Structural Measures to Reduce Oil Spills From Existing Tank Vessels Without Double Hulls

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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[[Page 1634]]

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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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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