published on December 28, 1995 (60 FR 67226).
This final rule represents the final phase of the Coast Guard's
three-phased effort to reduce oil pollution from certain existing tank
vessels. The first phase was completed on August 5, 1994, by issuing a
final rule entitled ``Emergency Lightering Equipment and Advanced
Notice of Arrival Requirements for Existing Tank Vessels Without Double
Hulls'' (59 FR 40186), which requires the carriage of emergency
lightering equipment and the inclusion of the vessel's International
Maritime Organization number in the advance notice of arrival report.
The second phase was completed on July 30, 1996, by issuing a separate
final rule entitled ``Operational Measures to Reduce Oil Spills from
Existing Tank Vessels without Double Hulls'' (61 FR 39769). That rule,
which focused on reducing the risk of groundings, collisions, or fires,
requires existing tank vessels without double hulls to comply with
certain operational measures until the year 2015.
To complete the third phase, the Coast Guard evaluated several
different structural measures to determine their economical and
technological feasibility. Such measures included retrofitting double
bottoms or sides, implementing hydrostatic balance loading (HBL) for
all vessel configurations, and restricting certain existing tanks from
carrying cargo or retrofitting spaces so that they are located
protectively around tanks carrying oil as cargo. As a result of further
economic cost-benefit analysis and the comments on the SNPRM, the Coast
Guard is not requiring structural measures. The Coast Guard has
determined that structural measures are not economically feasible and
that the measures required under phase one and two of this rulemaking
meet the Congressional mandate of OPA 90 section 4115(b).
Discussion of Comments
Background information on proposed structural measures for existing
vessels without double hulls is provided in the preambles to the
advanced notice of proposed rulemaking (56 FR 56284; November 1, 1991),
the notice of proposed rulemaking (58 FR 54870; October 22, 1993), and
the SNPRM (60 FR 67226; December 28, 1995). The Coast Guard received a
total of 29 letters on the SNPRM. These letters addressed several
issues and presented more than 180 comments. Twelve comments supported
operational measures and two comments supported emergency lightering
measures as finalized. The remaining comments discussed issues related
to reducing oil outflow after an accident occurs on an existing tank
vessel and are addressed in the following sections. All comments
received on this rulemaking are available for inspection in docket [CGD
91-045c] at the address listed under ADDRESSES. For the purposes of
this preamble discussion, the term ``single-hull'' means an existing
tank vessel without a double hull. Pre-MARPOL vessels are defined as
vessels that are not required to meet the pollution prevention
requirements of the 1973 International Convention for the Prevention of
Pollution from Ships (MARPOL 73). MARPOL 73/78 vessels are defined as
vessels that meet the requirements of the MARPOL 73 convention and
vessels that meet the MARPOL 73 convention as amended by the 1978
Protocol (MARPOL 78). The term ``Regulation 13G'' refers to Regulation
13G of Annex I of MARPOL 73 as amended by the 1978 Protocol.
I. Applicability
Twenty-three comments pertained to the application of structural
measures. Nine comments made general remarks on the applicability of
structural measures and the OPA 90 mandated phase-out schedule's
relationship to the implementation of structural measures. The
remaining comments suggested that the Coast Guard exempt various types
of vessels from the application of structural measures.
Two comments shared the opinion that the current OPA 90 phase-out
schedule effectively creates an orderly transition to a future double-
hull fleet, thus making additional measures unnecessary. One of these
comments specifically noted that tank barges, in particular, would
accrue no benefit from structural measures due to impending OPA 90
phase-outs. A separate comment agreed that the Coast Guard should
maintain OPA 90 phase-out dates, but did not request that vessels be
excluded from the application of structural measures or that structural
measures not be required.
Five comments recommended that the Coast Guard require structural
measures for all existing tank vessels, including non-petroleum oil
carriers and tank barges. The comments stated that non-petroleum
carriers may periodically transport petroleum and that non-petroleum
oil spills pose an equal or greater risk to the environment as
petroleum oil spills. In addition, the comments claimed that standards
[[Page 1623]]
should be uniform throughout industry to encourage equal competition
and an even distribution of costs.
Two comments suggested alternatives to the broad application of
structural measures. One comment encouraged the use of company
historical performance as a basis for requiring implementation of
structural measures. For example, the comment claimed that companies
with a history of minimal oil spillage should not be required to
implement structural measures to the same degree as frequent offenders.
The second comment recommended that the Coast Guard establish an
enforceable performance standard, as opposed to a one-size-fits-all
approach, for the implementation of specific measures to ensure a high
degree of spill prevention.
During this rulemaking, the Coast Guard extensively researched the
cost and benefit of requiring a multitude of measures on single-hull
tankships and tank barges prior to their phase-out dates. No tank barge
or tankship company commented that their sole cargo carriage consisted
on non-petroleum products. Consequently, all tank vessels, including
those with the ability to transport non-petroleum products for one
charter and change to carrying petroleum products for the next, were
considered for this rulemaking.
The anticipated cost to single-hull tank vessels until 2015, or
their phase-out dates, was strictly taken into account for this final
rule assessment. The OPA 90 phase-out dates and current differences
between U.S. and international fleet pollution prevention requirements
were also considered in the cost and benefit analysis. Because this
rulemaking addresses out-flow prevention measures typically requiring
architectural or loading changes, and not human performance factors
that are usually the reason for a company's lower spill record, the
Coast Guard did not consider equivalencies or exemptions based on
individual company performance.
Several comments claimed vessels trading at deepwater ports or
offshore lightering zones should be exempt from the application of
structural measures because most already operate with protection
adequate for trading in these low risk areas and would experience no
benefit from the use of structural measures. Other comments requested
exemptions for vessels carrying non-petroleum oil or product cargo
because most are already equipped with double bottoms and pose an
insignificant risk to the environment. Comments also recommended
excluding all tank vessels equipped with double bottoms from the
implementation of structural measures since these already have the
ability to reduce oil outflow due to grounding incidents. Comments
suggested that spill response tank barges, which transport oil for a
limited purpose only, be held to lower standards than structural
measures for routine oil carriers. In addition, several comments
requested that clean product tankers less than 30,000 deadweight tons
(dwt) be exempt from structural measures because spillage from these
vessels has historically proven to be less damaging and less difficult
to contain than spills from other vessels. Finally, some comments
claimed that vessels which meet the requirements of MARPOL 78, should
be exempt from these requirements because they already meet the highest
international standards.
Vessels that are solely engaged in oil spill response are already
exempt from the structural measures required by 33 CFR 157.08. Vessels
operating at deepwater ports, offshore lightering zones, and those
vessels fitted with double bottoms were considered in this rulemaking
because, although groundings are less frequent, collisions and
structural failures remain potential hazards. Non-petroleum carrying
vessels were included in this rulemaking because the Coast Guard has
determined that bulk spills of animal fat, vegetable oil, and other
non-petroleum oil can be damaging to the environment. The cost and
benefit of applying structural measures to single-hull tank vessels
were separately identified by deadweight tonnage categories in this
final rule regulatory assessment to determine if tank vessels, such as
those product carriers operating at 30,000 dwt or less, were
disproportionately affected. MARPOL 73/78 vessels were also considered
separately in the regulatory analysis for this final rule to ensure
anticipated benefits from any structural measures accurately reflected
their currently pollution prevention construction.
Several comments requested exemption of specific vessels from
implementation of HBL because it is not technically feasible for their
operation. Specific vessels included: Type 2 Bulk Chemical/Integrated
Cargo parcel tankers, which encounter difficulties in implementing HBL
when dealing with heterogeneous cargoes; and vessels engaged in multi-
port voyages, due to problems resulting from the implementation of HBL
multiple times during a single voyage.
The Coast Guard agrees that the difficulty of implementing HBL
directly correlates with cargo variety and discharge schedules. The
technical feasibility analysis for the structural measures SNPRM
assumed tank vessels were carrying homogeneous cargoes and had limited
off-loads. Small tankships, such as parcel tankers and vessels making
multiple port discharges, have valid concerns about the practical
application of HBL to their operations, and would most likely incur
voyage delays or higher cargo shutout rates than originally assumed in
the SNPRM for HBL. The regulatory assessment for this final rule
analyzed the effect that HBL, assuming a higher cargo shutout cost and
expense of delayed operations for a product or parcel tankship, would
have on the cost-benefit ratio.
2. Consistency With International Standards
The Coast Guard received 12 comments expressing support for the
development or adoption of regulations that are equivalent to
international standards such as Regulation 13G and International
Maritime Organization (IMO) standards. Arguments in favor of
harmonization included concerns that country-specific legislation would
be difficult for industry to implement, and would introduce technical
risks and disproportionate costs. Another comment specifically noted
that the combination of protectively located void spaces (PL/Spaces)
and HBL analyzed in the SNPRM would be too expensive and complex to
implement. Consequently, the comment recommended adoption of Regulation
13G because it permits use of HBL or PL/Spaces on an individual basis.
Another comment stated that a requirement to fit PL/Spaces would be
onerous to the international fleet because it affects a vessel's
ability to trade, unlike HBL, even when not trading in U.S. waters.
Other comments encouraged the Coast Guard to work in cooperation
with the IMO to ensure high standards of environmental performance for
all newly-built tank vessels. One comment also encouraged the Coast
Guard to consider enforcement issues when preparing a structural
measures regulation, stressing the importance of maintaining
competition on an equal level.
In contrast, only one comment disagreed that uniformity would be
achieved by drafting measures commensurate with international
standards. This comment reasoned that, theoretically, Regulation 13G
and OPA 90 express somewhat opposing objectives, since Regulation 13G
works to extend the operating life of single-hull vessels, while OPA 90
limits the operating life of single-hull vessels by setting a maximum
retirement date.
[[Page 1624]]
Consequently, it was suggested that other options be considered,
including an alternative PL/Space configuration that splits the
protected area between the side and bottom of the vessel.
The Coast Guard's goal is to implement its statutory mandates in
regulations that are consistent with international standards wherever
doing so is lawful, appropriate, and practical. Based on comments from
the SNPRM, the Coast Guard considered adoption of international
regulations including Regulation 13G, as well as other requirements not
presently required by IMO. However, based on the revised cost and
benefit analysis of these structural measures for existing tank
vessels, the Coast Guard has determined that no measures, international
or otherwise, are economically feasible.
3. Congressional Intent
Four comments argued that Congress directed the Coast Guard to
consider implementation of both structural and operational measures for
existing tank vessels without double hulls, but did not require the
adoption of both types of measures. Three of the four comments also
stated that no structural measures are required to be implemented
unless they are both economically and technologically feasible. Another
comment stated that Congress mandated strict standards to protect our
nation's waters, obligating the Coast Guard to develop measures that
closely approximate the protective effect of double hulls on single-
hull tank vessels.
The Coast Guard has done extensive research on the requirements of
section 4115(b) of OPA 90, including an analysis of the Congressional
guidance offered for its implementation. The three final rules
promulgated under CGD 91-045 make up a comprehensive evaluation of
section 4115(b) that implements those measures the Coast Guard deems
are both economically and technologically feasible as required by law.
4. Alternative Measures and Economic Incentives
The Coast Guard received five comments that encouraged the adoption
of alternative systems to reduce oil outflow. One comment recommended
that intermediate oil tight decks (IOTD) be required or offered as an
equivalent measure for compliance with structural measures. The comment
challenged the Coast Guard's refusal to consider IOTD on the basis of
its alleged failure to meet the benchmark equivalency for alternative
compliance found in Regulation 13G. The comment argued that the Coast
Guard's interpretation of the Regulation 13G standards was misleading
and incorrect as it pertained to IOTD. According to the comment, the
estimated installation costs for IOTD, $2 million per vessel, would be
approximately identical to fitting PL/Spaces. However, the comment
asserted that cargo shutout amounts would vary from 2 percent for an
IOTD equipped tanker to 19 percent for a tankship fitted with PL/
Spaces. The comment also contended that the IOTD concept should be
considered equivalent to a double hull.
The basis of the Coast Guard's determination of appropriate
alternative measures for single-hull tank vessels in this final rule
remains as stated in the SNPRM: the alternative must be approved by
IMO's Marine Environment Protection Committee (MEPC) as an alternative
structural arrangement meeting the requirements of Regulation 13G.
Although IMO has accepted the concept of IOTD as a method for complying
with the HBL alternative to Regulation 13G, this acceptance was not the
only factor considered for this rulemaking. This final rule's
regulatory assessment found that PL/Spaces, a combination of PL/Spaces
and HBL, and HBL alone are all economically infeasible for pre-MARPOL
tank vessels. A separate analysis using the IOTD shutout estimate of 2
percent and the refit costs of fitting PL/Spaces over 30 percent of the
cargo tank area revealed that even with the reduced cargo shutout of
IOTD, the cost-benefit of such a measure is not economically feasible.
Calculations from this analysis estimated that the cost-benefit of
implementing IOTD for vessels operating on U.S. coastal voyages ranged
from $62,200 to $211,000, and from $32,200 to $159,300 per barrel of
unspilled oil on those vessels operating on international voyages. The
Coast Guard estimates that these ranges are a conservative
representation of the IOTD's cost-benefit because the cost of fitting
IOTD for the entire cargo area would be substantially higher than the
cost of fitting bulkheads or double bottoms over 30 percent of the
cargo area. The determination of equivalency between IOTD and a double
hull is outside the scope of this rulemaking.
Another comment suggested that the Coast Guard adopt the American
Underpressure System. This comment claimed that this inert gas
controlled system dynamically controls the underpressure in the tank
ullage space and would prevent oil spills above the line of rupture.
This comment reasoned that since the Coast Guard has endorsed HBL and
PL/Spaces it should also accept alternative concepts, such as the
American Underpressure System, that are similarly effective and result
in comparable levels of risk regardless of IMO approval. According to
the comment, the American Underpressure System is comparable in
performance to the double hull, is significantly more effective than
either HBL or PL/Spaces, and introduces no unmanageable risks. The
comment estimated that the cost of implementing the American
Underpressure System would be between 1 and 1.5 percent of the
construction cost required to build a new single-hull tanker, while the
cost to install a double hull would be between 30 to 40 percent of the
construction cost required to build a new single-hull tanker. In
addition, the comment claimed that the out-of-service time to retrofit
the American Underpressure System was 1 to 3 weeks, compared to the 6
to 12 months typically required to install a double hull. Considering
the loss of cargo capacity that would result from the installation of
the double hull, as well as the comparison between the refit cost and
out-of-service time required for the implementation of both measures,
this comment concluded that no quantitative support exists to exclude
the American Underpressure System as a viable alternative measure.
While underpressure systems could be less costly than PL/Spaces or
HBL, they were not included in the regulatory assessment for this final
rule because they have not been approved by IMO as an alternative to
comply with Regulation 13G. Underpressure systems were specifically
examined and discussed by IMO. These systems were expressly rejected by
IMO due to various safety concerns.
Two comments recommended that the Coast Guard require emergency
transfer systems (ETS). Another comment suggested that the Coast Guard
develop industry-wide economic incentives that encourage companies to
employ spill-reduction measures such as effective combinations of PL/
Spaces and HBL prior to the regulatory phase-in dates and to engage in
further development of promising new measures such as Underpressure
Systems and ETS.
While ETS could be less costly than PL/Spaces or HBL, they were not
included in the regulatory assessment for this final rule because they
have not been approved by IMO as an alternative to comply with
Regulation 13G and there are indications that, in some instances, they
may be unsafe. The Coast Guard is using IMO approval of Regulation 13G
alternatives as a benchmark because it provides international
consistency as well as
[[Page 1625]]
general operational and safety requirements. Alternative measures
creating conditions such as exposure of the tankship to stress,
creation of fire or explosion hazards, stability considerations, and
loading requirements are not approved by IMO. The Coast Guard's 1995
report to Congress entitled, ``The Feasibility of Using Segregated
Ballast Tanks (SBT) for Emergency Transfer of Cargo and Storage of
Recovered Oil,'' concludes that when a vessel casualty occurs,
fundamental changes in the vessel's stability often result. These
stability changes make it potentially unsafe and inadvisable to use SBT
for the emergency transfer of cargo. The Coast Guard did not consider
an economic incentive program because it is beyond the scope of this
rulemaking and Section 4115(b) does not provide the authority for
incentives.
5. Phase-In Alternatives
The Coast Guard received 15 comments on phase-in alternatives. Four
comments claimed they could meet the 3-year phase-in period in the
SNPRM, but would rather have one of the following options: (1) A phase-
in period commencing no earlier than the date of a tank vessel's first
scheduled dry docking following issuance of the final rule; (2) a
requirement for industry to begin compliance in 1997 at a vessel's next
scheduled dry dock, but no later than the year 2000; (3) a phase-in
period no earlier than 1999 to 2001 for PL/Spaces to avoid substantial
economic hardships on U.S. coastwise crude trading resulting from
reduced cargo-carrying capacity; or (4) a phase-in for PL/Spaces at the
vessel's next scheduled or emergency dry docking period, or at the next
Certificate of Inspection renewal following issuance of the final rule,
if dry docking is not required. Another comment urged the Coast Guard
to delay the implementation of structural measures until at least 2000,
which is the time when pre-MARPOL tank vessels reaching 25 years of age
are required to comply with international standards. This comment
explained that if the implementation dates were delayed, it would be
easier for industry to meet the requirements, and, in addition, the
Coast Guard would not have to account for the cost of implementing
structural measures on these vessels in its final rule regulatory
assessment. Another comment did not express support for structural
measures, but suggested a standardized implementation period for
domestic and foreign fleets.
In contrast, five comments strongly urged the Coast Guard to
implement structural measures immediately. Two of these comments
limited their request to the implementation of HBL only, while another
recognized the potential for delays in implementing structural measures
on the pre-MARPOL fleet. One comment claimed that companies presently
operating double-hull tank vessels are already providing higher levels
of environmental protection, and consequently, are suffering economic
penalties because single-hull tank vessels are still operating. Another
comment alleged that the Coast Guard has failed to provide substantial
protection to the environment by neglecting to promulgate a rulemaking
within the deadlines established by OPA 90 and has harmed the public.
The Coast Guard has taken action to implement interim measures for
existing tank vessels by issuing regulations for emergency lightering
equipment and advanced notice of arrival requirements (59 FR 40186;
August 5, 1994), and operational measures (61 FR 39769; July 30, 1996).
These efforts reduce the risk of oil discharges from existing single-
hull tank vessels. In order to ensure the equal consideration of
economic burden on each facet of the industry, this final rule did not
consider a staggered implementation schedule across the single-hull
fleet. The regulatory assessment for this final rule analyzes the costs
and benefits of implementing HBL on MARPOL as well as pre-MARPOL
vessels starting in 1997. The assessment also considers implementation
of PL/Spaces with ballast on pre-MARPOL vessels starting in 1997,
assuming completion by 2000. The Coast Guard notes the comment
pertaining to the OPA 90 deadline.
6. Increased Potential for Environmental Harm
The Coast Guard received a total of 17 comments suggesting that the
implementation of structural measures would lead to a greater risk of
oil outflow, resulting in an increased risk of environmental harm.
Eight comments attributed the greater environmental risk to the
reduction in cargo capacity. Reduced cargo capacity would lead to more
vessels or voyages necessary to transport cargo, thus increasing tank
vessel traffic. Increased tank vessel traffic would create a greater
potential for accidents, in opposition to the objectives of OPA 90.
Six comments claimed that complications resulting from physical
structural modifications would increase the risk of vessel damage and
instability, eventually leading to a greater probability of structural
failure. The three remaining comments suggested that the implementation
of structural measures would pose an increase in safety hazards for
vessel personnel.
Estimated cargo shutout from measures similar to Regulation 13G
revealed that the resultant increase in the tank vessel traffic would
be about 12 percent. This represents an approximate 2 percent increase
in the total U.S. port deep draft traffic volume. The Coast Guard
assumes that this small increase in traffic volume would be offset by
the accident reduction measures implemented through operational
measures. The Coast Guard agrees that some measures studied would
modify the distribution of hull girder stresses and shear forces. In
some instances, vessel owners may have to conduct additional structural
analyses to determine how these stresses change the vessel's structural
integrity. In those cases where the stresses would not be within
allowable tolerances, additional structural safeguards such as swash
bulkheads may be required. In the cost analysis for this final rule,
refitting expense was considered for all measures, including HBL on
MARPOL tankships. The Coast Guard recognizes that material stresses on
a vessel's hull can develop due to hot work, specifically from the
marriage of large areas of new metal to existing plate or framing. In
some cases, this type of material stress has contributed to structural
failure. If however, proper shipyard procedures are followed and there
is thorough oversight of vessel construction or refits by the Coast
Guard inspectors or classification societies, material stresses can be
prevented. Corrosion damage due to converting cargo tanks to ballast
tanks is valid and the cost to coat tanks has been considered in the
regulatory assessment for this final rule. The Coast Guard disagrees
with the claim that structural measures would pose a safety hazard for
vessel personnel. Oil outflow reduction measures are incorporated
directly into the vessel's design or provide passive protection with
little human interface.
7. State Regulation
The Coast Guard received four comments regarding Federalism issues.
Two comments urged the Coast Guard to unambiguously declare that
regulations promulgated for structural measures preempt State laws to
avoid confusion arising from many independent laws. In contrast, two
remaining comments strongly recommended that the Coast Guard declare
that Federal law does not preempt State law on structural measures. The
Coast Guard believes the clear and manifest purpose of Congress
[[Page 1626]]
is to confer upon the Federal government, through the Coast Guard, the
exclusive authority to set structural standards for vessels to protect
the environment from harm. The Coast Guard has determined that no
additional structural measures are required for single-hull tank
vessels. Nevertheless, the Coast Guard believes that States are
precluded from imposing structural measures on tank vessels operating
in interstate or foreign commerce.
8. Technical Feasibility of PL/Spaces and HBL
Seven comments addressed implications of required implementation of
PL/Spaces. One comment suggested that the Coast Guard consider
alternative PL/Space configurations such as splitting the protected
area between the vessel's side and bottom as an option. Another between
the vessel's side and bottom as an option. Another comment encouraged
the Coast Guard to conduct further studies on potential PL/Space
configurations prior to mandating MARPOL requirements for the sake of
uniformity. In addition, another comment recommended that the Coast
Guard designate the location of PL/Spaces to ensure all vessels have
the same built-in protection. One comment specifically urged the Coast
Guard not to require PL/Spaces as this modification would lead to a
greater demand on the ship-building industry, resulting in the
production of inferior vessels. In contrast, one comment asserted that
PL/Spaces are technologically feasible and recommended that PL/Spaces
be required on all single-hull vessels.
For most tank vessel designs, the most technologically feasible
place to install PL/Spaces is in the tankship's midbody. However, due
to unique design considerations and the need to vary a vessel's draft
or cargo-carrying capacity, the Coast Guard researched and analyzed the
cost and benefit of allowing the owner to designate the location of PL/
Spaces on their vessels. The Coast Guard assumes that by mandating the
location of PL/Spaces for all tank vessels, the installation costs and
benefits realized would be similar to those realized in the event that
vessel owners were able to choose the PL/Space locations. While the
Coast Guard has determined that PL/Spaces are technologically feasible,
fitting them on pre-MARPOL tankships is economically infeasible.
A total of 15 comments were received pertaining to HBL. Eight
opposed HBL for reasons including the following: (1) The implementation
of HBL would place pre-MARPOL vessels at a competitive disadvantage
with MARPOL vessels, because they are already required to contain PL/
Spaces under Regulation 13G; (2) HBL would be practically impossible to
use because, depending on the type of cargo carried, problems may arise
due to variances in density, tank coating compatibility, heating and
cooling requirements, and permissible last cargoes; (3) HBL would
necessitate revisions to vessel manuals and equipment; and (4) HBL
would represent a significant regulatory challenge requiring strong,
effective operational enforcement through Coast Guard oversight of
industry compliance. Additionally, two comments suggested that HBL
would provide only minimal oil outflow protection during groundings.
One of these comments specifically explained that based on the static
model used by the Coast Guard to test HBL's effectiveness, HBL may
indicate a theoretical reduction in oil outflow for some grounding
scenarios. However, after an accident, HBL may have limited
effectiveness due to highly dynamic situations, such as weather-related
impacts, tide ranges, and changes in ship trim and heel. Another two
comments contended that HBL is not a structural measure requiring
physical modifications, but an operational measure requiring a skilled
knowledge of certain operating procedures.
In contrast to the opposing comments, the Coast Guard received
seven comments supporting implementation of HBL. One comment noted that
compliance with HBL requirements could be easily verified by tank
gauging report examinations and draft mark inspections. Another comment
recommended implementation of HBL on all single-hull vessels. An
additional two comments suggested employment of HBL in all vessel cargo
tanks, as opposed to only those tanks that are probabilistically
located. One comment based this recommendation on two assumptions: (1)
HBL would be easy to implement immediately as structural refits would
be unnecessary; and (2) HBL would effectively reduce oil outflow in
grounding incidents.
The Coast Guard has determined that HBL, in general, is technically
feasible for single-hull tankships. Multi-port voyages and complex
cargo carriage operations make HBL more time-consuming and difficult to
meet. Also, some vessels would have costs attributable to HBL that are
beyond the cargo shutout costs assumed in the SNPRM regulatory
assessment. The regulatory assessment for this final rule accounts for
some costs associated with HBL measures on smaller tankships since
these vessels are most likely to have difficulty implementing HBL. The
effectiveness estimates associated with HBL in reducing the outflow of
oil in a grounding were not changed for this final rule assessment
because the Coast Guard deems the estimates to be representative of
static, as well as limited dynamic conditions. The Coast Guard
recognizes that enforcement of HBL would require its direct oversight
to ensure compliance by all single-hull vessel owners or operators and
that tank gauging reports could be used as tools. Since no structural
measures are economically feasible, the Coast Guard will be using its
resources to ensure operational measures are met. The Coast Guard did
not analyze the cost-benefit of requiring tank vessel owners or
operators to use HBL in all cargo tanks. However, if the cost to
benefit ratio of applying HBL to those cargo tanks that are located in
areas of higher damage risk is prohibitive, then the cost to benefit
ratio for applying HBL to all cargo tanks is also infeasible.
Four comments suggested that the Coast Guard require a combination
of PL/Spaces and HBL. One comment suggested a combination of PL/Spaces
covering 30 percent of the vessel's side or bottom with HBL for the
remaining tanks to the extent necessary for compliance with Regulation
13G. Another comment recommended employment of PL/Spaces covering 100
percent of center tank bottoms, if HBL is used in wing tanks.
The Coast Guard has analyzed the cost and the resultant oil outflow
benefits attributable to a combination of fitting PL/Spaces and
applying HBL measures to pre-MARPOL tankships in accordance with
Regulation 13G. The cost for this measure when compared to its benefits
make this measure economically infeasible. If the combination of PL/
Spaces and HBL is not cost-effective, then employing the more onerous
requirement of 100 percent PL/Spaces would also be infeasible.
Amendments to 33 CFR 157
This final rule amends the subpart G, H, and I heading to reflect
that no structural measures are required as interim measures for
existing tank vessels without double hulls to meet the requirements of
Section 4115(b) of the Oil Pollution Act of 1990. The measures required
under subparts G, H, and I are all measures the Coast Guard has
determined are economically and technologically feasible for enhancing
[[Page 1627]]
the oil pollution prevention efforts of existing single-hull tank
vessels.
Assessment
This rule is a significant regulatory action under section 3(f) of
Executive Order 12866 and has been reviewed by the Office of Management
and Budget under that Order. It required an assessment of potential
costs and benefits under section 6(a)(3) of that Order, and is
significant under the regulatory policies and procedures of the
Department of Transportation (44 FR 11040; February 26, 1979). An
Assessment has been prepared and is available in the docket for
inspection or copying where indicated under ADDRESSES. The Assessment
is summarized in the following discussion.
This rulemaking applies to all existing vessels of 5,000 gross tons
(GT) or more that do not have double hulls and that carry oil, animal
fat, vegetable oil, and other non-petroleum oil in bulk as cargo. An
estimated 995 existing tankships (51 U.S. tankships, 944 foreign
tankships) that will be operating on U.S. navigable waters in 1997 were
considered to be affected by this rulemaking.
This final rule assessment revises the benefits assumptions and
calculations of the regulatory assessment conducted for the
supplemental notice of proposed rulemaking (SNPRM). Cost estimates were
appropriately reduced to account for implementation of Regulation 13G
of Annex I of the International Convention for the Prevention of
Pollution from Ships, 1973, as modified by the Protocol of 1978
(Regulation 13G) within the international fleet. Costs were also
revised where comments indicated that costs were underestimated or
omitted in the SNPRM analysis. The vessel population not required to
meet the pollution prevention requirements of the 1973 International
Convention for the Prevention of Pollution from Ships (pre-MARPOL) was
also reassessed and reduced based on port call data and certificate of
financial responsibility applications. The cost and benefits for
vessels meeting the requirements of the 1973 International Convention
for the Prevention of Pollution from Ships (MARPOL 73) and vessels
meeting the MARPOL 73 convention as amended by the 1978 Protocol
(MARPOL 78), were combined in this final assessment. MARPOL 73/78
refers to vessels meeting MARPOL 73 and vessels meeting MARPOL 78
requirements.
General Comments on the SNPRM Regulatory Assessment
The Coast Guard received 36 comments addressing general regulatory
assessment issues. Most of the comment criticized the Coast Guard's use
of oil spill data from accidents occurring prior to the promulgation of
the Oil Pollution Act of 1990 (OPA 90), because using this data
resulted in the underestimation of costs and overestimation of
benefits. The majority of these comments were based on a general
impression that little benefit would result from the implementation of
proposed structural measures in relation to the extensive costs
involved. One comment specifically noted that studies performed by the
International Maritime Organization (IMO), the Coast Guard, and Herbert
Engineering Corporation failed to indicate that these measures were
cost-effective.
The Coast Guard has revised its regulatory assessment for this
final rule. The major difference between its assessment for the SNPRM
and this final rule is the recalculation of anticipated oil outflow
benefits based on the accident data for single-hull tankships from 1990
through 1994. This five-year period indicates a reduction of single-
hull tankship accidents and reflects many of the improvements industry
has made to reduce oil spills since OPA 90.
Another comment contended that a cost-benefit analysis was not
authorized by OPA 90. The comment asserted that OPA 90 requires the
Coast Guard to adopt measures providing the maximum protection to the
environment that are economically feasible, not the ones that are least
costly. Two other comments argued that economic feasibility should not
be determined solely by a limited cost-benefit analysis. One of these
comments maintained that economic feasibility should be based on
whether the costs are wholly disproportionate to the benefits on an
industry-wide scale, with the fate of one isolated firm or facility
immaterial to the outcome of the rule. The other comment contended that
economic feasibility should be based on the industry's ability to pass
on or absorb costs without threatening the competitive structure of the
industry.
Several requirements to conduct a cost-benefit analysis exist in
law. One law requiring such analysis, which is specifically applicable
to this rulemaking, is the Small Business Regulatory Enforcement
Fairness Act of 1996. For this final rule, an evaluation of cost and
its relationship to the anticipated benefits was performed with respect
to structural measures. The evaluation included a review of the
potential impact of such measures on small entities, as well as a
comparison of the impact on domestic versus international fleet
vessels. The disproportionate cost to U.S. tankship companies operating
on coastal routes, considering the little anticipated benefit in oil
outflow reduction, was key in the Coast Guard's determination of
economic infeasibility for structural measures.
Industry Costs
This final rule reassessed the cost of implementing structural
measures in order to estimate the cost-benefit of requiring pre-MARPOL
tankships to meet the requirements of Regulation 13G earlier than the
25 year age limit it imposes. In addition, costs were also reassessed
to reflect the range of cargo shutout amounts realized by vessels
depending on the type of cargo carried, i.e., crude or product.
Finally, to ensure that a thorough examination of the cost to benefit
ratio was conducted, costs were broken down by deadweight tonnage.
Cost Comments on the SNPRM Regulatory Assessment
(a) General: The Coast Guard received over 40 comments regarding
various cost issues. Only two of the comments believed that the
proposed structural measures would be economically feasible. One of
these comments specifically disagreed with the hydrostatic balance
loading (HBL) cost estimates attributed to vessels complying with the
Ports and Waterways Safety Act or otherwise equipped with segregated
ballast tanks (SBT). The comment argued that HBL would not result in a
loss of cargo capacity for either vessel type.
The majority of the comments claimed that structural measures would
not be economically feasible due to the excessive cost resulting from
the reduction in cargo capacity. Most comments predicted a cargo
capacity reduction of between 8 and 25 percent, but a few indicated
that cargo capacity would be reduced by as much as 30 to 50 percent. If
measures were applied to all vessels, one comment contended that a
level economic playing field could be achieved throughout the industry
and the high costs of cargo shutout could be adequately offset by an
indirect distribution of costs to the public. Other comments stated
that the cost estimates for structural measures did not adequately
address opportunity costs (such as lost transportation time), time
charter rates, dry dock fees, depreciation losses, and transportation,
delivery, crew, fuel, financing, and insurance
[[Page 1628]]
costs. In addition, four comments claimed that some vessels would be
unable to continue operations to U.S. ports if structural measures were
implemented. Five more comments stated that the proposed measures would
not be economically feasible for their fleet because their vessels
would be phased-out of service shortly after incurring the cost of any
structural measures. One of these comments suggested that rather than
depleting limited financial resources to implement structural measures,
vessel owners and operators should use the finances to support their
fleet's transition to double hulls, which will become effective in
2015.
Another comment claimed that HBL-related cargo shutout amounts for
the pre-MARPOL fleet were overestimated by the Coast Guard, and would
amount to only 8 percent or less, as opposed to the 19 percent
estimated in the SNPRM regulatory assessment. Consequently, this
comment believed that HBL would be economically feasible, and that
structural measures would cause a relatively insignificant 1.5 percent
increase in tonnage demand on the international, import-trading fleet.
In contrast, four other comments strongly stated that when costs are
reviewed with respect to freight rates and worldwide tonnage capacity,
the implementation of structural measures would not be economically
feasible. Two comments stated that the SNPRM cost analysis
substantially underestimated costs by not recognizing the cost of
replacing lost oil-carrying capacity, and by not accounting for an
increase in charter rates (and oil prices) caused by the consequent
loss of capacity in the world fleets. The comments further explained
that while there is some slack cargo carriage capacity remaining in the
world's very large crude carrier (VLCC) tankship fleet, it is
disappearing rapidly as older ships continue to retire, and any
requirement reducing cargo capacity would inevitably exert substantial
upward pressure on charter rates and transportation costs worldwide.
The comments also calculated that the world scale spot charter market
rate would increase as much as four times the cost attributed by the
SNPRM to a VLCC tankship owner implementing HBL. Another comment
estimated that the significant increase in daily time charter rates
(from 27 to 78 percent to recover the costs of implementing
protectively-located spaces (PL/Spaces) to its pre-MARPOL fleet, and
from 6 to 32 percent to recover the costs of fitting double sides to
its MARPOL 73/78 fleet) on their tankships of less than 30,000 dwt
would severely impact their ability to recover their capital
investment. Consequently, the comment stated this would reduce its
current fleet of 42 tankships trading in U.S. waters to 6 tankships.
The fourth comment calculated that the total tonnage available for the
U.S. trades in the 25,000 to 30,000 dwt product carrier category would
be reduced 45 percent because of increased charter rates and reduced
cargo-carrying capacity. The comment went on to state that due to the
costs associated with the implementation of structural measures, 8
clean product tankers currently providing 64 percent of the clean
product to the U.S. Gulf and East Coast would be forced from U.S.
trade.
The Coast Guard has revised the cost and benefit calculations for
this final rule in consideration of the comments submitted to the
docket. This final rule assessment is extensive and uses factors such
as cargo loss, or lack thereof for vessel's fitted with SBT,
opportunity costs, and a wide range of costs a company might incur from
refitting a vessel. Financing, insurance costs, vessel depreciation,
the replacement of lost tonnage (resulting in time charter rate
increases), and a vessel's limited remaining life under the OPA 90
phase-out schedule were used, in general, to evaluate the cost-
effectiveness of replacing single-hull vessels with double hull vessels
earlier than their OPA 90 mandated dates. Concerns such as the loss of
a substantial portion of a company's fleet due to structural measures,
as well as the possibility of disproportionate indirect costs to
consumers in geographic areas dependent on a single oil source were key
in the Coast Guard's determination of economic infeasibility.
(b) Pre-MARPOL Tank Vessels: Two comments supplied specific data
for their international pre-MARPOL vessels between 5,000 to 29,000 dwt.
One of these comments estimated a cargo shutout of 25 to 27 percent and
refit costs of $225,000 per vessel to implement structural measures on
these smaller product tankers. The second comment indicated that each
of their parcel tankers would be subjected to a cargo shutout of 35
percent with an average refit cost of $10.3 million. Another comment
supplied only cargo shutout information for international pre-MARPOL
product tankers of 5,000 to 50,000 dwt. This comment calculated a cargo
shutout of 20 to 25 percent for PL/Spaces, with HBL increasing the
shutout to 28 to 35 percent. One comment estimated that the
implementation of HBL would result in a cost of $2 million per vessel
for the pre-MARPOL fleet. Another comment contended that the cost to
pre-MARPOL tankships operating as very large crude carriers (VLCC) was
overestimated in the SNPRM regulatory assessment, and that the pre-
MARPOL VLCC tanker model used in the SNPRM regulatory assessment was
not representative of a typical tanker of that size. As a result,
according to this comment, the Coast Guard's assumption that all VLCC
pre-MARPOL tankships will have to refit PL/Spaces to meet the
requirements of Regulation 13G is false. This comment indicated that
five vessels researched would be able to meet the requirements of
Regulation 13G by using the HBL criteria approved as an IMO
alternative. In a similar vein, another comment disagreed with the
Coast Guard's assumption that pre-MARPOL tankers reaching the age of 25
before 2002 would have to implement PL/Spaces to meet Regulation 13G.
This comment explained that these tankers can implement HBL to meet the
international requirement of 13G and continue to trade; thus, if PL/
Spaces are mandated without allowing for the HBL alternative, the cost
to fit such spaces on pre-MARPOL tankers reaching 25 years old before
2002 should be included in the regulatory analysis.
For this final rule, the Coast Guard reassessed the costs and
benefits of implementing different structural measures on the
international pre-MARPOL tankship fleet. Measures studied for this
reassessment included the combination of PL/Spaces and HBL, the use of
HBL only in order to meet the requirements of Regulation 13G, and the
implementation of HBL requirements on the identical timeline required
by Regulation 13G. The per vessel, per voyage cost for implementing HBL
in the final assessment varied depending on deadweight tonnage and
ranged from $121,000 to $2.4 million. The Coast Guard recognizes that
the assessment for the SNPRM only reflected cargo shutout cost for
crude carriers. In the assessment for the final rule, costs were broken
down by deadweight tonnage. A separate analysis was done to estimate
the effect higher cargo shutout amounts realized by small product
tankers may have on the cost-effectiveness of each of the structural
measures researched. The Coast Guard did not increase the refit cost
assumed in the SNPRM for small tankships because it deems the original
onetime refit cost estimate of $328,000 to be reasonable.
(c) MARPOL 73/78 Tank Vessels: Three comments supplied information
on U.S. coastal fleet, MARPOL 73/78 vessels. For product tankers in the
5,000
[[Page 1629]]
to 49,000 dwt category, one comment submitted cargo shutout amounts
approximating 207,515 long tons (LT) per year (yr), and opportunity
costs (which include structural refit costs needed to meet the HBL
requirement) of $1 to $3 million per vessel. Another comment supplied
shutout percentages for product vessels carrying heavy (bunker C),
medium (diesel oil), and light (gasoline) cargoes, using three
different variations of structural measures. According to their
calculations, shutout using HBL only would equal 5.5 percent for heavy
cargo, 19.5 percent for medium weight cargo, and 38 percent for light
cargo. Clean ballast tanks (CBT) with HBL would impose cargo shutouts
of 29 percent, 41.6 percent, and 50 percent, respectively. Ballasted
empty wing tanks with HBL would result in shutouts amounting to 53.6
percent, 59.2 percent, and 64.5 percent, respectively.
A comment estimated that crude-carrying U.S. MARPOL 73/78 vessels
ranging from 5,000 to 49,000 dwt would experience shutouts of 113,077
LT/yr, and refit costs of $1 to $3 million per vessel following the
implementation of structural measures. For crude-carrying tankers of
the 50,000 to 89,000 dwt category, shutouts were approximated at
326,195 LT/yr, with refit costs again ranging from $1 to $3 million per
vessel. Crude-carrying vessels operating in the 90,000 to 199,000 dwt
range were estimated to potentially experience shutout amounts of
724,655 LT/yr and refit costs of $1 to $3 million per vessel following
implementation of structural measures. For those crude-carrying vessels
comprising 200,000 dwt or greater, a comment indicated that shutout
would amount to 861,785 LT/yr plus $1 to $3 million in refit costs per
vessel.
Two comments supplied information relating to the international
MARPOL 73/78 fleet. For product-carrying vessels of 30,000 to 49,000
dwt, a cargo shutout cost was calculated to be $300,000 per year (or
$1.5 million for the remainder of the ship's life). For parcel tankers
operating in the 5,000 to 29,000 dwt category, cargo shutout was
estimated at 34 percent for the implementation of HBL, plus 10 percent
for the implementation of PL/Spaces when required, while refit costs
amounted to an average $7.4 million per vessel. Calculations submitted
for parcel tankers operating in the 30,000 to 49,000 dwt category,
showed 34 percent shutout using HBL, plus an additional 10 percent for
PL/Spaces where required, with refit costs averaging $11.9 million per
vessel.
For this final rule, the Coast Guard reassessed the costs and
benefits of implementing HBL on the MARPOL 73/78 tankship fleet. A
range of cargo shutout amounts was used to demonstrate the variance
between the cost of implementing HBL on crude-carrying and product-
carrying vessels. Per vessel, per voyage cargo shutout estimates for
implementing HBL in this final assessment also varied depending on a
vessel's deadweight tonnage, and ranged from $151,000 to $2.4 million.
The Coast Guard recognizes that the assessment for the SNPRM did not
include a refit cost for MARPOL 73/78 vessels. Onetime refit costs to
MARPOL 73/78 vessels for swash bulkheads or other associated structural
changes were added to the cost estimates for this final assessment.
This onetime refit cost was assumed for MARPOL 73/78 vessels between
5,000 and 50,000 dwt in order to account for the practical application
of HBL to these smaller tankships, which would necessarily have to fit
some proportion of PL/Spaces to account for the high shutout
consequences of HBL. Refit costs were not included for larger MARPOL
73/78 vessels because it was assumed that these vessels have sufficient
CBT or PL/Spaces to practically apply HBL, assuming the cargo shutout
amounts estimated in this final rule's regulatory assessment.
(d) Tank Barges: One comment estimated that for tank barges, the
installation of PL/Spaces would impose average costs of $3 million per
tank barge, while the implementation of HBL would reduce cargo capacity
by 33 to 50 percent, and in some cases, 100 percent per barge. This
comment went on to explain that such costs are not readily absorbed,
and are even exacerbated by the limited service life remaining for some
of these barges, the enormous capital expenditure necessitated by the
OPA-mandated transition to double hulls, and the diminution in value of
the existing barge fleet brought on by the OPA-mandated replacement
schedule. Another comment surmised that is was not technologically
feasible for barges to meet the requirements of PL/Spaces or HBL
without eliminating cargo tanks or performing major modifications at a
significant cost. This comment estimated that PL/Spaces would reduce
cargo capacity by 25 percent on barges with three longitudinal
bulkheads, while HBL would impose a cargo shutout of 50 percent for
barges with one longitudinal bulkhead. In addition, the costs of
installing longitudinal bulkheads were estimated at $800,000 to $1.2
million per barge, ballast systems and tank coatings at $400,000 to
$500,000 per barge, and opportunity costs at $600,000 to $800,000 per
barge.
The Coast Guard reviewed and reassessed the cost for U.S. tank
barge owners to comply with PL/Spacing requirements using either added
bulkheads or existing tanks, and HBL requirements. The costs analyzed
for the PL/Space options were similar to those used in the SNPRM
assessment, but the costs studied for HBL measures were estimated by
using figures provided in the comments. The phase-out dates for these
barges were also factored into this cost analysis, along with costs
similar to those incurred by the pre-MARPOL fleet. Through this final
rule, the Coast Guard verifies that because of the high cost of
implementing structural measures on tank barges, such measures are not
economically feasible.
Final Rule Cost Assessment
The cost assessment for this final rule, as presented in Table 1,
provides an estimate of costs for each tank vessel category (pre-MARPOL
or MARPOL 73/78) and deadweight tonnage range. In general, these costs
were calculated using a methodology similar to that done for the SNPRM
assessment. However, additional analyses were used to calculate the
projected costs of several variations of measures researched for the
SNPRM including: (1) Implementation of Regulation 13G on the pre-MARPOL
fleet in 1997, 1998, or 1999; (2) implementation of Regulation 13G on
the pre-MARPOL fleet using the same timeline mandated by that
regulation; (3) implementation of the HBL alternative allowed under
Regulation 13G on the pre-MARPOL fleet; and (4) implementation of HBL
on tank barges. An estimated range of costs was also developed to
represent the difference in cargo shutout amounts attributable to
vessels carrying crude oils (low number) and vessels carrying lighter
products (high number). As a summary, the present-value cost of
implementing certain structural measures in 1997 is presented in Table
1.
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[[Page 1631]]
Benefits
The benefit analysis for this final assessment, in general, uses a
methodology similar to that used in the SNPRM for evaluating the
incremental reduction in volume of oil spilled as a result of
structural measures. Although effectiveness ratios for international
pre-MARPOL vessels were reevaluated based on the implementation of
Regulation 13G, other effectiveness ratios remained the same as those
reported in the SNPRM assessment. However, the volume of oil spilled
due to accidents was estimated based on revised historical oil spill
data reflecting: (1) The accident history of single-hull tankships
since the enactment of OPA 90; (2) the anticipated reduction in oil
spills due to the effect of the operational measures final rule on the
frequency and severity of future accidents; and (3) the elimination of
operational discharge benefits from the calculation, since operational
discharge is not allowed in U.S. navigable waters.
Benefit Comments on the SNPRM Regulatory Assessment
Six comments included remarks regarding the potential environmental
benefits that may result from the implementation of structural
measures. Three comments urged the Coast Guard to provide equal or
greater consideration to the environmental benefits derived from the
use of structural measures. Yet another comment contended that the
SNPRM regulatory assessment failed to properly assess the benefits of
the measures considered, citing the Coast Guard's failure to state the
value of avoiding spills in comparable terms such as cleanup costs,
natural resource damages, restoration costs, and commercial and
recreational losses. Another comment urged the Coast Guard to include
the potential reduction of both environmental and economic damages from
oil not spilled in its regulatory analysis.
Although the Coast Guard recognizes the value of assessing benefits
in terms of the cost of third-party cleanup and damage to natural
resources, the Coast Guard, for all OPA 90 rulemakings, has reviewed
benefits from the perspective of the amount of oil not spilled, rather
than a dollar value figure. Details on the extensive work that NOAA has
done on this subject can be found in its final rule entitled, ``Natural
Resource Damage Assessments'' published in the Federal Register on
January 5, 1996 (61 FR 440). When calculating benefits using NOAA
natural resource guidance, a wide range of benefits can be estimated
depending on the sensitivity of the habitat, restoration costs,
compensable value, and damage assessment costs. However, the inclusion
of these factors would not significantly increase the benefits
resulting from the implementation of structural measures to make them
cost-effective.
The remaining comments minimized the potential benefits that may
arise from the use of structural measures, and essentially concluded
that structural measures would contribute little to the reduction of
oil spill volume in U.S. waters. One comment noted that the
environmental benefits resulting from the implementation of PL/Spaces
would likely be minimal because the most cost-effective location for
such spaces, the vessel's mid-body, would not provide adequate
protection to the fore and aft sections of the vessel, which are the
areas most likely to sustain damage in collisions. Another comment
contended that the Coast Guard overestimated operational discharge
benefit amounts by wrongly assuming that foreign tankers are not
operating to the same operational discharge criteria as U.S. tankers,
explaining that discharge criteria established by the 1973
International Convention for the Prevention of Pollution from Ships was
brought into force in the late 1970s and applies to over 90 percent of
the world's tanker tonnage. Two comments argued that the Coast Guard
overestimated benefits for pre-MARPOL vessels by using the MARPOL 73
maximum allowable discharge amounts and underestimated the operational
discharge benefits from MARPOL 73/78 vessels, which were incorrectly
assumed to have no discharges. One of these comments questioned the
Coast Guard's incorporation of operational discharges into the
regulatory assessment for the SNPRM in the first place, because all
operational discharge is forbidden in U.S. waters. Therefore, the
comment asserted that the quantities of unspilled oil occurring from
operational discharge were significantly overestimated in the SNPRM
regulatory assessment and should be removed from the benefit
calculations. The other comment calculated that the quantity of oil not
spilled from operational discharges from pre-MARPOL vessels when
converting to SBT/CBT was overestimated by the Coast Guard by a factor
of 10 to 20.
A total of nine comments challenged the Coast Guard's use of pre-
OPA 90 oil spill data in the regulatory assessment for the SNPRM,
primarily on the grounds that it did not reflect the significant gains
achieved in oil spill reduction within recent years. In addition,
several comments recommended that the Coast Guard consider the
following when reviewing post-OPA 90 data: oil released from accidents,
instead of oil released from operational discharges; and, accident data
involving groundings or structural failures. In contrast, other
comments stated that the Coast Guard should specifically exclude the
following data from the economic assessment for structural measures:
spill data in international waters; lightering zone data; and barge and
tanker spill data unrelated to groundings, collisions, and structural
failures.
The Coast Guard has extensively reassessed the anticipated benefits
for structural measures in this final rule. This reassessment was done
because the Coast Guard recognized the substantial decrease in oil
spill volume from the tank vessel industry since 1990. The Cost Guard
agrees that oil spill amounts attributed to operational discharges
should not be included as a benefit for structural measures. The Coast
Guard deems this final rule benefit assessment a reasonable estimate of
oil outflow reduction amounts achieved through the implementation of
structural measures.
Final Rule Benefit Assessment
Oil spill amounts attributed to single-hull tankships and tank
barges during the 5-year period of 1990 through 1994 were taken from
the regulatory assessment for the operational measures final rule if
the spills were caused by groundings, collisions, or structural
failures. Based on this accident data, an average annual oil spill
amount from single-hull tankships was estimated at 11.52 barrels per
vessel. The average annual oil spill amount from single-hull tank
barges over 5,000 GT was estimated to be 72.4 barrels per barge. Using
a combination of the phase-out schedule and the build dates of the
affected vessel population, as calculated in the SNPRM assessment, an
estimated present value of oil spilled due to groundings, collisions,
or structural failures was calculated to be 52,369 barrels for single-
hull tankships and 21,487 barrels for barges. Based on anticipated oil
spill prevention resulting from the implementation of operational
measures, this present value oil spill amount was reduced appropriately
and estimated to be between 16,768 and 32,520 barrels spilled between
1997 and 2015 for tankships and between 18,055 and 19,865 barrels
spilled for tank barges. The average of this present value oil spill
amount was then proportioned out between the four tankship categories
based on vessel population as follows: (1) International pre-MARPOL
(11,735
[[Page 1632]]
barrels); (2) U.S. pre-MARPOL (558 barrels); (3) International MARPOL
73/78 (11,742 barrels); and (4) U.S. MARPOL 73/78 (608 barrels). For
U.S. and international tank barges, the average present value of 18,960
barrels spilled was used in this analysis. As done in the SNPRM, the
U.S. fleet consists of vessels that only operate in U.S. coastwise
trade. If a U.S. flagged vessel also trades between international
ports, it was accounted for in the international population.
To estimate benefits in terms of oil unspilled, each structural
measure's ability to reduce oil outflow in a grounding, collision, or
structural failure accident was calculated and translated into an
effectiveness ratio similar to those developed for the SNPRM
assessment. This effectiveness ratio was then multiplied by the
anticipated annual oil spill amount for each of the three accident
types to calculate the anticipated benefits of the implementation of
structural measures.
Because comments received on the SNPRM stated that the cost to
benefit ratio was disproportionate for smaller tankship operations,
anticipated oil spill benefits were further broken down by deadweight
tonnage. Benefits were also calculated for pre-MARPOL fleets where HBL
was instituted to meet the requirements of Regulation 13G. The Coast
Guard recognizes that PL/Spaces must be ballasted down in order to
provide oil outflow benefits, despite the fact that Regulation 13G does
not articulate this requirements. Consequently, for this final rule
assessment, benefits for the measure combining PL/Spaces and HBL were
calculated based on the assumption that the spaces were ballasted down.
The benefits estimated for this final rule are significantly less than
those estimates used in the SNPRM, because the recalculation of
benefits did not include consideration of operational discharge
benefits for pre-MARPOL vessels, and because the spill history used for
all tankships reflects post-OPA 90 accident data. Table 2 is a summary
of the present-value benefits estimated for this final rule with
respect to vessel type and deadweight tonnage based on an
implementation date of 1997.
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Cost-Benefit
Cost-benefit calculations were completed using the revised cost and
benefit estimates calculated for each structural measure. Based on the
cost-benefit analysis performed for this final rule, structural
measures, in particular, pose the greatest economic challenge to the
U.S. coastal fleets. Post OPA-90 benefits combined with the high cost
to U.S. coastal vessels to refit PL/Spaces or to implement HBL
requirements that meet Regulation 13G requirements make the cost-
effectiveness of implementing structural measures on these vessels
questionable. In addition, given the disproportionate cost impact of
structural measures on that portion of the fleet operating as small
product tankers crucial to certain ports, economically feasible
structural measures for these vessels cannot be attained.
Cost-Benefit Comments on the SNPRM Regulatory Assessment
The Coast Guard received six comments on the cost-effectiveness of
implementing structural measures. One comment estimated that a
refinement of the SNPM regulatory assessment using post-OPA 90 data,
excluding operational discharges in whole or in part (since such
discharges occur far from U.S. waters in amounts substantially less
than assumed in the SNPRM regulatory assessment), and including the
cost of fitting PL/Spaces to pre-MARPOL tankers (since many vessels can
satisfy the requirements of Regulation 13G using light-loading only),
would result in costs in excess of $50,000 per barrel of oil not
spilled, as opposed to actual spill costs of $2,000 to $10,000 per
barrel spilled. Another company evaluated the true cost-benefit of
implementing structural measures to their corporation in light of the
company's historical non-spill performance. Based upon their
calculations, a 3-year phase-in period would result in cargo shutout
and onetime modification costs totaling $17.7 million for their fleet
of product and crude-carrying vessels, while the net present value cost
per barrel of spilled oil avoided would be $1 million per barrel.
Consequently, this comment estimated the potential cost to this
particular corporation as being 28 to 84 times greater than that
indicated in the SNPM regulatory assessment. Another comment provided
extensive documention and analysis on the cost-effectiveness of the
proposed measures by using oil spill data from 1991 through 1994,
estimating the operational discharge benefits based on actual vessel
discharge records, and including an estimate of clean-up and
retribution costs. Using National Oceanic and Atmospheric
Administration (NOAA) damage assessment and restoration settlement data
and oil spill data from spills recorded within U.S. waters in the Oil
Spill Intelligence Report, this comment estimated that the average
damage amount per barrel should be $18,580, and explained that in order
for a requirement to be cost-effective, its cost-benefit should be less
than this amount. According to this comments analysis, no structural
requirement is cost-effective.
The Coast Guard agrees with the comments and has calculated the
benefits for this final rule using post-OPA 90 accident data and
excluding the benefits gained from eliminating operational discharges.
The recalculated benefits for this final rule do not include estimates
in terms of the amount of money saved by eliminating oil spill clean-up
costs. To remain consistent with all other OPA 90 assessments, the
Coast Guard has considered benefits in terms of oil unspilled. Because
the cost-benefit ratios presented in this final rule are much higher
than $2,000 or $18,580 per barrel as referenced in the comments, the
Coast Guard deems that even if clean-up cost savings were included in
this cost-benefit analysis, the cost-benefit ratios would not fall
below these thresholds.
Three more comments specifically discouraged the Coast Guard from
implementing the least costly structural measure. Two of these comments
noted that the Coast Guard proposed PL/Spaces in light of its low cost,
despite findings that another alternative requiring HBL would prevent
the spillage of significantly more oil. Specifically, the comment
estimated that the HBL alternative would present spillage of 164,000
barrels of oil which is nearly 8 times the 21,000 barrels of spillage
prevented by PL/Spaces. One of the comments also conceded that the HBL
alternative would cost approximately $3 billion to implement from 1998
to 2015, which amounts to nearly 5 times the estimated cost of
implementing PL/Spaces, $579 million, but explained that as compared to
the cost of cleanup under California law, $18,900 per barrel, the
feasibility of HBL in terms of avoided costs is economically favorable.
The Coast Guard has reassessed the cost to benefit ratio for
various structural measures. The costs for this final assessment
closely correlate the costs used in the SNPRM assessment; however, the
benefits have been significantly reduced, and no longer correlate. If
the cost to benefit ratio of $18,900 per barrel of unspilled oil is
compared to this final rule assessment, none of the measures can be
deemed cost-effective. However, the Coast Guard determination of
economic infeasibility is not based solely on the dollar per barrel
unspilled ratio. While the numbers certainly support a determination of
economic infeasibility, the impact on small entities and geographic
areas dependent on a single oil source also weighted in favor of this
decision.
Final Rule Cost-Benefits
The Coast Guard has extensively researched both the cost and the
resultant benefits of implementing structural measures on single-hull
tank vessels. In accordance with current Office of Management and
Budget guidance, program costs and benefits are discounted at 7 percent
back to 1990. A summary of the cost-benefit ratios, which were computed
by dividing the cost of each structural measure by its associated
benefit, it presented in Table 3, and reflects a 1997 implementation
date. These ratios are categorized by international and U.S. coastal
fleets.
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[GRAPHIC] [TIFF OMITTED] TR10JA97.030
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An analysis of the cost to benefit ratio for requiring
implementation of Regulation 13G on pre-MARPOL tankships on the same
timeline as required by Regulation 13G (25 years after the vessel's
build date) was also completed for this final rule regulatory
assessment. Because those pre-MARPOL vessels on international routes
were assumed to comply with this requirement, no cost or benefit was
assigned to these vessels for implementing this requirement. The cost
for implementing Regulation 13G on pre-MARPOL tankships was estimated
to be $13.5 million and would be placed solely on those tankships
operating on U.S. coastal routes until 2015. The benefit from this
requirement was not specifically calculated. The Coast Guard estimated
a benefit lower than the attained by the HBL requirement on U.S.
coastal pre-MARPOL tankships because the implementation date would be
later than 1997 (the date assumed for the HBL calculations). Therefore,
the cost-benefit to the U.S. coastal fleet would be higher than
$240,642 per barrel of unspilled oil. Because the financial burden of
this measure reduces the ability of U.S. ships to compete with foreign
shipping interests and the cost-benefit ratio is extremely high, the
Coast Guard deems this measure to be economically infeasible.
Similar cost-benefit calculations were also conducted for varying
implementation years ranging from 1998 to 2001. These calculations show
that the cost-benefit ratio becomes higher with each implementation
year proposed due to the short benefit time-frame resulting from the
aggressive vessel phase-out schedule created by OPA 90. The inability
to recoup financial losses, as well as the effectiveness of operational
measures for existing tank vessels for reducing oil spills, supports a
determination that the costs of structural measures outweigh the
benefits.
The total present value cost of structural measures over the 18-
year period of this final rule would range from $896 million to $1.1
billion. Total present value of the benefits for structural measures
over the 18-year period of this final rule would range from 5,718 to
10,386 barrels of unspilled oil. As a benchmark for this analysis, the
Coast Guard used cost-benefit of $24,000 per barrel of unspilled oil,
which was the estimated cost-benefit of the double hull requirements
mandated by OPA 90 in Section 4115(a) to which these interim
requirements are linked. Because the cost-benefit estimates for the
measures are well over $24,000 per barrel of unspilled oil, and the
measures would impose substantial costs to the industry over the
estimated 18-year period, no measures are required. Some regulatory
text is contained in this final rule to clearly indicate that the Coast
Guard considers the operational measures and lightering equipment
requirements to be the only feasible interim requirements for existing
tank vessels without double hulls, and that these requirements, as
promulgated, satisfy section 4115(b) of OPA 90.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601, et seq.), the
Coast Guard must consider whether this rule will have a significant
economic impact on a substantial number of small entities. ``Small
entities'' may include: (1) Small businesses and not-for-profit
organizations that are independently owned and operated and are not
dominant in their fields; and (2) governmental jurisdictions with
populations of less than 50,000. The Coast Guard has determined that
this rule will not have a significant economic impact on a substantial
number of small entities because no structural measures are being
imposed in this rule. Therefore, the Coast Guard certifies under
section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601, et
seq.) that this rule will not have a significant economic impact on a
substantial number of small entities.
Unfunded Mandate
Under the Unfunded Mandates Reform Act (Pub. L. 104-4), the Coast
Guard must consider whether this rule will result in an annual
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector, of $100 million (adjusted annually for
inflation). The Act also requires (in Section 205) that the Coast Guard
identify and consider a reasonable number of regulatory alternatives
and, from those alternatives, select the least costly, most cost-
effective, or least burdensome alternative that achieves the objective
of the rule.
After extensive review of several alternatives, all with varying
cost and effectiveness ratings, the Coast Guard has determined that no
structural measures are cost-effective, and is therefore not requiring
any in this rule. Consequently, this rule will not result in estimated
costs of $100 million or more to either State, local, or tribal
governments in the aggregate, or to the private sector.
Collection of Information
This rule contains no collection-of-information requirements under
the Paperwork Reduction Act (44 U.S.C. 3501, et seq.).
Federalism
The Coast Guard has analyzed this rule under the principles and
criteria contained in Executive Order 12612 (October 26, 1987) and,
because of the long-standing and judicially recognized need for uniform
rules regulating the design and construction of vessels engaged in
interstate and international commerce, has determined that this rule
does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
Environment
The Coast Guard considered the environmental impact of this final
rule and concluded that preparation of an Environmental Impact
Statement was not necessary. As discussed in the Environmental
Assessment, the final rule's Regulatory Assessment, and the Operational
Measures final rule Regulatory Assessment provide sufficient evidence
and analysis for determining that structural measures are not
economically feasible; and therefore, should not be promulgated under
Section 4115(b) of OPA 90. Because no structural measures are required,
an Environmental Impact Statement is not required under the National
Environmental Policy Act. An Environmental Assessment and a Finding of
No Significant Impact are available in the docket for inspection or
copying where indicated under ADDRESSES.
List of Subjects in 33 CFR Part 157
Cargo vessels, Oil pollution, Reporting and recordkeeping
requirements.
For the reason set out in the preamble, the Coast Guard amends 33
CFR part 157 as follows:
PART 157--RULES FOR THE PROTECTION OF THE MARINE ENVIRONMENT
RELATING TO TANK VESSELS CARRYING OIL IN BULK
1. The authority citation for part 157 continues to read as
follows:
Authority: 33 U.S.C. 1903; 46 U.S.C. 3703, 3703a (note); 49 CFR
1.46. Subparts G, H, and I are also issued under section 4115(b),
Pub. L. 101-380, 104 Stat. 520; Pub. L. 104-55, 109 Stat. 546.
2. The subpart heading of subpart G is revised to read as follows:
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Subpart G--Interim Measures For Certain Tank Vessels Without Double
Hulls Carrying Petroleum Oils
3. The subpart heading of subpart H is revised to read as follows:
Subpart H--Interim Measures For Certain Tank Vessels Without Double
Hulls Carrying Animal Fat or Vegetable Oil
4. The subpart heading of subpart I is revised to read as follows:
Subpart I--Interim Measures For Certain Tank Vessels Without Double
Hulls Carrying Other Non-Petroleum Oil
Dated: January 3, 1997.
Robert E. Kramek,
Admiral, U.S. Coast Guard Commandant.
[FR Doc. 97-471 Filed 1-9-97; 8:45 am]
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