[Senate Hearing 108-842]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-842

                 PHASE-OUT OF SINGLE-HULL TANK VESSELS

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 9, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation


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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on January 9, 2003..................................     1
Prepared statement of Senator Hollings...........................     4
Statement of Senator Inouye......................................     2
Statement of Senator McCain......................................     1
Statement of Senator Nelson......................................    23
Statement of Senator Stevens.....................................     2
Statement of Senator Sununu......................................     2
Statement of Senator Wyden.......................................    78

                               Witnesses

Allegretti, Thomas A., President and CEO, the American Waterways 
  Operators......................................................    24
    Prepared statement...........................................    26
Cowen, Robert N., Senior Vice President and Chief Operating 
  Officer, Overseas Shipholding Group, Inc.......................    65
    Prepared statement...........................................    67
    Article dated January 8, 2003 from Lloyd's List, entitled 
      Spanish ban sends single-hull Elcano ship to U.S., by Brian 
      Reyes......................................................    69
    Letter dated January 31, 2003 to Hon. John McCain............    75
Cox, Joseph J. President and CEO, Chamber of Shipping of America.    29
    Prepared statement...........................................    32
Davies, Elaine F., Deputy Director, Office of Emergency and 
  Remedial Response, Environmental Protection Agency.............    14
    Prepared statement...........................................    15
Frick, G. William, Vice President for Industry Operations and 
  General Counsel, American Petroleum Institute..................    59
    Prepared statement...........................................    61
Godfrey, Tom, President, Colonna's Shipyard, Inc.; Chairman, 
  Shipbuilders Council of America................................    35
    Prepared statement...........................................    38
Keeney, Timothy R. E., Deputy Assistant Secretary of Commerce for 
  Oceans and Atmosphere, Department of Commerce..................     8
    Prepared statement...........................................    10
Pluta, Rear Admiral Paul J., Assistant Commandant for Marine 
  Safety, Security and Environmental Protection, United States 
  Coast Guard....................................................     4
    Prepared statement...........................................     7
Rauta, Dragos, Technical Director, International Association of 
  Independent Tanker Owners (INTERTANKO).........................    46
    Prepared statement...........................................    48
Sandalow, David, Executive Vice President, World Wildlife Fund...    42
    Prepared statement...........................................    44

                                Appendix

Response to written questions submitted by Hon. John McCain to:
    Thomas A. Allegretti.........................................    85
    Robert N. Cowen..............................................    98
    Tom Godfrey..................................................    86
    Dragos Rauta.................................................    90

 
                 PHASE-OUT OF SINGLE-HULL TANK VESSELS

                              ----------                              


                       THURSDAY, JANUARY 9, 2003

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m. in room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    The Chairman. Good afternoon. The Committee meets today to 
consider issues relating to the required phase-out of single-
hull tanker vessels that carry oil in bulk, including calls by 
some in the international community to accelerate the deadlines 
for transition to double-hull tankers.
    Since the break-up and sinking of the PRESTIGE on November 
19, 2002, Spain and France have taken unilateral action against 
single-hull tankers and the European Commission has adopted a 
new phase-out schedule for such tankers. As a result of those 
actions, concerns have been raised about how those actions 
could, if adopted by the European Union and the International 
Maritime Organization, impact the international and domestic 
transportation of oil.
    The phase-out of single-hull tankers is not the sole 
solution to oil spills. Based on experiences here in the U.S., 
we know that oil spill prevention, response, and damage 
mitigation efforts necessitate a combination of things, 
including the phase-out of single-hull tankers, liability and 
insurance requirements, response preparation and coordination, 
and improved response technology. This combination is clearly 
represented in the Oil Pollution Act of 1990, commonly referred 
to as ``OPA-90.''
    Since OPA-90 was enacted, there has been a significant 
decline in cargo oil spills. In 1990, 152,000 barrels of oil, 
the equivalent of 6.4 million gallons, were spilled in U.S. 
waters. By 2000, the volume of oil spilled had fallen to 24,600 
barrels.
    About 60 percent of all oil worldwide moves by oil tanker. 
The U.S. is currently responsible for one-quarter of total oil 
consumption, and in 2001 we imported 55 percent of our oil 
supply. Because so much oil and oil products move in and out of 
the United States and we know from experience that bad things 
can happen even to sound ships and barges, we must remain 
vigilant.
    It has been over 12 years since the enactment of OPA-90 and 
I hope that today's hearing will be helpful in shedding light 
on what has been accomplished and whether there is a need for 
any further action on our part to help prevent oil spills or to 
change our existing policies along the lines of the European 
Community.
    Senator Inouye.

              STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    Senator Inouye. Thank you very much, Mr. Chairman, and I 
wish to commend you for holding this hearing on this very 
important matter. Obviously, I am looking forward to assuming 
my position as Ranking Member on the Merchant Marine 
Subcommittee, at which time this issue and many others will be 
considered in the coming years.
    Thank you very much, sir.
    The Chairman. Thank you, Senator Inouye.
    Senator Stevens.
    Senator Stevens. He was the first one.
    The Chairman. Senator Sununu.

               STATEMENT OF HON. JOHN E. SUNUNU, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Sununu. Something is truly wrong with the decorum 
in the Senate when I am asked to give a statement ahead of 
Senator Stevens.
    [Laughter.]
    Senator Sununu. I am looking forward to the testimony and 
learning a little bit more about this issue, and I have no 
further statement, Mr. Chairman. Thank you.
    The Chairman. Senator Stevens.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Thank you very much.
    Mr. Chairman, I join Senator Inouye in congratulating you 
for moving forward on this hearing as quickly as possible. It 
is almost 13 years ago that Senator Breaux and I managed a bill 
on the floor that would become the most significant policy 
change, I think, in maritime transportation of oil. That was 
the Oil Pollution Act of 1990 that you mentioned. It was in 
response to the largest oil spill in U.S. history. Eleven 
million gallons of crude oil poured out of the EXXON VALDEZ, 
polluting one of the Nation's most sensitive ecosystems and 
spreading over 350 miles of shoreline in the Prince William 
Sound on the coast of Alaska.
    I went up and flew over that. It was the most awesome sight 
I think I have ever seen. Alaskans will never forget the 
devastating effect of that spill and its effect on our 
wildlife, fisheries, and our overall economy.
    Without really being too specific, I think I was the one 
that negotiated the specifics of the Oil Pollution Act to 
phase-out single-hull tankers. The proposal was criticized at 
the time by the international community as being too stringent 
and aggressive. Nonetheless, we proceeded. I remember at one 
time Senator Magnusen sent me over to a meeting of that 
international committee in London to talk about single-hull 
tankers long before the EXXON VALDEZ disaster, and I wish they 
had listened to us then. But we passed a law that provides for 
safe maritime transportation of oil and the structure necessary 
for preparedness and response in case of a spill in the United 
States.
    During the height of Alaskan oil production in 1988 to 
1999, there were 70 tankers moving oil from Valdez to West 
Coast ports. During this period the throughput of the Trans-
Alaska Pipeline was 2.1 million barrels a day, near full 
capacity. Today the pipeline carries only 1 million barrels of 
oil a day, which means the pipeline is only half full. Because 
of this decline in production, there are now only 25 tankers 
presently transporting oil from Alaska.
    The American Petroleum Institute, the American maritime 
industry and trade unions reported last year that we would need 
to construct 18 new double-hulled vessels to transport oil if 
Congress opened the coastal plain of Alaska to oil production. 
Maritime unions also tell us that each ship would create 3,000 
direct employment jobs during the period of construction. Those 
are high-paying jobs, high-skilled and labor-intensive jobs 
that we do need in the United States.
    Last month, the State of Alaska extended the right of way 
for the pipeline across our state lands. Just this week the 
Secretary of the Interior signed a 30-year renewal for the 
federal right of way for the Alaska oil pipeline. The Federal 
Government believes this pipeline needs to be on line for at 
least another 30 years, but that means opening up enough lands 
of Alaska for oil production, and ANWR is still the best 
prospect.
    I know I have come to be a little provincial here today, 
Mr. Chairman, but I want to announce that this is my No. 1 goal 
for this Congress, to try to find a way to start to find out if 
we do have additional prospects in the northern part of Alaska.
    The requirement for Oil Pollution Act compliance, that is 
the 1980 Act, for single-hull tankers will be phased out by 
2015, and this would be--starting new production of tankers for 
Alaskan oil would be a great opportunity for our shipyards, but 
only if there is a demand for increased domestic production.
    I want to work with you and to try to extend the concept of 
single-hull tankers for all the tankers that serve our waters, 
and I think it would be in the best interest of the whole world 
if we would find some way to not only utilize such tankers, but 
find ways to limit the transportation of oil by ship wherever 
it is possible.
    Thank you very much.
    The Chairman. Well, thank you, Senator Stevens. Again, 
thank you for the job that you and Senator Breaux did on OPA-
90. It certainly has stood the test of time and, as I mentioned 
in my opening statement, the dramatic reduction in oil spill 
over the years has been a direct result of that effort. I think 
we will all learn a lot. Perhaps, since it has been 12 years, 
over 12 years, since that law was passed, maybe we will be 
updated today and our witnesses will be able to give us a 
snapshot as to how things are today and how they will look in 
the future.
    [The prepared statement of Senator Hollings follows:]

            Prepared Statement of Hon. Ernest F. Hollings, 
                    U.S. Senator from South Carolina
    Mr. Chairman, we are here today to consider the implementation of 
the Oil Pollution Act of 1990 (OPA-90), and the international 
agreements that require the retirement and cessation of the use of 
tankers that have single hulls. Fortunately, since the passage of OPA-
90, we have seen a real improvement in the safe marine transport of 
oil. I would commend the Coast Guard on a fantastic job, who along with 
agencies like NOAA, have set up a first rate system of prevention and 
response.
    However, the fact is, our marine ecosystem is too fragile too 
sustain the type of long term damage that can be caused as a result of 
an oil spill, and all possible care must be taken to ensure that we 
have a system that protects our marine environment to the maximum 
extent. I am convinced that we must take all steps necessary to force 
unsafe tanker tonnage out of the marketplace, and I concur that the 
double hull design is probably the best technology out there. However, 
we cannot just sit back and rely on ship design to protect against oil 
spills. Other steps should be taken to prevent against oil spills. The 
Coast Guard has a lot of jurisdiction to combat unsafe shipping 
practices, but the fact is, that we have been forced to rely on a lot 
of inspectors, and qualifications and such, from foreign nations, and 
in some cases, I would say that we have to deal with foreign nations 
that do not police safety and marine operations the way we do here in 
the United States. We need to level the playing field, and we need to 
ensure that they are doing as adequate a job of policing as we are.
    I would also like to note that I am concerned that many oil 
companies have gotten out of the business of doing marine 
transportation, and now they are sitting back and relying on the 
charter market, and trying to absolve themselves of liability when they 
hire a cut-rate operator who spills their oil because of shoddy 
practices. This is just what happened off the coast of France, when the 
ERIKA sank. Apparently, the French oil company that chartered that 
vessel was passing out bonuses based on how cheap they could get 
transportation. Well they got the cheapest transportation, and the 
nation of France had to pay the costs. This oil company was every bit 
as responsible for that oil spill as the tanker company, and I can 
guarantee that if they were liable for their action of chartering 
unsafe tonnage, they would have spent a lot more time looking for the 
safest tanker as opposed to the cheapest tanker. Maybe we should look 
at policies that favor double-hull users, for instance tax credits, or 
reestablishing the assessments that go into the Oil Spill Liability 
Trust Fund on the movement of oil in single-hull tankers.
    I am also very concerned that, while the deadlines for the phase 
out of single-hull tankers is not very far in the future, most oil 
companies are not being active enough in building or using double-hull 
ships, with the exception of some companies in the Alaska trade. The 
companies need to know that we are not going to relax OPA-90, and we 
are not going to relax the Jones Act. If they want to continue carrying 
oil in coast-wise trade, they'd best get cracking at building double-
hull vessels.
    Of course, double-hull tankers by themselves aren't the only 
solution. As the double-hull fleet begins to age, we will face some of 
the same risks of a catastrophic oil spill that we are facing with some 
of these old single-hull tankers. We also need to look at whether more 
should be done with respect to other types of sources of oil pollution, 
such as requiring response plans by non-tanker vessels that carry large 
amounts of fuel oil.
    While we have done much better in this area, the stakes are simply 
to high not to continue to do even better. I look forward to this 
afternoon's testimony.

    The Chairman. So we welcome our witnesses. Thank you for 
being here. We will start with you, Admiral Pluta, and then we 
will go to Mr. Keeney and then Ms. Davies. Admiral.

 STATEMENT OF REAR ADMIRAL PAUL J. PLUTA, ASSISTANT COMMANDANT 
                FOR MARINE SAFETY, SECURITY AND 
      ENVIRONMENTAL PROTECTION, UNITED STATES COAST GUARD

    Admiral Pluta. Thank you, Mr. Chairman. Good afternoon, and 
good afternoon to the distinguished Members of the Committee.
    I am Rear Admiral Paul J. Pluta, Assistant Commandant for 
Marine Safety, Security, and Environmental Protection, and it 
is a pleasure to appear before you today with my shipmates from 
EPA and NOAA to discuss the Oil Pollution Act of----
    The Chairman. Could you move the microphone over?
    Admiral Pluta. Yes, sir.
    It is a pleasure to appear before you today with my 
shipmates from EPA and NOAA to discuss the Oil Pollution Act of 
1990 and the phase-out of single-hull tankers.
    Thirteen years ago, we faced what seemed an insurmountable 
task, responding to a spill of 258,000 barrels or 11 million 
gallons of crude oil into the pristine environment of Prince 
William Sound, Alaska. Coincident with the massive clean-up 
effort, the Congress, state legislatures, many countries, and 
the international organizations began an intensive 
investigation and exploration of the root causes of the 
accident and deliberated on appropriate prevention and response 
measures to reduce the likelihood of similar oil pollution 
incidents.
    Here in the United States, the 101st Congress unanimously 
passed the Oil Pollution Act of 1990, or OPA-90, as Senator 
Stevens rightly pointed out, and the President signed it into 
law on August 18, 1990. Since the passage of OPA-90, there has 
been a dramatic reduction in the volume of oil spilled into 
U.S. waters per million gallons shipped, declining from 9.7 
gallons spilled per million gallons shipped in 1990 to 2.7 
gallons spilled per million gallons shipped in 1999, a decrease 
of over 70 percent.
    In broad terms, the public policy objectives of OPA-90 are 
the prevention of oil spills, the provision of a comprehensive 
response regime when spills occur, and the assessment of 
appropriate penalties and liabilities to ensure that polluters 
pay for damages. As part of the prevention objective, the Oil 
Pollution Act of 1990 established double-hull requirements for 
newly constructed tank ships and tank barges that operate in 
U.S. waters, and established a phase-out schedule for existing 
tank vessels.
    The OPA-90 phase-out schedule requires that existing 
single-hull tank vessels be retrofitted with a double bottom, 
or be phased out of operation by 2010 unless they are equipped 
with a double bottom or double sides, in which case, some may 
continue to trade in the United States through 2015 depending 
on their age. The phase-out schedule is specified in section 
4115 of OPA-90, and all tank vessels operating in U.S. waters 
must have double hulls by January 1, 2015.
    It is important to note that certain exemptions in OPA-90 
allow single-hull tank vessels to continue to operate in the 
U.S. through 2015. Any single-hull tank vessel unloading oil in 
bulk at a deep water port licensed under the Deep Water Port 
Act of 1974 as amended, or offloading oil in bulk within a 
lightering zone more than 60 miles offshore may still operate 
until 2015. Currently, the Louisiana Offshore Oil Port is the 
only deep water port operating in the United States, and three 
designated lightering zones are available in the Gulf of 
Mexico. In addition, the double-hull requirements do not apply 
to foreign vessels while engaged in innocent passage through 
U.S. waters.
    To provide clarification in applying the provisions of OPA-
90, the Coast Guard produced a circular which provides guidance 
for determining phase-out dates for single-hull tank vessels 
operating in waters subject to the jurisdiction of the United 
States.
    In 1991 the U.S. took the OPA-90 single-hull phase-out 
proposal to the Maritime Environment Protection Committee, or 
MEPC, of the International Maritime Organization. This resulted 
in the adoption of amendments to the International Convention 
for the Prevention of Pollution from Ships, or MARPOL, in 1992. 
Regulations 13.F and 13.G of that convention establish a 25- to 
30-year life for single-hull tank vessels and require double 
hulls or tank vessels with designs equal to or exceeding the 
double hull's ability to reduce or stop oil outflow due to a 
collision or grounding. While this represented a significant 
step forward in the elimination of single-hull tank vessels, 
these international amendments fell short of the phase-out 
scheme established by OPA-90.
    In December 1999, the tank ship ERIKA, containing 30,000 
tons of heavy oil, broke-up off the French coast. The European 
Commission initiated a study which resulted in numerous 
recommendations and proposals to prevent another such 
occurrence. One of these proposals was an acceleration of the 
MARPOL Regulation 13.G phase-out schedule for single-hull 
tankers.
    In June 2000 France, along with Belgium and Germany, 
submitted a comprehensive paper to the 45th session of the 
MEPC, proposing an amendment to Regulation 13.G of MARPOL that 
accelerated the phase-out schedule for single-hull tankers. The 
U.S. assisted France to ensure that the proposed dates were 
aligned as closely as possible with the phase-out dates in OPA-
90.
    At its 46th session, MEPC adopted the modified version of 
that regulation. However, these dates were not consistent with 
those in OPA-90, and the U.S. was unable to become a party to 
these amendments.
    In November of 2002, the tank ship PRESTIGE, carrying 
approximately 20 million gallons of fuel oil, broke--began 
leaking after its hull split in a storm. The vessel eventually 
sank 150 nautical miles off the northwest coast of Spain, and 
the Coast Guard, along with the National Oceanic and 
Atmospheric Administration, sent a delegation to assist Spain 
with the massive clean-up effort. Under OPA-90, the tank vessel 
PRESTIGE had reached its phase-out date on January 1, 2000, and 
could no longer operate carrying oil in a U.S. port. In 
response to the sinking, the European Commission is looking at 
accelerating the phase-out time line for single-hull vessels to 
those originally proposed after the sinking of the tank vessel 
ERIKA.
    In conclusion, the success of OPA-90 can be measured by the 
absence of significant oil spills from tankers in U.S. waters 
since its passage. It establishes the cornerstones of 
prevention, preparedness, and response that serve as a useful 
model for the international maritime community. Nevertheless, 
we will continue to work with the international maritime 
community to ensure that shipping remains a safe, economical, 
and environmentally friendly transport option.
    Thank you for the opportunity to testify before you today. 
I will be happy to answer any questions that you have, Mr. 
Chairman. Thank you, sir.
    [The prepared statement of Admiral Pluta follows:]

Prepared Statement of Rear Admiral Paul J. Pluta, Assistant Commandant 
for Marine Safety, Security and Environmental Protection, United States 
                              Coast Guard
    Good afternoon Mr. Chairman and distinguished Members of the 
Committee. I am RADM Paul J. Pluta, Assistant Commandant for Marine 
Safety, Security and Environmental Protection. It is a pleasure to 
appear before you today to discuss the Oil Pollution Act of 1990 and 
the phase-out of single-hull tankers.
    Thirteen years ago, we faced what seemed an insurmountable task: 
responding to a spill of 258,000 barrels (11 million gallons) of crude 
oil into the pristine environment of Prince William Sound, Alaska. 
Coincident with the massive cleanup effort, the Congress, state 
legislatures, many countries, and international organizations began an 
intensive investigation and exploration of the root causes of the 
accident and deliberated on appropriate prevention and response 
measures to reduce the likelihood of similar oil pollution accidents. 
Here in the United States, the 101st Congress unanimously passed the 
Oil Pollution Act of 1990 (OPA-90), and the President signed it into 
law on August 18, 1990. Since the passage of OPA-90, there has been a 
dramatic reduction in the volume of oil spilled into U.S. waters from 
tankers per million gallons shipped--declining from 9.7 gallons spilled 
per million gallons shipped in 1990 to 2.7 gallons spilled per million 
gallons shipped in 1999, a decrease of over 70 percent.
    In broad terms, the public policy objectives of OPA-90 are: the 
prevention of oil spills, the provision of a comprehensive response 
regime when spills occur, and the assessment of appropriate penalties 
and liabilities to ensure that polluters pay for damages.
    As part of the prevention objective, the Oil Pollution Act of 1990 
established double hull requirements for newly constructed tank ships 
and tank barges that operate in U.S. waters and established a phase-out 
schedule for existing tank vessels. The OPA-90 phase-out schedule 
requires that existing single-hull tank vessels be retrofitted with a 
double hull or be phased-out of operation by 2010, unless they are 
equipped with a double bottom or double sides, in which case some may 
continue to trade in the United States through 2015 (depending on their 
age). The phase-out schedule is specified in section 4115 of OPA-90 and 
all tank vessels operating in U.S. waters must have double hulls by 
January 1, 2015.
    It is important to note that certain exemptions in OPA-90 allow 
single-hull tank vessels to continue to operate in the U.S. through 
2015. Any single-hull tank vessel unloading oil in bulk at a deepwater 
port licensed under the Deepwater Port Act of 1974, as amended, or 
offloading oil in bulk within a lightering zone more than 60 miles may 
still operate until 2015. Currently, the Louisiana Offshore Oil Port is 
the only deepwater port operating in the United States and three 
designated lightering zones are available in the Gulf of Mexico. In 
addition, the double hull requirements do not apply to foreign vessels 
while engaged in innocent passage through U.S. waters.
    To provide clarification in applying the provisions of OPA-90, the 
Coast Guard produced Navigation and Vessel Inspection Circular number 
10-94, ``Guidance For Determination and Documentation of the Oil 
Pollution Act of 1990 (OPA-90) Phase-Out Schedule For Existing Single 
Hull Vessels Carrying Oil in Bulk.'' This circular provides guidance 
for determining phase-out dates for single-hull tank vessels operating 
on waters subject to the jurisdiction of the United States.
    In 1991, the U.S. took the OPA-90 single hull phase-out proposal to 
the Maritime Environment Protection Committee (MEPC) of the 
International Maritime Organization (IMO). This resulted in the 
adoption of amendments to the International Convention for the 
Prevention of Pollution from Ships (MARPOL) in 1992. Regulations 13F 
and 13G establish a 25-30 year life for single-hull tank vessels and 
require double hulls or tank vessels with designs equal to or exceeding 
the double hulls' ability to reduce or stop oil outflow due to a 
collision or grounding. While this represented a significant step 
forward in the elimination of single-hull tank vessels, these 
amendments fell short of the phase-out scheme established by OPA-90.
    In December 1999, the tank ship ERIKA carrying 30,000 tons of heavy 
oil broke up off the French coast. The European Commission (EC) 
initiated a study, which resulted in numerous recommendations and 
proposals to prevent another such occurrence. One of these proposals 
was an acceleration of the MARPOL regulation 13G phase-out schedule for 
single-hull tankers. In June 2000, France (along with Belgium and 
Germany) submitted a comprehensive paper to the 45th session of the 
MEPC proposing an amendment to regulation 13G of MARPOL that 
accelerated the phase-out schedule for single-hull tankers. The U.S. 
assisted France to ensure that the proposed dates were aligned as close 
as possible with the phase-out dates in OPA-90. At its 46th session, 
MEPC adopted the modified version of 13G that requires the phase-out of 
all single-hull tankers by 2015. However, since the dates were not 
consistent with those in OPA-90, the U.S. was unable to become a party 
to these amendments.
    In November 2002, the tank ship PRESTIGE, carrying approximately 20 
million gallons of fuel oil, began leaking after its hull split in a 
storm. The vessel eventually sank 150 miles off the northwest coast of 
Spain and the Coast Guard, along with National Oceanic and Atmospheric 
Administration (NOAA), sent a delegation to assist Spain with the 
massive clean up effort. Under OPA-90, the tank vessel PRESTIGE had 
reached its phase-out on January 1, 2000 and could no longer operate 
carrying oil in a U.S. port.
    ln response to the sinking, the European Commission is looking at 
accelerating the phase-out timeline for single-hull vessels to those 
originally proposed after the sinking of the tank vessel ERIKA and more 
in line with the United States' OPA-90. This might also include an 
immediate prohibition on the carriage of heavy or persistent oils in 
single-hulled tank vessels. The Coast Guard currently has a delegation 
meeting with the European Commission to discuss their proposals. The 
economic impact of the EC initiative is unclear at this point. The 
April 2000 Government Accounting Office (GAO) report to Congress 
recommended that MARAD regularly assess the progress being made to 
replace phased-out single-hull vessels to determine whether sufficient 
shipping capacity exists to meet domestic oil needs. MARAD indicates 
that it intends to continue such assessments with the Coast Guard's 
assistance and routinely report its finding to the Congress until the 
phase-out for single-hull tank ships is complete on January 1, 2015.
    In conclusion, the success of OPA-90 can be measured by the absence 
of significant oil spills from tankers in U.S. waters since its 
passage. It establishes the cornerstones of prevention, preparedness 
and response that serve as a useful model for the international 
maritime community. Nevertheless, we will continue to work with the 
international maritime community to ensure that shipping remains a 
safe, economical, and environmentally friendly transport option.
    Thank you for the opportunity to testify before you today. I will 
be happy to answer any questions you may have.

    The Chairman. Thank you, Admiral.
    Mr. Keeney, welcome.

 STATEMENT OF TIMOTHY R. E. KEENEY, DEPUTY ASSISTANT SECRETARY 
                  OF COMMERCE FOR OCEANS AND 
               ATMOSPHERE, DEPARTMENT OF COMMERCE

    Mr. Keeney. Good afternoon, Mr. Chairman and distinguished 
Members of the Committee. I am Timothy Keeney, Deputy Assistant 
Secretary of Commerce for Oceans and Atmosphere. On behalf of 
NOAA Administrator Vice Admiral Conrad Lautenbacher, thank you 
for inviting NOAA to testify today.
    Under several laws, NOAA has been distinguished as a 
steward of the Nation's ocean and coastal--excuse me--as a 
steward of the Nation's oceans and coasts and as a trustee of 
marine resources. As such, NOAA has a strong interest in how 
tanker accidents impact the ocean and coastal environment, 
including habitat and living marine resources.
    Two recent oil spill events off the coast of Europe 
demonstrate the difficult issues presented by tanker spills. 
Both tankers were old and broke apart during fierce storms. The 
PRESTIGE tanker which sunk off the coast of Spain in November 
of last year, was 26 years old; and the ERIKA tanker which 
ruptured off the coast of France in 1999 was about 24 years 
old. Second, both vessels were single-hull tankers.
    Both of these events have focused renewed attention on 
phasing out single-hull tankers in favor of double-hull 
tankers. NOAA supports the Coast Guard's efforts to implement 
the Oil Pollution Act requirements for double-hull tankers. 
Shifting to double-hull tankers, however, is not the silver 
bullet solution to our problems. Other significant oil 
pollution threats can or do result from aging infrastructure, 
including pipelines, shoreside facilities, and non-tank 
vessels, maritime acts of terror, and polluted runoff. In 
addition, we must also plan for the day when new double-hull 
tankers become older and decayed.
    Mr. Chairman, my testimony will focus on NOAA's roles of 
prevention, preparedness, and response, restoration, and will 
conclude with four recommendations.
    Under prevention, prevention of marine disasters is hard to 
measure, but it must remain a priority. Prevention is simply 
the best way to protect people, the economy, and the marine 
environment. In addition to regulation, the Federal Government 
assists prevention by providing information that facilitates 
safe marine transportation. Today, NOAA is the major provider 
of geographic, oceanographic, and meteorological information in 
the form of nautical charts, hydrographic and related surveys, 
tide and current predictions, and weather forecasts.
    New technologies are providing advanced services to meet 
the needs of modern navigation, including electronic 
navigational charts and the Physical Oceanographic Real-Time 
System, or the acronym ``PORTS''. PORTS measures water levels, 
currents, and other oceanographic and meteorological conditions 
that directly support safe and efficient marine trade.
    A report by the Woods Hole Oceanographic Institute 
concluded that the electronic navigational charts and other new 
technologies could yield a higher cost-benefit ratio than 
double-hull tankers, especially in high traffic areas. 
Accidents such as the EXXON VALDEZ, for example, could be 
avoided using modern navigational systems.
    Under preparedness, despite prevention efforts, we know 
that spills can and will occur. Without adequate preparation, 
such as the periodic training and drilling exercises the Coast 
Guard conducts with NOAA and others, a response will not be 
effective. NOAA supports preparedness with several products, 
including the environmental sensitivity indexes, which are maps 
depicting the location of vital and sensitive natural 
resources; the trajectory analysis planner, a computer program 
that helps to predict spill movements so spill response action 
can be planned even prior to a spill actually occurring; and 
through regional representatives NOAA helps states, 
communities, and industry develop contingency plans that are 
location-specific.
    Following the EXXON VALDEZ, many industry cooperatives and 
companies specializing in spill preparedness and clean-up were 
formed. Over time, many of these companies have gone out of 
business or merged, reducing the national investment in 
research and development.
    Under response, NOAA serves as the primary scientific 
support to the Coast Guard during oil spills. NOAA's scientific 
expertise includes oceanographers, meteorologists, chemists, 
biologists, and others. When an incident does occur, NOAA first 
assesses the spill's behavior, focusing on immediate health and 
safety issues. NOAA then provides forecasts, predictions, 
models, and analysis of the spill. Experts from NOAA try to 
determine the threat the spill poses to living marine 
resources.
    In late November, Spain accepted American assistance 
following the PRESTIGE tanker disaster. Both NOAA and the Coast 
Guard sent staff to Spain to assist. NOAA has provided experts 
on beach clean-up techniques, methods to prioritize sites, 
marine biology, seafood safety, and forecasting oil spill 
movements. Currently, three NOAA staff are working in different 
areas of Spain on PRESTIGE-related issues.
    Finally under restoration, under the Oil Pollution Act of 
1990 NOAA is responsible for assessing and restoring coastal 
and marine resources injured by oil spills. When oil threatens 
and injures coastal marine resources, NOAA provides 
multidisciplinary teams of scientists, economists, and 
attorneys that work collaboratively with other natural resource 
trustees to determine the injury to coastal resources and the 
restoration required to address those injuries.
    In order to build upon improvements in prevention and 
preparedness, response and restoration, NOAA offers the 
following four recommendations: One, implement advanced 
charting technologies and navigation information systems;
    Two, institutionalize and improve coordination of oil spill 
research and development between government, academia, and 
industry;
    Three, ensure adequate levels of funding for the oil spill 
liability trust fund;
    And four, finally, continue efforts to review potential 
impacts from tankers and other vessels on the marine 
environment. Such efforts should include working through the 
International Maritime Organization.
    Thank you, Senator. I look forward to your questions.
    [The prepared statement of Mr. Keeney follows:]

Prepared Statement of Timothy R. E. Keeney, Deputy Assistant Secretary 
     of Commerce for Oceans and Atmosphere, Department of Commerce
Introduction
    Mr. Chairman, and distinguished Members of the Committee, I am 
Timothy Keeney, Deputy Assistant Secretary of Commerce for Oceans and 
Atmosphere. On behalf of NOAA Administrator Vice Admiral Conrad C. 
Lautenbacher, Jr., USN (ret), thank you for this opportunity for NOAA 
to testify on recent oil spills, the phase-out of single-hull tankers, 
and related issues. The United States Coast Guard (USCG) and 
Environmental Protection Agency (EPA) are charged with executing many 
vessel-related laws and regulations, so I will respectfully defer to 
Assistant Commandant of the Coast Guard, Rear Admiral Pluta, and Deputy 
Director of EPA, Elaine Davies, on some of these issues. After some 
introductory remarks, I will discuss NOAA's efforts following the 
recent PRESTIGE tanker disaster off the coast of Spain, and NOAA's role 
in marine oil spill prevention, preparedness, response and restoration.
    Approximately 70 percent of imported oil used by the United States 
is shipped by tanker. At any given time, oil, petroleum products, and 
other hazardous materials account for about half of all cargo in 
transit upon U.S. waters, most of it in tankers or tank barges. NOAA's 
principal concern regarding tankers is the impact of spills on the 
ocean and coastal environment, including habitat and living marine 
resources. NOAA is a steward and trustee of many of the Nation's 
coastal and marine resources pursuant to the Oil Pollution Act, the 
Magnuson-Stevens Fishery Conservation and Management Act, the Marine 
Mammal Protection Act, the National Marine Sanctuaries Act, and other 
laws. NOAA has a strong interest in vessel activities because of its 
marine stewardship responsibilities and has some capability to regulate 
vessels under these authorities, depending on actual or potential 
impacts on NOAA's trust resources. Having such broad stewardship 
responsibilities also creates an incentive for NOAA to work closely 
with sister agencies that have more direct regulatory responsibilities 
over maritime activities. Two agencies that we coordinate with are the 
Coast Guard and EPA.
    Two recent events that resulted in major oil spills off the coast 
of Europe demonstrate the difficult issues presented by major oil 
spills from oil tankers. First, both tankers were old. The tanker, 
PRESTIGE, which recently broke apart off the coast of Spain, was 26 
years old. The ERIKA was about 24 years old when it broke apart off the 
coast of France in 1999. The average age of a tanker in the global 
tanker fleet at the beginning of 2002 was 18.2 years. \1\ Second, both 
vessels were single-hull tankers, as are the majority of the estimated 
9,716 tankers of 300 gross tons and over operating globally. \2\ Third, 
both PRESTIGE and ERIKA broke apart during fierce storms. Fourth, 
international shipping typically involves a host of actors, which can 
make it difficult to determine the responsible party in the event of an 
oil spill. For example, the PRESTIGE was a Japanese-built ship, owned 
by a company registered in Liberia, managed by a Greek firm, registered 
in the Bahamas, certified by an American organization, and chartered by 
a Swiss-based Russian trading company. Finally, PRESTIGE was traveling 
neither to nor from a European Union port. Port State control offers an 
important mechanism for a country to impose regulations on ships; 
however, it is extremely difficult (if not impossible) to do so for 
ships merely in transit past a Nation's coast.
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    \1\ See http://www.isl.org/english/public/shortcommentno3-e.htm
    \2\ Id.
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    The global nature of the maritime transport industry presents a 
strong argument for a uniform set of environmental and safety rules. A 
diverse array of unilateral regulatory approaches could contribute to 
increased costs for the tanker industry and ultimately for national 
economies and consumers. Uniform rules allow for the efficient, 
economic conduct of business and creates a level playing field among 
the participants. However, agreeing to and approving uniform rules 
through the International Maritime Organization (IMO) can take 
considerable time to accomplish, and since IMO works primarily by 
consensus, a country may not achieve its desired outcome through the 
IMO process. The bottom line is that nations (and their political 
subdivisions) directly impacted by major spills inevitably face heavy 
pressure to take rapid and decisive action. A nation may decide that 
domestic legislation is the best way to protect its interests.
    Double hulls can provide an added measure of safety, but shifting 
to double-hull tankers is not a panacea. Even as we phase out single-
hull tankers, we must remain vigilant in providing state-of-the-art 
navigation data and other preventive and preparedness services. We also 
must recognize other significant oil pollution threats to public 
health, commerce, and the marine environment from other aging 
infrastructure, including pipelines, shore-side facilities, and non-
tank vessels. We should also recognize and prepare for the future when 
double-hull tankers become older and consequently, are at an increased 
risks for spills.
    A particular concern today is maritime acts of terror. Events like 
the October 2002 explosion that rocked the Yemen-bound French tanker, 
LIMBURG, breached both hulls of a new, double-hulled ship, penetrating 
about 24 feet into the cargo hold. I commend Congress, and particularly 
Members of this Committee, for recognizing the vulnerability of our 
ports and coastal communities by passing the Maritime Transportation 
Security Act of 2002, which President Bush signed the same day that he 
signed into law the Homeland Security legislation.
    I would be remiss if I did not mention that spills are not the only 
threat to marine resources from petroleum products. The amount of oil 
deposited in the coastal waters of the United States from urban runoff, 
highways and related sources greatly exceeds deposits from the 
transportation of oil. While the impacts of a major spill can be 
dramatic, these deposits also present a serious and complex challenge 
and will continue regardless of ongoing efforts to curb marine 
disasters from tankers. In addition, natural seepage of crude oil is 
another significant source of oil in the marine environment, although 
this natural seepage tends to occur sporadically and at low rates. 
Devoting attention to distinguishing the effects of petroleum released 
by natural processes versus anthropogenic activities would greatly aid 
in understanding crude oil behavior in the marine environment, and how 
marine life responds to the introduction of petroleum.
    The remainder of my testimony will summarize the support NOAA has 
provided in response to the PRESTIGE catastrophe and then I will update 
the Committee on NOAA programs and responsibilities in the areas of 
spill Prevention, Preparedness, Response, and Restoration.
NOAA and the PRESTIGE Spill
    NOAA offered expert (knowledge only, not products) assistance to 
Spain after the PRESTIGE sank. Spain accepted and NOAA sent four people 
to Spain a few days later: two experts in cleanup measures and general 
organization of information during a spill, a fisheries expert and a 
damage assessment economist. The U.S. Coast Guard also sent one person 
with this team from their Gulf Strike Team. The first team was in Spain 
for two weeks, providing clean-up guidance, helping to prioritize 
cleanup areas, visiting beaches, and writing reports. When they rotated 
out, two more NOAA employees, a marine biologist and a cleanup expert, 
took their place.
    Three weeks after accepting our original offer of assistance Spain 
requested a trajectory expert to help them set-up their own 
capabilities to determine the fate and transport of the oil still 
coming up from the PRESTIGE. NOAA agreed to help and sent a trajectory 
expert after Christmas to work with Spain's team. The cleanup expert on 
the second team was also invited to Madrid to speak to the new Spanish 
Scientific Commission, which he did. NOAA is currently evaluating the 
level of our continued support to Spain. On December 18, NOAA 
Administrator, Vice Admiral Lautenbacher, along with the Commandant of 
the Coast Guard, met with the Prime Minister of Spain, to discuss our 
efforts in Spain and to receive his thanks for our continued presence. 
Vice Admiral Lautenbacher offered further technical assistance to 
Spain, and the Prime Minister accepted.
Prevention
    Prevention of maritime disasters is hard to measure. It is 
difficult to attribute credit for accidents that do not occur. However, 
prevention must remain a priority. It is simply the best way to protect 
people, the economy, and the marine environment.
    One way for government to aid in prevention is through regulation. 
This can include regulating the structural integrity, design, and 
manning requirements of vessels, such as phasing in a requirement for 
double-hull tankers. Governments can also regulate vessel traffic, 
including creating vessel traffic lanes or designating certain 
sensitive areas off limits. Another regulatory option is to create 
financial disincentives to pollute, such as OPA, which requires 
responsible parties to pay the costs of the response and restoration, 
as well as penalties in certain circumstances.
    The Federal Government also facilitates safe marine transportation 
by providing mariners with vital oceanographic and meteorological 
information. The life-saving and economic value of this non-regulatory 
approach was recognized early in our history when President Thomas 
Jefferson authorized the Survey of the Coast in 1807. Today, NOAA is 
the major provider of geographic, oceanographic, and meteorological 
information about our coastal waters. NOAA's services include nautical 
charts, hydrographic and related surveys, tide and current predictions, 
and weather forecasts. Although, ultimately mariners are responsible 
for prudent navigation, NOAA takes seriously its responsibility to 
provide them with accurate, up-to-date information so that their 
decisions are well informed.
    New technologies are aiding in providing advanced services that 
meet the needs of modern navigation, including Electronic Navigational 
Charts (ENCs) and the Physical Oceanographic Real Time System (PORTS). 
PORTS supports safe and cost-efficient navigation by providing ship 
masters and pilots with accurate real-time information necessary to 
avoid groundings and collisions. PORTS includes centralized data 
acquisition and dissemination systems that provide real-time water 
levels, currents, and other oceanographic and meteorological data from 
bays and harbors to the maritime user community. NOAA ENCs support real 
time navigation, as well as collision and grounding avoidance needs of 
the mariner, and accommodate a real-time tide and current display 
capability that is essential for large vessel navigation. NOAA ENCs 
also provide fully integrated vector base maps for use in geographic 
information systems (GIS) that are used for coastal management or other 
purposes. A report by the Woods Hole Oceanographic Institution's Marine 
Policy Center concluded that ENCs and other new technologies could 
yield a higher cost-benefit ratio than double-hull tankers. \3\
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    \3\ Hauke L. Kite-Powell, Di Jin, and Scott Farrow, Expected Safety 
Benefits of Electronic Charts and Integrated Navigation Systems, May 
1997.
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    Data from NOAA weather buoys and water level stations also support 
a backbone of observations in support of an Integrated and Sustained 
Ocean and Coastal Observing System. PORTS represents a practical 
application of such a system in support of safe and efficient maritime 
commerce. Of course, every accident avoided also supports NOAA's 
responsibilities as a trustee, steward and manager of marine resources 
by preventing harm to ocean and coastal waters and living marine 
resources. In addition to enhancing safety and stewardship, this data 
also promotes more efficient movement of goods. This can provide 
significant national economic benefits, including supporting the 
competitiveness of U.S. exports in an increasingly global marketplace.
    I would like to add at this point that an interagency task group at 
the National Science and Technology Council is planning an 
international Earth Observation Summit for this coming summer, and has 
asked NOAA, along with NASA, to coordinate the interagency planning 
effort. This event will highlight the need for a comprehensive data 
collection system, which will complement the existing ocean, coastal 
and terrestrial observation systems.
Preparedness
    Even as we seek to prevent maritime accidents, we must be mindful 
that they can and will occur. How prepared we are to respond in such 
instances can prevent loss of life and mitigate the degree of 
environmental and economic harm. The bottom line is that without 
adequate preparation, a response cannot be effective. The Coast Guard's 
Incident Command System provides a framework to organize decision-
making, understand response strategies, and establish mechanisms for 
evaluating tradeoffs among response approaches.
    In preparation for and in actual response to marine emergencies, 
NOAA brings valuable expertise, which is readily available to respond 
to accidental spills as well as deliberate acts of sabotage and threats 
to homeland security. This expertise includes oceanographers, 
meteorologists, chemists, biologists, and others who have focused on 
better understanding the behavior of marine oil and chemical releases 
and reducing the risks to resources. Examples of services NOAA provides 
include:

        1.  The Environmental Sensitivity Indexes, which are maps 
        depicting the location of vital natural resources. This 
        information improves the ability to make strategic response 
        decisions.

        2.  The Trajectory Analysis Planner helps predict spill 
        movements, which supports strategic placement of response 
        resources.

        3.  The NOAA Guide to Seafood Safety supports decision making 
        on fisheries that may be impacted by an event.

        4.  NOAA also provides training and participates in joint 
        drills and related activities to enhance our capabilities for 
        responding to spills and conducting natural resource damage 
        assessments.

    Improving the ability to respond to a spill was a major focus 
following the EXXON VALDEZ catastrophe. This included the formation of 
industry cooperatives and companies specializing in spill preparedness 
and clean up. Unfortunately, over time many of these companies have 
gone out of business or merged, reducing the national investment in 
research and development.
Response
    When an incident does occur, NOAA's primary role in a response is 
to mitigate damage to public health, property and the marine 
environment and resources by providing scientific support to response 
agencies. A successful response is dependent on an agency's response 
capability; and NOAA has made a conscious effort to implement a 
disciplined, agency-wide capability. Since 1994, NOAA has responded to 
896 spill incidents.
    NOAA's first efforts involve assessments of a spill's behavior, 
focusing on immediate health and safety issues for on-scene responders 
and the public. NOAA offices begin providing regular weather forecasts, 
tide and current predictions, oceanographic modeling, and analysis of 
how these may impact the trajectory and related aspects of the event. 
Experts from NOAA undertake efforts to understand the threats to living 
marine resources. The need to deploy vessels, aircraft, and 
instruments, such as tide gauges, is assessed.
Restoration
    Under the Oil Pollution Act of 1990 (OPA), NOAA is responsible for 
assessing and restoring coastal and marine resources injured by oil 
spills. NOAA is also responsible for developing and maintaining 
regulations under OPA that guide federal, state and tribal natural 
resource trustees in their efforts to conduct natural resource damage 
assessments. When oil threatens and injures coastal and marine 
resources, NOAA arrives on-scene to take samples of oiled natural 
resources and collect other information about injuries to natural 
resources and the services they provide. This information is used in 
the damage assessment and for restoration planning. NOAA provides 
multi-disciplinary teams of scientists, economists, and attorneys that 
work collaboratively with other natural resource trustees to determine 
the injury to coastal resources and the restoration required to address 
those injuries.
    NOAA also places a high priority on working cooperatively with the 
parties responsible for the released oil--government and industry 
working cooperatively can reduce transaction costs and expedite 
restoration of the injured resources. NOAA has conducted natural 
resource damage assessments and restoration projects for oil spills 
across the country, including Alaska, California, Florida, Hawaii, 
Louisiana, Maine, Maryland, New Jersey, Oregon, Rhode Island, Texas, 
and Washington. Through these authorities and cooperative efforts, NOAA 
successfully restores natural resources across the nation and ensures 
the long-term health of coastal and marine resources.
Conclusions and Recommendations
    In order to build upon improvements in prevention, preparedness, 
response and restoration, NOAA offers the following recommendations:

        1.  Implement advanced charting technologies and navigation 
        information systems. Support for safe and efficient marine 
        transportation should be a priority of a coastal observing 
        system.

        2.  Institutionalize and improve coordination of research and 
        development between government and industry.

        3.  Continue efforts to review potential impacts from tankers 
        and other vessels on the ocean environment. Such efforts should 
        include working through the International Maritime 
        Organization.

        4.  Maintaining a regular schedule of periodic training and 
        drills for oil spill response is absolutely essential.

        5.  Senate assent and U.S. ratification of the Law of the Sea 
        Treaty would strengthen the position of the United States in 
        addressing global ocean issues.

    Thank you and I look forward to answering any questions.

    The Chairman. Thank you, sir.
    Ms. Davies, welcome.

        STATEMENT OF ELAINE F. DAVIES, DEPUTY DIRECTOR, 
          OFFICE OF EMERGENCY AND REMEDIAL RESPONSE, 
                ENVIRONMENTAL PROTECTION AGENCY

    Ms. Davies. Thank you. Thank you, Mr. Chairman. Good 
afternoon. Thank you, Members of the Committee.
    I am Elaine Davies, the Deputy Director of the Office of 
Emergency and Remedial Response. I am pleased to be here today 
to discuss EPA's efforts to prevent, prepare for, and respond 
to oil spills in our Nation's waters.
    EPA's Office of Emergency and Remedial Response manages the 
agency's oil program activities. We regulate preparedness and 
prevention at such facilities as oil production and bulk 
storage facilities and refineries. We share responsibility for 
responding to oil spills with the U.S. Coast Guard. We respond 
in the inland waters and Coast Guard responds along the coast. 
We have a very good working relationship with the Coast Guard 
as well as with NOAA and we are indeed, as Admiral Pluta says, 
shipmates. In practice, EPA and Coast Guard often provide each 
other technical assistance and support regardless of where the 
spill occurs.
    The Coast Guard, however, is principally responsible for 
most marine transportation-related oil spill prevention 
activities, including the subject of today's hearing, the 
phase-out of single-hull tankers.
    EPA strongly supports the Coast Guard's effort to implement 
the Oil Pollution Act requirements for double-hull tankers. We 
feel that the phase-out of single-hull tankers is an important 
component of Federal efforts to protect our Nation's 
environmental and natural resources from potentially 
catastrophic oil spills.
    Every year EPA evaluates approximately 13,000 reports of 
oil spills to determine whether there is a need for the agency 
to respond, and we do respond at approximately 300 of those, 
where we manage the event or we provide oversight. The vast 
majority of responses are done by the parties who cause the 
spills. In conducting the response, we use the national 
contingency plan, which provides the blueprint for all Federal 
oil and chemical spill response.
    We also chair the National Response Team, and Coast Guard 
is our Vice Chair. This is a group composed of 16 Federal 
agencies who meet regularly to deal with preparedness, 
prevention, and response, planning and policy issues, and then 
can provide valuable response and assistance during a spill. In 
responding to a major spill, we would make use of incident 
command, which is an excellent organizational tool for such an 
event.
    Since the EXXON VALDEZ spill, there has been significant 
effort to improve readiness in the Nation. One element is area 
contingency planning, which has gone on for the last 12 years 
since the passage of OPA. The plans are created and updated by 
those who would actually respond, the federal, the state, the 
local, and industry, and they have made tremendous progress.
    In conclusion, I want to say preparedness and prevention 
are the surest way to protect human health and the environment 
from the harmful effects of an oil or chemical spill.
    Mr. Chairman, I ask that my entire written statement be 
submitted for the hearing record. I will be pleased to answer 
any questions you may have.
    The Chairman. Without objection. Thank you, and thank all 
the witnesses for coming today.
    [The prepared statement of Ms. Davies follows:]

  Prepared Statement of Elaine F. Davies, Deputy Director, Office of 
    Emergency and Remedial Response, Environmental Protection Agency
    Good Afternoon Mr. Chairman and Members of the Committee. I am 
Elaine Davies, Deputy Director of EPA's Office of Emergency and 
Remedial Response. I am pleased to appear today to discuss EPA's 
responsibilities in the event of a major oil spill in our Nation's 
waters.
    EPA's Oil Spill Response Program is an integrated program that 
works to prevent, prepare for and respond to spills at a wide variety 
of facilities that handle, store, or use oil across the country. EPA 
regulates approximately 400,000 facilities, including oil production, 
bulk oil storage, and oil refinery facilities that store or use oil in 
above-ground and certain below-ground storage tanks. Additionally, EPA 
is the principal federal response agency for spills in inland waters, 
including oil pipeline ruptures and tank spills.
    EPA shares the responsibility of responding to oil spills with the 
U.S. Coast Guard (USCG). Further, we share the responsibility for 
prevention and preparedness with USCG and several other federal 
agencies. The USCG responds to spills that occur along the coast of the 
United States, or the coastal zone, and EPA responds to spills that 
occur in the internal United States, or the inland zones. The exact 
lines between the inland and coastal zones are determined locally and 
established by Memoranda of Agreement (MOAs) between regional EPA and 
Coast Guard offices. While oil spills that occur off the coast of the 
United States and certain transportation related oil spill prevention 
activities, such as the phase-out of single-hull tanker vessels, are 
the principal responsibility of the Coast Guard, EPA often provides 
assistance and works closely with the USCG at all times.
    EPA strongly supports the USCG's efforts to implement Oil Pollution 
Act requirements for double-hull tankers. The phase-out of single-hull 
tankers is an important component of federal efforts to protect our 
Nation's environmental and natural resources from potentially 
catastrophic spills.
EPA's Oil Response Program
    Each year, millions of gallons of petroleum and other oils are 
transported and stored throughout the country, creating a significant 
potential for oil spills and serious threats to human health and the 
environment. Approximately 20,000 oil spills are reported to the 
Federal Government each year, and of those, EPA evaluates as many as 
13,000 to determine if its assistance is required. On average, EPA 
either manages the oil spill response or oversees the response efforts 
of private parties at approximately 300 sites per year.
    The type and extent of EPA's participation in an oil spill response 
varies depending on who is actually leading the oil spill cleanup and 
where the spill is located. If the party responsible for the spill is 
unknown, unwilling, or unable to clean up the spill, EPA may be the 
lead responder, and the response decisions and activities are made by 
EPA and paid for by the Federal Oil Spill Liability Trust Fund. This 
is, however, a rare occurrence, and the majority of oil spills are 
cleaned up and paid for by the parties responsible for the spill, with 
EPA's advice or under EPA's direction, or in some instances by a state 
agency.
    The type of technical assistance EPA provides after an oil spill 
includes air and water monitoring support and access to the Federal 
Environmental Response Team, a group of highly skilled environmental 
experts available to employ the most up-to-date and innovative 
technological practices to each and every response situation.
    EPA is also responsible for maintaining the National Contingency 
Plan's (NCP) Product Schedule. The NCP Product Schedule lists chemical 
and biological products available to a federal On-Scene Coordinator 
(CSC) that may help clean up an oil spill. Due to the unique nature of 
each oil spill, and the potential impact on natural resources, OSCs 
help determine which products, if any, may be used on a particular 
spill. To make the best use of this resource, an OSC, in consultation 
with the Regional Response Team (RRT), is the final decision maker in 
determining which technology and particular product would most 
successfully assist in the spill cleanup.
EPA's Oil Spill Coordination With the USCG
    EPA and the USCG closely coordinate our activities to ensure an 
effective national oil spill response program. One major coordination 
tool is the National Contingency Plan (NCP). The NCP is the Federal 
Government's blueprint for responding to both oil spills and hazardous 
substance releases among federal, state, and local authorities. 
Additionally, it provides the government with a framework for 
notification, communication, and responsibility for response to an oil 
spill.
    Under the NCP, another major coordination tool is the National 
Response Team (NRT). Composed of up to 16 federal agencies, with EPA 
serving as chair and the Coast Guard serving as vice-chair, the NRT 
assists responders by providing information, technical advice, and 
access to resources and equipment during an incident. In the event that 
response is needed by more than one federal region, the NRT helps 
coordinate the overall response efforts.
    In addition to the NRT, there are 13 Regional Response Teams 
(RRTs), one for each of EPA's ten regional offices and one each for 
Alaska, the Caribbean, and the Pacific Basin. RRTs are co-chaired by 
each EPA Region and its Coast Guard counterpart. The RRTs work with the 
federal OSC in making certain response decisions, and identifying and 
accumulating specialized resources.
    For example, through the RRT, the OSC can request and receive 
assistance on natural resource issues from the Department of the 
Interior, or borrow specialized equipment from the Department of 
Defense. Involvement of the RRT in these response decisions and 
activities helps ensure efficient agency coordination while providing 
the OSC with the assistance necessary for successful response.
    In addition, during major oil spills, EPA joins with other 
responders in implementing an Incident Command System (ICS). This 
system provides the OSC with an organizational structure to facilitate 
and effectively use the resources from all appropriate federal, state, 
local and private organizations.
EPA's Oil Spill Preparedness and Prevention Program
    While EPA's Oil Response Program is ready to respond whenever 
necessary, it is always better to prevent spills before they happen. 
This is the goal of EPA's Oil Spill Preparedness and Prevention 
Program.
    A principal preparedness tool, Area Contingency Plans (ACPs), are a 
critical element of the national oil spill preparedness, prevention, 
and response infrastructure. The plans are created and updated by a 
committee composed of federal, state, and local agency representatives 
who will work together during an actual emergency response. Chaired by 
an EPA OSC in the inland zone and the USCG in the coastal zone, the 
committees work with industry and responders to identify potential 
discharge scenarios, potentially affected resources (including 
environmentally sensitive areas), and possible response resources such 
as equipment and trained personnel. This up-front planning work allows 
the various agencies, including EPA and the USCG, to become familiar 
with each other and understand their expected roles and 
responsibilities during a response. It also ensures that high risk 
scenarios are considered and practiced before actual spills occur, 
thereby testing the response mechanism in a given area of the country.
    EPA also requires owners and operators at certain high-risk, non-
transportation related, oil storage facilities to prepare and submit to 
EPA a Facility Response Plan (FRP) that outlines exactly how a facility 
will respond to a worst-case oil spill at the facility. We also manage 
the Spill Prevention, Control and Countermeasures (SPCC) program, which 
requires owners or operators of all regulated oil facilities to prepare 
and implement facility plans to prevent an oil spill.
    By working to prevent and prepare for oil spills across the 
country, the EPA Oil Program actively protects human health and the 
environment and greatly reduces the harmful effects of an oil spill.
Conclusion
    EPA works diligently to maintain an effective Oil Spill Program. 
The lessons learned from preventing, preparing for, and responding to 
oil spills over the past 30 years have enabled EPA to build an overall 
emergency response program that effectively responds to and mitigates 
the human health and environmental effects of both natural and man-made 
events. EPA looks forward to working with Congress as we strive to meet 
our common goal of protecting human health and our Nation's 
environmental and natural resources through prevention, preparedness, 
and response to oil spills.

    The Chairman. I guess that this issue has clearly been made 
significantly more important because of the threat of acts of 
terror. Would you agree, Admiral Pluta?
    Admiral Pluta. Yes, sir.
    The Chairman. Including the October 2002 explosion on board 
the French liner LIMBERG, which was a new double-hulled ship, 
which is of some interest, I think, in our discussion here.
    But what I found interesting in Mr. Keeney's--believe it or 
not, we do read your statements from time to time.
    [Laughter.]
    The Chairman. Mr. Keeney, you mentioned in your statement 
that the PRESTIGE was a Japanese-built ship, owned by a company 
registered in Liberia, managed by a Greek firm, registered in 
the Bahamas, certified by an American organization, and 
chartered by a Swiss-based Russian trading company.
    Finally and very importantly here, PRESTIGE was traveling 
neither to nor from a European Union port. In other words, a 
huge amount of damage was done to a European country that this 
tanker was never even intended to come very close to. I note in 
OPA-90 that the double-hull requirements do not apply, the 
phase-in of double-hulled requirements do not apply to foreign 
vessels while engaged in innocent passage through U.S. waters. 
Is that an issue, Admiral and Mr. Keeney and Ms. Davies?
    Admiral Pluta. Mr. Chairman, yes, it is an issue. But my 
response to you would be that double-hull is merely one 
intervention in the package that OPA-90 presents to us, Mr. 
Chairman. There are many other facets of OPA-90 that have 
caused changes in the way that oil is shipped to and from the 
United States, and since OPA-90, we have had other 
interventions, both domestically and internationally, that 
permit us to take even more action, port state control action. 
There is a safety management system in place on these ships 
now. We have upgraded the standards for training and 
certification of all the people on watch.
    The Chairman. That does not address my question, Mr. Pluta. 
If a ship is sailing through, is cruising through United States 
waters, through our waters--and I do not know exactly which--to 
show you the level of my ignorance, I am not sure which 
boundary we use in that connection.
    Admiral Pluta. The 12-mile limit, Mr. Chairman.
    The Chairman. The 12-mile limit. Some countries use as much 
as a 200-mile limit, right?
    Admiral Pluta. Yes, sir.
    The Chairman. But if that ship is passing within 12 miles 
of the United States, but it is not going into port in the 
United States, it can be forever a single-hulled ship; is that 
correct?
    Admiral Pluta. Mr. Chairman, under the limits, if it is not 
a U.S. flag vessel it would have to comply with the limits at 
IMO, and they would eventually be phased out anyway. But you 
are quite right that these ships can be passing close to the 
United States. There are Law of the Sea issues in what is 
happening off of some countries in Europe that need to be 
addressed at the U.N. as well, Mr. Chairman. But you are right 
on target.
    The Chairman. Mr. Keeney?
    Mr. Keeney. I defer to the Coast Guard on this. This is 
really not an area that NOAA has direct knowledge, with regards 
to foreign vessels and the rules that apply to them in U.S. 
waters.
    The Chairman. Does it concern you if indeed a ship can come 
within 12 miles of the United States, single-hull like the 
PRESTIGE, and not be required to have a double hull at any 
time, 2015, 2030, whatever it is?
    Mr. Keeney. Certainly. Any kind of increased risk concerns 
us at NOAA to potential damage to marine resources.
    The Chairman. Ms. Davies?
    Ms. Davies. We certainly are concerned about any oil spill 
and we definitely would defer to the Coast Guard on any of the 
guidelines of the work that they are doing on double-hull, and 
we would support them in any way we could.
    The Chairman. Admiral, do you believe the PRESTIGE would 
have broken apart and sunk if it had had a double hull, given 
your knowledge of the experience that that ship went through?
    Admiral Pluta. Mr. Chairman, it is hard to say until the 
accident investigation is complete, but my experts tell me that 
just by virtue of the fact that you have a double hull does not 
prevent that a vessel is not going to unzip and break apart at 
sea in heavy weather like the motor vessel PRESTIGE 
experienced.
    The Chairman. And age is always a factor in the ability of 
any ship to resist those kinds of things?
    Admiral Pluta. Yes, Mr. Chairman, as well as many other 
factors.
    The Chairman. This ship was 26 years old, the PRESTIGE?
    Admiral Pluta. Yes, sir. Age as well as how well the vessel 
is being maintained and monitored in service.
    The Chairman. And some of them are not, especially if they 
may be a Japanese-built, owned, registered in Liberia, managed 
by a Greek firm, registered--the maintenance may not be the 
best on that kind of ship?
    Admiral Pluta. That is always a possibility, Mr. Chairman.
    The Chairman. It has been your experience of your many 
years of observing these ships in the United States Coast 
Guard?
    Admiral Pluta. Yes, sir, that is a distinct possibility.
    [Laughter.]
    Admiral Pluta. You never can tell. There are some countries 
and some companies take their responsibilities very seriously, 
and I think the majority of them do, Mr. Chairman. But there 
certainly are those that do not and those are the ones that 
cause the problems.
    The Chairman. Mr. Keeney, I believe it was in your 
statement you recommend ratification of the Law of the Sea 
Treaty; is that correct?
    Mr. Keeney. That is correct.
    The Chairman. Is that the Administration's position?
    Mr. Keeney. I have not checked. My testimony, I believe, 
did get cleared.
    [Laughter.]
    Mr. Keeney. But I did not make any specific calls on that 
one. We just at NOAA believe that it puts us, the United 
States, in a stronger position in dealing with other countries 
in relation to the taking advantage of the provisions of the 
Law of the Sea Treaty.
    The Chairman. Well, I may have additional questions, but 
what I think we owe the American people--and from your 
testimony and everything I know, our agencies of government are 
doing a fine job, and OPA-90 was not only an excellent piece of 
legislation, it was eventually copied by other nations. I think 
that the leadership of our Nation in that is laudable.
    I just think, given post-9/11, given the PRESTIGE 
devastation to the Spanish coastline, that it is appropriate 
for us to review what we are doing, how we are doing it, and 
whether there needs to be changes in existing law, or 
regulations or government policy. That is what I really would 
like to have from all three witnesses.
    Senator Inouye.
    Senator Inouye. Thank you very much, Mr. Chairman.
    Admiral Pluta, it is correct that the United States has 
jurisdiction over foreign vessels entering U.S. waters to do 
business in the United States?
    Admiral Pluta. Yes, sir.
    Senator Inouye. All safety practices?
    Admiral Pluta. Yes, sir. We have port state control 
provisions that permit us to enforce the international 
standards.
    Senator Inouye. However, I have been advised that, because 
of the volume of foreign vessels entering American ports, that 
you oftentimes have to limit your inspection to just inspecting 
paperwork. Is that correct?
    Admiral Pluta. Not exactly, Mr. Senator. But let me explain 
it this way. There are too many volumes of vessels coming 
toward the United States for us to board and inspect every 
single one. But what we use is in our port state control 
program is a targeting matrix, where we look at the flag state, 
the owner, the classification society, and we are looking at 
the charterers now as well. We rate even the performance of the 
vessel as it has performed, as it has visited the United States 
before.
    We will go through this targeting matrix to see whether 
that vessel poses a high risk or a low risk to safety or 
environmental protection in the United States, and that is how 
we make our decisions on what to board. But when we board, we 
always look at more than paper. We will look at the general 
condition of the vessel and go through all the important parts 
to see where--and we have enough experience to know where to 
look and what to look for. If we see anything that does not 
look right, well, we will continue to go further. But if 
everything looks in order, well, then we will move on.
    Senator Inouye. That is provided you are in that matrix 
group?
    Admiral Pluta. Yes, sir.
    Senator Inouye. Just as an aside, would Senator McCain's 
PRESTIGE come within that matrix group?
    Admiral Pluta. It would have been phased out January 1, 
2000, I think, Mr. Inouye.
    Senator Inouye. I gather that the Coast Guard would like to 
have a much more thorough inspection process. If that is the 
case, how much more would you need?
    Admiral Pluta. Senator, you have been very generous to the 
Coast Guard, and I cannot answer your question specifically, 
but I can tell you that we feel confident that, given the laws 
that you have given us to enforce, we are using our resources 
to the best. We are--over a multi-year budget strategy with 
maritime homeland security overlaid on top of our safety and 
environmental protection responsibilities, with your good 
graces, we ought to be able to catch up.
    Senator Inouye. I thank you very much.
    Secretary Keeney, you cited a study in your full statement 
in which you concluded that if you implemented the Advanced 
Charting and Navigation Information System, that could be just 
as effective as double hulls, especially in busy ports. What is 
the current navigation information available for U.S. ports? Do 
we have data that is useful?
    Mr. Keeney. Senator Inouye, we have a system which we refer 
to as the PORTS system, which NOAA has tried to put in place in 
some of--many of the major ports in the United States where 
there is heavy traffic. This is a system that is a shared cost 
system. It is referred to as--it stands for, again, ``Physical 
Oceanographic Real-Time System,'' which supports safe and cost-
effective navigation, providing ship masters and pilots with 
accurate real-time information required to avoid groundings and 
collisions.
    The system includes centralized data acquisition and 
dissemination systems that provide real-time water levels, 
currents, and other oceanographic and meteorological data from 
bays and harbors to the maritime user community.
    We believe that this system along with the electronic chart 
information are two excellent tools for reducing the risk of 
collision or grounding.
    Senator Inouye. Have you implemented this program?
    Mr. Keeney. We have. We have implemented--I can give--for 
the record, I can produce the record of which ports have active 
programs. This has been a successful program and in every port 
we have had it, I think we have had great response and 
cooperation. In fact, the ports where it is operating right now 
include Narragansett Bay, the New York-New Jersey Harbor, the 
Delaware River, Chesapeake Bay, Tampa Bay, Galveston, Houston 
ports, San Francisco Bay, and the Port of Anchorage, which we 
just opened at the end of last year.
    Senator Inouye. But this will not be an adequate substitute 
for double hulls? You would like to have both, would you not?
    Mr. Keeney. No, I do not think we refer to it as a 
substitute. We are basically saying that it is actually even 
more cost-effective than investing in double hulls. The 
implication was that we go both routes. I can also provide a 
copy for the record of the study that was done at Woods Hole 
that verifies my statement.
    Senator Inouye. I thank you very much, Mr. Secretary.
    Mr. Keeney. Thank you.
    Senator Inouye. Thank you, Mr. Chairman.
    The Chairman. Senator Sununu.
    Senator Sununu. Thank you, Mr. Chairman.
    The modern charting and navigation system, Mr. Keeney, that 
you are speaking of, you referred to as a shared cost. Shared 
by whom?
    Mr. Keeney. It is shared by the local port facilities, so 
that the local governments, I believe, contribute toward the 
expense of installation and operation of the system. That is an 
important part of, I think, trying to implement the system, 
that it is accepted.
    Senator Sununu. I consider that, generally speaking, one 
entity, the local port authority.
    Mr. Keeney. That is correct.
    Senator Sununu. So, are they paying for it, or are they 
sharing the cost with someone else?
    Mr. Keeney. Just let me check on that for a minute.
    [Pause.]
    They are sharing the cost with many of the operators of the 
port.
    Senator Sununu. With the operators.
    Mr. Keeney. Right.
    Senator Sununu. But NOAA is not putting out any money for 
this, or actually undertaking the implementation itself?
    Mr. Keeney. I think NOAA does put out money for the initial 
implementation of the program.
    Senator Sununu. Can you give me an estimate of how much 
money is put out?
    Mr. Keeney. We will provide that for the record, Senator 
Sununu.
    Senator Sununu. Just to try to gauge a sense of how cost-
effective it is, at least relative to the burden that is shared 
by I guess the taxpayers or by NOAA.
    Mr. Keeney. We will provide that.
    Senator Sununu. What locations--that was a pretty extensive 
list. I did not see Long Beach on there, knowing Long Beach is 
a pretty significant port. Are there many ports that have not 
been touched by the upgrades to navigation and charts that you 
would like to see take on the new technology?
    Mr. Keeney. We do. We have probably as many as an 
additional 20 ports that are interested in this program.
    Senator Sununu. How long has it been available?
    Mr. Keeney. 3 years. I think only in the case of--I think 
San Francisco is the one area where I think they are having 
difficulty meeting the requirements of maintaining the system 
because of some of the financial constraints that they have 
locally.
    Senator Sununu. One of the most striking charts in the 
package that I saw leading up to the hearing today showed the 
amount of oil spilled per volume that is shipped in U.S. 
waters. There really has been a dramatic fall-off in spillage 
since 1990, obviously due in part to the success of the OPA 
legislation. To what specific changes in the legislation or 
required by the legislation do you attribute that to? This is 
really one, I think, more for the Admiral.
    Admiral Pluta. Thank you, Senator Sununu.
    Senator Sununu. In fact, I should point out it is a Coast 
Guard graph.
    Admiral Pluta. I will be happy to respond, sir. Obviously, 
the single-hull phase-out has had a major impact by having 
vessels not be permitted to come back to the United States to 
trade. Also there are operational measures that we have 
imposed. We have gotten access to the National Drivers Register 
and other criminal background kind of checks that we can now 
make on mariners. We have more stringent civil and criminal 
penalty procedures that we can go through. We have response 
plans that are required. That is a very critical issue 
because----
    Senator Sununu. Those sound like excellent provisions. But 
the nature of the drop-off is so sharp, I was just curious 
whether there was any one provision that was found to be the 
most effective. I mean, the threat of criminal provisions; I do 
not imagine there was a huge majority of vessels that suddenly 
were being used that were double-hulled in just a 1- or a 2-
year period, although that may well be. There may have been a 
huge influx as soon as the legislation was passed, knowing that 
a phase-in was coming.
    Admiral Pluta. Senator Sununu, the best answer I could give 
you is that in our opinion, it is the comprehensive approach 
taken by OPA-90 which no one else has done. It is the most 
comprehensive oil prevention package in existence today, and it 
has been extremely effective because of all the pieces working 
together. And we have even refined the process further with 
other international provisions that we have implemented since 
then.
    So, I do not think it is any one thing. I think it is the 
whole package together.
    Senator Sununu. Are there any oceanographic conditions, 
weather conditions, shoreline features, navigational 
challenges, where the potential damage sustained and spillage 
sustained by a double-hulled tanker is greater than that of a 
single-hulled tanker, all other things such as age or 
maintenance being equal?
    Admiral Pluta. I do not think so, sir. I think I look at it 
as an equal opportunity environment. You know, you are managing 
your risk by having--you know, we know through either 
calculations or by the school of hard knocks when vessels run 
aground how deep do they get penetrated and we make ships 
designed, make the people design the ships to avoid those sorts 
of limits. Of course, there are no guarantees.
    But in response to your issue of geography, we have done a 
study of all of the major ports of the United States, and for 
those where congestion is an issue or maybe tight entry, some 
sort of thing like that is an issue, we have vessel traffic 
systems and traffic separation schemes to try to prevent bad 
things from happening as well.
    Senator Sununu. You may have answered my question, but I 
was not talking so much about traffic. You said, well, when 
vessels run aground. A vessel can run aground on rocks, on 
sand. A vessel can break up because of the stresses involved in 
waves during very heavy seas. A vessel can be struck by another 
vessel. All of those accidents involve different sets of 
strains and scenarios and damage to the vessel.
    I guess my question was, is a double-hulled vessel less 
prone to catastrophic damage in all cases? You believe so?
    Admiral Pluta. My answer, to the best of my knowledge, is 
yes, sir.
    Senator Sununu. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Senator Nelson.

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. Thank you, Mr. Chairman. This of course is 
an exceptionally important subject to my state, which has 14 
deep water ports, and such an enormous amount of coastline.
    Admiral should we consider not accepting the safety 
certifications of certain classification societies who we 
determine not to have the adequate and sufficient safety 
programs?
    Admiral Pluta. In essence, Senator Nelson, we take--we do 
grade and score classification societies, and for those vessels 
that--it is a part of our grading factor that we use in our 
targeting matrix to decide whether to board a vessel. So, if we 
have a class society that is suspect, it is probably going to 
wind up being boarded, and we are probably going to look 
closer, yes, sir.
    But as far as not accepting their work, we take the 
approach of overchecking their work.
    Senator Nelson. What types of drills do we test to use in 
order to test the readiness of private companies that are 
involved in oil spill clean-up?
    Admiral Pluta. Senator Nelson, we have--and EPA might even 
chime in on this one as well, Senator Nelson. But we together 
work with the states and work with the stakeholders and port 
committees to have drills on a very predictable, routine basis. 
Plus we have the Spills of National Significance, and it 
involves not only tabletop exercises, where we get people 
together and go through scenarios, but then, there is also 
large-scale exercises where we actually will break out 
equipment and make sure that everything works. So, the people 
are trained, the procedures are checked and revised, and the 
equipment is run to make sure that it is functional.
    Senator Nelson. Does the producing of this report by the 
GAO, which says as U.S. single-hull old vessels are eliminated, 
few double-hull vessels may replace them, does that, in 
essence, say that we are not moving to the double-hull vessels 
and this is, in essence, an impediment to us getting the double 
hulls?
    Admiral Pluta. Senator Nelson, the maritime--I cannot speak 
specifically for the Maritime Administration, but we have been 
through this exercise to see, are we going to run into a 
carriage requirement based on our best predictions, and I think 
what that report says is with the current bookings for 
construction, that there may be a shortfall of double-hull 
vessels to carry what we think our need is going to be.
    Senator Nelson. Even with this most recent action of the 
European Union wanting to speed up the double hulls as a result 
of this tanker being sunk off of Spain?
    Admiral Pluta. Senator, certainly if they change their 
standards for Europe, it will have an effect on the carriage 
capacity worldwide. But we do not know exactly what they are 
going to do. One of our Coast Guard people who goes to MEPC is 
in Brussels right now meeting with the European Commission to 
find out exactly what they have in mind, and what their 
timeframe is, so that we can predict for you what potential 
action the U.S. may consider as a result.
    But we do not know, sir. But whatever they decide--if they 
are going to accelerate their phase-out schedule, it clearly 
will have an impact, yes, sir.
    Senator Nelson. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Nelson.
    I want to thank you for coming today, and I appreciate the 
information you have provided for the Committee. Thank you very 
much.
    Admiral Pluta. Thank you, Mr. Chairman.
    The Chairman. Our next panel will be: Mr. Thomas 
Allegretti, President of the American Waterways Operators; Mr. 
Joe Cox, President of the American Chamber of Shipping; Mr. Tom 
Godfrey, the President of Colonna's Shipyard and Chairman of 
the Shipbuilders Council of America; Mr. David Sandalow, who is 
Executive Vice President of the World Wildlife Fund; Mr. Dragos 
Rauta, the Technical Director of the International Association 
of Independent Tanker Owners; and Mr. G. William Frick, Vice 
President and General Counsel, American Petroleum Institute; 
Mr. Robert Cowen, Senior Vice President and Chief Operating 
Officer of the Overseas Shipbuilding Group.
    I am sorry, I apologize for it being a little crowded at 
the witness table. We will begin with Mr. Allegretti, who is 
the President of the American Waterways Operators. Welcome, Mr. 
Allegretti. Thank you for coming to the Committee today.

   STATEMENT OF THOMAS A. ALLEGRETTI, PRESIDENT AND CEO, THE 
                  AMERICAN WATERWAYS OPERATORS

    Mr. Allegretti. Good afternoon, Mr. Chairman and Members of 
the Committee. On behalf of the 375----
    The Chairman. Could you pull it a little closer there so I 
can hear you. Thank you.
    Mr. Allegretti. On behalf of the 375 member companies in 
the American Waterways Operators, thank you for holding this 
important hearing today.
    Tank barges account for more of the domestic transportation 
of petroleum in our country than any mode except pipelines. In 
fact, more than 20 percent of the oil that fuels our economy, 
keeps our cars running, keeps our homes comfortable, is moved 
each year by barge.
    The recent tanker spill off the coast of Spain is a 
sobering reminder of the inherent risks of oil transportation 
and the need for constant vigilance in minimizing those risks. 
We are very fortunate in the United States that the marine 
transportation of oil is governed by the Oil Pollution Act of 
1990, a law that is working well. While I cannot tell you the 
OPA-90 has eliminated all of the risks of oil transportation, I 
can say that the passage of that law launched a process that 
has worked to reduce spills and to reduce the risk of spills 
significantly.
    Today, the U.S. maritime industry is moving oil more safely 
than ever before. Today, more than two-thirds of the U.S. tank 
barge fleet is double-hulled, years in advance of the OPA-90-
mandated phase-out dates. The record over the last decade is an 
encouraging one. Oil spills in the United States are today at a 
historic low, and the trend line is pointing in the right 
direction. Tank barge operators spilled 87 percent less oil in 
2000 than they did in 1990. Today, for every one million 
gallons of oil moved by barge in the U.S. less than two gallons 
are spilled.
    Just as encouraging as those statistics is the story that 
is behind the numbers. Tank barge companies have put in place a 
comprehensive array of safety improvements and spill prevention 
measures that have not only produced a safer oil transportation 
system, but one that offers the promise of continued progress 
in the years ahead, with the ultimate goal of zero spills.
    This array of safety improvements and spill prevention 
measures is very broad. It begins with better-trained crews. It 
also includes the establishment of comprehensive safety 
management systems, like AWO's Responsible Carrier Program. And 
all of this reflects a sea change in the way companies operate 
their fleets and within AWO, it is now a condition of 
membership within our association.
    Adoption of these safety management systems reflects our 
industry's understanding that oil spills are simply not 
acceptable. They are not acceptable to Congress, they are not 
acceptable to the American people, and they are not acceptable 
to us.
    The risk of oil transportation in the United States is 
further reduced by the OPA-mandated retirement of single-hull 
vessels. America's tank barge operators are leading the 
transition to an all-double-hull fleet and have invested more 
than a billion dollars in new vessels to serve the U.S. energy 
transportation market. Indeed, single-hull retirements are 
proceeding at a faster pace than OPA-90 requires, and that 
represents an enormous commitment by tank barge companies in 
the business of transporting petroleum by water. My written 
testimony highlights several examples of these significant 
company commitments.
    Mr. Chairman, as a result of all of this the domestic tank 
barge industry today is not only maintained and operated more 
safely than ever before, but is rapidly transitioning to the 
double-hull design that OPA-90 requires.
    We know that globally and domestically, there is still too 
much oil spilled into the world's oceans and rivers. In the 
United States, our industry firmly believes that safety 
management and spill prevention are never-ending imperatives. 
The actions Congress took in 1990 are working just as you 
designed, and as a result the risk of oil spills in the United 
States today is dramatically lower.
    However, our job is not done. Our goal and your expectation 
is zero spills and a 100 percent double-hulled fleet, and our 
industry is fully committed to achieving those goals.
    Thank you for the opportunity to testify today. I will be 
happy to take any questions that you may have.
    [The prepared statement of Mr. Allegretti follows:]

  Prepared Statement of Thomas A. Allegretti, President and CEO, The 
                      American Waterways Operators
    Good afternoon, Chairman McCain, Senator Hollings, and Members of 
the Committee. I am Tom Allegretti, President and CEO of The American 
Waterways Operators (AWO), the national trade association for the 
American tugboat, towboat, and barge industry. AWO's 375 member 
companies include the owners and operators of tugboats, towboats, and 
barges that move more than 800 million tons of America's cargo every 
year, including dry, liquid, containerized and specialty cargoes on the 
inland river system, the Atlantic, Pacific, and Gulf coasts, and the 
Great Lakes. We carry over 60 percent of U.S. grain exports, providing 
American farmers a safe, economical and environmentally-friendly way to 
stay competitive with foreign producers. We also move enough of the 
nation's coal to produce 10 percent of all U.S. electricity annually. 
AWO's members also operate the tugboats that provide shipdocking 
services in our nation's ports and harbors. The transportation of 
petroleum and petroleum products is a key segment of our industry's 
business: tank barges move 20 percent of the oil that fuels our economy 
and keeps our cars running and our homes warm. Powerful, state-of-the-
art tugboats also provide tanker escort services to facilitate the safe 
movement of petroleum cargoes in busy ports and harbor approaches.
    On behalf of AWO's diverse membership, thank you for the 
opportunity to testify at this hearing on the phase-out of single-hull 
tank vessels that carry oil in bulk as mandated by the Oil Pollution 
Act of 1990 (OPA-90). The overriding message I want to leave you with 
today is this: the law you passed 12 years ago is working. Oil spills 
from U.S. tank vessels have declined to historic lows. American 
companies have invested more than a billion dollars in new double-
hulled vessels to serve the U.S. energy transportation market. While 
the recent tanker spill in Europe reminds us all of the inherent risks 
of oil transportation and the need for constant vigilance, you can be 
proud of the transformation you helped to bring about in the U.S. tank 
vessel industry. Today, less than one ten-thousandth of one percent of 
the oil moved by tank barge in this country is spilled. Today, more 
than two-thirds of the U.S. tank barge fleet is double-hulled, years in 
advance of the OPA-mandated phase-out schedule. Our job is not over: 
our goal, and your expectation, is zero spills and a one-hundred-
percent double-hulled fleet. We come before you today firmly committed 
to achieving those goals.
    Mr. Chairman, I can tell you that the U.S. tank barge industry is 
working hard to meet the demand of Congress, our customers, and the 
American public to move oil safely and securely, with not one drop 
entering our precious marine environment. In 1990, according to Coast 
Guard and Army Corps of Engineers' data, the U.S. tank barge industry 
moved 1.7 billion barrels of oil in U.S. waters. Of that total, 23,600 
barrels were spilled. While this means that 99.99998 percent of the oil 
moved by barges in this country was delivered safely, no one would 
argue that the 23,600 barrels of oil that did enter the marine 
environment was acceptable. However, the record since 1990 tells an 
encouraging story: oil spills in the United States are today at a 
historic low. In 2000, the last year for which complete statistics are 
available, barges spilled 87 percent less oil than in 1990, with 3,180 
barrels entering the water. That's not perfect, to be sure, but an 87 
percent improvement is indisputably a trend line pointing in the right 
direction.
Oil Spill Reductions Result from a Full Array of Improvements
    What is perhaps more encouraging is the story behind the numbers. 
Spills are a lagging indicator of oil transportation safety; they help 
us to evaluate the efficacy of the prevention measures we have 
implemented in the past. Given that we have ten years of post-OPA-90 
statistics to look back on, that's an appropriate report card to 
consider. But, if we look behind the statistics at the state of the oil 
transportation industry today, we see what might be considered some 
leading indicators, some harbingers of future improvements. The fact is 
that companies in the oil transportation business today have and are 
continuing to put into place a more comprehensive array of safety 
improvement and spill prevention measures than any time in the history 
of oil transportation by water. Taken together, these measures have 
produced a safer oil transportation system that offers the promise of 
continuing progress toward our ultimate goal of zero spills.
    Perhaps the most significant change in the oil transportation 
industry today is the degree to which companies have embraced safety 
management systems that aim to reduce operational risks throughout 
their operations. The tugboat, towboat and barge industry has been a 
leader in this transformation. In December 1994, AWO's Board of 
Directors established the AWO Responsible Carrier Program, a code of 
practice for member companies. The Responsible Carrier Program 
establishes safe operating standards--standards that exceed 
governmental requirements--in the areas of management and 
administrative practices, vessel equipment and inspection, and human 
factors, such as training and watchstanding practices. In April 1998, 
in a tangible demonstration of the industry's commitment to leadership 
in marine safety and environmental protection, AWO's membership voted 
to make compliance with the Responsible Carrier Program a condition of 
membership in the association. Today, all members of AWO, and any 
company that seeks to become a member, must commit to complying with 
the Responsible Carrier Program and undergoing an independent, third-
party audit within two years of joining the association. This 
represents nothing less than a sea change in the character of our 
industry and its trade association.
    Complementing the transformation of the oil transportation industry 
itself is a changed relationship between industry and government. Over 
the past twelve years, both industry and the Coast Guard have come to 
appreciate that we are bound together by the common, critically 
important goal of improved marine safety and environmental protection. 
Starting from the premise that we share common objectives, we have 
developed a reservoir of mutual trust and forged a constructive working 
relationship. We have also discovered a broader array of tools 
available to us to achieve our common goals. Today, both the industry 
and the Coast Guard recognize that regulations are just one of the 
tools that can be used to implement safety improvements. Clearly, 
regulations have their place, and where they do, we've learned that the 
regulatory development process can be approached cooperatively. More 
significantly, we have recognized that there are many opportunities to 
bring about safety improvements outside the regulatory process. The 
first-of-its-kind Coast Guard-AWO Safety Partnership was inaugurated in 
November 1995 for just that purpose--not to replace the regulatory 
process, but to augment it and encourage companies to go beyond 
regulatory compliance.
    Vessels are safer, as a matter of design, maintenance, and 
operation. Innovative new technologies are being phased into the fleet. 
``Z-drive'' or ``tractor'' tugs capable of exerting propulsive power in 
all directions--the maritime equivalent of the helicopter--are 
transforming the fleet of shipdocking and escort tugs. In the coastal 
environment, articulated tug-barge units, or ATBs, are gaining 
recognition for their safety, fuel efficiency, and all-weather 
capability. Developments in navigation and communication technology, 
including Automatic Identification System (AIS) technology, offer 
enhanced collision avoidance capability. Companies have implemented 
more rigorous maintenance programs to ensure that vessels and equipment 
remain as safe and functional on the water as they were designed to be 
in the shipyard.
    The Coast Guard has estimated that 80 percent of accidents are the 
result of the human factor. Therefore, state of the art vessels and 
better practices are by themselves not enough. Industry safety would 
not be possible without qualified, experienced, well-trained vessel 
crews. That is why there is a commitment to see that vessel crews today 
are better trained and better prepared to do their jobs safely. Both 
the Coast Guard and the industry recognize that operational competence 
means more than the ability to pass a license exam. The Coast Guard has 
issued regulations establishing new licensing requirements for towing 
vessel operators that require a practical demonstration of operational 
skill as a prerequisite to obtain a Coast Guard license. The industry 
has also invested heavily in training to ensure that qualified 
crewmembers continue to hone and improve their skills throughout their 
careers. State-of-the-art training facilities and company training 
centers established by some of the nation's leading tank barge 
operators, demonstrate the industry's increasing recognition that 
training and professional development are good investments and an 
essential part of doing business safely.
    All of these efforts--many of them expensive and all of them 
requiring the highest level of commitment of both the public and 
private sector--are working together to produce the significant 
decrease in oil spills that we have seen over the last decade.
Double Hull Fleet Modernization is Proceeding on Schedule
    Even as government and industry sources agree that there is a 
surplus of tonnage on the market today--more vessels than are needed to 
meet U.S. demand for oil transportation--America's tank barge operators 
are leading the transition to an all-double-hull fleet. According to 
U.S. Coast Guard data, U.S. tank barge operators have built 607 new 
double-hulled petroleum barges for inland and coastal service since the 
Oil Pollution Act was passed in 1990. The pace of new construction has 
accelerated in recent years, with more than a quarter of this total--
174 doublehulled barges--built between 1999 and 2002. When looking at 
vessels of more than 5,000 gross tons, an OPA-90 threshold, the picture 
is just as bright. Government and industry sources indicate that 
approximately 50 of these larger vessels have been built since OPA-90 
was enacted. In the last three years alone, 32 double-hull vessels 
greater than 5,000 tons have been built or contracted for. Many 
companies hold options for construction of additional vessels, while 
some companies have plans for conversion of existing single-hull 
vessels to a double-hull configuration.
    The capital investment required to overhaul the U.S. tank barge 
fleet is significant: a 30,000 barrel inland tank barge costs some 
$1.45 million to build, while a 120,000-140,000 barrel coastal tank 
barge carries a price tag of $15-17 million. Because a double-hull 
barge is much larger than a single hull with the same carrying 
capacity, vessel owners must often invest an additional $9-10 million 
for a more powerful tugboat to move the larger barge. Retrofitting 
(adding a double-hull to an existing single-hull barge) can shorten 
delivery time by several months, but the cost remains high: some $12-13 
million for a 120,000-140,000 barrel barge. The cost of a state-of-the-
art articulated tug-barge unit, or ATB, runs $26-27 million.
    Given the size of the capital outlay required, companies must weigh 
many factors in deciding when to build a new double-hulled vessel. 
Paramount is demand for oil transportation--the strength of shipper 
demand, and the likelihood that freight rates will be sufficient to 
offset the cost of such a major investment. If demand is there, 
building will follow. Building vessels of any kind in the absence of 
demand hurts the industry, artificially depressing freight rates and 
undermining the industry's ability to shoulder the investment in 
modern, environmentally friendly vessels to meet future needs.
    Government sources agree that U.S. tank vessel capacity exceeds 
demand for domestic oil transportation, and will continue to do so 
until at least 2004. The Government Accounting Office in 2000 found 
that ``industry currently has more vessels than needed to meet the 
current shipping demand,'' and concluded that decisions on new double 
hull construction would likely await reduction of this overcapacity. 
The U.S. Coast Guard, after consulting with the Maritime 
Administration, reached a similar conclusion in its September 2001 
Report to Congress on the Progress to Replace Single Hull Tank Vessels 
with Double Hull Tank Vessels, and noted that a number of U.S. flag 
tank vessels were then working in foreign trades because of 
overcapacity in the U.S. domestic market.
    As American companies strongly committed to the U.S. market, the 
members of the American Waterways Operators have already made 
substantial investments in new double-hulled vessels, and stand ready 
to make additional investments to meet the nation's energy 
transportation needs, and to continue providing safe, environmentally 
friendly, and economically efficient service to U.S. shippers and 
consumers. I'd like to share just a few examples of AWO companies who 
have, and will continue to, respond to the demands of the market and 
meet the requirements of OPA-90 in order to ensure the continued 
availability of domestic carrying capacity for petroleum products. 
These examples are representative of the commitment shared throughout 
our industry, and taken together, they help to paint the picture of an 
industry that is collectively expending more than a billion dollars in 
this effort.
    In New England, which is heavily dependent on barge transportation 
of petroleum products, family owned companies like Bouchard 
Transportation Company of New York and Reinauer Transportation Company 
of New York and Massachusetts have invested hundreds of millions of 
dollars to ensure that their companies can continue to meet the needs 
of U.S. shippers and consumers in future generations. Bouchard, founded 
in 1918, has built seven new double-hulled barges, retrofitted three 
single hulls, and will take delivery of two new double hulls this year. 
The Bouchard family has invested some $200 million so far, and will 
spend another $70-80 million by the time its fleet replacement program 
is complete. Reinauer Transportation, founded in 1923, has spent $200 
million on its own fleet modernization program, which includes two new 
state-of-the-art ATBs and a third barge scheduled for delivery this 
year. Reinauer will have to spend tens of millions more to complete the 
replacement or retrofit of the company's remaining single-hull barges.
    Similar investments are taking place throughout the tank barge 
industry, by companies that are making a tangible commitment to serve 
the U.S. domestic market for the future. On the West Coast, Crowley 
Marine Services, a family company in business for more than a century, 
has spent $130 million to date on a fleet replacement program that 
includes four new double-hulled ATBs. Canal Barge Company of Louisiana, 
which will celebrate its 70th anniversary in December of this year, has 
built 69 double-hulled inland tank barges since the passage of OPA-90, 
at a cost of more than $70 million. The company will retire its only 
remaining non-double-hulled barge--a double-sided, single-bottom barge 
in limited service--in the near future.
    This is real money, being spent by real people to comply with OPA-
90 and serve the energy needs of the American economy in a safe and 
environmentally responsible way. The stories of these companies, and 
those of the dozens of other American tank barge operators, large and 
small, that are making similar investments are sometimes overlooked in 
dry macroeconomic analyses and bar graphs showing petroleum movements 
and fleet tonnage.
    As Congress considers the state of OPA-90 implementation today, and 
the progress of the transition to a double-hulled fleet, it is worth 
reflecting on these stories and the commitment to the U.S. market they 
demonstrate. It is also worth noting that, as a practical matter, the 
marketplace is accelerating the single-hull retirement schedule to a 
degree few of us envisioned in 1990. This has happened because shippers 
are demanding that their cargoes be moved in double-hulled vessels, and 
vessel owners who see themselves as long-term players in the U.S. 
market are building double-hull vessels to satisfy the demands of their 
customers, both now and for the future. Congress helped bring this 
success story about by providing, in OPA-90, for an orderly phase-out 
schedule that allowed market forces to work--and work they have. Going 
forward, Congress can best support U.S. vessel owners in meeting their 
obligations under OPA-90 by exercising its oversight role and making 
clear its continuing commitment to transitioning to an all-double-hull 
fleet as provided for in OPA-90.
Conclusion
    In summary, Mr. Chairman, the single hull phase-out schedule 
contained in OPA-90 has provided stability and certainty to the process 
of transitioning our petroleum carrying capacity from a single-hull 
fleet to one that is entirely double hulled. For over a dozen years it 
has been, and it continues to be, the expectation that the existing 
schedule will remain in effect. Against that backdrop, and with a 
substantial commitment of resources, American vessel owners are making 
decisions to invest in new double hull capacity based on a variety of 
economic factors. The pace of that construction has increased in recent 
years. The evidence shows that capacity will rise to meet demand, but 
also that new vessels will not be constructed or contracted for until 
there is an economic basis for their construction. Subject to these 
economic considerations, the domestic tank barge industry is 
transforming its vessels into a fully double-hulled fleet.
    Perhaps the best news is that oil spills in U.S. waters have 
declined dramatically and OPA-90 is working to promote safer 
transportation of petroleum products and better protection of our 
marine environment. This is being accomplished through compliance with 
new regulatory requirements as well as a strong industry commitment to 
new technologies, safer vessels, constructive partnership with 
government, comprehensive safety management systems, and improved 
training for vessel crews. The breadth of the transformation of the 
U.S. tank barge industry--a transformation that goes beyond the 
statutory requirements of OPA-90--demonstrates our commitment to the 
shared goal of protecting our environment while meeting Americans' need 
for the safe transportation of petroleum products.
    Mr. Chairman, thank you for the opportunity to appear before the 
Committee today. I would be pleased to respond to any questions the 
Committee may have.

    The Chairman. Thank you very much.
    Mr. Cox.

   STATEMENT OF JOSEPH J. COX, PRESIDENT AND CEO, CHAMBER OF 
                      SHIPPING OF AMERICA

    Mr. Cox. Thank you, Mr. Chairman. I will submit my 
statement for the record if I can and I will summarize here.
    The Chairman. Without objection.
    Mr. Cox. Thank you, sir.
    On behalf of the members of the Chamber of Shipping of 
America, which are owners, operators, and charterers of 
vessels--and I point out, Mr. Chairman, they do operate both 
foreign-flag and U.S.-flag vessels, we are pleased to testify. 
You have heard some of the issues being discussed in the 
government panel. In my testimony, I go through a history of 
phase-out. The phase-out concept does go back to 1978, and the 
original changes to MARPOL that required tankers to outfit 
segregated ballast tanks or dedicated clean ballast, then OPA, 
then two changes in MARPOL. Then I ended that history with the 
PRESTIGE incident and the proposed EU actions.
    Mr. Chairman, I am a little bit questioning about the EU 
activities. I certainly look at their press releases, I talk to 
my colleagues in Europe, and I am not at all convinced that we 
are getting straight answers from each particular European 
participant. I think we have yet to see what the final outcome 
of their deliberations is going to be.
    However, after the PRESTIGE, Mr. Chairman, my testimony 
describes what we feel are unacceptable actions taken by 
individual countries, or by the European Union itself. This 
includes the arrest of the master of the PRESTIGE after he had 
come ashore from going through a quite harrowing experience 
where he lost his vessel and, thankfully, did not lose any of 
his crew.
    Then, two nations, France and Spain, began escorting 
tankers outside of their 200-mile limit, which we feel is in 
violation of the Law of the Sea Treaty and also international 
traditional law of the sea. There is a definite effect on IMO. 
Mr. Chairman, it was kind of interesting to be at the IMO, 
where they were talking to us about restrictions with regard to 
U.S. actions relative to security measures and to what extent 
we could go out into international waters to inspect vessels 
for security measures, and at the same time be escorting 
tankers outside of their waters for environmental purposes.
    There will be an effect on IMO, the very same organization 
that was taking the U.S. to task in 1990 for OPA-90. Some of 
the same nations that were criticizing the United States then 
are now proposing actions themselves along the same lines of 
unilateralism.
    Finally, Mr. Chairman, there is a ports of refuge issue 
that I think is a very important and one for the world to start 
talking about. That is, when a vessel is in distress, what do 
we do with that vessel? Do we tell it to go out into some other 
waters and handle it as best they can or do we have some type 
of a safe haven available for those ships so that they can come 
in and possibly, maybe take care of their problem?
    Mr. Chairman, we looked at the effect of the 23-year issue, 
and this is where a little bit of the confusion about the 
definitiveness of the EU actions comes into play. We looked at 
vessels over 23 years old in our data base. There are some 1630 
tankers in the world's fleet that are over 50,000 deadweight 
tons, therefore could trade in the international market. Eight 
hundred thirty-four of those are currently double-hull, and 
some 168 are over 23 years old, so those vessels cannot come 
into our ports, although they can trade into LOOP and in 
offshore lightering.
    Now, how many will is a question for the marketplace to 
determine, because certainly, if Europe puts a ship out of 
Europe that is 23 years old, it could come into the U.S. It 
could also trade to the Far East, it could also trade to the 
Indian subcontinent, and it could also trade into South 
America. Those determinations would be made by the marketplace.
    Mr. Chairman, I was talking to somebody in the audience 
today who is a smart guy, and he reminded me about the 15-year-
old issue in crude oil tankers and how the Europeans may be 
discussing not allowing crude oil carried on single-hull 
tankers over 15 years old. That is a little bit of an 
interesting issue because I discussed with some friends in 
Europe yesterday and that would put out of business all their 
North Sea shuttle tankers except for four of them. So I am not 
quite sure that they would take that step, but if they do, we 
would add to that 168 approximately 300 more vessels that would 
be capable then of trading in other parts of the world than 
Europe.
    Mr. Chairman, the commercial marketplace, at the end of the 
day, is going to determine where those vessels go.
    You have heard comments about OPA-90. We agree with all 
those before us. It is a well-thought-out piece of legislation. 
It is all-encompassing. We will have to review the final EU 
action to see what vessels would be involved. We certainly--if 
the Congress feels necessary, if the Senate feels it necessary, 
to begin a deliberation about those vessels, it is certainly 
something we are willing to discuss. But we have to address the 
ships that are affected therein, and not the wholesale review 
of OPA-90.
    You have heard a little bit of reaction from Senator--
``Senator Pluta'' might be a little bit premature, to call him 
that, Senator--but Admiral Pluta has talked about maintenance. 
I want to say that, in respect to double-hull, certainly 
maintenance is as important as any other parameter, including 
age, and we should put on the record that double-hull is not a 
panacea. It does provide a great amount of protection in low-
energy collisions and groundings. However, in catastrophic 
situations, it will not be the answer. We have not seen 
catastrophic situations because mainly, quite seriously or 
quite frankly, those vessels are relatively new ships with all 
the newest----
    The Chairman. Did you not see one with the French tanker?
    Mr. Cox. Well, the French tanker, sir, was----
    The Chairman. You saw a catastrophic----
    Mr. Cox. Well, that was a terrorist incident.
    The Chairman. Is that not a catastrophic event?
    Mr. Cox. I am sorry, I would determine catastrophic event 
in the sense of a grounding, or a collision or some internal 
problem with the vessel. I think a terrorist incident I would 
not characterize as catastrophic. However, the effect would be 
the same.
    The Chairman. I think most----
    Mr. Cox. The effect would be the same.
    The Chairman. I do not want to quibble over words with you, 
but I think it is a catastrophe, Mr. Cox. Go ahead.
    Mr. Cox. On that issue, Senator, it does, the double hull 
does provide a protection. You do have that extensive void area 
between the outer hull and the inner hull that any type of an 
action against the outer hull is going to have somewhat of a 
protective measure against the inner hull being breached.
    We did include, Senator, two other issues which we took the 
opportunity of responding in terms of your request for 
comments. One was on terrorism insurance for vessels. It is a 
very serious problem, particularly applicable to the American 
operator and owner because his assets are all here in the 
United States, and he cannot hide behind the registration of a 
vessel in another locale.
    We also discussed the confidentiality of our information in 
the ship safety security plans.
    Thank you very much, Senator. I will certainly be available 
for questions.
    [The prepared statement of Mr. Cox follows:]

  Prepared Statement of Joseph J. Cox, President and CEO, Chamber of 
                          Shipping of America
    Mr. Chairman, we appreciate the opportunity to testify before you 
today on the subject of double hull phase-out dates and the potential 
effect of recent decisions by the European Union. The Chamber of 
Shipping of America (CSA) is an organization that represents companies 
that own, operate or charter commercial vessels. We were founded over 
eighty years ago and are involved in domestic and international issue 
affecting our members.
    Early in December, we attended the Maritime Security Conference at 
the International Maritime Organization (IMO) that deliberated on and 
adopted amendments to the Safety of Life at Sea Convention. Those 
amendments dealt with the vital issue of security in the maritime 
industry. The resulting requirements that must be met by the ship 
owning community are comprehensive and the cost will be totally borne 
by the ship owner. During the year it took to develop those 
requirements, CSA participated in numerous domestic deliberations with 
the Coast Guard and were members of the U.S. delegation to the three 
preparatory meetings held in London. We mention the conference because 
the main topic of discussion for many other nations' representatives at 
the conference was the intended actions of the European community in 
response to the PRESTIGE incident. The PRESTIGE is a single-hull tanker 
that broke in two off the coast of Spain in November and caused a major 
spill. The U.S. delegation was focused on the security deliberations 
and they did a good job of achieving all U.S. objectives. One major 
point very actively debated on security was the rights of sovereign 
nations to control vessels entering their waters.
    During the conference, a working group was sent out a number of 
times to draft language allowing nations to take certain steps for 
security. The working group was very careful to allow security controls 
yet not violate traditional law of the sea. From the U.S. bench, we saw 
an incongruous situation where some of the nations at IMO were taking 
definitive positions on rights of ships regarding security while these 
same nations were taking actions against ships based on environmental 
concerns that went beyond what were considered prudent for security. 
These actions affected single-hull tankers. In explanation of the 
incongruity of the circumstance, we should discuss briefly the 
background of vessel control and why double hulls and the phase-out of 
single hulls is with us today.
Background
    Under well-established international maritime law, it is recognized 
that any sovereign nation has the right to control vessels entering its 
maritime jurisdiction. A nation may require an entering vessel to meet 
any requirements it determines prudent. The corresponding right of the 
vessel is to not enter the waters of a nation that has requirements it 
does not agree with or is unable to meet. The role of international 
treaties is to provide a set of universal requirements that nations can 
agree. Once agreed, a nation enforces those international requirements 
on vessels entering its waters although it retains the right as a 
sovereign nation to require additional measures if it sees fit to do 
so. This is not an optimum situation for ship owners and we usually 
object to a nation seeking additional requirements unilaterally. We 
strongly urge all nations to seek additional requirements in the 
international fora such as the IMO.
    When the ``EXXON VALDEZ'' ran aground in 1989, she was one of the 
newest U.S.-flag ships and was built to meet the international 
requirements for tankers at the time which included segregated ballast 
(SBT). SBT was placed into the Maritime Pollution Prevention Convention 
(MARPOL) in 1978 and required a certain percentage of the tanks to be 
for the carriage of ballast only. These non-cargo carrying tanks were 
also to be in locations along the hull that provided a degree of 
protection against collision. The requirements addressed the 
operational discharge of ballast water that contained oil residue and, 
to a degree, the threat of collision damage to a cargo tank. Existing 
tankers were given a short period of time to comply with requirements 
for dedicated clean ballast tanks or crude oil washing systems. We did 
not use the term ``phase-out'' at the time but the effect of the 
coverage of existing tankers in this manner was to phase-out the 
existing tanker and replace it with a more environmentally protective 
tanker albeit one with the same external hull.
    After substantial debate on the spill and the causes, Congress 
wrote OPA-90. Among other requirements, it included one that all 
tankers calling into U.S. maritime jurisdiction must be double hulled. 
Included in that debate was much discussion about alternatives to 
double hulls. While the door was left open for research, OPA-90 did not 
recognize any alternatives. Once again after much debate, the Congress 
agreed that the changeover to double-hull tankers was to be accelerated 
by legislatively phasing out older, single-hull tankers. A very 
deliberate approach was crafted based on age and size. The U.S. took 
these actions as a sovereign nation and there is no contention that the 
U.S. acted outside traditional maritime law, however, because the U.S. 
is such a large market for tankers, no international owner would 
consider building a tanker that did not meet the new U.S. requirement. 
The Coast Guard soon took the issue to the IMO and asked them to place 
a double hull requirement into MARPOL.
    After a relatively short period of review, the IMO amended MARPOL 
to require double hulls on tankers. A measure was also adopted that 
would limit the age of existing tankers although the age at which they 
would be phased out was conservative relative to OPA, i.e. the dates of 
phase-out were longer than the dates contained in OPA-90. This 
situation, where some tankers could trade to the U.S. and, when phased 
out of our trade, could remain in the rest of the world's markets, was 
static until the late 1990's. On December 12, 1999 a vessel called the 
``ERIKA'' sank and caused a very damaging spill on the coast of France. 
It was noted in the European press that the ``ERIKA'' could not trade 
into the U.S. due to OPA-90 phase-out dates. The subsequent move by the 
European community was to ask the IMO to revise MARPOL and accelerate 
the phase-out date of existing single-hull tankers. Once again, the IMO 
started a discussion on amending MARPOL. The result is a new schedule 
that is a sliding scale much like OPA-90 although the new schedule 
still allows tankers to have older phase-out dates than those contained 
in OPA-90. In the later years of effectiveness for the new MARPOL 
changes, a tanker is allowed to trade up to 26 years of age. These 
changes to MARPOL came into force on September 1, 2002 or just four 
months ago. Regrettably, another incident in European waters occurred 
this past November and was the subject of the discussion at the 
conference we refer to above.
    The PRESTIGE sank after breaking in two off the coast of Spain. 
Once again, there was a call for action both in the European press and 
among representatives of the European Union. This incident, however, 
highlights a number if issues. While we are not privy to technical 
details and believe the cause or causes are still under review, we can 
comment on several steps taken by authorities that we believe are 
unacceptable.
    The master of the PRESTIGE knew he had a problem and requested 
permission to come into sheltered waters. That permission was denied 
and the ship was then at the mercy of her own devices in a heavy 
weather situation. When the ship subsequently sank, with no loss of 
life, the master was then taken into custody and placed in prison. Two 
nations, France and Spain then took steps to prevent single-hull 
tankers not only from entering their waters but also from being within 
200 miles of their coasts. We saw press coverage in December of tankers 
being escorted by naval vessels out of the 200 mile zone. Mr. Chairman, 
it was a singularly interesting moment to be at IMO debating the rights 
of sovereign nations to take steps regarding security and have actions 
being taken for environmental reasons that were in excess of those 
being debated for security measures. The PRESTIGE was not destined for 
a Spanish port; she was in innocent passage, so we believe the action 
taken violates international law.
    The topic of discussion among many at the IMO meeting involved 
phase-out dates and the fact that the PRESTIGE, like the ``ERIKA'' 
before her, could not enter U.S. waters. Several persons in authority 
positions in the European community were calling for a phase-out of 
tankers as a European Union action.
European phase-out Decision
    On December 20, the European Commission announced new measures to 
``protect our coasts''. The steps announced, which have to be adopted 
by the European Union Council and Parliament, include not allowing 
single-hull tankers to carry heavy fuel oil in European waters, phasing 
out single-hull tankers to an accelerated schedule from the MARPOL 
schedule, and a special inspection program for those single-hull 
tankers not yet affected by the phase-out. There are several points 
about this action:

   There is no logical connection between the structural 
        failure of the PRESTIGE (or the ``ERIKA'') and the debate about 
        single/double hulls, nor any suggestion that a double hull 
        would have made any difference,

   The EU program to accelerate the phase-out dates does not 
        include an analysis of the practicability in terms of 
        shipbuilding and ship recycling capacity,

   The EU is damaging the role and objectives of the IMO, the 
        same organization that wrote the new phase-out schedule just 
        come into force at the request of the EU,

   The first step taken by authorities after the incident was 
        to criminalize the incident,

   The denial of a refuge for the tanker when she was in 
        trouble is not mentioned nor is a review of the policy 
        mentioned.

Effect on Tankers Calling at U.S. Ports
    The EU proposal sets a 23-year age date for phase-out. That is the 
same as OPA. The EU proposal does not allow any additional time for 
lightering or calls at offshore terminals; OPA-90 does. OPA-90 allows 
single-hull tankers older than 23 years to offload at a deepwater port 
or to lighter in designated lightering zones more than sixty miles 
offshore. The controlling phase-out dates for these tankers are the new 
dates contained in MARPOL that came into effect in September. The 
maximum age in MARPOL is 26 years although the phase-out allows some 
older tonnage to continue following a sliding scale. We considered all 
tankers older than 23 years. We are indebted to Poten and Partners, a 
firm that provides analysis and data to the industry, for the basic 
data on numbers of tankers, sizes and date of build.
    There are 1637 tankers over 50K dwt that serve world trade. Of 
those, 168 are over 23 years old. That is the potential number that 
would be permitted to call at our offshore terminal or be involved in 
lightering, however we really cannot predict what can happen in the 
market place and using the total number of 168 would be highly 
misleading. Many of the tankers are not of a size appropriate to use in 
the Gulf of Mexico. If they are currently in the European market, they 
would go elsewhere than the U.S. We can assume that not all these 
tankers are calling at European ports or what portion of their voyages 
over a time period have them calling into Europe. A number are involved 
in trades now that are totally outside Europe and the U.S. While we 
cannot give a firm number of tankers displaced into which markets, we 
can predict with a degree of certainty that the EU proposal will 
tighten up the market for double-hull tankers and there will probably 
be a rise in rates across the board.
    At this point, we should mention that 834 of the tankers are double 
hull and another 161 are double bottom or double side tankers. Single-
hull tankers make up less than forty percent of the tanker fleet today 
and the number continues to shrink.
OPA-90
    OPA-90 was a well thought out piece of legislation that balanced 
risk management and commercial impacts. Industry has planned capitol 
investment to comply with the OPA-90 phase-out regime. While the 
actions of the EU affecting these few tankers may deserve review, we do 
not believe that a wholesale look at OPA-90 is warranted. If the few 
tankers described above are a concern, they can be dealt with as a 
separate legislative issue from the phase-out that is taking place 
predictably and as planned.
Maintenance
    A discussion of phase-out based on age does not include the most 
important issue of any ship, i.e. maintenance. Age is a factor although 
a greater one is the maintenance of the ship. For many years, the Coast 
Guard has recognized the need for port state control inspections to 
ensure that ships calling into the U.S. meet the requirements of the 
safety and environmental protection treaties. These inspections are 
more critical than a one-dimensional look at a paradigm such as age. A 
concern recently voiced among the CSA membership is the continuance of 
the level of inspections by the Coast Guard. We recognize the Coast 
Guard is moving to a new department with security as a focus. We do not 
want to experience a lessening of the degree of oversight of the 
industry when the move takes place. The continuance of the high quality 
inspections should continue to serve us well and we support continuing 
the Coast Guard's budget for safety/environmental compliance 
inspections.
Other Issues
    The invitation to testify asked us to cover other issues. We have 
two: terrorism insurance and security/safety documents.
    Insurance is a major concern. Currently, our protection and 
indemnity insurance does not cover acts of terrorism. This was a 
theoretical concern until the ``LIMBURG'' was attacked. We have worked 
on this issue for a time now and our concerns have not lessened. The 
main point is one of pollution. Whether double hull or not, a vessel is 
strictly liable for an oil spill. If a spill is caused by a terrorist 
incident, the vessel is strictly liable and insurance is not available. 
Arguably, the pollution fund could be available although the 
determination is made after the fact and we believe that the decision 
about liability should not wait for oil on the water. We are working 
closely with the Coast Guard and others on this issue and would like to 
brief your staff on the issue. Any assistance your Committee could 
provide is deeply appreciated.
    The issue of our documentation on security/safety is one of 
confidentiality. Many of the CSA members will dovetail their vessel 
plans for security with the existing safety management plans. The 
safety plan was used as a paradigm for the security plan and each 
contains self-audits and management follow up. Our intention is to have 
these plans and documents as one the company can share with the Coast 
Guard and other government agencies with a reason to review them and 
limit the availability to others. At the conference, we were asked to 
meet with other nations' representatives to ensure the international 
language permitted the confluence of the two plans. We were successful 
and note the Coast Guard has recognized this in the Notice of Meetings 
they published on December 31, 2002.
    Mr. Chairman, we appreciate the opportunity to testify before your 
Committee today and would be pleased to answer any questions.

    The Chairman. Thank you, Mr. Cox.
    Mr. Godfrey.

        STATEMENT OF TOM GODFREY, PRESIDENT, COLONNA's 
   SHIPYARD, INC.; CHAIRMAN, SHIPBUILDERS COUNCIL OF AMERICA

    Mr. Godfrey. Mr. Chairman, thank you.
    My name is Tom Godfrey. I am President----
    The Chairman. Would you move the microphone closer. Thank 
you, Mr. Godfrey.
    Mr. Godfrey. Thank you.
    My name is Tom Godfrey. I am President of Colonna's 
Shipyard in Norfolk, Virginia. I am also Chairman of the 
Shipbuilders Council of America. The council is the oldest and 
most broad-based trade association representing all sectors of 
the commercial shipyard industry. Founded in 1920, SCA 
represents 71 shipyards--71 companies that own and operate 150 
shipyards over 24 states, including about 35,000 employees. Our 
member companies are involved in building and repairing 
America's commercial fleet, as well as the vessels involved in 
the U.S. military, the U.S. Coast Guard, and other mid-sized 
vessels included in the government operations. We maintain 
these vessels, we repair these vessels, and we also are active 
in maintaining vessels for the National Defense Reserve Fleet.
    Relative to OPA-90, the phase-out of single-hull tankers, 
clearly, these catastrophic spills in Europe have raised new 
issues. We are watching the EU very carefully right now, and it 
appears that new regulations are coming up, and it is quite 
possible that they are going to promulgate regulations that, 
frankly, validate the leadership of the United States in the 
action taken by this Congress 12 years ago in designing and 
implementing OPA-90.
    The EU proposal considers eliminating all single-hull 
vessels in a certain trade immediately. It would ban all 
single-hulls by 2010, and would impose very strict inspection 
schemes on vessels older than 15 years old. In some regards, 
the EU regulations that are under discussion may be more 
aggressive than OPA-90.
    This initiative by the EU, I think, raises several 
questions for Congress and for industry to examine at this 
point. We would ask, will the accelerated EU single-hull 
retirement schedule create a shipping problem, a shortage of 
hulls to supply the crude oil that we need to support our needs 
here domestically?
    The second question may be, what is the status of the 
domestic energy transportation needs as OPA-90 deadlines 
approach us? And should--the third question being, should OPA-
90 be modified or adjusted relative to the action taken by the 
EU?
    This is our comment relative to those questions. As we see 
it, in the global marketplace, there is sufficient ship 
construction capacity to meet the deadlines that are under 
discussion in the EU. The entire global fleet, about 1600 
tankers, could be replaced in a timeframe of only 7 years. 
About half of that fleet is already in the double-hull 
configuration.
    So, while we see the market being impacted, and perhaps the 
cost of transportation being impacted, we believe that the ship 
industry, the ship construction capacity, is out there to 
construct and deliver these new vessels.
    Relative to the second question, in the domestic petroleum 
markets, we see a mix of circumstances and we want to point out 
a few of those to you. There has been a very significant 
launching of new vessels in the market of tank barges. Based on 
our statistics, we believe about 60-65 percent of the large 
coastwise tank barge fleet is OPA-compliant today. We believe, 
based on construction to date, the progression of new double-
hull tank barges going into service is going to readily meet 
the OPA deadlines, and we feel very confident that that aspect 
of the industry will be ready.
    In the ship community, there are more questions about the 
availability of new double-hull vessels being available to meet 
the OPA-90 deadlines. Very few new vessels have been built. At 
this date, approximately 40 percent or so of the active tonnage 
is double-hulled, and there are very few or no contracts 
pending for new vessels at this time. I want specifically to 
say that, with respect to new product tankers, there have been 
no contracts signed since the mid-1990's.
    There are factors that come to bear relative to these 
circumstances. The oil majors are not offering long-term 
charter and transportation agreements to the owner-operators of 
ships. Economic profits are obviously very substantial for 
those that choose to continue to use these single-hull vessels 
until the bitter end.
    The liability for environmental damage is focused on the 
vessel owner and operator. Charterers, oil companies, 
producers, brokers, other people involved in the distribution 
of petroleum products, can limit their liabilities, and perhaps 
the analogy of the Japanese-built ship that is now registered 
in one country and managed by a company in another country is a 
good analogy.
    Charterers in most cases, being in business to make a 
profit, will utilize the lowest-cost transportation and I think 
the economic forces there are obvious.
    It is also a fact that markets are changing. The patterns 
of oil distribution are shifting. Supply and demand is moving. 
Clearly, some of the markets that were traditionally served by 
self-propelled tankers may be better-served more economically 
with today's newest tank barge and they are doing a marvelous 
job in many markets.
    The question concludes with, can the U.S. shipbuilding 
industry meet the need to build the projected tankers? Yes, we 
believe absolutely that is possible. Assuming conservatively 
that perhaps 15 tankers could be ordered, the industry could 
easily supply those over the next 5 years or so. The fact that 
the barge operators have ordered and received 32 large barge 
units in the last 3 years is evidence and affirmation of what 
our capabilities are. The same thing can be done with the 
ships.
    We believe that Congress must send a clear message to 
everyone concerned that U.S.-built ships, U.S.-owned and U.S.-
crewed double-hull vessels will be used to move our oil and our 
oil products along our coastlines and our river systems, and 
that there will not be the possibility of extension, or waiver, 
or modification of the OPA-90 deadlines. I know there has been 
a lot of discussion in industry, maybe not recently, but over 
the years since OPA was implemented, is there any possibility 
that those dates might be stretched?
    Congress may want to consider some additional measures to 
ensure that vessel safety and compliance is encouraged to be 
prompt and timely. For instance, we specifically would suggest 
that Congress consider implementing more stringent inspection 
requirements for vessels of a certain age, perhaps 15 years and 
older. That seems to be in step with what the EU is 
considering.
    We would also consider--would offer that Congress may need 
to revisit the structure of liability law to consider how we 
can clarify where the liability runs if a vessel does encounter 
a problem and spill oil. Charterers and other types of entities 
that are involved in this process should all equally share in 
whatever risk and liabilities there may exist.
    Further, we would maybe make a suggestion that Congress go 
back and look at reenacting some assessments on cargo moved in 
single-hull tonnage, and deposit those collections in the oil 
spill liability trust fund. This would create a clear economic 
incentive for owners to go ahead and make the transition to 
double hulls as soon as possible.
    Last, I would make one further comment, and that is with 
respect to the fact that we are concerned that the U.S. flag 
tanker fleet is not well-prepared to serve this country's 
military needs that are upcoming. There are studies on the 
record from the Military Sealift Command of the Navy and the 
United States Maritime Administration that project a 
significant shortage of double-hull tanker capacity in as early 
as 2005. Our military sealift requirements are critical, and 
failure to address those needs could have dire implications for 
our security here at home.
    In closing, the Shipbuilders Council appreciates the 
opportunity to testify, Mr. Chairman, and I would be very happy 
to answer any questions you may have.
    [The prepared statement of Mr. Godfrey follows:]

Prepared Statement of Tom Godfrey, President, Colonna's Shipyard, Inc.; 
               Chairman, Shipbuilders Council of America
    Good Afternoon Mr. Chairman and Members of the Committee. My name 
is Tom Godfrey and I am President of Colonna's Shipyard in Norfolk, 
Virginia. Colonna's Shipyard is a 128-year-old family owned business 
currently engaged in commercial and Navy ship repair and new barge 
construction activities.
    I am also the Chairman of the Shipbuilders Council of America. SCA 
is the oldest and most broad based trade association representing all 
sectors of the commercial shipyard industry. Founded in 1920, SCA today 
represents 71 shipyard companies that own and operate over 150 
shipyards in 24 states and employ approximately 35,000 workers. Our 
member companies build and repair America's commercial vessel fleet as 
well as support vessels for the U.S. military, U.S. Coast Guard vessels 
and other small and mid-sized government craft. We also repair and 
maintain Navy combatant ships, vessels in the National Defense Ready 
Reserve Fleet and other vessels needed to maintain our military 
readiness.
    Mr. Chairman, the spate of recent oil spills around the world and 
the reaction to those spills in the European Union and elsewhere is 
proof that Congress took the right course when it enacted the Oil 
Pollution Act of 1990 (``OPA-90'') in response to the EXXON VALDEZ 
disaster. In its simplest terms, that law mandates that all vessels 
calling at U.S. ports be double-hull by 2015. The environmental benefit 
of moving petroleum product in double-hull vessels far outweighs the 
negligible cost to the consumer that the double-hull requirement 
imposes. It is estimated that the total transportation cost of refined 
petroleum product moving from the Gulf of Mexico to New England is less 
than $.07 per gallon, a small price to pay to protect our coastlines 
from potentially devastating oil spills.
    It has taken the EU two major spills and several minor ones over 
the last few years to make the difficult economic and political 
decisions you made in 1990. Recent spills off the coasts of France and 
Spain could have been prevented, or at least minimized with more 
modern, double-hull ships. The most recent accident which occurred in 
the English Channel last week was minimized to some extent because the 
vessel in question was double-bottomed. Some have suggested that the 
spill could have been minimized even more with a vessel that was 
entirely double-hulled. No vessel, or any form of transportation for 
that matter, can protect 100 percent against potential spills, but 
double-hulls are safer under most circumstances.
    Now the Europeans in reaction to these spills are likely to take 
action, which will almost assuredly create more comprehensive 
protections against spills in EU waters than enacted in the OPA-90 law. 
Specifically, the EU proposals would prohibit carriage of heavy fuel 
oil in single-hull vessels immediately; ban single-hull vessels more 
than 23 years old immediately; phase-out all single-hull tonnage by 
2010; and, require vessels 15 years old to comply with more frequent 
and stringent inspection requirements. Individual European countries 
are considering even tougher actions such as banning all single-hull 
vessels from their ports immediately.
    This new EU action raises several questions:

   Will accelerated EU phase-outs create a tonnage shortage in 
        the international market, which could constrain the ability of 
        the U.S. to import crude and/or petroleum products?

   What are our domestic energy transportation needs and are we 
        doing what is necessary to ensure that adequate environmentally 
        safe petroleum product transportation will be available under 
        the OPA-90 requirements?

   Should the OPA-90 retirement schedule be accelerated to meet 
        or exceed EU plans and what would the impact of an accelerated 
        phase-out schedule be?

    Accelerated retirement schedules being considered by the EU will 
not create a petroleum transportation crisis worldwide. There is 
sufficient capacity to build tankers worldwide. Analysis performed by 
Poten & Partners, a well-known energy and transportation brokerage and 
consulting firm, estimates that the entire world tanker fleet of 1654 
vessels can be replaced every 6.6 years given current shipbuilding 
capacity worldwide. In fact, Poten & Partners reports that 107 tankers 
have been delivered in the last four years and that 70 large tankers 
are on order, and this before the EU enacted an accelerated phase-out 
requirement. International-flag operators have for some time been 
taking advantage of subsidized construction prices, mostly in Asian 
shipyards, to add to their tanker fleets well in advance of 
international regulations requiring them to do so.
    The result of this added tonnage is overcapacity in the oil 
transportation sector and depressed shipping rates as more double-hull 
tonnage is added to the international marketplace, while international 
owners try desperately to keep single-hull vessels operating for as 
long as possible. Until now, there simply has not been a clear and 
unequivocal signal to the world that old tonnage must be retired. As 
long as domestic and international charterers are unwilling to pay a 
premium for transportation in modern, double-hull vessels, operators 
will continue to utilize all single-hull tonnage available, much of 
which is registered in ``flags of convenience'' states that pose 
significant security risks when they call on U.S. ports and around the 
world.
    While an accelerated phase-out of single-hull tank vessels 
servicing European markets should not create an insurmountable shortage 
of vessels available elsewhere, additional vessel retirements 
especially of older, cheaper tonnage is expected to put upward pressure 
on international shipping rates potentially affecting decisions on 
whether to import or produce petroleum product at home through efforts 
such as the opening of ANWR. Higher international shipping costs could 
lead to more domestic production and increased domestic shipping 
demands.
    The larger question in my opinion, Mr. Chairman, is whether there 
will be sufficient U.S.-flag, double-hull capacity to meet domestic 
petroleum product transportation requirements. It has been a dozen 
years since OPA-90 was enacted and much remains to be done with the 
first major phase-out date for large, ocean-going tank vessels less 
than two years away.
    Demand for coastwise petroleum product movement is difficult to 
project with certainty. Weather, economic activity, the cost of 
petroleum overseas, and other transportation options all impact demand 
for coastwise transportation; however, a private study cited by the 
National Research Council in 1998 estimates that approximately 4.150 
million deadweight ton (dwt) or roughly 29 million barrels of capacity 
(tanker and tank barge) will be needed to meet domestic coastwise 
petroleum transportation requirements in 2005. These projections do not 
include transportation of crude oil from Alaska, nor do they take into 
account military requirements. \1\
---------------------------------------------------------------------------
    \1\ Statistics in this testimony do not include vessels that 
service the Alaska crude oil market. Vessels constructed for the 
Alaskan trade are significantly larger than those needed for domestic 
coastwise petroleum product transportation and are prevented by the 
economics of operating larger vessels from being interchangeable with 
vessels utilized in the coastwise trades. 


                                 ______
                                 
         \2\Sources: U.S. Maritime Administration, 2001; Clarkson's 
        Tanker Registry, January 1, 2000.
         \3\Sources: U.S. Corp of Engineers, Master File, 2001; 
        coltoncompany.com, U.S. Maritime Administration, 2001.
         \4\Demand: Wilson, Gillette & Co. (as cited in Double-Hulled 
        Tanker Legislation: An Assessment of the Oil Pollution Act of 
        1990, National Research Council, 1998.
    Today, there is approximately 815,000 dwt (21 tankers) (roughly 
5,705,000 barrels) of double-hull capacity in the domestic coastwise 
self-propelled tanker fleet. Of this available tonnage, only 456,000 
dwt (11 tankers) was built or rebuilt after OPA-90 was enacted and 
359,000 dwt (10 tankers) of this capacity will be 20 years old or older 
in 2005. In addition to the double-hull self-propelled tonnage 
available, an additional 1,297,000 dwt (29 product tankers) of single-
hull or double-bottom capacity will be available in 2005. \5\ Total 
coastwise tanker capacity in 2005 will be 2,112,000 dwt under the 
current retirement schedule.
---------------------------------------------------------------------------
    \5\ This includes six 46,000 dwt integrated tug/barges classified 
as tankers by the Coast Guard and the Corp of Engineers. These vessels 
phase-out under OPA-90 in 2012, 2013, and 2014.
---------------------------------------------------------------------------
    If the U.S. were to enact policies similar to the EU proposal and 
ban non double-hull tankers more than 23 years old from U.S. coastwise 
trade, all but one of the non double-hull U.S. flag tanker fleet would 
be forced into retirement by 2007. OPA-90 currently does not prohibit 
trade by double-hull vessels regardless of their age. The lack of 
double-hull tanker replacement construction and the age of the fleet 
that can remain in service under OPA-90 clearly illustrates that we are 
fast approaching a crisis point, and as the experience in Europe has 
shown there is clearly a greater risk of disaster with older single-
hull vessels.
    The one bright spot in this picture has been U.S.-flag tank barge 
operators who have been much more responsive to OPA-90 retirement 
schedules and requirements than those operating self-propelled vessels. 
U.S. shipyards and tank barge operators have worked together to develop 
new technologies such as articulated tug/barges (AT/Bs) to meet 
coastwise petroleum transportation requirements. AT/Bs are less 
expensive to build and operate than self-propelled tankers. They are 
safer and faster than traditional tug/barges or even integrated tug/
barges. \6\ Almost every large tank barge constructed in the last five 
years has been built in the AT/B design. Today, operators are 
considering even larger AT/Bs, equivalent in size to a handy-size 
product tanker, to replace portions of the self-propelled tanker fleet.
---------------------------------------------------------------------------
    \6\ AT/B systems allow the tug to connect into a notch built into 
the barge with a fixed connection that enables the tub and barge to 
move independently of each other. Integrated tug/barge systems look 
similar but have a rigid connection which does not enable independent 
movement of the tug and barge.
---------------------------------------------------------------------------
    Since OPA-90 was enacted, U.S.-flag tank barge operators have built 
or contracted for 48 large coastwise tank barges equaling roughly 
800,000 dwt (5,665,000 barrels) of capacity. In the last three years 
alone, U.S.-flag coastwise tank barge operators have ordered 32 large 
ocean-going barges with a capacity of 530,000 dwt from U.S. shipyards. 
There is 543,000 dwt of double-hull tank barge capacity built prior to 
1990 in the marketplace. In addition to double-hull tonnage, an 
additional 1,012,000 dwt (40 barges) of large ocean-going tank barge 
capacity will remain available for coastwise movements in 2005, 
bringing total U.S.-flag tank barge capacity in 2005 to approximately 
1,940,000 dwt (13,580,000 barrels).
    Total coastwise tank vessel--tankers and barges--capacity in 2005 
assuming all vessels currently under contract are delivered will be 
approximately 4,052,000 dwt, approximately 100,000 dwt below projected 
demand. The shortfall grows to 756,000 dwt by 2008 assuming no growth 
in transportation demand and the OPA-90 retirement schedule remains 
unchanged. The shortfall will grow to 953,000 dwt assuming the modest 
growth in coastwise petroleum transportation demand projected in the 
National Research Council analysis. To put these numbers into 
perspective, 953,000 dwt equates to approximately (10) 40,000 dwt self-
propelled product tankers, (6) 280,000 barrel AT/Bs, (6) 150,000 barrel 
barges, (10) 100,000 barges, and (10) 80,000 barrel barges.
    Can U.S. shipyards build the tonnage needed to meet demand by 2008? 
The answer is yes as long as vessel operators place orders in a timely 
and orderly manner. Indeed, if they would approach it in this way, 
significant cost reductions could be obtained through series 
construction efficiencies. Seven shipyard companies are building/
converting or have recently delivered large ocean-going tank barges. 
There are several additional shipyards with the capabilities and 
infrastructure needed to build tank barges in the range of 150,000 
barrels or below if the demand requires it. There are at least six 
shipyards today that have the capability to build larger--280,000 
barrel range--AT/Bs. Construction of these larger ``handy-size tanker 
equivalent'' AT/Bs is expected to take 12 to 14 months with follow-on 
vessels every four to six months.
    The number of shipyards with the capacity today to build self-
propelled tankers is smaller. There are currently three commercially-
oriented shipyards capable of beginning construction of self-propelled 
tankers immediately and several others have expressed interest in this 
market, but they are either engaged in ship construction of another 
type or would require facility modifications. Construction of the first 
of a series of 40,000 dwt product tankers will take 20 to 24 months to 
complete depending on engineering and design requirements. Follow-on 
vessels can be delivered every four to six months thereafter. The first 
ships can be delivered in 2005 assuming contracts materialize very 
soon. U.S. shipyards can deliver at least a dozen product tankers by 
2007; however, this simply cannot be achieved if U.S. owners persist in 
delaying investments in new tonnage. In our view, failure to sign 
construction contracts within the next 12 months will make it virtually 
impossible for new tonnage to be delivered in advance of the current 
OPA retirement schedule.
    Mr. Chairman, there has been some discussion over whether the U.S. 
should accelerate vessel phase-outs under OPA-90 in reaction to likely 
actions by the EU. This is a decision that ultimately lies with 
Congress, but I would ask you to consider that a large number of 
tankers and large tank barges must be built over the next several years 
to meet the current OPA-90 retirement schedule and to consult with the 
vessel operator and shipbuilding industries before taking any such 
action.
    Because the commercial marketplace does not differentiate in rates 
between new vessels and older, fully depreciated assets, commercial 
operators are in effect encouraged to keep old tonnage operating for 25 
years and beyond. We ask you today to send a clear message to the 
marketplace that Congress and the American people will not tolerate any 
delay in complying with the OPA-90 dictate that petroleum product must 
be moved in modern, double-hull, U.S.-flag tonnage. In fact we would 
ask you to consider options to encourage voluntary compliance more 
quickly than the current law requires, such as extending the liability, 
to a greater extent, for future damages to the oil producers, refiners 
and distributors. You might also consider reinstituting the assessment 
on petroleum product moved in single-hull vessels with the assessment 
to be deposited into the Oil Spill Liability Trust Fund. This would 
bring the transportation cost for product moved in newer, more 
expensive double-hull vessels into parity with the cost of using older, 
fully depreciated, vessels. We would also ask you to consider requiring 
a more comprehensive and frequent inspection regime, similar the EU 
proposal, for U.S.-flag vessels to ensure that all vessels used to move 
heavily pollutant cargoes are in sound condition.
    Mr. Chairman, my testimony focuses primarily on the OPA-90 law as 
it relates to supply and demand of the domestic coastwise petroleum 
transportation market from the shipbuilders perspective. I would; 
however, be remiss if I did not at least mention the importance to our 
military readiness of an adequate U.S.-flag tanker fleet. Our armed 
forces depend on a mix of vessels in the Military Sealift Command 
(MSC), the National Defense Ready Reserve Fleet, U.S. flag commercial 
fleet and ``Effective U.S. Control'' \7\ fleet to meet sealift 
readiness requirements. Recent studies by MSC and the U.S. Maritime 
Administration project significant tanker capacity shortages as early 
as 2005 for this critical sealift need based on single-hull retirements 
in all of these fleets. We must find a way (other than through 
reflagging of foreign built vessels) to ensure adequate U.S.-flag tank 
vessel tonnage to meet our commercial and military needs.
---------------------------------------------------------------------------
    \7\ EUSC fleet is made up of vessels owned by U.S. citizens but 
operated under the flags of the Marshall Islands, Honduras, Liberia, 
Panama and the Bahamas.
---------------------------------------------------------------------------
    Mr. Chairman, I want to thank you for holding this hearing today. 
America's commercial shipyards stand ready to construct vessels 
necessary to meet our domestic petroleum transportation requirements in 
an efficient manner. Very few issues are as important to our economic 
and national security as our access to oil and petroleum products and 
our ability to transport these products on U.S.-built, U.S.-owned and 
U.S.-crewed vessels.
    In closing, Mr. Chairman, I urge the Committee to send a clear 
message to the marketplace that Congress will not under any 
circumstance consider any delay in the double-hull requirement in the 
OPA-90 law.
    Thank you and I will be happy to answer any questions.

    The Chairman. Thank you, sir.
    Mr. Sandalow, welcome.

 STATEMENT OF DAVID SANDALOW, EXECUTIVE VICE PRESIDENT, WORLD 
                         WILDLIFE FUND

    Mr. Sandalow. Thank you, Senator. With your permission, I 
will submit my written statement for the record.
    The Chairman. Without objection.
    Mr. Sandalow. I am pleased to be here today to testify on 
behalf of the World Wildlife Fund, one of the largest nature 
conservation organizations in the world. WWF currently works in 
more than 80 countries, thanks to the support of 1.2 million 
members in the United States, and more than 5 million members 
worldwide.
    Mr. Chairman, I come here today with a simple message: 
There are reasonable and prudent steps that we should take to 
protect our oceans from major oil spills. In this oral 
statement, I will recommend two such steps: first, accelerating 
the phase-out of single-hull tankers; and second, of critical 
importance, building a network of ``no go'' zones in our oceans 
that are off limits to tanker traffic.
    Mr. Chairman, the sinking of the tanker PRESTIGE off Spain 
in November grabbed the attention of millions around the world. 
But what is most striking about this accident is its 
familiarity. Since the EXXON VALDEZ ran aground roughly 13 
years ago, large spills have continued to take their toll on 
coastal communities and fisheries around the world.
    In 2001, for example, the Ecuadoran ship, JESSICA, spilled 
diesel and bunker fuel into the sea off the Galapagos Islands, 
imperiling one of the world's great ecological treasures. In 
November 2000, a single-hull tanker dumped 550,000 gallons of 
Nigerian crude oil near Port Sulphur in the Gulf of Mexico. In 
the past decade, eight tankers have accidentally spilled at 
least 1 million gallons of oil into the world's oceans.
    The costs of these spills are enormous. Consider: 550 miles 
of coastline, the entire Atlantic coast of the Spanish province 
of Galicia, have been closed to fishing and shellfish-gathering 
since the PRESTIGE spill, affecting 90,000 people whose 
livelihoods depend directly on these activities. The damages 
associated with the EXXON VALDEZ spill have been estimated to 
exceed $2 billion. And although the United States has taken 
important steps in the past to prevent similar disasters, most 
notably by passing OPA, we must do more.
    I will speak very briefly today to two steps that we can 
take. First, we must eliminate the riskiest vessels. Present 
U.S. and international law calls for the phase-out of single-
hulled tank vessels by 2015. Yet incidents like the PRESTIGE 
remind us that we are still at risk, and that 2015 remains a 
long ways off. Today the majority of tankers carrying oil out 
of VALDEZ are still not double-hulled. As late as this summer, 
the average age of tankers in the Trans-Alaska Pipeline trade 
between VALDEZ and the U.S. West Coast was 20.5 years.
    Accelerating the elimination of single-hulled vessels is a 
good idea whose time has come. Knowledgeable observers note 
that a quicker timetable is realistic. An OECD report suggested 
a phase-out in the next 7 to 9 years may be possible. The 
United States should carefully consider such advice and support 
the quickest possible removal of single-hull tankers both in 
our home waters and abroad.
    Second, Mr. Chairman, and very critically, we should build 
a global network of ``no go'' zones in our world's oceans. Even 
under an accelerated phase-out timetable and other measures 
that have been discussed today in this hearing, single-hulled 
and unsafe vessels will continue to pose a threat to marine 
biodiversity and coastal commerce for years to come.
    Moreover, double-hulled tankers, although they do better 
than single-hulls in preventing pollution, are by no means a 
panacea, as Mr. Cox has said before me on this panel. 
Accordingly, we urge the United States to play a leadership 
role in establishing a global network of ``no go'' zones where 
tanker traffic would be prohibited.
    IMO rules provide an important mechanism for the 
designation of such zones, known as Particularly Sensitive Sea 
Areas, PSSA's. Our Nation should be active in promoting the use 
of this important tool by the IMO. In our own waters, we should 
seek ``no go'' zone status for areas that are critical to the 
ocean web of life, or of special importance to commercial and 
recreational fishermen and others who rely on the sea.
    As a starting point, the United States should strongly 
consider petitioning the IMO for special protection of: first, 
areas of special importance to the economy of coastal 
communities, including places designated as essential fish 
habitat under the Magnuson-Stevens Fishery Conservation and 
Management Act; and second, areas of special biological 
importance, such as our national marine sanctuaries. These ``no 
go'' zones can make a huge difference in protecting the world's 
oceans.
    Mr. Chairman, WWF thanks you and the Members of the 
Committee for the opportunity to testify today. We stand ready 
to assist the Committee in shaping constructive solutions to 
the serious continuing problem of major oil spills in the 
world's oceans.
    Thank you.
    [The prepared statement of Mr. Sandalow follows:]

 Prepared Statement of David Sandalow, Executive Vice President, World 
                             Wildlife Fund
Introduction
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to testify today. I am David Sandalow, Executive Vice 
President of the World Wildlife Fund. WWF is the largest private 
conservation organization working internationally to protect wildlife 
and wildlife habitats. We currently sponsor conservation programs in 
more than 100 countries, thanks to the support of 1.2 million members 
in the United States and more than 5 million members worldwide.
    WWF has a keen interest in the issue before this Committee. With 
offices and programs around the world, we have too often witnessed 
first hand the devastating effects of tanker spills on marine wildlife. 
WWF has a major presence in Spain, and is playing a significant role in 
the wake of the PRESTIGE spill. WWF experts are helping train 
volunteers to clean oil-covered birds, advising authorities on wildlife 
rescue and treatment and coordinating volunteers cleaning beaches and 
rescuing animals.
The Cost of Inaction: Long Time No Sea
    The sinking of the tanker PRESTIGE less than two months ago 
reminded us once again of the grave risk posed by irresponsible 
shipping to the marine environment and coastal communities. As the 
tragedy in Galicia unfolded, Americans recalled the disastrous 
grounding of the EXXON VALDEZ thirteen years ago and the ecological 
nightmare that was its aftermath. These incidents are but two examples 
in a long line of accidents involving oil tankers. Their effect on the 
web of life in our oceans--and on the millions of people who derive 
their livelihoods from it--has been both incredibly destructive and 
long-lived. Remarkably, we seem to forget these biological and human 
impacts soon after each incident disappears from the front page. And 
their costs to nature and coastal economies are discounted each time we 
formulate policies to prevent future spills.
    It is time for a more honest reckoning of the cumulative price we 
have paid for ignoring the problem of sub-standard shipping. As we 
weigh the need for new policies to prevent spills in the wake of the 
PRESTIGE disaster, we must base our decisions on a full accounting of 
these costs. Too often the price tag of more effective regulation has 
been amplified while the biological effects of inaction, not to mention 
the hard economic costs of oil spills, have been given short shrift. 
Clearly there are real costs associated with more rigorous tanker 
inspection requirements and better vessel design standards; but they 
are more than outweighed by the price we have paid for adhering to the 
status quo. Some cases in point include:

   550 miles of coastline (the entire Atlantic coast of 
        Galicia) have been closed to fishing and shellfish gathering 
        since the PRESTIGE spill, affecting 90,000 people whose 
        livelihood depends directly on these activities. Galicia 
        accounts for 40 percent of the total Spanish fish catch (it is 
        the foremost fishing region in all of Europe). Experts estimate 
        economic and environmental recovery in the region will take at 
        least a decade.

   Damages associated with the EXXON VALDEZ spill exceeded $2 
        billion. The spill's environmental toll is still being felt 
        today. Of the 28 species and resources studied since the spill, 
        recovery objectives have only been met for seven.

    Although the United States has taken important steps in the past to 
prevent similar disasters--most notably by passing the Oil Pollution 
Act of 1990--we must do more. Single-hulled tankers still pose a direct 
threat to America's marine environment. Our most valuable ocean areas 
remain unprotected. In addition, we must recognize that America has a 
direct stake in the health of the global oceans. Our interests at home 
are affected in many ways by activities that take place far from our 
shores. Much of the fish that we consume in the United States is 
produced elsewhere. Many of the jobs in our seafood sector depend on 
the productivity of fisheries located on the opposite side of the 
globe. The prevention of oil spills in foreign waters is in keeping 
with our own national interests.
    WWF supports a three-part prescription for preventing future 
disasters like the PRESTIGE incident, and minimizing the impact of 
accidents that do occur. We must accelerate the removal of substandard 
tankers from ocean commerce, speeding up the timetable for phasing out 
single-hulled vessels to the extent practicable. We must insist on a 
system of real accountability for oil transport at sea, focussing on a 
more effective regime for tanker inspection and new mechanisms that 
ensure real flag state responsibility. Finally, we must take steps to 
protect our most valuable ocean areas by making them ``off limits'' to 
tanker traffic.
Eliminating the riskiest vessels
    Present U.S. and international law calls for the phase-out of 
single-hulled tank vessels by 2015. This requirement is the centerpiece 
of the Oil Pollution Act of 1990, and the most significant shift in 
policy associated with the EXXON VALDEZ spill. Yet incidents like the 
PRESTIGE sinking remind us that we are still at risk and that 2015 is a 
long way off.
    Today, the majority of tankers carrying oil out of Valdez are still 
not double-hulled. As late as this summer, the average age of tankers 
in the Trans-Alaska pipeline trade between Valdez and the U.S. West 
Coast was 20.5 years. And outside of the United States, ``garbage 
ships'' like the PRESTIGE transport oil through sensitive ocean areas 
every day.
    Given the biological, economic and human costs of disasters like 
the PRESTIGE spill, accelerating the elimination of single-hulled 
vessels is a good idea. Knowledgeable observers note that a quicker 
timetable is not unrealistic: an OECD report suggests that a phase-out 
in the next seven to nine years may be possible. The United States 
should carefully consider such advice and support the quickest possible 
removal of single-hulled tankers, both in our home waters and abroad.
Ensuring International Accountability
    The current approach to setting international standards for 
shipping has tended to be reactive, ponderous and based on industry-
driven compromises. Even where rules have been agreed on 
internationally, ensuring compliance has been a major problem. 
Enforcement of shipping regulations relies largely on the actions of 
flag states. Many flag states take these responsibilities seriously but 
some--often referred to as flags of convenience (FOC)--profit from 
allowing foreign ship operators to register vessels in their nation's 
name but fail to effectively oversee the ships that fly their flag. The 
FOC system turns ship registration into a business and creates a 
competitive advantage for states that allow sub-standard shipping 
practices. The PRESTIGE spill was in large measure a product of this 
system.
    Ultimately, the major weaknesses that exist in current 
accountability mechanisms can only be addressed through the fundamental 
reform of international law. In the best of worlds, this would involve 
revisiting the relevant provisions of the United Nations Convention on 
the Law of the Sea (UNCLOS) and the United Nations Convention on the 
Conditions for Registration of Ships. In the shorter term, expedited 
consideration of the proposals that have emerged since the PRESTIGE 
incident for beefing up vessel inspections should be a priority--as 
should new measures to require that the details of ownership and 
management of ships be fully transparent. The PRESTIGE story 
demonstrates that current arrangements make it very difficult to 
identify the real owners of vessels and hold them accountable.
Protecting Sensitive Ocean Areas from Future Spills
    Even under an accelerated phase-out timetable, single-hulled 
vessels will continue to pose a threat to marine biodiversity and 
coastal commerce for a decade. Moreover, although casualty data 
demonstrates the positive impact of double-hulled tankers in preventing 
pollution, they are not a complete panacea. So while WWF strongly 
supports a stepped-up effort to eliminate substandard vessels and 
strengthen inspection protocols and design standards, we also recognize 
that these initiatives can not prevent oil spills altogether--and may 
do little to eliminate spills in the short-term.
    Accordingly, we urge the United States to play a leadership role in 
establishing a global network of ``no go'' zones where tanker traffic 
is prohibited. International Maritime Organization rules provide an 
important multilateral mechanism for the designation of such zones, 
known as Particularly Sensitive Sea Areas (PSSAs). PSSAs are areas of 
the ocean that need special protection because of their ecological or 
economic significance and their vulnerability to the harmful impacts of 
shipping activities. Within these areas shipping traffic can be more 
carefully regulated, or prohibited altogether. Coastal nations may 
petition the IMO to have important sea areas recognized as PSSAs--a 
process that assures designations will reflect national priorities as 
well as international interests in maritime commerce. Our nation should 
be more actively promoting the use of this important conservation tool 
by the IMO.
    In our own waters, we should seek PSSA status for areas that are 
critical to the ocean web of life, or of special importance to 
commercial or recreational fishermen and others who rely on the sea. As 
a starting point, the United States should strongly consider 
petitioning the IMO for special protection of:

   Areas of recognized biological importance, such as our 
        national marine sanctuaries, and

   Areas of special importance to the economy of coastal 
        communities, including places designated as essential fish 
        habitat under the Magnuson-Stevens Fishery Conservation and 
        Management Act

Conclusion
    In closing, Mr. Chairman and Members of the Committee, WWF wishes 
to express our gratitude for your active interest on oil spills and 
protecting the marine environment from their impacts. We stand ready to 
assist the Committee in providing constructive solutions to this 
serious problem. I am happy to answer any questions you may have.

    The Chairman. Thank you very much.
    Mr. Rauta, please help me with the pronunciation.

 STATEMENT OF DRAGOS RAUTA, TECHNICAL DIRECTOR, INTERNATIONAL 
     ASSOCIATION OF INDEPENDENT TANKER OWNERS (INTERTANKO)

    Mr. Rauta. Thank you very much, Mr. Chairman. Good 
afternoon, Mr. Chairman. My name is Dragos Rauta.
    The Chairman. ``ROU-tah,'' thank you.
    Mr. Rauta. Yes. I am the Technical Director of INTERTANKO 
and U.S. representative of INTERTANKO. INTERTANKO is a trade 
association representing a majority of the world tanker owners 
and operators. Our members operate more than 2,000 tankers. 
This is more than 70 percent of the world's independent fleet. 
INTERTANKO ships fly the flags of more than 40 countries, 
including the United States, and transport more than 60 percent 
of all the oil and petroleum products imported into the United 
States each year.
    INTERTANKO appreciates that this Committee has taken an 
interest in international maritime safety issues so early in 
this Congress. We are pleased to be able to appear here this 
afternoon. I have submitted for the record a more complete 
statement. In this short oral presentation, I would only 
highlight a few points, particularly in light of recent 
European actions that follow the loss of vessel PRESTIGE.
    First, the international nature of the marine 
transportation system means that effective marine safety 
measures must be developed and accepted globally. No one nation 
or region can unilaterally decree new safety or prevention 
measures without having impacts, many of them potentially 
negative, in other nations or regions.
    Second, while there is an understandable political impulse 
to react immediately to issues raised by marine or aviation 
casualties, this impulse must give way to the need for accurate 
information about the cause of a casualty and to efforts to 
gain international consensus on remedial measures.
    Third, unilateral European bans on the carriage of 
particular types of petroleum and proposals for accelerating 
double-hull requirements undermine existing international 
safety mechanisms and, more immediately, threaten to fragment 
artificially the international oil transport markets. If there 
are remedial measures that are clearly suggested by the causes 
of the PRESTIGE spill, they should be placed before the 
International Maritime Organization and applied globally. 
Arbitrary restrictions on cargoes, vessels' ages, and vessel 
designs, for example, double hulls versus single hulls, bear 
little connection to what is currently known about the cause of 
this incident.
    Fourth, although we all understand the desire of the 
governments of coastal nations affected by the PRESTIGE 
disaster to appear decisive, there is no justification for 
interference by those nations with the right of freedom of 
passage through their exclusive economic zones, a right 
enshrined in the United Nations Convention of the Law of Sea 
and established by international public law. The maritime 
nations of the world, particularly the United States, must 
speak forcefully against French and Spanish interference with 
the lawful activities of vessels that conform to all 
internationally accepted safety standards. Well-established 
principles of freedom of passage must be defended for the 
benefit of all nations, including the United States.
    Fifth, maritime nations must give urgent attention to the 
designation of ports of refuge. Never should a ship in distress 
like the PRESTIGE be forced out to sea to break up when there 
exists a chance of moving into sheltered areas where damage can 
be contained. With regard to the PRESTIGE, it should be noted 
that its cargo tanks were substantially intact at the time the 
ship was warded out to sea. Had it not been forced out by 
Spanish authorities, the resulting pollution and areas impacted 
very likely would have been a small fraction of what we 
experienced.
    Sixth, before new measures are created we must inquire 
whether existing flag and port state obligations are being 
properly implemented. INTERTANKO has worked in partnership with 
the United States Coast Guard to promote effective port state 
control in the United States. We hope that this success can be 
repeated in other nations' ports.
    Finally, the inclination in the United States and abroad to 
treat marine casualties as criminal matters is bad policy and 
harmful to efforts to protect ships, crews, and the marine 
environment. Absent gross negligence or willful misconduct, no 
officer or crew member should be incarcerated because a ship 
has been lost or damaged at sea. No response to a casualty 
should be compromised by fear of fines or imprisonment. No 
investigation should be complicated by concerns that honest 
answers will land people who have done no intentional harm in 
jail.
    Shipowners in the United States and other nations have 
incurred enormous expenses in modernizing their fleets and in 
ensuring the safe operation of their vessels. The pace of 
double-hull conversions worldwide is testimony to the immense 
capital commitments that shipowners have borne to meet current 
legal requirements, and to improve the quality of their fleets. 
Safety has advanced considerably over the past 20 years. 
Continued progress depends on the diligent daily efforts of 
shipowners and crews. National and regional governments must 
act responsibly to protect the benefits of these efforts.
    Thank you for your interest in these important issues. I 
will answer any questions you may have to the best of my 
ability. I assure you that INTERTANKO will continue--as it has 
for many years--to make its expertise available to the Congress 
and the administration. We have made substantial progress and 
look forward to continuing improvements in the efficient 
maritime transportation of the commerce of the United States.
    The Chairman. Thank you, Mr. Rauta, and your complete 
statement will be made a part of the record.
    [The prepared statement of Mr. Rauta follows:]

 Prepared Statement of Dragos Rauta, Technical Director, International 
         Association of Independent Tanker Owners (INTERTANKO)
    Good afternoon. I am Dragos Rauta from the International 
Association of Independent Tanker Owners (INTERTANKO). INTERTANKO is an 
international trade association representing the majority of the 
world's tanker owner and operators. INTERTANKO has 239 members 
controlling some 2,050 tankers with a total of 157.7 million tons 
deadweight (dwt) capacity. INTERTANKO members represent approximately 
70 percent of the world's independently owned tanker fleet above 10,000 
dwt. Tankers operated by INTERTANKO's members transport more than 60 
percent of the oil and petroleum products imported into the United 
States. In addition to its full members, INTERTANKO also has 287 
companies which are associate members. INTERTANKO has offices in Oslo, 
London, Singapore and Washington, DC.
    INTERTANKO appreciates the opportunity to be here today to discuss 
the implications of the recent marine casualty involving the tanker 
PRESTIGE off the coast of Spain. INTERTANKO is recognized as a leading 
advocate of tanker safety by national and international public and 
private organizations around the world. Our program emphasis has been 
on finding meaningful safety measures based on sound technology and 
procedures that can be applied globally to protect our crews, our ships 
and the global marine environment.
I. PRESTIGE Accident
    INTERTANKO is grateful that the crew of the PRESTIGE is safe, due 
primarily to prompt and successful rescue operations conducted by 
Spanish maritime authorities. We also note the bravery of the Master 
and his two senior colleagues who remained on board in efforts to save 
their ship. INTERTANKO also commends the oil spill response efforts 
being undertaken by national and private entities to prevent and 
minimize environmental damages from this accident.
    The PRESTIGE accident has caused major economic impacts to persons 
who earn their living from the sea. While prevention must always be the 
first goal of government and industry, INTERTANKO is keenly ware of the 
human and environmental costs of marine oil spills. INTERTANKO 
champions continual review of the resources and technologies available 
for response and for support of those whose work and property are 
affected by these casualties.
    As in the case of any marine casualty, a complete and thorough 
inquiry into the causes of the accident must be pursued. Currently, 
none of us, and indeed no one in Europe, knows with precision what 
caused the loss of the PRESTIGE. Until we know the cause of the initial 
structural damage, we cannot intelligently determine whether specific 
remedial measures are necessary. Structural failure of some sort 
appears to have been an important contributor to this incident, but we 
do not know whether the age of the vessel was a factor or whether a 
double-hull vessel would have fared any better in the heavy November 
seas that doomed the PRESTIGE.
    We believe it is essential that every effort be made to investigate 
and fully understand the circumstances of this accident. This includes 
a complete assessment of the historical record of the ship, its tragic 
last voyage and all the events surrounding the accident. We are 
therefore gratified to see that initial reports concerning the 
investigation underway have been, and hopefully will remain, open and 
impartial. We are however very concerned that vessel's Master is still 
being detained, being unable to meet an extremely unreasonable level of 
bail and that his circumstances are prejudicing the conduct of post-
incident investigations. When a vessel is lost or is fighting for its 
life, imminent incarceration should be the last thing a master should 
have to worry about.
II. European Reaction
    European organizations and governments have reacted swiftly, but 
without adequate information, to the PRESTIGE accident. Many of these 
reactions and subsequent initiatives generally lack supporting 
analysis, violate obligations under international conventions, and have 
the potential to create unnecessary economic hardships for many within 
Europe. More to the point of these hearings, many of the measures being 
considered in Europe have the potential of imposing adverse economic 
and safety impacts on other parts of the globe, including the United 
States. These impacts are not intentional, but rather reflect the 
reality of international transport of oil. When one nation or region 
arrogates to itself the right to impose standards that apply only in 
that region, other nations will be affected, often adversely. For this 
reason, it is essential that all significant marine safety measures be 
the product of international consensus. To gain that consensus, 
measures that address vessel design and operations must address 
documented issues and must be reasonable responses to those issues.
    The European Commission issued proposed rules on December 20, 2002 
in the form of a ``Proposal for a Regulation of the European Parliament 
and of the Council amending Regulation (EC no 417/2002) on the 
accelerated phasing in of double hull or equivalent design requirements 
for single hull oil tankers and repealing Council Regulation (EC) No 
2978/94''.
    This proposal includes basically three amendments to existing 
regulations:

        1. Mandating that heavy grades of oil can only be carried by 
        double-hulled tankers;

        2. Shortening the phasing out schedule of single-hulled 
        tankers; and

        3. Broadening application of the special inspection regime for 
        tankers, the so-called Condition Assessment Scheme, which is 
        designed to assess the structural soundness of single-hulled 
        tankers over the age of 15 years.

    The Commission urged the European Parliament and the Council to 
adopt these measures as soon as possible so that they may enter into 
force by March 2003. The Commission also called upon European Union 
(EU) member States to ensure that similar measures are adopted by the 
International Maritime Organization (IMO).
    Additionally, certain EU member states have taken unilateral 
measures in the aftermath of the PRESTIGE accident. For example, on 
December 13, 2002, a Royal Decree-law was published by the Spanish 
Government banning all single-hull tankers (regardless of registry) 
carrying heavy fuel oil, tar, asphaltic bitumen and heavy crude, from 
entering Spanish ports, terminals or anchorages. This decree entered 
into force on January 1, 2003. Spain and France also unilaterally 
prohibited all single-hull tankers carrying heavy fuel oils and heavy 
crude oil from transiting through their 200 nautical mile Exclusive 
Economic Zone (EEZ). Portugal has supported this position. This order 
was implemented almost immediately, resulting in Spanish and French 
warships intercepting tankers in their EEZ and preventing them from 
transiting and utilizing internationally recognized innocent passage 
and rights of freedom of navigation.
III. Concerns with Europe's Response
    INTERTANKO is obviously very concerned with these initiatives and 
has undertaken to work with the EU, its member states and other 
organizations to develop appropriate responses to the PRESTIGE 
accident, particularly once all the parties have obtained adequate 
information about the cause of the casualty. However, several of the 
proposed measures potentially fly in the face of well-established 
international law and procedures. INTERTANKO must point out certain 
infirmities with the general thrust of the reactions of Spain, France, 
Portugal and the EU.
    Single-hull tankers: There is at present no evidence that the loss 
of the PRESTIGE was caused by its single hull construction or that a 
double-hulled tanker of similar dimensions would have survived where a 
single-hull tanker failed. It is misguided public policy to regard 
double hull construction as a panacea to all tanker casualties. Double 
hulls have been introduced to provide additional protection in low-
energy groundings and collisions, neither of which were factors in the 
PRESTIGE. Accelerated phase-out schedules for single-hull tankers 
operating in Europe totally ignore the less than two year old work that 
developed a timetable for phasing out single-hulled tankers and that 
took into account demand for oil, the capacity of shipyards and ship 
recycling yards, and the need to avoid a tanker tonnage shortage.
    Serious tanker owners with long-term commitments will find 
themselves in a most difficult situation if, for existing tonnage, new 
regulations make it impossible for them to fulfil their charter 
commitments. Some of these owners are of the quality that European 
authorities would have liked to serve the European trades on a regular 
basis. Sudden and ill-conceived changes can have dramatic market and 
safety implications.
    Vessel Age: The focus on age limitations for ships, regardless of 
whether they are equipped with a single or double hull, also causes 
particular concern. A well built and maintained vessel can last a 
considerable period of time, with some tankers in the United States 
fleet lasting almost 50 years. There is a flawed logic in limiting the 
age of any ship because it discourages the initial investment in 
durable and robust ships and dissuades expensive maintenance of the 
asset in later life. A robust and sophisticated new built tanker would 
require at least 25 years of trade to justify the initial investment. A 
related concern is the prospect that an internationally agreed-upon 
program or vessel service life and maintenance may be arbitrarily 
abandoned. This program mandates increasing maintenance and inspection 
requirements for vessels based on age and service. By proposing 
elimination of vessels based on arbitrary age limits, regardless of 
maintained condition, potentially undermine maritime safety.
    Economic Impacts: It is less than two years since a newly 
constructed timetable for phasing out single-hull tankers was 
introduced and agreed to at the EU and the IMO. This timetable took 
into account the demand for oil, the capacity of the shipyards and ship 
recycling yards, and the need to avoid a tonnage supply crisis. This 
may all be thrown out without proper consideration for tanker supply/
demand situation. Attached (Appendix 1) is a graphical comparison of 
single-hull tanker tonnage to be phased-out under the current EU/IMO 
phase-out for single-hull tankers regulation, the EU new proposal and 
the OPA phase-out schedule.
    Heavy Oil: Another problem is the confusion and potential chaos 
resulting from European proposals to restrict the carriage of ``heavy 
oil'' to or from European ports, offshore terminals or anchorage areas, 
to double-hull oil tankers. While the EU defines ``heavy grades of 
oil'' as heavy fuel oil, heavy crude oil, waste oils, bitumen and tar, 
application of this definition to real cargoes have widely different 
results.
    Attached (Appendix 2) is an analysis conducted by INTERTANKO on the 
EU-proposed definition for ``heavy crude oil'' and a list of crude oils 
(Appendix 3) which could be banned from transportation by single-hull 
tankers. This proposal is being made without a clear understanding of 
its impact, the actual characteristics of the cargo and how the cargo 
reacts if released in the environment. There is also no analysis 
regarding the likely impact on the availability of appropriate tanker 
tonnage and probable supply implications.
    Unilateral Action: INTERTANKO is opposed in principle to unilateral 
and regional legislation for international shipping. The free passage 
of vessels on the high seas of the world is fundamental principle of 
international law. It is in everyone's best interest to conduct 
discussions and impose regulations in the internationally recognized 
forum for marine matters, namely the International Maritime 
Organization (IMO).
IV. Control and limitation of ships in Europe's EEZ: Innocent Passage
    The EU has proposed to infringe on the long-held international 
principle of ships' innocent passage. This is a principle that the 
United States has fought to preserve and which the United States Navy 
continues to protect through ``freedom of navigation'' operations.
    Following the loss of the PRESTIGE, it is understandable that EU 
member states wish to ``analyze and address various ways to take 
measures to protect their coastal waters, including the territorial sea 
and exclusive economic zone'' . . . where there is a threat . . . ``to 
the marine environment''. EC Communication to the Parliament and 
Council of 6 December 2002. The actions of member states Spain and 
France however, it indicates that this review is meant to provide the 
basis for denying ships freedom of passage in European EEZ waters.
    The United Nations Convention on Law of the Seas (UNCLOS) Article 
56 grants Coastal States jurisdiction in the EEZ ``as provided for in 
the relevant provisions of this Convention with regard to, inter alia, 
the protection and preservation of the marine environment'' (Articles 
211 (5) and (6) and 220). Basically, 211(1) provides that States acting 
through the IMO shall establish international rules to prevent, reduce 
and control pollution . . . and promote the adoption of routing systems 
designed to minimize the threat of accidents which might cause 
pollution. 211(5) and (6) allow Coastal States to adopt laws in respect 
of their EEZs ``where the international rules and standards are 
inadequate to meet special circumstances and Coastal States have 
reasons for believing that a particular clearly defined area of their 
EEZ is an area where the adoption of special mandatory measures for the 
prevention of pollution from vessels is required . . . ''. Such laws 
may not impose design, construction, manning or equipment standards on 
foreign vessels other than generally accepted international rules and 
standards. Consultation with and approval by IMO is required, and at 
least 15 months notice of entry into force.
    Section 220(5) and (6) provide that where there is clear evidence 
that a vessel navigating in the EEZ or territorial sea has committed a 
violation of applicable international standards for the prevention of 
pollution resulting in a discharge causing or threatening significant 
pollution, the State can inspect or detain the vessel. Where there are 
clear grounds for believing a vessel has committed such a violation in 
the EEZ, the Coastal State can require information from the vessel to 
establish whether it has in fact occurred (220(3)).
    INTERTANKO recognizes the concerns of coastal nations over marine 
safety and environmental protection. These concerns must be addressed 
within the context of international law. In a joint press statement on 
December 12, 2002, the Round Table of international shipping 
organizations (INTERTANKO, the International Chamber or Shipping, the 
Baltic and International Maritime Council and INTERCARGO) condemned the 
continuing contravention of the Law of the Sea Convention by coastal 
states in the wake of the PRESTIGE incident. There is no justification 
for the illegal action taken by the Governments of Spain and France in 
ordering a number of foreign ships out of their 200 mile EEZ.
    Merchant ships are entitled to freedom of navigation through the 
EEZ. The flouting of international obligations by two important 
maritime nations sets an inexcusable and damaging precedent which 
should be strongly opposed by other nations worldwide. Unilateral 
action by one or more Coastal States, or the entire EU, cannot be 
condoned, when clearly there are adequate provisions within 
international law to address these concerns. The United States 
Government should voice its position on this very important 
international law issue.
V. Positive Indications
    While we have focused upon the negative aspects of the European 
reactions to the PRESTIGE, there are nevertheless some aspects that we 
believe are positive:

   Long overdue attention that is now being given to Places of 
        Refuge and the need for appropriate pre-planning of response 
        arrangements. Acceleration of the designation of places of 
        refuge is an essential activity not only in Europe but also 
        around the world. Some independent commentators have suggested 
        that much of the resulting oil pollution the PRESTIGE would 
        have been avoided if the Spanish authorities had offered the 
        vessel sheltered waters and assistance in cargo transfer in the 
        early hours of the vessel's struggle with the sea;

   There is recognition that several European states have 
        failed to live up to their obligations on Port State 
        inspections, and the hope that, in addition to enforcement of 
        those commitments, an enhanced inspection system will include 
        better targeting rather than adherence to simple numerical 
        targets;

   There must be renewed focus on compensation schemes, 
        including a call for States to ratify both the Carriage of 
        Hazardous and Noxious Substances and the Bunker Oil Pollution 
        Damage Conventions, as well as support the introduction of the 
        Supplementary Fund for Oil Pollution Compensation. The United 
        States should give consideration to joining international 
        conventions governing compensation for pollution;

   There has been confirmation that the ERIKA 1 package will be 
        implemented promptly;

   The case for establishment of a European Maritime Safety 
        Agency (EMSA). Such an agency could contribute to ensuring that 
        EU states uniformly implement and enforce internationally 
        agreed legislation and provide the European Commission with 
        much-needed maritime competence, including a thorough analysis 
        of post-accident inquiries, review of vessel maintenance and 
        construction standards, training of inspectors, and designation 
        of places of refuge; and

   Support for the development of a Flag State code of practice 
        and the model audit scheme (the PRESTIGE was registered in the 
        Bahamas, a flag with better safety record than many of the 
        European flags), as well as procedures for the authorization 
        and control of Classification Societies.

    All of these developments are positive. INTERTANKO is totally 
committed to working with all responsible parties to ensure the safe 
transport of oil and to protect the marine environment. The Association 
therefore will remain strongly engaged in assisting the international 
maritime community, European officials and the European Maritime Safety 
Agency to achieve these goals.
VI. Conclusion
    Marine casualties are traumatic events because of the human, 
environmental, and economic losses they often cause. This shock often 
leads to an impulse to respond politically before all relevant 
information is available. In terms of environmental protection, it is 
important to identify and understand problems before we try to solve 
them. It is obvious that some in the EU are determined to take 
unilateral action, in clear contradiction of previous statements in 
support of multinational international regulation of shipping. By 
contrast, some EU Member States do not agree with this approach and are 
advocating a more conscientious approach that does not risk diluting 
overall marine safety and environmental protection.
    The effect of hasty European proposals can have impacts both in the 
EU as well as other countries, including the United States.
    According to EIA (U.S. Energy Information Administration), the 2001 
total costs of U.S. oil imports were $102,747,000,000. Out of this, 
only $5,000,000,000 (or 5 percent) was the cost of transportation. A 
market with regional regulations means a less flexible and a tighter 
market. Such a situation will cause problems for oil companies and 
traders who wish to fix ships for optional discharge areas. Although, 
at this point in time, INTERTANKO cannot anticipate the level or 
significance of a possible increase of the transportation costs, one 
cannot exclude that the transportation costs to the U.S. could increase 
to $2.5 per barrel instead of the approximate costs of $1.5 per barrel 
for long haul crude been the average over the last years.
    INTERTANKO is not implying that the EU rules will induce immediate 
shortages of tonnage. It is, however, of interest to note that U.S. 
imports a large amount of crude oils which, under the proposed EU 
definition, might be considered ``heavy crude oils''. These are all 
Venezuelan crudes, some from West Africa and some from the Arabian 
Golf. If the EU goes ahead with current proposals, all these oils would 
need to be transported in and out of the EU by double-hull tankers 
only. This could result in shortage of adequate tonnage supply either 
in U.S. or Europe or other parts of the world.
    We are prepared to work with the United States Government to ensure 
its concerns are addressed both internationally and domestically. 
INTERTANKO believes very strongly that only through all parties working 
together can we truly achieve higher levels of marine safety and 
environmental protection.
    Thank you again for the invitation to be here today and I would be 
happy to answer any questions you may have.




APPENDIX 2
  An interpretation of the meaning behind ``Heavy Oil'', T.J. Gunner--
                             December 2002
Introduction
    Currently various proposals are circulating within the EU to ``ban 
the transport to or from ports of Member States of heavy grades of oil 
in single-hull oil tankers''. The term ``heavy grades of oil'' is 
further defined within the proposal to mean and include ``heavy fuel 
oil, heavy crude oil, waste oils, bitumen and tar''. In real terms and 
for the layman this would mean all oils that are ``dark and sticky'' 
and impact the environment. How can the terms ``Dark and Sticky'' be 
associated with a defined grouping of all the infinite number of 
differing oils that are carried by tankers today.
    Given the association of the phrases with heavy fuel, tar, and 
bitumen and the use of the term ``heavy'' this would imply the use of 
the physical parameter of density as the guideline parameter. The 
parameter of ``Density'' reflects the ``heaviness'' of all substances 
where for example the density of lead is higher or heavier than that of 
water--in other words it sinks in water. However, is it the intention 
of the EU Commission, by use of this terminology, to identify those 
oils that create the greatest environmental impact and pollution 
threat? If this is so, then it is believed the greatest concern is the 
``persistence'' of the oil as to its ability to break up and reduce its 
environmental impact from a pollution perspective. If this is so, then 
perhaps the parameter of Kinematic Viscosity at a defined temperature 
would be a potential guideline for the definition of the group of oils 
that need restriction to double-hulled tankers.
    Alternatively, there is already an alternative definition, supplied 
by the International Oil Pollution Compensation Fund (IOPC), which 
allows the identification of those oils that are non-persistent. This 
definition uses the parameter of the percentage of the substance that 
can distil at certain defined temperatures. \1\ The problem is that the 
distillation data for each type or individual cargo is never available 
and therefore no valued judgement can be made regarding the shipment 
criterion for that specific cargo for the type of vessel to be used for 
its transportation.
---------------------------------------------------------------------------
    \1\ The IOPC Fund definition of a non persistent oil is ``An oil is 
considered non persistent if at the time of shipment at least 50 
percent of the hydrocarbon fractions, by volume, distil at a 
temperature of 340 +C (645 +F), and at least 95 percent of the 
hydrocarbon fractions, by volume, distil at a temperature of 370 +C 
(700 +F), when tested in accordance with the ISO 3405:2000 test method 
or any subsequent revision thereof.''
---------------------------------------------------------------------------
    What is needed is a clear outline for the cargo type using a 
regularly available physical parameter so that a clear evaluation can 
be undertaken regarding a cargo's shipment. Such parameters would be 
either Density and/or Kinematic Viscosity.
Density
    Given the foregoing discussion and the association with the terms 
``heavy'' and ``fuel oil'', the standard max density of heavy fuel oil 
is 991 kg/m3 at 15 +C (ISO 8217) but is more usually about 985-989 kg/
m3 at 15 +C. Using this criteria then there are very few crude oils 
that are regularly traded by sea in large volumes that have equivalent 
densities to that of a residual fuel oil given that fuel oils are 
derived as a heavy residue from the crude oil refining process. 
However, by lowering the density figure and using an arbitrary density 
figure of say 900 kg/m3, as a definition for ``heavy crude oil'', then 
this same density would capture all persistent fuel oils, tars and 
bitumens carried by tankers today. The density criteria would also 
include such crude oils as examples:

        Alba (North Sea), Bachaquero (all grades), Champion, Gryphon, 
        Balder, Laguna, Leona, Duri, Bonny Med., Lokele, Maya, Merey, 
        Captain (North Sea).

    The foregoing list is but an example of crudes carried by sea in 
any volume.
Viscosity
    Turning to the viscosity criteria then it will be recalled that 
crude oils fall into three defined but broad categories; namely 
Paraffinic, Intermediate and Aromatic types. Paraffinic and 
Intermediate crude oils have a Kinematic Viscosity similar to that of 
water at 50 +Centigrade. Therefore, it will be the Aromatic type crude 
oils that would be primarily considered for impact of this parameter. 
Using the same principles as above by comparing viscosities with those 
of fuel oils then with a heavier fuel oil viscosity being 380 
centistokes at 50 +C (ISO 8217) the majority of these type of crude 
oils would come from Venezuela and the northern areas of South America 
e.g. Boscan, Tia Juana Pesado etc.
Proposed Definition
    Given the foregoing discussion, the following possible definition 
may be a balanced and suitable definition to meet the objectives of the 
proposals for a ``Heavy Crude Oil'':

        A Heavy Crude Oil is a crude oil, as defined by Regulation 1.28 
        of MARPOL 73/78, but having a Density greater than 900 kg/m3 
        AND a Kinematic Viscosity greater than 250 cst \2\ at 30 
        +Centigrade. \3\
---------------------------------------------------------------------------
    \2\ This viscosity criterion has its basis within the associated 
guidelines to the International MARPOL Regulations for pumpability of 
cargoes--i.e. those cargoes whose viscosity is so high that they 
require heating for transportation.
    \3\ N.B. proposals for alternative definitions include the 
parameter of API Gravity at 60 +F. This is an alternative oil industry 
parameter for the SI parameter of Density (normally recorded at 15 +C). 
Proposals for either API Gravity 20 or 30 have been voiced but the 
foregoing definition weighs the total impact of these values. The 
proposed density of 900 kg/m3 is equivalent to an API Gravity of 
approximately 25.6. For reference purposes the following web site can 
provide an indicative API Gravity for a diverse selection of crude 
oils:
http://www.oil-transport.info/Crude Oil Data/crude oil data.html
---------------------------------------------------------------------------
Heavy Fuel Oil
    Turning now to the question concerning ``Heavy Fuel Oil''--
reference to this type of material for ships may be found in the ISO 
8217 specification and table 2 thereof. However, this definition as 
quoted above will also cover all the intended types of fuels and 
substances as defined within the original scope of oils--i.e. ``Heavy 
Grades of Oils'' to be banned from carriage on single-hulled tankers.
APPENDIX 3

                                       Crude Oils with an API less than 30
    (suggested as ``heavy fuel oils'' by the EU Commission proposed definition and which could be banned from
                                     transportation on single-hull tankers)
----------------------------------------------------------------------------------------------------------------
            Name of Crude                      API Gravity at 60 F          Indicative 2001 Shipped  Vol [Bbls)*
----------------------------------------------------------------------------------------------------------------
Abu Safah                             28.90                                 15,047,441
Alaskan North Slope                   27.20                                 138,960,523
Alba (North Sea)                      19.00                                 23,536,950
Al Rayyan                             24.50
Al Shaheen                            29.00
Arabian Heavy                         27.80                                 91,160,684
Arabian Medium                        29.50                                 112,857,221
Ardeshir                              26.20
Ashtart                               29.00
Bachaquero BCF13                      13.00
BCF 17                                17.00
BCF 22                                22.00
BCF 24                                24.00
Bachaquero Dos                        13.80
Nowruz                                26.80
Balder (N.Sea)                        23.40
Basrah Heavy                          23.70
Basrah Medium                         29.60
Belayim Blend                         27.30                                 13,402,771
Belayim Land                          22.30
Belayim Marine                        29.50
Bima                                  20.50
Bintulu                               29.40
Bolivar Coast 24                      24.00
Bonny Medium                          26.60
Bouri                                 26.00                                 21,444,608
Bow River                             24.90
Buzachinakaya                         25.00
Caldarosa                             29.20
Canadon Seco                          26.60
Cano Limon                            29.00
Captain (N.Sea)                       19.30
Carassai Gasolina                     26.30
Caripito                              21.60
Carmopolis                            25.10
Cavone                                24.10
Ceuta                                 29.70
Champion                              23.40
Chinaja                               29.20
Cinta                                 28.00
Clair 1                               28.00
Coban                                 25.80                                 6,463,302
Cold Lake Vancouver                   23.00
Dai Hung                              29.10
Dirillo                               15.40
Djeno                                 28.00
Duri                                  21.80                                 11,437,739
Dutch Offshore                        29.50
E4                                    19.80
Emerald                               23.10
Emeraude                              23.00
Emilio 5                              9.30
Emilio 7                              8.60
Escalante                             23.50
Fao Blend                             29.70
Foinhaven                             25.00
Forcados Blend                        28.40                                 77,526,071
Forth Central                         19.00
Fosterton                             23.80
Furial                                29.00
Geisum                                18.50
Gela                                  14.60
Gianna 2                              7.10
Giaurone                              12.90
Gombe Marine                          23.00
Gyrphon                               21.30
Gulf of Suez                          29.90
Gullfaks                              28.60                                 106,047,000
Harding Blend                         20.60
Heidrun                               28.60                                 21,496,332
Helm Blend                            27.30
Iranian Heavy                         29.70                                 96,648,389
Isla                                  11.30
Khafji                                27.90
Kiame                                 29.30
La Rosa Medium                        24.50
Lagotreco Mediano                     24.50
Laguna                                11.20
Leona                                 22.70
Libyan B1NC41                         28.10
Liu Hua                               22.80
Lloydminster                          22.50
Loango                                26.10
Lokele                                20.00
Mandji                                28.50
Maralago                              20.90
Mars                                  28.40
Maya                                  21.90                                 272,329,420
Menemota                              18.90                                 11,780,256
Merey                                 16.60                                 20,179,943
Mesa 28                               27.30
Mesa 30                               29.50                                 33,108,164
Miri Light                            29.00
Mokoko Abana                          19.20
Morichal                              12.00
Narciso                               21.00
Odudu                                 27.00
Ombrina                               21.50
Oriente                               28.10                                 17,138,675
Payamino                              25.50
Perla                                 14.10
Pilon                                 13.80
Pisticci                              9.40
Prezioso                              19.00
Prinos Blend                          27.90
Prinos North                          18.70
Ragusano                              19.56
Ras Budran                            24.70
Ras Gharib                            25.40
Ratawi                                24.30
Reb 28                                28.10
Rospo Mare                            11.88
San Joaquin Valley                    15.10
Santa Maria                           17.40
Sarago                                11.40
Sarago 1                              8.10
Schiehallion (N. Sea)                 25.40
Sedgewick                             21.40
Seme                                  22.70
Sendji                                26.00
Shengli                               24.50
Souedie                               24.00                                 29,659,237
Stag                                  18.50
Sumatran Heavy                        21.70
Tarakan                               26.30
Tempa Rossa 2                         18.70
Tia Juana 102                         25.80
Tia Juana 24                          24.00
Tia Juana Light                       29.40
Tia Juana Pesado                      11.00
Tona                                  29.40
Trintopec                             26.90
Troll (N. Sea)                        28.70                                 36,740,966
Turkish Indigenous                    25.80
Urals Heavy                           28.00
VS 28                                 28.00
Vega                                  18.30
Vic Bihl                              21.10
Wafra Burgan                          23.10
Wafra Ratawi                          24.80
Wandoo                                19.40
Yanga                                 29.20
Yizheng                               28.50
Yombo                                 17.50
Zaafarana                             23.10
Zafiro                                29.60
Zatchi                                23.70
----------------------------------------------------------------------------------------------------------------
* This is only an indication of the extent of carriage of the individual crude oil by sea where data is
  available. These figures should not be taken as absolute but seen in relationship to one another.


    The Chairman. Mr. Godfrey, can you move over just a little 
bit. I want to apologize to the witnesses that there is not 
sufficient room at the table, and I apologize for that again.
    Mr. Frick, welcome.

       STATEMENT OF G. WILLIAM FRICK, VICE PRESIDENT FOR 
           INDUSTRY OPERATIONS AND GENERAL COUNSEL, 
                  AMERICAN PETROLEUM INSTITUTE

    Mr. Frick. Thank you, Mr. Chairman, Members of the 
Committee. I am Bill Frick, Vice President for Industry 
Operations and General Counsel of the American Petroleum 
Institute, a trade association representing over 400 companies 
involved in all aspects of the petroleum industry. I am pleased 
to be here today on behalf of the API members, member companies 
who own, operate, and charter tanker fleets for the 
transportation of crude oil and petroleum products.
    With the chair's permission, I will proceed with a brief 
oral statement, and submit a more detailed version for the 
record.
    The Chairman. Your complete statement will be made part of 
the record, Mr. Frick. Thank you.
    Mr. Frick. The Committee is to be commended for calling 
this hearing to consider issues arising from the breakup of the 
MV PRESTIGE and the subsequent damage caused the coastlines of 
France and Spain. It is distressing to all of us to see the 
impacts this incident has caused and continues to cause to such 
a beautiful and bountiful area of our world.
    As Members of this Committee know, concern over the effects 
of major tanker accidents was the impetus for enactment of OPA-
90. This act deserves a large measure of credit for the 
dramatic improvement in spill prevention over the last decade. 
In the average year from 1981 to 1990, according to U.S. Coast 
Guard records, a total of 70,000 barrels of oil were released 
by tankers in U.S. waters. But the rate dropped to just 4,000 
barrels per year in the 10 years following enactment of OPA-90, 
a decrease of 95 percent. A chart of this dramatic improvement 
is attached to our written testimony.
    Given that over 25 billion barrels were imported over this 
period, it is an extraordinary success story. Nevertheless, 
even with great progress, the industry continuously seeks to 
improve its records, guided by the OPA-90 framework.
    OPA-90 is an important bulwark against a catastrophe such 
as the one caused by the PRESTIGE. It has many beneficial 
features, from establishing financial accountability and 
liability to limiting the hours a seaman can work. The most 
discussed feature of the act, however, is the directive for an 
orderly phase-out of single-hull tank vessels in favor of 
double-hull or hull-within-a-hull designs.
    Some have questioned whether the American tanker industry 
still favors the conversion that will make single-hull tankers 
a thing of the past in U.S. waters by the year 2015. To be very 
clear, API and its member companies support the double-hull 
conversion schedule in OPA-90. API members who own ships are 
investing large sums in new double-hull tankers and are on 
schedule to meet OPA's phase-out.
    We do not, however, want the expected benefits of double 
hulls to diminish the importance of other components in our 
having safe marine transportation of oil. Effective prevention 
relies on a system of measures that goes beyond hull 
configuration, including regulatory and industry oversight, a 
vessel's maintenance as well as the competency of its crew, and 
port infrastructure. Each of these plays a vital role in the 
system's success. Double hulls provide protection from low-
energy collision and grounding. They are not a substitute for 
proper standards of management, operation, maintenance, and 
corrosion control.
    In the wake of the PRESTIGE incident, European governments 
have under consideration unilateral acceleration of the single-
hull phase-out schedule along with certain other restrictions 
on tankers that may enter EU ports. This has raised issues of 
whether the EU requirements could affect shipments to the 
United States. Certainly, to the extent that phase-out 
schedules differ from one part of the world to another and 
companies must redeploy tankers, the world shipping system will 
not run as smoothly and efficiently as it can.
    It appears, however, that there is sufficient capacity and 
flexibility in the worldwide shipping industry to adjust, if 
the EU does adopt these new requirements, without significant 
disruption to U.S. commerce. Were such measures to spread to 
other regions, however, the situation could change. Because 
shipping is a global activity, API believes that the 
development of programs and standards relative to these issues 
should generally be directed toward the entire world fleet, via 
an international body such as the International Marine 
Organization, IMO. They should not be implemented just on a 
unilateral port-state-by-port-state basis, which is why the 
United States pursued worldwide phase-out of single hulls 
through IMO after passage of OPA-90.
    As an industry, we are very pleased with the strong record 
of improvement in preventing tanker spills. We remain committed 
to full implementation of OPA-90 and believe that it has all 
parties on the right track. More stringent measures such as the 
EU is considering are not in our view warranted, given the 
progress made here pursuant to OPA-90.
    We look forward to continuing our work with the Coast 
Guard, the other agencies, and the Congress to realize the 
statute's goals. Mr. Chairman, I will be happy to respond to 
questions.
    [The prepared statement of Mr. Frick follows:]

  Prepared Statement of G. William Frick, Vice President for Industry 
      Operations and General Counsel, American Petroleum Institute
    The American Petroleum Institute (API) is a national trade 
association representing over 400 companies involved in all aspects of 
the petroleum industry. A significant number of API member companies 
own, operate, and charter substantial tanker fleets. On their behalf, 
API would like to take this opportunity to respond to your questions 
and concerns regarding the recent MV PRESTIGE oil spill incident off 
the coast of Spain. We would like to address the protections offered to 
this country by the passage of the Oil Pollution Act of 1990 (OPA) and 
to emphasize additional measures that API and its member companies have 
taken to improve the integrity and safety of the marine transportation 
system in the United States.
    API has testified before Congress on a number of issues relating to 
OPA. We specifically addressed the topic of OPA's double-hull 
requirements for tank vessels, during a hearing of the U.S. House or 
Representatives' Committee on Transportation and Infrastructure 
Subcommittee on Coast Guard and Marine Transportation on June 29, 1999. 
API has aggressively supported the highest technical and safety 
standards for tank vessels and, on behalf of its Marine Transportation 
Segment members, have taken very seriously our role in safely and 
efficiently transporting the oil needed to meet America's energy needs. 
We remain committed to the tanker requirements of OPA, which mandate 
when a vessel must either be retrofitted with a double-hull or retired 
from U.S. service.
    As a direct result of the MV PRESTIGE incident, the European 
Commission proposes an immediate prohibition of single-hull vessels of 
600 tons deadweight and above from the transportation of heavy fuel 
oil, heavy crude oil, waste oils, bitumen and tar into the ports of the 
15 European Union (EU) member States and also proposes an accelerated 
phase-out of all single-hull vessels for the transport of all types of 
oil. Since December 12, 2002, the Spanish and French governments have 
taken a further step in banning singlehull tankers, built more than 15 
years ago, from sailing within 200 miles of their coastlines unless 
such vessels submit to extensive inspections by the port states.
    The double-hull provisions of OPA have significantly changed the 
oil transportation industry, both domestically and abroad. The 
international community followed the U.S. lead by adopting similar 
requirements through amendments to the International Convention for the 
Prevention of Pollution from Ships (MARPOL). Since 1993, international 
law has required that all large, newly constructed tankers be built 
with double-hulls. According to INTERTANKO \1\, well over 50 percent of 
the world's fleet carries double-hulls as we enter 2003.
---------------------------------------------------------------------------
    \1\ International Association of Independent Tanker Owners.
---------------------------------------------------------------------------
     Vessels that are directly owned or chartered by the major oil 
companies or their affiliate organizations transport a significant 
volume of crude oil and petroleum products to the U.S. As part of their 
respective safety management system, organizations employ or subscribe 
to a vessel screening and inspection process (vetting) when selecting 
third party vessels to transport cargo. Typically, the vetting and 
screening process includes a review of a third party's management 
system and compares the nominated vessel to marine safety criteria 
which is based on recognized safety standards established by regulatory 
authorities and reputable maritime organizations. Oil company tanker 
fleets must meet the same high standards as these chartered vessels.
    Members of the U.S. maritime industry have and will continue to 
take delivery of new Jones Act double-hull tankers (U.S. owned, built, 
flagged, and crewed with U.S. documented seafarers) to maintain 
compliance with the provisions of OPA and to keep pace with tonnage 
requirements. However, the number of Jones Act tankers will remain a 
relatively small portion of the total tanker fleet that delivers crude 
oil and petroleum products to the U.S. Today, the U.S. consumes almost 
20 million barrels of oil daily. We import 55 percent of the crude oil 
and petroleum products we consume. Of this total, 10 million barrels 
per day are transported to the U.S. by non U.S.-flag tankers.
    In early November 2002 API responded to a letter of inquiry from 
six U.S. Senators, relating to the 25-year phase-out schedule of OPA 
and concerns over the number of shipbuilding orders to serve coastwise 
or Jones Act oil transportation trade in the near future. As much of 
the discussion on the petroleum industry's conversion to double-hulls 
has focused on the U.S. tanker fleet, we offer the following 
observations about the two primary and distinctly different trades that 
affect U.S. flag tonnage--Alaska North Slope (ANS) crude and the U.S. 
coastwise petroleum product market.
Alaska North Slope Crude Trade
    The number of tankers needed to transport Alaskan North Slope (ANS) 
crude to West Coast refineries is declining. Still, several double-hull 
tankers have been introduced to this trade and several others are being 
built in accordance with OPA's phase-out schedule. More specifically, a 
fleet of 25 Jones Act tankers is currently engaged in the transport of 
ANS crude oil. Nine of these tankers have double-hulls. Seven (or 11 if 
all options to build are exercised) additional double-hull tankers will 
be added to the fleet when the new Polar Tankers \2\ and Alaska Tanker 
Company \3\ crude tankers ordered and under construction are delivered 
by 2008. In addition, SeaRiver Maritime, Inc. \4\ is currently 
evaluating its needs.
---------------------------------------------------------------------------
    \2\ Polar Tankers is owned by ConocoPhillips.
    \3\ Alaska Tanker Company is a newly formed ``pool'' operator 
formed between BP, Keystone Shipping, and OSG.
    \4\ SeaRiver Maritime, Inc. is a wholly owned affiliate of Exxon 
Mobil Corporation.
---------------------------------------------------------------------------
    As you know, production of ANS crude oil has declined from 1.8 
million barrels per day in 1990 to 1.0 million barrels per day in 2002. 
The Alaska Department of Natural Resources forecasts that ANS 
production will steadily decline to about 577,000 barrels per day by 
2016, resulting in a corresponding reduction in needed tanker capacity. 
Based on the production from existing fields, average utilization of 
tankers and recent shipping patterns, API's analysis found that the 
capacity of the existing and planned fleet should be sufficient to meet 
the projected ANS production (see Figure 1) as single-hull vessels are 
phased out under the mandated OPA timetable.
U.S. Coastwise Petroleum Product Trade
    Again, while faced with decreasing demand for petroleum product 
tankers, industry has invested significant resources to construct new 
double-hull product tankers. According to the U.S. Maritime 
Administration's (MARAD's) most recent statistics, there are currently 
64 available tankers to operate and move products along the U.S. coast. 
Twenty-two are double-hulled. However, U.S.-flag tankers continue to 
move a diminishing amount of product, particularly between the Gulf 
Coast and East Coast. Since the 1980s, there has been an ever-
increasing use of domestic pipelines, movement of product imports on 
foreign flag tank vessels, and an increased deployment of double-hull 
coastal tank barges. (Coastal tank barges have become more attractive 
as the cost for new product tanker construction continues to escalate.) 
These trends are expected to continue, primarily because of the 
disparate cost of new U.S. product tanker construction (approximately 
triple the cost of a similar foreign built vessel). \5\
---------------------------------------------------------------------------
    \5\ The cost of a foreign built product tanker is approximately $30 
million and a U.S. built is approximately $90 million.
---------------------------------------------------------------------------
    Currently there is excess capacity in the U.S.-flag product tanker 
market. In 2000 (the latest data available from MARAD), of the 64 U.S.-
flag product tankers, only 53 were engaged in domestic operations. Ten 
could not find cargo to haul in the domestic market and were deployed 
by their owners to the international market (where they were at a 
distinct competitive disadvantage); another was idle. Moreover, the 
U.S. coastal tank barge fleet, which continues to become a competitive 
alternative to product tankers, is also under-utilized.
    Congress, when it enacted OPA, recognized that the transition from 
a single-hull to a double-hull fleet needed to occur in an orderly 
fashion and without a condemnation of the substantial investment 
already made in the existing tanker fleet. Congress provided a 25-year 
period to retire single-hull vessels. Thanks to the foresight of the 
drafters of OPA, the energy supply chain has not been disrupted as a 
result of this legislation. This was a risk-based decision that 
balanced economic and supply chain considerations with the oil spill 
risk reduction potential of double-hulls. It is worth noting the wisdom 
of this decision. The transition has been and we expect it to continue 
to be orderly.
    The value of double-hull tanker designs has been evaluated and 
supported by the National Research Council (NRC). Their 1991 report, 
Tanker Spills--Prevention by Design, concluded that the double-hull 
design is among the best values on the basis of cost-effectiveness. The 
findings of this report are consistent with the operational experiences 
of double-hull tankers and the overall improved environmental 
performance record of the tank vessel industry.
    However, we believe that safe marine transportation, as a system, 
goes beyond hull configuration and that each component of this system 
(including regulatory oversight, the vessel's maintenance as well as 
the competency of its crew, and port infrastructure) plays a vital role 
in the system's success. Double-hulls provide protection from low 
energy collision and grounding. They are not a substitute for proper 
standards of management, operation, maintenance, and corrosion control.
    The question of whether the MV PRESTIGE incident could have been 
prevented by a double-hull requirement presupposes we know why the 
PRESTIGE incident occurred. That question has not yet been fully 
answered. Although several possibilities are under investigation, none 
lead to the conclusion that a double-hull design would have prevented 
the incident. The PRESTIGE was in trouble days before her catastrophic 
failure and had requested help and refuge from Spanish authorities. It 
was declined entry to a port of refuge and sent back out to sea in 
deteriorating weather.
    It is important to keep in mind that while the double-hull design 
is good, hull design alone will not prevent all oil spills. More 
important than hull design are good management, proper maintenance, and 
correct navigational decisions. Detailed attention, by Classification 
Societies to vessel structure and then to Special Survey repairs, 
together with comprehensive Port State Control inspections and the use 
of industry and other databases (such as the OCIMF SIRE system and 
Equasis), will greatly reduce the risk of such environmental incidents. 
\6\
---------------------------------------------------------------------------
    \6\ The Oil Companies International Marine Forum's (OCIMF's) SIRE 
system and Equasis--the European Commission's/French Maritime 
Administration's cooperative information system, which collates 
existing safety-related information on ships from both public and 
private sources and makes it available on the Internet--are examples of 
such databases.
---------------------------------------------------------------------------
Beyond OPA--An Improved Industry Record
    To date, 75 percent of the world tanker fleet is independently 
owned. To ensure that vessels and their crews are of the highest 
quality, tankers are subjected to a series of rigorous inspections by 
government, vessel classification societies, and the industry. For 
example, all tankers operating in the U.S. are evaluated for inspection 
by the U.S. Coast Guard. Since July 1998, vessels are required to have 
a certified International Safety Management (ISM) system in place. Our 
companies conduct pre-hiring inspections of independent tankers using 
trained inspectors located throughout the world. These inspections go 
beyond governmental requirements and often extend to the tanker's 
management structure.
    As a result of numerous international and U.S. requirements and 
industry practices, the tankers calling on U.S. ports, both domestic 
and foreign-flagged, are the best-maintained commercial ships in the 
world. For example, less than 1 percent of tankers inspected by the 
Coast Guard are detained, which is the lowest percentage of any vessel 
type. Furthermore, Coast Guard data shows the dramatic reduction in oil 
spills from tankers since the enactment of OPA. For the period 1981 to 
1990, tankers released an average of 70 thousand barrels per year. 
However, for the period 1991-2000, releases from oil tankers averaged 4 
thousand barrels per year--a decrease of 95 percent!
    Tankers deliver the oil and petroleum products we depend on, and 
the nation depends on tanker operators to do their job safely. It is a 
responsibility that each of our members considers paramount to their 
success (see Figure 2). Our members will continue to ensure they secure 
adequate capacity to meet their own transportation requirements and the 
energy needs of this country.
Actions of the European Union (EU) and Impacts on U.S. Trade
    It is difficult to determine at this time the exact economic 
impacts that the EU actions (banning heavy oil shipments in single-hull 
tankers and accelerating the phase-out of single-hull tankers) might 
have on U.S. trade. Demand for new, well-maintained, double-hulled 
tankers to haul heavy oil will likely increase, placing upward pressure 
on chartering rates for these vessels. Finally, the impact of the more 
general accelerated phase-out schedule is difficult to assess. However, 
to the extent that phase-out schedules differ from one part of the 
world to another, the tanker market may become segmented and operate 
less efficiently.
    In the long-term however, we have concerns over the port of refuge 
issue emanating from the MV PRESTIGE incident. This important topic has 
the potential to impact trading decisions by U.S. companies. API 
strongly believes that the development of programs and standards 
relative to this issue should be directed toward the entire world 
fleet, via an international body such as the International Maritime 
Organization (IMO), and not attempted on a unilateral port state by 
port state basis.
Conclusion
    Over the past 12 years, the oil and tanker industries have 
demonstrated that they can safely supply America with petroleum under 
the provisions of OPA. This oil fuels our transportation systems, heats 
our homes, powers our industry, and contributes substantially to 
America's high standard of living. The industry is converting its 
tanker fleet to double-hulls in compliance with OPA and MARPOL. By 2015 
the tanker fleet that calls on U.S. ports will be double-hulled. API 
supports the double-hull conversion schedule in OPA, and no additional 
action by Congress is necessary to ensure that this conversion will 
take place.
    API and its members are dedicated to ensuring that the oil we all 
use to go about our daily lives is delivered safely. Since 1990, there 
have been no major environmental incidents involving tankers in U.S. 
coastal waters and a substantial reduction in smaller incidents has 
also occurred. This can be credited to improved industry operations, 
technological advancements, enhanced risk management tools, 
international enforcement of tanker regulations (for foreign tankers 
calling on U.S. ports), and modernization of the tanker fleet, 
including the double-hull requirements.
    We continue to support the excellent environmental and safety 
improvements made to date through OPA and industry initiatives. We 
continue to strive for 100 percent safe delivery of petroleum and 
petroleum products.
    Thank you for the opportunity to share these important views with 
the Members of the Senate Commerce, Science, and Transportation 
Committee.



    The Chairman. Thank you, Mr. Frick.
    Mr. Cowen, welcome.

 STATEMENT OF ROBERT N. COWEN, SENIOR VICE PRESIDENT AND CHIEF 
      OPERATING OFFICER, OVERSEAS SHIPHOLDING GROUP, INC.

    Mr. Cowen. Thank you, Mr. Chairman. My name is Robert N. 
Cowen. I am Senior Vice President and Chief Operating Officer 
of Overseas Shipholding Group. OSG, based in New York and 
listed on the New York Stock Exchange, is the largest U.S. 
independent owner and operator of oil tankers. Over the past 3 
years, OSG has invested over $800 million in the renewal of our 
fleet with modern double-hull vessels.
    With your permission, Mr. Chairman, I would like to submit 
my full remarks.
    The Chairman. Without objection.
    Mr. Cowen. Thank you.
    When Congress enacted the Oil Pollution Act of 1990, the 
U.S. took a bold leap forward, leading the world in requiring 
double hulls and imposing new safety requirements for tankers 
moving oil to our shores. The International Maritime 
Organization followed our lead to require double hulls. But 
recent spills involving older single-hull vessels off the coast 
of Europe highlight the continuing dangers associated with 
older single-hull vessels and create a very real risk that new 
stricter practices and rules imposed in other parts of the 
world will force such vessels to trade to the U.S.
    The point I want to stress to the Committee today, Mr. 
Chairman, is that in the highly competitive world of 
international shipping, restrictions that bar older tonnage 
from particular trades will necessarily drive substandard 
tonnage to trades where regulations and practices are more lax 
and permissive. The U.S. cannot allow our waters to become a 
haven for older single-hull vessels that are no longer 
permitted to trade to the EU, or to other major trading nations 
like Japan and Korea. We must act to restrict these vessels 
from trading to the U.S. or face an unacceptable risk of our 
own PRESTIGE or ERIKA.
    I would like to share with this Committee some very 
disturbing statistics. Shockingly, a disproportionately large 
number of the world's remaining 25-year-old single-hull VLCCs 
are trading to the U.S. Gulf every day. While the world fleet 
continues to add modern double-hull vessels, the remaining 
older vessels are still coming to the U.S. in large numbers. In 
2002, 56 single-hull VLCCs of 25 years of age or older were 
fixed on voyages to the U.S. Gulf Coast. This represents over 
40 percent of all spot liftings worldwide on vessels of this 
vintage. Only one vessel of over 25 years of age was fixed to 
the EU in all of 2002. Not a single vessel of this vintage 
discharged in Japan or in Korea.
    Similarly, 50 percent of all spot liftings on VLCCs, very 
large crude carriers, of between 21 and 25 years of age, some 
171 liftings, discharged in the U.S. Gulf. Not a single vessel 
of this age vintage discharged in the EU or in Japan or in 
Korea throughout 2002. Just looking at the first week of this 
year alone, all seven spot fixtures of VLCCs in excess of 20 
years of age were reported moving oil from the Middle East to 
the U.S. Gulf.
    For many years, it has been known in the tanker business 
that older single-hull vessels are not welcome in Japan or 
Korea. Since the ERIKA incident in 1999, it is also the fact 
that such vessels are effectively discouraged from calling to 
the EU as well. With the recent oil pollution disaster 
involving the 26-year-old single-hull tanker PRESTIGE off the 
coast of Spain, the EU and in particular, Spain, France, and 
Portugal have moved rapidly and forcefully to tighten the 
restrictions on old single-hull tonnage trading to their ports 
and moving along their coastlines.
    The European Commission has recently adopted an outright 
ban on any single-hull vessel carrying fuel oil or heavy crude 
from entering EU ports. France, Spain and Portugal have already 
acted to exclude single-hull vessels carrying fuel oil and 
heavy crude from passing within their 200-mile economic 
exclusion zones.
    Once the current EU proposals to ban single-hull vessels 
from their ports and coastal waters are put into effect, these 
vessels will be forced to seek employment in trades that still 
accept them. When single-hull vessels are banned from trading 
to the EU, where will these vessels trade? We cannot allow our 
rules here to be more permissive, or these vessels will surely 
trade here.
    This is most eloquently illustrated by an article that 
appeared in Lloyd's List, which is the shipping newspaper, on 
January 8, 2003, a copy of which is appended to my testimony. 
As stated in that article, a single-hull tanker carrying crude 
oil, which had been scheduled to discharge in Spain, was 
diverted to the U.S. because of the present sensitivity in 
Spain to calls by single-hull tankers.
    As an aside, I would like to point out to the Committee 
that if increasing numbers of older single-hull vessels call at 
U.S. ports, we believe the Coast Guard will be faced with an 
enormous additional burden to inspect all these vessels. In 
this case, consideration would have to be given, we would 
suggest respectfully, to providing the Coast Guard with the 
necessary additional resources to carry out such a task.
    We submit that it is wholly unacceptable to allow the U.S. 
to become the world's port of last resort. As a matter of law 
and public policy, the Congress declared in 1990 that the U.S. 
would ban older substandard tonnage from its shores. Congress 
concluded that these vessels represent an unacceptable risk to 
our environment. Unfortunately, recent incidents in Europe 
confirm that such vessels continue to trade, and do in fact 
pose a grave risk to our oceans and coastlines. The U.S. cannot 
stand by and permit others to adopt trading rules which are 
more stringent than ours and that drive such vessels to our 
shores. We must maintain our vigilance, and ensure that our 
rules restrict such vessels from trading to the U.S.
    Thank you, Mr. Chairman. I will be pleased to answer any 
questions.
    [The prepared statement of Mr. Cowen follows:]

Prepared Statement of Robert N. Cowen, Senior Vice President and Chief 
          Operating Officer, Overseas Shipholding Group, Inc.
    My name is Robert N. Cowen. I am Senior Vice President and Chief 
Operating Officer of Overseas Shipholding Group, Inc. OSG, based in New 
York and listed on the New York Stock Exchange, is the largest U.S. 
independent owner and operator of oil tankers. OSG's modern fleet of 50 
vessels includes 15 double-hull Very Large Crude Carriers or VLCCs 
which typically carry 2 million barrel loads from the Middle East and 
West Africa and 13 double-hull Aframax tankers that typically carry 
crude oil loads of 700,000 barrels in the Atlantic Basin. Over the past 
three years, OSG has invested over $800 Million in the renewal of our 
fleet with modern double-hull vessels.
    OSG commends the Committee for holding these hearings to highlight 
the critical issue of protecting our marine environment, coastlines and 
commerce from the dangers posed by older, substandard tanker tonnage.
    When Congress enacted the Oil Pollution Act of 1990 (``OPA-90''), 
the U.S. took a bold leap forward, leading the world in requiring 
double hulls and imposing other new safety requirements for tankers 
moving oil to our shores. The International Maritime Organization 
(``IMO'') followed our lead to require double hulls on all new vessels 
for the rest of the world. But recent spills involving older, single-
hull vessels off the coast of Europe highlight the continuing dangers 
associated with older single-hull vessels and the very real risk that 
stricter rules in other parts of the world will force such vessels to 
trade to the U.S.
    On November 19, 2002, the PRESTIGE, a 26-year-old single-hull 
tanker carrying 77,000 tons of heavy fuel oil split apart and sank some 
130 miles off the coast of Spain. Cargo from the PRESTIGE has continued 
to wash up onto the coastline of Galicia and to pollute sensitive 
fishing grounds. It is now also washing ashore in the picturesque 
Landes region near Bordeaux. The clean-up costs in Spain alone have 
exceeded $200 million and the vessel is still leaking oil. The PRESTIGE 
sinking was strikingly similar to the pollution incident involving the 
1975 built product carrier ERIKA. The ERIKA split in two and sank off 
the coast of Brittany, France in December 1999, polluting the tourist 
beaches in the Bay of Biscay. Both of these pollution disasters 
involved older, single-hull vessels nearing the end of their 
permissible trading lives under existing IMO regulations.
    With the sinking of the PRESTIGE, the EU, and in particular Spain, 
France and Portugal have moved rapidly and forcefully to ban 
substandard tonnage from EU waters. The European Commission has 
recently adopted an outright ban on any single-hull vessel carrying 
heavy fuel oil or heavy crude from entering EU ports. This ban will be 
submitted to the EU Council and Parliament and is expected to become 
effective by March of this year. The EU is also proposing to 
significantly accelerate the phase-out of all single-hull tankers, with 
the most vulnerable pre 1982 built single-hull tankers to be phased out 
at 23 years of age. At the same time the EU has proposed that all 
single-hull tankers reaching age 15 will have to comply with strict 
inspections under a Condition Assessment Scheme.
    France, Spain and Portugal have already acted to exclude single-
hull vessels carrying fuel oil and heavy crude from passing within 
their 200 mile Economic Exclusion Zones. These nations have also 
significantly stepped up their inspections of older tankers. The EU is 
also seeking to establish a code of conduct with the oil industry that 
will preclude the chartering of any single-hull vessel over 23 years of 
age.
    In the highly competitive world of international shipping, 
restrictions that bar older tonnage from particular trades necessarily 
drive substandard tonnage to trades where regulations and practices are 
more lax and permissive. The U.S. cannot allow our waters to become a 
haven for older single-hull vessels that are no longer permitted to 
trade to the EU or to other major trading nations like Japan and Korea. 
We must act to restrict these vessels from trading to the U.S. or face 
an unacceptable risk of our own PRESTIGE or ERIKA oil spill.
    This is most eloquently illustrated by an article that appeared in 
Lloyd's List on January 8, 2003, a copy of which is appended to my 
testimony. As stated in the article, a single-hull tanker carrying 
crude oil which had been scheduled to discharge in Spain was diverted 
to the U.S. because of the present sensitivity of Spain to calls by 
single-hull tankers. As indicated in the article, this is just the tip 
of the iceberg.
    Proof that current U.S. rules encourage substandard tonnage to 
enter the U.S. is all too evident today in the VLCC trade. Shockingly, 
a disproportionately large number of the world's remaining 25 year old 
single hull VLCCs are trading to the U.S. Gulf each day. Under an 
exception to the phase-out rules of OPA-90, such vessels are permitted 
to offload 18 miles off the coast of Louisiana at LOOP or to lighter in 
designated areas of the U.S. Gulf as close as 60 miles from shore. For 
a number of years, it has been well known in the tanker business that 
such vessels are not welcome in Japan or Korea. Since the ERIKA 
incident in 1999, it is also the fact that such vessels are discouraged 
from calling to the EU.
    Fifty-six single hull VLCCs of 25 years of age or older had been 
fixed on voyages to the U.S. Gulf Coast in 2002. This represents over 
40 percent of all spot liftings worldwide on vessels of this vintage. 
Only one vessel over 25 years of age was fixed to the EU in all of 
2002. Not a single vessel of this vintage discharged in Japan or in 
Korea. Similarly, 50 percent of all spot liftings on VLCCs of between 
21 and 25 years of age--some 171 liftings--discharged in the U.S. Gulf. 
Not a single vessel of this vintage discharged in the EU or in Japan or 
Korea in 2002.
    The trend of over-age VLCCs trading in disproportionately high 
numbers to the U.S. has unfortunately continued into 2003. For the 
first week of this year, on a world-wide basis, a total of six spot 
fixtures were reported of VLCCs in excess of 20 years of age. Every one 
of these fixtures of old, single hull VLCCs involved the movement of 
crude oil from the Middle East to the U.S. Gulf.
    Once the current EU proposals to ban single-hull vessels from their 
ports and coastal waters are put into effect, these vessels will be 
forced to seek employment in trades that still accept them. Under 
existing U.S. law, a single hull VLCC, Aframax or Panamax (carrying 
approximately 400,000 barrels) vessel can enter a U.S. port until age 
23. If the vessel has either a double bottom or double sides, it can 
trade to the U.S. until age 28. When single-hull vessels are banned 
entirely from trading in fuel oil or heavy crudes to the EU, where will 
these vessels trade? As older single hull VLCCs are discouraged from 
trading to the EU, Japan and Korea, where will these vessels trade? We 
cannot allow our rules to be more permissive, or these vessels will 
surely trade here.
    The issue is not one of law enforcement. The Coast Guard has done 
an admirable job of enforcing OPA-90 requirements. But the world is 
changing. Our laws need to keep up with those changes. As an aside, I 
would just point out that if the Coast Guard is faced with a need to 
inspect an increasingly large number of older single-hull vessels, 
consideration should be given to providing the Coast Guard additional 
resources to meet this challenge.
    We submit it is wholly unacceptable to let the U.S. become the port 
of last resort. As a matter of law and public policy, the Congress 
declared in 1990 that the U.S. would ban older, substandard tonnage 
from its shores. Congress concluded that these vessels represent an 
unacceptable risk to our environment. Unfortunately, recent incidents 
in Europe confirm that such vessels continue to trade and do in fact 
pose a grave risk to our oceans and our coastlines. The U.S. cannot 
stand by and permit others to adopt more stringent trading rules that 
drive such vessels to our shores. We must maintain our vigilance and 
ensure that our rules restrict such vessels from trading to the U.S.
                                 ______
                                 

                     Lloyd's List, January 8, 2003

           Spanish ban sends single-hull Elcano ship to U.S.

voyage shows inconsistencies shipowners face in the regulatory shake-up 
                      following the prestige loss

                             By Brian Reyes

    A SPANISH-operated suezmax tanker fixed last month for a trip to 
Spain but subsequently banned under Madrid's new rules for single-hull 
ships, has been re-routed on a charter to the U.S., once regarded as 
the nation with the toughest rules for such vessels.
    Industry observers said the voyage illustrates the sort of 
inconsistencies that shipowners now face due to the regulatory shake-up 
following the loss of the PRESTIGE.
    A ban on single-hull tankers carrying heavy grades of oil, agreed 
at a European Union transport council last month, has created a 
situation where vessels allowed into strictly-controlled U.S. waters 
could now be barred from Europe.
    ``A single-hull ship is not inherently a bad ship,'' said one 
industry official, adding that the focus for policy makers should be on 
issues such as ports of refuge. The important factor is that the U.S. 
accepts this ship but not the EU.
    ``This was probably not the desired effect (of the EU proposal),'' 
he added.
    The 131,391 dwt Almudaina, built in Spain in 1993 and operated by 
former state-owned company Elcano, was due to call at the Spanish ports 
of Cartagena and La Coruna last Sunday and tomorrow, carrying crude 
from Cayo Arcas Terminal in Mexico. But the single-hull ship, which is 
equipped with segregated ballast tanks and has a spotless inspection 
record, was re-routed and is now fixed for a journey from Port Gentil, 
in Gabon, where it is due on January 15, to Philadelphia, where it is 
expected on February 5.
    Officially, Elcano said that the Spanish ban, announced shortly 
after the transport council and approved in a Royal Decree law last 
month, had not affected any of its ships.
    But well-placed sources confirmed that the Almudaina's charter to 
Spain had been dropped and changed to the U.S. voyage, adding that the 
decision was taken because of the present political climate in Spain.
    The voyage is indicative of a broader trend that is becoming 
evident as charterers avoid single-hull tankers for trips to Spain. 
``There have been virtually no single-hull tankers chartered to Spain 
since the Royal Decree came into force,'' said one official.
    With other European countries expected to follow Spain's lead and 
implement the ban in national legislation, brokers are already warning 
of tonnage shortages to Europe.
    One of the main initial concerns with the Spanish ban was the lack 
of fine detail in the Royal Decree law, particularly the definitions of 
the crude cargoes that would be affected.
    Spanish shipowner association Anave has had verbal confirmation 
from the government that the ban will affect vessels carrying crude 
oils with an API grade below 30, which is in line with the EU 
agreement.
    The Royal Decree law applies to all single-hull vessels of more 
than 5,000 dwt, which means that bunker barges and small tankers 
operating in Spanish ports are largely exempt.
    But there is concern in the shipowning community that Brussels 
wants to set that tonnage threshold as low as 600 dwt, which could 
impact on other types of vessel that carry thousands of tonnes of 
bunker fuel in single-hull fuel tanks.
    Shipowners cannot challenge the law except on constitutional 
grounds, which is seen by experts as a legal non-starter.
    It is possible, however, to challenge the way the law is being 
applied on a case-by-case basis.
    One Spanish shipowner that carries fuel between the country's 
island territories has apparently managed to get around the ban by 
agreeing to keep its side cargo tanks empty, effectively giving its 
vessel a second skin.

    The Chairman. Well, thank you, Mr. Cowen. In other words, 
you believe that we should enact the same rules that are now 
pending before the EU?
    Mr. Cowen. Mr. Chairman, I believe that we have to be very 
vigilant to make certain that if they do adopt those rules that 
the vessels do not trade here in disproportionate numbers.
    The Chairman. But you do not go so far as--I do not know 
how you would do that except by adopting those same rules. Do 
you?
    Mr. Cowen. No, I think you are right, Mr. Chairman.
    The Chairman. Well, let me start out here with something 
that I think disturbs a lot of Americans and puzzles me, and I 
do not know if there is anything to be done about it, but I 
think it affects the confidence of Americans about the security 
of their environment. I take it that PRESTIGE was not an 
unusual ship in this respect: Japanese-built, owned by a 
company registered in Liberia, managed by a Greek firm, 
registered in the Bahamas, certified by an American 
organization, chartered by a Swiss-based Russian trading 
company.
    Why do we have--why can we not have a ship that is built in 
a country and perhaps operated in another country? I know one 
of the answers is labor, wages, standards, et cetera. But does 
this build confidence in the American people, to know that 
ships like that, in those conditions--I mean, who would we hold 
responsible if something like happened with the PRESTIGE off of 
Spain happened in the United States of America? The Bahamas? 
The Liberians? Greeks? Russians?
    We will begin with you, Mr. Cox. You are an expert.
    Mr. Cox. Thank you, Senator. I was hoping you would go 
alphabetically by association.
    [Laughter.]
    Mr. Cox. I think your description of the circumstance 
around the ownership and operation and crewing and that of that 
vessel is certainly not strange in the maritime industry. The 
IMO did look at an issue which we put on the table when we 
began the security debate last year in February, and that was 
beneficial ownership. The idea was that the beneficial owner--
and there is no description of that term, Senator, but at the 
same time, I would call beneficial owner that person who 
ultimately receives the final profits from that vessel's 
operation.
    The IMO looked into that and, after much debate at the 
Maritime Safety Committee, they kicked it over, not 
uncharacteristically, but they kicked it over to the legal 
committee, to say you take a look at it. What they came in with 
was that the key aspect of a vessel is that person who has 
control over the operations of that vessel.
    The Chairman. OK, but let me interrupt. Let me have a 
dialogue with you. But if it is registered in one country, the 
purpose of the registry is that that country would make sure 
that any ship registered under its flag would meet certain 
standards and criteria, right?
    Mr. Cox. Correct, sir.
    The Chairman. Then would not that country be responsible? 
Would not Liberia or the Bahamas be responsible, not the person 
or entity that is making the money, or both?
    Mr. Cox. Yes, sir, in respect to your example, the 
Liberians are the ones who would have their flag on that ship. 
That would be the country we would look to as being responsible 
for the conditions of the vessel in terms of it meeting 
standards.
    The Chairman. And as you know, Liberia would say: Fine, we 
are responsible; so?
    Mr. Cox. Well, we can get into a description of the flags, 
of what are called the flags of convenience, and how good or 
not good they are. But carrying on from that issue, Liberia as 
the flag and in the state does not control the movements of the 
vessel. Someone controls the movements of that vessel.
    The Chairman. But the fact that it is registered in that 
country gives that country the responsibility for it. Otherwise 
they should not register it under that flag. That is why its 
country's flag is flying on the stern of the ship.
    Mr. Cox. I am not disagreeing on that, Senator. I think 
that you are getting to a very critical and pertinent piece of 
information within the maritime community, and that is who can 
we finger and hold responsible for the operation of the vessel, 
and that person also has the responsibility for the condition 
of the vessel also. It is not just where it is going, but what 
condition is that ship. That is the person we are trying to get 
to.
    The Chairman. Maybe that is why, maybe that is why, Mr. 
Rauta, they throw the captain in jail, because they sure know 
that they are not going to get any Liberians. Go ahead.
    Mr. Rauta. Thank you, Mr. Chairman. If I may come back to 
your first question regarding who is responsible for the 
operation of the ship, the answer is the operator or the owner. 
It depends on the structure. It is no doubt about this. In this 
case the operator is known, the owner is known. All factors 
such as the class society who has classified the ship, are 
known.
    The Chairman. The country under which that ship is flying 
the flag bears responsibility.
    Mr. Rauta. Bears, shares----
    The Chairman. Any interpretation of international law will 
tell you that. Otherwise, it does not have the right to fly its 
flag.
    Mr. Rauta. I do not disagree. It shares the responsibility 
and, therefore, the Bahamas flag, which by the way has one of 
the best records, probably better than many EU flags or 
Administrations, will be the one conducting the accident 
investigation.
    The Chairman. Well, I believe in dialog here, Mr. Rauta. 
You are telling me that the Liberians can carry out the kind of 
inspections and enforce the kind of standards on a ship and its 
construction and its operation that the French can?
    Mr. Rauta. Mr. Chairman, with due respect, it is Bahamas, 
and by the records of port state control in this country, in 
Paris MOU agreements and in Far East Port State Control 
agreements Bahamas has--or ships registered with Bahamas, have 
very good records. In the Paris MOU system in Europe, they 
belong to a short list of white-listed flags, so their records 
are good, generally speaking. About this case, we need to find 
out the causes and listen to the investigation report.
    On the business type of----
    The Chairman. Mr. Sandalow, this kind of lash-up is not the 
exception, it is the rule; is that right?
    Mr. Sandalow. That is absolutely correct, Mr. Chairman.
    The Chairman. I am not interrupting. I am going to get back 
to you, Mr. Rauta.
    Go ahead.
    Mr. Sandalow. Let me just say, this Bahama-Liberian-Greek-
Japanese web of control here is a huge concern, and it is one 
reason that we need to take long-term steps under the 
Convention on the Law of the Sea to have additional obligations 
on flag states. They need to actually have duties and 
responsibilities, as well as the capability to carry out the 
responsibilities that they are undertaking.
    The Chairman. Continue, Mr. Rauta--go ahead.
    Mr. Sandalow. One additional point, Mr. Chairman. It is 
going to take a while to get there. In the interim, we need 
these ``no go'' zones I talked about in order to protect the 
most sensitive areas of the ocean.
    The Chairman. Complete your comment, Mr. Rauta.
    Mr. Rauta. Mr. Chairman, on the business relationship that 
you describe, maybe not though with so many different countries 
of residence, but there are many other businesses which are 
likewise administrated and organized. It is not only shipping. 
So, it is not particularly only for maritime business which has 
such an organizational structure.
    The Chairman. But those other businesses do not carry crude 
oil around the world and bring and cause a risk to lives and 
environment.
    Mr. Rauta. This is correct, sir. This is correct.
    Now, in our comments, what we have said is actually not in 
contradiction to anybody else. The only plea we make is, No. 1, 
that if there are going to be corrective actions, those should 
be based on factual--fact-finding accident investigation and, 
No. 2 that those corrective actions are discussed, applied and 
adopted at an international level.
    Now, the master of the ship is the key witness on this 
investigation. That man has battled in impossible weather for 
24 hours to hook the vessel to the tug boat. After that he is 
put in jail and sits there for the last 2 months. That man 
probably would not be the excellent witness an investigator 
would need to have in order to clarify the real cause of the 
accident. That was the background of my statement.
    The Chairman. I would be glad if there is any of the other 
witnesses that have a comment on this particular issue, because 
it has all got to do with confidence. I do not think that 
Americans, who I am worried about, but I am worried about all 
citizens of the world, have any confidence in the safety, the 
maintenance, all of the aspects that have the do with 
prevention of these kinds of things, when they are an alphabet 
soup.
    Go ahead, Mr. Allegretti.
    Mr. Allegretti. At the risk of appearing to be a shameless 
opportunist, Mr. Chairman, and I go here with some trepidation 
because I know you are a skeptic, the kinds of concerns that 
you raise about international shipping do not exist in the 
domestic fleet because of the Jones Act, and because all of the 
vessels that trade domestically in the United States are owned 
by American citizens, operated by American crews, and built in 
U.S. shipyards, and are subject to the----
    The Chairman. I appreciate that commercial, but these ships 
come into U.S. ports and operate in U.S. waters. That was the 
issue, after the commercial is over for the Jones Act, which 
has raised costs dramatically to all American citizens who 
consume products that are carried in this exclusionary fashion. 
That is my commercial.
    Go ahead.
    Mr. Allegretti. I said I was going there with trepidation. 
I think I have made the point.
    [Laughter.]
    The Chairman. No, but please go ahead if you had a comment 
on this other situation.
    Mr. Allegretti. I would simply say that the question of 
confidence is one that should not exist with respect to 
domestic trade because we are subject to the full extent of 
U.S. law within American jurisprudence, and to all the 
liabilities that accrue under OPA-90. End of commercial.
    The Chairman. I thank you, Mr. Allegretti. I think you do 
make a very legitimate point because we do have confidence in 
ships that are carrying an American flag. I would like to have 
that same confidence in every ship that carries any flag of any 
nation in the world, and that is not the case today.
    Go ahead, Mr. Cox, if you want to. We will go down, if you 
have any additional comments, or just pass.
    Mr. Cox. Just quickly, Senator, that the international 
maritime community is engaged in a debate as we sit here on 
transparency. That is, are we too secretive in regards to 
holding close to the chest cards that do not have to be held 
close to the chest and should be opened up for review. I think 
the investigation into the PRESTIGE, the class society and the 
governments involved have been extremely open, much more open 
than any previous incident. So, this is an extremely good time 
for you to be expressing an interest in this aspect of the 
industry.
    The Chairman. Mr. Godfrey.
    Mr. Godfrey. Mr. Chairman, yes. I believe OPA-90 is good 
evidence that when you can clearly define who is responsible 
you get good results. I think in the international realm of 
shipping, it is a mess out there, and I think again one of our 
points was we believe that liability and responsibility needs 
to be clarified.
    The Chairman. Mr. Sandalow, anything in addition?
    Mr. Sandalow. A quick additional point. This is an area 
where I think we can work very productively with the European 
Union in light of what has happened over the past couple of 
months, and particularly putting short-term diplomatic pressure 
on the worst violators of flags of convenience-type rules.
    The Chairman. Mr. Frick, I know you do not have a direct 
interest, but it is your product that is carried. Do you have 
any additional? And I, again, apologize for the inconvenience.
    Mr. Frick. It is like a bad cocktail party.
    [Laughter.]
    Mr. Frick. What I would like to add to this is that--and I 
am not touching the whole issue of flags of convenience, both 
from a knowledge standpoint, and I know it is a very 
complicated issue. But what I think we can look at to your 
question of confidence is that OPA did more than just deal with 
single hulls. It has a system, the Coast Guard has a system, 
our members have systems, in which they look at these tankers 
that are coming in.
    So we screen these facilities. It is not just that they 
say, well, it is coming from Liberia, they flagged it, it is 
OK. There is a lot of other review that takes place as a part 
of our own companies' practices, but also because of some of 
the initiatives that have been brought in by OPA. So that I 
think what we are missing here is that there are a lot of other 
aspects of it, all of which lead us to the results, which I 
tried to emphasize, we are not having these dangerous ships 
come in. We have a way of ensuring that the ones coming in are 
meeting higher standards, and that is why in the last year that 
they have records 200 gallons were spilled when 3.2--barrels, 
excuse me--while 3.2 billion barrels were imported.
    So, I think the record shows we are doing better and part 
of it is because of these other elements, such as certificates 
of financial responsibility and other elements of OPA.
    The Chairman. Thank you.
    Mr. Frick--I mean Mr. Cowen. I am sorry.
    Mr. Cowen. Thank you, Mr. Chairman. Mr. Chairman, I agree 
wholeheartedly that Americans should have confidence in all the 
oil that is coming into our country. We are importing 10 
million barrels a day by sea.
    The Chairman. Not just oil.
    Mr. Cowen. Yes, absolutely, Mr. Chairman. The point that I 
wish to make is OSG is a U.S.-based tanker company. We are a 
rarity today in the industry. For reasons having to do with the 
tax law, U.S. owners of these vessels that move the oil are at 
a competitive disadvantage. With your permission, Mr. Chairman, 
I would be pleased to submit for the record a brief statement 
that would explain some of the tax problems we have, and why we 
are not on a level playing field with our foreign competitors.
    But we do very much believe that there should be a greater 
U.S. ownership involvement in the vessels that move oil on the 
high seas and come into our ports.
    The Chairman. Thank you, and we will include that statement 
in the record.
    [The information referred to follows:]

                            Overseas Shipholding Group Inc.
                                         New York, January 31, 2003
Hon. John McCain,
Chairman,
Commerce, Science, and Transportation Committee,
Washington, DC.

    Dear Mr. Chairman:

    I am writing to follow up on a point that you raised with me at the 
January 9, 2003, Commerce, Science, and Transportation Committee 
hearing on the phase-out of single-hull tanker vessels. I appreciate 
your allowing me to provide material for the record to supplement my 
response, and I am submitting this letter for inclusion in the hearing 
record.
    At the hearing, you expressed your concern about the general lack 
of transparency relating to foreign-owned ships entering U.S. waters. 
In order to achieve greater transparency, we should be encouraging 
greater U.S. ownership of vessels in our foreign trade. U.S. owners are 
well known to Coast Guard and other federal agencies. If the U.S. tax 
law were modified to remove a significant obstacle that impedes U.S. 
ownership of international shipping, there would be a far greater 
number of U.S. companies engaged in this business.
    As a result of tax-law changes enacted in 1975 and 1986, U.S. 
shipping companies must pay tax on income earned by subsidiaries 
overseas immediately rather than when such income is later brought back 
to the United States. This treatment represents a sharp departure from 
the generally applicable income tax principle of ``deferral'' and 
places U.S.-based owners of international fleets at a distinct tax 
disadvantage compared to their foreign-based competitors. Most foreign-
based carriers pay no home-country taxes on income they earn abroad 
from international shipping.
    As a result of this competitive imbalance, U.S. companies now hold 
precious little share of the world shipping marketplace. Indeed, U.S. 
ownership of vessels engaged in international shipping dropped 
precipitously in the aftermath of the 1975 and 1986 tax-law changes. 
Before 1975, the U.S.-owned share of the world's open-registry shipping 
fleet stood at 26 percent. By 1986, the U.S. share had dropped to 14 
percent. By 1996, the U.S. share had dropped to 5 percent. \1\
---------------------------------------------------------------------------
    \1\ Price Waterhouse, ``Decline in the U.S.-Controlled Share of the 
Open-Registry Merchant Shipping Fleet Since 1975,'' June 6, 1997.
---------------------------------------------------------------------------
    The Treasury Department, in a recent study, clearly articulated the 
problem created by present law for U.S.-owned shipping:

          .  .  .  the U.S. tax system imposes current tax on the 
        income earned by a U.S.-owned foreign subsidiary from its 
        shipping operations, while that company's foreign-owned 
        competitors are not subject to tax on their shipping income. 
        Consequently, the U.S.-based company's margin on such 
        operations is reduced by the amount of the tax, putting it at a 
        disadvantage relative to the foreign competitor that does not 
        bear such a tax. The U.S.-based company has less income to 
        reinvest in its business, which can mean less growth and 
        reduced future opportunities for that company. \2\
---------------------------------------------------------------------------
    \2\ ``Corporate Inversion Transactions: Tax Policy Implications,'' 
Office of Tax Policy, Department of the Treasury, May 2002.
---------------------------------------------------------------------------
    Bipartisan legislation that would seek to address the problems 
described by Treasury was introduced in the 107th Congress by Rep. 
Jerry Weller (R-IL). \3\ Similar legislation is being reintroduced this 
Congress, and we would greatly appreciate your support. Enactment of 
this legislation would encourage greater U.S. ownership of 
international shipping, and therefore greater transparency with respect 
to ships entering U.S. coastal waters.
---------------------------------------------------------------------------
    \3\ HR. 3312, 107th Cong.
---------------------------------------------------------------------------
    Other security concerns also are raised by the decline in U.S. 
ownership in the international shipping trade. The U.S. military, in 
times of emergency, relies on the ability to requisition U.S.-owned 
foreign-flagged tankers, bulk carriers, and other vessels to carry oil, 
gasoline, and other materials in defense of U.S. interests overseas. 
These vessels comprise the Effective United States Control (``EUSC'') 
fleet. The sharp decline in the EUSC fleet since the 1975 and 1986 tax-
law changes, and the resulting adverse strategic consequences, have 
been confirmed in a recent MIT study. \4\
---------------------------------------------------------------------------
    \4\ ``Increasing the Size of the Effective United States Control 
Fleet'' Massachusetts Institute of Technology, August 2002.
---------------------------------------------------------------------------
    U.S. security depends in no small part on our ability to maintain 
adequate domestic oil supplies in times of emergency. The United States 
consumes approximately 19.6 million barrels of oil per day, of which 
roughly 55 percent, mostly crude, is imported into the United States. 
It is estimated that 95 percent of all oil imported into the United 
States by sea is now imported on foreign-owned tankers. This means that 
one half of every gallon of oil consumed in the United States is 
carried on foreign-owned vessels. This growing dependence on foreign 
parties--who may not be sympathetic to U.S. interests--to deliver our 
oil in times of global crisis is cause for potential alarm.
    Enactment of the tax legislation discussed above would mitigate 
these concerns. I would be happy to provide you with any additional 
information on these or other issues if you wish.
        Sincerely,
                                           Robert N. Cowen,
                 Senior Vice President and Chief Operating Officer.

    The Chairman. With the indulgence of my colleague from 
Oregon, I ask one more question for the panel. Should the U.S. 
consider adopting the European Commission proposal, 
particularly if it is adopted by the IMO, and what impacts 
would the EU proposal have on the U.S. flag fleet? Mr. Rauta, 
beginning with you, sir.
    Mr. Rauta. Thank you very much, sir. Well, difficult to 
give you a straight answer because the EU proposes two new 
regulations. The first is an accelerated phase-out, which it 
might be more clear and probably easier to look into the 
statistics and make a judgement.
    The second proposed regulation is to restrict certain types 
of cargo of being transported in single-hull tankers. These 
cargoes are heavy fuel oils, which are well-defined, and heavy 
crude oils. This is--there is no definition at the moment for 
heavy crude oils. There are two or three alternative 
definitions. In our written submissions, and according to the 
proposed rule by the European Commission at the moment, we 
listed to our best ability those crudes that might fall into 
the heavy crude oil category that in Europe should be brought 
in, or trade out by double hulls only.
    Now, with that degree of uncertainty it would be very 
difficult to make an assessment globally. In the United States, 
probably in the long-term, I personally would not believe there 
will be too much of an impact. In the short term, it depends 
very much on the definition of what is a heavy crude oil. Most 
of the Venezuelan crude, some of the crude from West Africa, 
and a couple of crudes coming from the Arabian Gulf will fall 
in this category, should the EU still retain the definition 
that they are proposing now.
    We basically have alternative definitions given there. So, 
we will have to wait and see what is the final outcome.
    The Chairman. Thank you.
    Mr. Allegretti.
    Mr. Allegretti. I am not an expert on the EU proposal, but 
my understanding of it is that it has many, many similarities 
with OPA-90, and indeed is moving the European regulatory 
system closer to what we already have here. I hesitate to say 
that there would be no impact on U.S. flag vessels because I 
think that in order to figure out what the impact is of that 
movement, you have to actually look at the vessel, at its size, 
at its age, and make a comparison.
    But I believe that it is correct that, generally speaking, 
the EU proposals are largely in accordance with what we already 
live under here in the U.S. under OPA-90.
    The Chairman. I think they accelerate what we are doing 
here.
    Mr. Cox.
    Mr. Cox. Thank you, Senator. I agree, I think they 
accelerate in terms of the single hulls calling into LOOP and 
into the lightering zones. My testimony was, yes, there could 
be a market shift of some ships to our market, and we do have 
to take a look at that. We also suggest that we do not open up 
all of OPA-90 and redo everything that is working 
satisfactorily now. But we certainly do have to pay strict 
attention to something that is occurring in another major 
market that could have an impact on us.
    I think one of the factors that could ameliorate our 
concern is the port state control that we exercise. I think I 
can say with some confidence that our inspection circumstances 
here in the U.S. are much stronger than even in the EU, and 
therefore, we are protected even today by a more stringent and 
diverse type of an inspection regime. So, that would have to be 
factored into our determination.
    Thank you.
    The Chairman. Thank you.
    Mr. Godfrey.
    Mr. Godfrey. Mr. Chairman, in general the Shipbuilders 
Council believes that Congress should confirm OPA-90 without 
any significant change. However, and to qualify that, we think 
there are going to be a few good ideas in the new EU 
regulations, for instance stricter inspection, more frequent 
inspection of older vessels. We think Congress should consider 
adopting some of those enhancements.
    Last, I would say that we need to be very careful to watch 
what the final form of these regulations might be, because if 
they turn out to be tremendously different than OPA-90 and 
there became quite a difference in terms of timing and the 
conditions under which vessels would be put out of service, 
anything that would increase traffic of aged vessels toward 
U.S. shores needs to be guarded against.
    I think we are going to have to watch and anticipate the 
direct and the indirect effects of those new regulations in 
Europe. And I do not know what they will be, but we need to 
watch it very closely.
    The Chairman. Mr. Sandalow.
    Thank you, Mr. Godfrey.
    Mr. Sandalow. Yes.
    The Chairman. Thank you.
    Mr. Sandalow. Delighted to elaborate. This will help us 
protect our oceans. I am encouraged by what I hear to be some 
of the openness from my colleagues on the panel here to the 
suggestion that you raise.
    The Chairman. Thank you.
    Mr. Frick, I think you can take a pass if you want to on 
this.
    Mr. Cowen.
    Mr. Cowen. I think certainly, in terms of the possibility 
that tighter EU rules would apply and drive the vessels they do 
not want to our shores, we certainly have to act. So far as the 
Jones Act trade goes, I would say that that is not directly 
impacted by rules that have the effect of driving other 
international flag vessels here. The Jones Act trade, of 
course, is a trade unto itself. But in that trade, I think we 
have to continue to remain vigilant. We maintain the Jones Act 
vessels to a high standard. These vessels are in our ports 
every day. These vessels are subject to Coast Guard regulation 
every day. And I note that the Alaskan fleet is currently being 
replaced with double hulls that are on order right now. So I 
think that modernization of the Jones Act fleet is happening.
    The Chairman. Thank you. I want to thank the entire panel 
for a very interesting and informative discussion.
    Senator Wyden.

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. [presiding] Thank you, Mr. Chairman. I want 
to join you, Mr. Chairman, in this effort to close the 
loopholes on the foreign-flag vessels. I think, frankly, you 
have been pretty diplomatic in terms of how you have handled 
it. To me, what is going on is real simple. You have got these 
foreign-flag vessels playing a corporate shell game. They are 
playing a shell game that is designed to try to avoid 
accountability, to hide the ownership interests along the lines 
that the chairman is talking about.
    I want you to know, Mr. Chairman, I am going to support you 
fully in the effort to close the loopholes in this statute. 
That is priority business.
    Frankly, I would like to see us go significantly further. I 
think there is much to do in this area. The system certainly 
incentivizes using older, less seaworthy vessels rather than 
modern double-hulled vessels. Again and again, as you look at 
this area, it seems to me that profits are constantly trumping 
safety, to the detriment of communities across the country.
    We have had a special problem in my home State. The NEW 
CARISSA ran aground on Oregon's shores in February 1999. We saw 
firsthand environmental devastation on our special coastline, 
and we have been playing catch-up ball to repair the damage 
done to the State's shoreline and coastal resources ever since. 
That was a spill involving a ship carrying 400,000 gallons of 
oil, and supertankers like the EXXON VALDEZ that split in two 
and sank off Spain carry millions of gallons of oil and that is 
why it is important that we go at this in a comprehensive way.
    So, I wanted to start with a question for Mr. Frick if I 
might. It has been reported, Mr. Frick, that the tanker ERIKA 
that broke in half and sank off the coast of France was 
chartered by the oil company TotalFina Elf at half the going 
market rate and that the oil company officials involved in 
chartering the tanker were rewarded for keeping down the 
charter cost.
    My question to you is, how do you justify a system that 
creates these perverse incentives to charter less seaworthy 
vessels that put at risk coastlines and livelihoods of coastal 
communities rather than the charters that seem to me to be in 
the public interest, and those are the modern, state-of-the-art 
charter vessels?
    Mr. Frick. Obviously, I have no immediate knowledge of the 
details of the charter there. All I would say is that for the 
traffic into the United States, due to OPA, due to the policies 
of our members and the Coast Guard's activities, I would submit 
that that is not the lowest--we are not looking for the lowest 
price. We have many criteria we use. We have high limits of 
liability that we have to deal with. We have our own standards 
that we apply.
    So, I think it would be wrong to say that cost is the only 
factor in making those determinations. I think OPA, company 
policies, Coast Guard policies are working to get the better 
ships into the United States.
    Senator Wyden. Well, let us examine that. It is my 
understanding that the difference in chartering single-hull 
versus double-hull vessels in the domestic trades for charters 
of approximately 6 months to 2 years is approximately $4,000 to 
$5,000 a day. Now, over the course of the year, that difference 
is as much as $1.5 million, certainly what looks to me to be a 
substantial financial incentive not to charter the double-hull 
tankers.
    Do you not think--and again, I am not going to ask you 
about a specific case. But is not, from the standpoint of the 
system, is that not a substantial financial incentive that 
exists today for chartering the older, less seaworthy vessels? 
Because I do not want us to say that government policy should 
be to just sit around and hope that you do not have a disaster. 
I want government policy to try to create the appropriate 
incentives to limit the prospect for tragedies.
    Mr. Frick. I think we will find that the statistics are 
showing that the number of shipments coming in by double hulls 
is growing significantly. I think it is about 50-50 now. So I 
think there are a lot of reasons.
    Just because--and second is, just because you have an older 
single-hull ship does not mean that it is not seaworthy. If you 
have the right inspections, if you have the right criteria that 
you are applying, you can ensure that they are of high quality 
performance coming in. So, I think just because we have those, 
we have age and single hull, does not mean those are not 
seaworthy ships.
    Senator Wyden. I think that is just one of the sort of 
structural problems I see with respect to the industry today. I 
look at the fact that ships containing as much diesel oil as a 
small tanker are not regulated as you would have a double-hull 
vessel. That was part of the problem in Oregon. I think what I 
would like to do is take the panel through the Oregon 
situation.
    In Oregon, you have a vessel, the NEW CARISSA, that ran 
aground. It was not a tanker, it was a cargo ship. But at the 
time it ran aground, it was carrying 400,000 gallons of fuel 
oil. Now, this caused enormous devastation to our coastline and 
severe economic hardship to the coastal communities.
    What ought to be done in the view of this panel to reduce 
the risk of oil spills from these ships? This seems to me to be 
another shortcoming in the statutes as they exist on the books. 
I would like to hear what this panel thinks, because you have 
got a situation where my State has been hammered as a result of 
a tragedy involving a ship containing as much diesel oil as a 
small tanker, and the fact of the matter is it is not regulated 
with the kind of safety provisions that you would have with the 
double-hull requirements.
    Let us take this panel, and we can just begin at the end of 
the table.
    Mr. Cowen. Thank you, Senator. Your point is, of course, 
well taken. It is a fact, what happened. OSG, I might say, has 
recently modified the designs on the latest double-hulled 
tankers it is building to actually extend the double hull to 
cover the bunker area. This is, in fact, an area of additional 
vulnerability and I think the point is well-taken. Of course, 
accidents can happen regardless of what you do, but I think 
that is an additional element of safety that can be introduced 
into tanker design, or any ship design.
    Senator Wyden. Would others on the panel like to respond?
    Mr. Cox. Thank you, Senator. Yes, we were certainly aware 
of the NEW CARISSA and the outcome there, and there were some 
operational issues that have to be looked at. But at the same 
time, I wrote down here ``protective fuel tank location.'' I 
think that is something that has to be looked at for all types 
of ships.
    I believe that the NEW CARISSA was a bulk carrier and she 
went aground and the fuel spilled. I do not know the technical 
details.
    Senator Wyden. How would you see strengthening the fuel 
tank protections that you have touched on?
    Mr. Cox. Well, you would want to locate the fuel tanks in a 
protected location, maybe aft in vertical-type tanks.
    Senator Wyden. So, you would require that of new vessel 
construction?
    Mr. Cox. That is what I think we are looking at at the IMO, 
fuel tank location.
    Senator you brought up an interesting point, which is that 
certainly OPA-90 covers oil spills from all types of ships. So 
if a ship like the NEW CARISSA happens it is certainly an OPA 
incident in terms of spilling that oil, even though it was not 
cargo, it was oil in the water.
    Senator Wyden. Other suggestions from panel members? Yes?
    Mr. Rauta. Senator, thank you very much. Actually, the NEW 
CARISSA accident really did bring the issue that you raised 
here to IMO. The issue is on the IMO agenda. However, the ERIKA 
accident and all this revision of phasing out of single-hull 
tankers kind of delayed those developments in IMO related to 
protection of bunker tanks.
    Now, the good news is that the IMO is taking up again the 
issue and actually INTERTANKO, together with the U.S.-based 
Society of Naval Architects and Marine Engineers, have already 
submitted a paper for an IMO meeting in March with suggestions 
of a methodology on how to address this issue for all ship 
types.
    Senator Wyden. How soon could that be implemented? Again, 
what my constituents are very frustrated about is that we have 
spent years now wrangling with the owners of this company, and 
we still have this vessel out there, and there is enormous 
frustration. It seems that there is one meeting or one workshop 
after another and very little done to actually get in place the 
changes.
    Mr. Rauta. Senator, we here, we are NGO's, we are industry 
representatives. In IMO, it is very much up to the governments 
to speed up the rulemaking development. The last couple of 
years IMO have shown very much strength in speeding up 
legislation. So, I would say that immediately when IMO shapes 
up proposed regulations, and when the industry has the 
confidence that those proposals will not be changed throughout 
the approval procedure, all the new ships will be built up to 
those standards, even before the rules come into force.
    Senator Wyden. Others? Yes?
    Mr. Sandalow. Senator, another question is whether the NEW 
CARISSA should have been at that location at all. If it was an 
area of special importance to coastal communities, or an area 
of special biological importance, the answer is no, it should 
not have been. One of the proposals that could make a 
difference in this type of incident is to have ``no go'' zones 
adopted by the IMO to make sure that vessels are not traversing 
over areas where accidents would cause a special damage to 
communities and to fisheries.
    Senator Wyden. Other suggestions?
    Mr. Godfrey. Senator, if I might make a few comments. Any 
new requirements that would require greater hull protection for 
fuel tanks would have very far-reaching implications for all 
vessels, including many vessels that are not necessarily 
concerned with OPA-90. Many vessels in the domestic trade are 
carrying fuel in single-skin tanks. This would, of course, also 
include military vessels and vessels owned by the U.S. 
Government. Many of those vessels are fueled with tanks that 
are adjacent to the exterior shell of the vessel.
    You would have to reconfigure the fleet of the entire world 
to deal with that regulation, and I do not know how that could 
be dealt with in any period of time reasonably. So, that is a 
big issue, and I just caution that it has massive implications 
for all vessels and I do not know how you deal with it, 
frankly.
    Senator Wyden. So, you do not do anything?
    Mr. Godfrey. No, sir, I am not saying that.
    Senator Wyden. Well, tell me what you do. You have told me 
what you are against. I would like to know----
    Mr. Godfrey. No, I am not against.
    Senator Wyden. I would like to know what you are for, 
because the fact of the matter is 3 years after this tragedy in 
Oregon involving a ship containing as much diesel oil as a 
small tanker, which was not subject to the tougher rules, we 
still do not have a remedy for the people in Oregon who are 
hurting as a result of this tragedy.
    I want to be sensitive to the questions of cost, and making 
sure that you phase in any new requirements and all of the 
technical questions that are relevant to putting in place these 
new requirements. But I think what has been important about 
this hearing is it has exposed some very significant loopholes 
in the system.
    Tell me what you are for?
    Mr. Godfrey. Well, first of all, I am all for making these 
vessels safer. I am concerned that that type of requirement 
would take far longer than OPA-90 to put into place. There are 
many vessels by nature of their design, and by nature of their 
naval architecture that would become unstable and unseaworthy 
if the fuels were removed from those tanks, or relocated 
elsewhere in the vessel. It would require a complete redesign 
of the world's fleet.
    What I would suggest, first of all, shipyards would be 
delighted to be involved. And I assume, since the chairman is 
no longer here, I can set forth an advertisement. We would love 
to take that problem on and fix it.
    Senator Wyden. I have absolutely nothing against the idea 
of putting people to work in the Portland shipyard.
    [Laughter.]
    Mr. Godfrey. Very good, Senator.
    Senator Wyden. If that is part of the remedy, folks, that 
we can come up with something that beefs up safety and creates 
some family wage jobs in shipyards, I think you will have a lot 
of Senators flock to that proposition.
    Mr. Godfrey. Well, to encourage you, Senator, I am sure 
there are good engineering solutions and we look forward to 
helping you with them.
    Senator Wyden. Let us hold the record open for your 
suggestions on this point, because I will tell you I just had a 
town hall meeting in Coos Bay, Oregon, in fact just this past 
weekend, where there is substantial frustration as a result of 
the years worth of wrangling with the company and the inability 
to secure the compensation that is appropriate. People want 
answers. I will hold the record open. I think the points you 
are making with respect to how you do it and ensuring that it 
is cost-effective and which vessels and under what 
circumstances are very fair questions. But we have got to find 
answers to this.
    Mr. Cox, did you want to get into this?
    Mr. Cox. Yes, Senator, I would like to add onto the 
concerns of the shipyards, and that is, we have begun to engage 
this protective fuel tank location issue. It will affect all 
vessels in the world's fleet. I think you can confidently go 
back and tell the people of Oregon that the initiatives that 
the U.S. took to the IMO are going to have a major impact on 
the way ships are designed throughout the world.
    Certainly, it is going to take a lot of time in eventually 
coming to fruition on changing all these vessels. But at the 
same time, Senator, if we do not start we will not get to the 
point where we want to be, either, and we are at that starting 
point.
    Senator Wyden. Gentlemen, anything you want to add further?
    [No response.]
    Senator Wyden. I think your last point, Mr. Cox, is again a 
fair one, and I would only say in rejoinder what my 
constituents want to know as a result of what happened in 
Oregon, as a result of news reports that they have seen around 
the country, is they are asking: How many gallons of oil need 
to be spilled, and how many miles of coastline need to be 
destroyed before our country gets serious about this issue, and 
gets serious about dealing with vessels that are unseaworthy, 
and are transporting oil in our coastal waters?
    The problems are particularly egregious with respect to 
these foreign vessels that the chairman has been talking about. 
But suffice it to say that it is relevant in a number of other 
areas. So there is much to do on this.
    Do any of you gentlemen have anything further that you 
would like to add this afternoon?
    [No response.]
    If not, the hearing is adjourned.
    [Whereupon, at 4:43 p.m., the Committee was adjourned.]
                         A  P  P  E  N  D  I  X

    Response to Written Questions Submitted by Hon. John McCain to 
                          Thomas A. Allegretti
    Question 1. Mr. Allegretti, you indicated in your statement that 
``there is a surplus of tonnage on the market today--more vessels than 
are needed to meet U.S. demand for oil transportation.'' Yet Mr. 
Godfrey, from the Shipbuilders Council has stated that there is a 
growing shortfall in capacity. How do you explain this difference of 
opinion?
    Answer. With all due respect to our colleagues from the shipyard 
industry, we do not foresee a growing capacity shortfall as they 
suggest. In fact, we have a fundamentally different view of the very 
premise of their concerns that suggests future transport capacity 
constraints. AWO does not believe the Committee should have any 
concerns about the long-term ability of America's tank vessel industry 
to move the nation's energy cargoes. We reach this conclusion for 
several reasons.
    First, we question both the supply and demand projections used by 
the shipyards. Arguably, projecting demand is an imprecise art that 
involves several factors that are themselves hard to predict. But, 
every projection of the demand for domestic ocean transportation of 
energy cargoes that AWO has seen is relatively flat. As our testimony 
pointed out, the amount of oil moved by tank barges in 2000 was the 
same as that moved in 1990. If history is any guide, we do not 
anticipate any skyrocketing demand for oil transportation in the near 
future.
    On the supply side, an analysis prepared by the shipbuilders about 
16 months ago was projecting a shortage of more than half a million 
deadweight tons in the domestic tank vessel fleet by 2005. Yet, their 
January 9 hearing testimony shows that projected shortage to now be 
only 98,000 deadweight tons. The disparity of those two projections in 
such a short timeframe would suggest that they are not an accurate 
basis for concluding that the nation faces a crisis.
    The most precise information available, which gives us confidence 
that no capacity crisis is on the horizon, is the track record of our 
industry to be there to provide transportation whenever shippers have a 
need for transportation. That historically and routinely takes place as 
a function of the market, and as a result of the fact that we enjoy in 
this country families and companies who have a long-term commitment to 
this business. Our testimony highlights nearly a half-dozen prominent 
examples of that--companies that have been in the oil transportation 
business for generations and that have invested hundreds of millions of 
dollars in the recapitalization and modernization of their fleets. 
Their track record is clear that they are committed to meet the needs 
of their customers. If the shortage projected by the shipbuilders is 
indeed accurate, that is a business opportunity that these companies 
will be pleased to seize.
    Finally, the Committee should have an appreciation for the fact 
that the 2005 shortage projected by the shipbuilders is not terribly 
surprising. The vessel of choice for ocean transportation is the ATB, 
which the yards say takes less than 18 months to build. It is unlikely 
that an examination of vessel capacity available in 2005 would reflect 
today an order already placed for such a vessel.

    Question 2. If a capacity problem were to develop in a market, how 
long would it take for your members to establish additional capacity in 
that market?

    Question 2a. Am I correct that if a crisis were to develop, your 
members would very likely see it coming and act in advance to build 
additional capacity?
    Answer. As I outlined in my testimony, the OPA-90 phase-out 
schedule is only one of the factors that determines when new double-
hull vessels will be built. To be sure, it is a ``bottom line'' for the 
elimination from service of single-hull vessels. However, the decision 
to construct new double hull capacity is basically an economic one, 
made as a result of a variety of economic and market factors.
    Each AWO member is of necessity an expert in the particular markets 
in which they operate. They watch their markets closely to remain 
competitive and to anticipate business opportunities. They are 
constantly evaluating rates and demand, both current and projected, and 
factoring in their current and projected fixed and variable costs, to 
decide the best course of action for their business. If they were to 
see a capacity shortfall on the horizon, and I am confident that they 
would, they would not regard it as a crisis but as a business 
opportunity--and they would be prepared to take advantage of that 
opportunity by ordering additional vessels at an appropriate point.
    So I believe that AWO members would act well in advance of any 
capacity shortfall to meet the needs of the market. The lead-time 
required for ordering vessels to meet anticipated demands is relatively 
short. As I testified, the construction time for a new ATB of the type 
used on coastal routes is less than 18 months. For inland tank barges 
and smaller coastal vessels, the construction time would be shorter.

    Question 3. Can you tell us how the federal agencies involved in 
enforcement of OPA-90 monitor your industry? What types of inspection 
of tank barges are conducted by federal agencies? How often is the 
integrity of a barge inspected and by whom?
    Answer. Tank barges carrying oil, petroleum products and hazardous 
substances must meet comprehensive Coast Guard standards for design, 
construction, equipment and all elements of their operation. These 
vessels are inspected by the Coast Guard annually to ensure compliance.
    The specific requirements for inspection of tank vessels, including 
tank barges, are contained in 46 CFR Part 31. Tank vessels are required 
to be fully examined for the issuance of a Certificate of Inspection 
(COI) every 5 years. In addition, another full inspection is required 
at the midpoint of the 5-year COI inspection cycle. Finally, as stated 
above, an annual inspection is required to determine any deficiencies 
or major changes in the vessel. The initial inspection for issuance of 
the COI and subsequent 5-year renewal inspections may be conducted by 
approved classification societies under the Coast Guard's Alternative 
Compliance Program. All other inspections are conducted by Coast Guard 
marine inspectors.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. John McCain to 
                              Tom Godfrey
    Question 1. It is clear from your written statement that you are in 
favor of phasing out all single-hull tankers no later than what is 
mandated under OPA-90. That is understandable on your part given that 
the phase-out means more business for U.S. shipyards. However, your 
analysis of domestic capacity, demand, and availability, seems to 
ignore the decline in demand for domestic movements of crude and oil 
products. Do you disagree that demand for oil movements is declining?
    Answer. We agree that demand for crude oil movement from Alaska has 
declined dramatically in recent years; however, we disagree with the 
assumption that demand for domestic product movements is declining and 
will continue to do so. Over the long term oil consumption will grow 
and demand for transportation of that oil product will grow as well.
    My written testimony focused exclusively on coastwise product 
movement. Carriage of crude oil from Alaska is a unique market that 
must be considered separately from the coastwise petroleum 
transportation market. Vessels built to carry crude from Alaska are not 
transferable to the domestic coastwise product trades, because of their 
larger size and cost of operation. The Alaska North Slope trade is 
really a function of the refining process--market rules do not apply, 
because there is no alternative mode of transportation available.
    Product movement is impacted by varied circumstances at various 
times. For example, today much of the demand for New England heating 
oil is being met with product imports from Europe because product 
refined in the Gulf of Mexico is being diverted to the Caribbean to 
replace production interruption in Venezuela. Product imports from 
Europe are temporarily available at discounted prices because European 
demand for product has decreased due to slow economic growth in most EU 
countries and the move from gasoline to diesel fuel as Europe's primary 
source of energy. European refineries are retooling their output to 
increase diesel production and reduce gasoline production, which will 
soon end the overcapacity situation in Europe and lead to more 
expensive product exports and a greater demand for domestic product 
movement. Similarly, the political uncertainty in Venezuela will 
ultimately be resolved and the product currently being diverted to the 
Caribbean will again be available for the New England marketplace 
increasing demand for coastwise product movement.
    The biggest determinant in the demand for product movement; 
however, is the economy. Economic growth is inevitable and that growth 
will require more fuel. Increased consumption will increase demand for 
product movement. This cannot be accomplished solely in pipelines--
waterborne product movement has to increase as well. Pipelines can only 
increase capacity by 10 percent and pipelines are not practical for all 
types of product movement. Increasing pipeline capacity beyond the 10 
percent, which is possible with the current infrastructure, will be 
cost prohibitive and environmentally risky. Growth for demand of 
coastwise product movement is inevitable.

    Question 2. What is the average cost to build a handysize product 
tanker in a U.S. shipyard? What would that same vessel cost if built in 
a foreign shipyard? How do you explain the difference?
    Answer. The cost to build a handysize product tanker in a 
commercially oriented shipyard in the U.S. today is approximately $90 
million. Several U.S. yards are currently working with foreign yards to 
take advantage of their buying power and proven designs to reduce that 
price. A similarly sized vessel can be purchased from Asian shipyards 
for approximately $30 million.
    No one single reason explains the difference between U.S. and Asian 
tanker construction pricing. There are a number of factors not the 
least of which is the fact that America has not built many large 
commercial ships in more than two decades and our nation has not 
benefited from the experience and efficiencies that series construction 
provides. Because Americans haven't had the same opportunities to learn 
from experience, U.S. productivity lags behind Asian shipyards. This 
situation will not be reversed until American yards see the same type 
of series construction projects that have proved so beneficial to Asian 
shipbuilders.
    Another factor is that, for the most part, U.S.-flag operators want 
ships designed to their individual company's specifications and usually 
include duplicative systems and more robust steel requirements than 
foreign designs require. Most Asian yards develop a ship design and 
primarily offer only that design. Foreign operators buy the stock 
design. Asian ship owners are much like an American consumer walking 
into a car showroom and choosing the model you want. Obviously, the 
cost would be much greater if you ask the factory to build you a car 
three feet longer, six inches wider and with other specialty features 
not offered on the basic design.
    Complying with U.S. labor, safety and environmental regulations are 
more rigorous and expensive than in foreign countries and add to the 
price differential. In the U.S., we understand that it is 
counterproductive to pollute the environment building ships designed to 
protect the environment. One concrete example of a regulatory 
compliance cost in the U.S. is that shipbuilders are required by 
Congress to participate in the workers compensation scheme provided for 
in the Longshoreman Act--complying with this requirement costs an 
estimated 12 cents of every payroll dollar.
    Moreover, the cost of materials is also more expensive for U.S. 
yards. Our material costs alone are greater than the delivered price of 
product tankers in most Asian yards. For example, the materials package 
for a handysize product tanker constructed in the U.S. is estimated at 
roughly $40 million, while Korean yards can buy the materials for the 
same vessel for roughly half that amount. Commercial shipyards in the 
U.S. are not subsidized and haven't been for several decades. Foreign 
governments have enacted policies that promote domestic shipbuilding 
because they understand that shipbuilding is a labor intensive business 
that supports large numbers of industrial jobs.

    Question 3. In your written testimony, you mention that 
international operators have for some time been taking advantage of 
subsidized construction prices. I understand that vessel pricing in 
Asian shipyards has been the subject of some debate for the last 
several years. Can you tell us how vessel construction is being 
subsidized in these shipyards?
    Answer. Subsidization of foreign shipyards is a complex issue. 
Subsidization over an extended period of time creates huge market 
distortions, because it allows subsidized shipyards to maintain 
artificial order books and use the work generated through those order 
books to learn and implement production efficiencies that unsubsidized 
shipyards cannot achieve. Once that production advantage has been 
achieved, it becomes extremely difficult for shipyards that have not 
benefited from extended subsidization to reach market parity. When a 
shipyard or a shipbuilding country has established itself as a market 
leader, the market advantages multiply.
    A perfect example of this fact is the way Korean shipyards have 
used volume buying power to reduce material costs. As I mentioned 
earlier, Korean shipyards because they buy in huge volumes and have 
created the world's most extensive shipbuilding infrastructure, they 
can purchase materials and equipment needed to build ships for half 
what the same equipment would cost a U.S. yard.
    Korea is the ``poster child'' for shipbuilding subsidies. The EU 
has a case pending in the WTO alleging that the Korean government:

        1.  provides repayment guarantees for vessels built for export 
        if the contracts are not fulfilled;

        2.  provides through KEXIM, the state-owned Export-Import Bank 
        of Korea export subsidies in the form of excessively low 
        interest loans;

        3.  engineered massive debt forgiveness, preferential debt-for-
        equity conversions, debt and interest relief, and tax 
        concessions for Korean shipbuilding companies; and,

        4.  provides direct subsidies to upstream suppliers of key 
        shipbuilding components and materials, thereby indirectly 
        subsidizing shipbuilding costs.

    Korean shipbuilding companies have used this array of subsidies and 
preferential government policies to build one of the world's most 
efficient shipbuilding industries. Tragically, U.S. taxpayer financed 
loans from the International Monetary Fund has likely subsidized these 
activities.
    EU shipyards, despite complaints over Asian subsidization, also 
benefit from direct and indirect subsidies. Official EU policy today 
allows a subsidy payment of 15 percent of the cost of containerships 
built in EU countries. EU shipyards also benefit from indirect 
subsidies for worker training, etc. because the EU understands the 
necessity of maintaining strategic heavy industries as a way to keep 
workers employed.

    Question 3a. Does the U.S. have trade agreements regarding 
shipbuilding with the nations involved?
    Answer. To my knowledge the U.S. does not have shipbuilding trade 
agreements with major shipbuilding nations.

    Question 3b. Would you object if the Administration included 
shipbuilding in its next round of trade negotiations with these 
countries?
    Answer. The Shipbuilders Council of America strongly supported the 
OECD Shipbuilding Agreement negotiated during the first Bush and 
Clinton administrations. Unfortunately, that agreement was never 
ratified by Congress and served only to divide the industry and divert 
our attention away from a focus on modernization and productivity 
improvements. I do not believe that at the current time it would be in 
the best interest of U.S. shipyards to include shipbuilding in the next 
round of trade negotiations. The U.S. government, American workers and 
the shipyard industry would be better served focusing on ways to 
improve our operations to build for the domestic market before we 
attempt again to level the playing field on the world market, which has 
benefited from massive government funded improvements not available in 
the U.S.

    Question 4. How much of an impact has OPA-90 had in forcing ships 
to be replaced before the end of their useful lives?
    Answer. The impact of OPA-90 in forcing ship retirements sooner 
than the end of their useful lives has been minimal. The OPA-90 
retirement schedule was negotiated with broad maritime industry 
participation, which resulted in a reasonable and practical retirement 
schedule that allowed vessels to stay in service until their estimated 
useful lives had expired. Unfortunately, even the largest charterers 
have been unwilling to pay a premium to ship on double-hull tonnage 
except in rate circumstances. As a result, vessel owners understandably 
have an incentive to operate single-hulls as long as possible.

    Question 5. How much does a double hull add to the cost of a new 
tanker or barge?
    Answer. No single-hull tank vessels have been built in the U.S. 
since OPA-90 was enacted so an exact cost differential is difficult to 
provide; however, the industry estimates that the cost differential 
between single-hull and double-hull construction for similar vessel 
types is a modest 5 to 10 percent of the delivered price, primarily 
accounted for with additional steel and labor costs, although a double-
hull vessel may require a slightly more extensive piping system. The 
added steel requirement is less than one would expect because adding 
the double-hull removes much of the internal framing required for 
single-hull construction.

    Question 6. In your written statement you state that by 2008, the 
shortfall in product tanker and barge capacity will grow to 756,000 dwt 
assuming no growth in transportation demand and the current OPA-90 
retirement schedule. To what do you contribute this shortfall?
    Answer. The shortfall is the result of tonnage retired under OPA-90 
that to date has not been replaced.

    Question 6a. If the issue is that revenues from oil tanker 
transportation are not sufficient to justify investment in new 
capacity, what has been the driving force behind the construction of 
the new articulated tug/barges, or AT/Bs?
    Answer. AT/B revenue does allow for new construction today. AT/Bs 
are less expensive to build and operate and their improved operating 
efficiencies make them more competitive than previous designs.

    Question 6b. Do you expect that most of the shortfall in capacity 
will ultimately be made up by AT/Bs rather than self-propelled product 
tankers?
    Answer. Some capacity has already moved from tanker to barges and 
more may well follow; however, self-propelled tankers are economically 
more desirable for some trades, primarily those with greater sea leg 
voyage length.

    Question 7. The written statement of the American Waterways 
Operators (AWO) states that `` . . . government and industry sources 
agree that there is a surplus of tonnage on the market today--more 
vessels than are needed to meet demand for oil transportation . . . '' 
The written statement of API states that demand in the movement of both 
Alaska Crude Oil and oil products is declining. Figures from the U.S. 
Maritime Administration from 2000 also show demand is dropping as well. 
Can you explain why AWO's and API's conclusions are so different from 
your organizations?
    Answer. The AWO statement referred to government studies that 
considered supply/demand through 2004 and not beyond (prior to a major 
OPA-90 retirement date--2005). I don't disagree with that statement; 
however, as the statistics in my testimony indicate, a vessel shortfall 
will occur beginning in 2005 unless new vessels are built to replace 
tonnage forced into retirement by OPA-90. I believe it vital that the 
Congress consider the impact of vessel retirements in 2005 and beyond. 
Product tankers contracted for today cannot be delivered for operation 
until 2005. Failure to sign construction contracts this year will make 
vessel delivery in time to meet the projected 2005 vessel capacity 
shortfall virtually impossible.
    The testimony provided by the American Petroleum Institute 
correctly segregated the Alaska North Slope crude trade from the 
coastwise petroleum product trade, but the testimony relied on market 
demand and vessel capacity in 2000. Similar to the testimony of AWO, 
the testimony did not consider OPA-90 retirements in post 2000 years, 
which are significant. The U.S.-flag fleet of 64 product tankers 
referred to in the API testimony will be reduced to a maximum of 50 
ships by 2005 and will be further reduced to a maximum of 42 ships in 
2008--and only 21 of these ships are double-hulled.
    Estimating the demand for coastwise product movement is difficult 
to project because so many factors impact demand; however, there are 
some basic assumptions that can be relied upon. The overall economy 
will grow over time and with that growth will come increased demand for 
product movement, pipelines are not practical for every type of product 
movement, pipelines are already operating at virtually full capacity, 
and pipeline operators have announced no plans to expand capacity. 
Common sense dictates that demand for coastwise product movement will 
increase. The statistics in my testimony assume a very modest growth 
rate projected in the only public study on coastwise product movement 
demand of which I am aware. \1\ It will always be possible to look at 
specific time periods where demand for product movement is low--warm 
winters, economic downturns, post September 11 travel decline, etc.; 
however, over any extended period of time, demand for product movement 
will increase. Furthermore, none of the testimony, including mine, 
considered the impact of Administration policy to promote ways for the 
U.S. to become more reliant on domestic sources of energy.
---------------------------------------------------------------------------
    \1\ Wilson, Gillette & Co. (as cited in Double-Hulled Tanker 
Legislation: An Assessment of the Oil Pollution Act of 1990, National 
Research Council, 1998.

    Question 8. How much does the age and condition of a vessel have to 
do with the risk that the hull, single or double, may be breached? The 
action of the European Commission suggests that it believes that 
single-hull vessels more than 23 years old are simply too dangerous to 
be operated.
    Answer. Obviously age of the hull is one of the determining factors 
in whether a vessel is safe to operate, but more important than age is 
whether a vessel has been properly maintained, repaired and operated 
over the vessels life span. Properly maintained and operated ships can 
remain in service 25 years and beyond. With a rigorous inspection 
regime on the part of the classification society, there is no reason to 
require vessels to retire at an arbitrary age. However, common sense 
tells us that older vessels will be at greater risk and the EU proposal 
to require vessels older than 15 years to submit to an annual 
inspection makes good sense. We would suggest that the Committee 
consider requiring all vessels trading in the U.S. to be subject to 
more rigorous and frequent inspection programs.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. John McCain to 
                              Dragos Rauta
    Question 1. Was the PRESTIGE an INTERTANKO vessel?
    Answer. The manager of the vessel, Universe Maritime Ltd., of 
Greece, has been an INTERTANKO member in good standing since 1989.
    Appendix 1 gives a general information sheet on PRESTIGE produced 
by INTERTANKO after the tanker sunk.

    Question 2. Does membership in INTERTANKO carry with it 
responsibilities as to the maintenance and inspection of vessels?
    Answer. To become a member of INTERTANKO, all applications are 
reviewed by the applicable INTERTANKO Regional Membership Panel in 
which the application is submitted then approved by a vote of the 
Association's Executive Committee and Council. In order to become a 
member, all applicants must:

   Have experience in operating tankers;

   Demonstrate compliance with domestic and international 
        requirements through Port State Control inspections;

   Have a certified International Safety Management (ISM) Code 
        system:

   Classify their tankers with a Classification Society 
        approved by the International Association of Classification 
        Societies (IACS);

   Enter their tankers with a Protection and Indemnity Club; 
        and

   Maintain oil pollution response plans and insurance cover.

    INTERTANKO monitors its members' compliance with these criteria. We 
also pay close attention to members' Port State Control detention 
records. Lack of compliance with the above criteria or a negative 
record of detentions may result in a membership in the Association 
being suspended or terminated. Appendix 2 gives more details on 
INTERTANKO membership Criteria.

    Question 3. Are there international regulations governing the 
maintenance of tanker vessels?
    Answer. There are numerous international, national and private 
requirements and arrangements regulating the operations and maintenance 
of tankers. This is the most heavily regulated segment of the maritime 
industry. The most important convention regulating and preventing 
marine pollution by ships is the IMO International Convention for the 
Prevention of Pollution from Ships, 1973, as modified by the Protocol 
of 1978 relating thereto (MARPOL 73/78). It covers accidental and 
operational oil pollution as well as pollution by chemicals, goods in 
packaged form, sewage, garbage and air pollution. Vessel construction 
standards are also covered.
    In addition, the International Convention for the Safety of Life at 
Sea, 1974 (SOLAS), specifies minimum standards for the construction, 
equipment and operation of ships, compatible with their safety. Flag 
States are responsible for ensuring that ships under their flag comply 
with its requirements, and a number of certificates are prescribed in 
the Convention to provide evidence of compliance. Port State Control 
provisions also allow governments and their agents to inspect ships of 
other nations if there are clear grounds for believing that the ship 
and its equipment do not substantially comply with the requirements of 
the Convention. Thus, the ship is subject to scrutiny both by the 
nation whose flag it carries and, as a check on that process, separate 
inspection and review by Port States.
    Many flag and port states have unique domestic requirements 
pertaining to maintenance which are applied to vessels. These 
requirements are supplemented further by insurance and charterer 
standards and inspections.
    In conclusion, tank vessels are subject to the strictest regime of 
inspections in the maritime industry.

    Question 4. What actions have INTERTANKO members taken since the 
PRESTIGE accident to prevent another spill?
    Answer. As indicated in our testimony before the Committee, the 
accident investigation regarding the PRESTIGE is ongoing. Consequently, 
the ``lessons learned'' element of future measures must await an 
understanding of the causes of the casualty.
    However, INTERTANKO has taken the following actions:

   we have offered data and statistical analysis to the 
        European Commission;

   we have participated as an Observer to the IACS' Audit on 
        the classification society which inspected the PRESTIGE, the 
        American Bureau of Shipping (ABS). The Audit is part of the 
        IACS Procedures to check whether the surveys, repairs and 
        controls performed by the Class Society was in conformity with 
        all applicable rules and procedures;

   we have submitted a joint information paper to the 
        International Maritime Organization (IMO), together with the 
        U.S.-based Society of Naval Architects and Marine Engineers 
        (SNAME), regarding assessment of risks associated with large 
        fuel tanks; and

   we set up a ``ship repair'' assessment group with other 
        industry partners. INERTANKO has established with industry 
        partners representing classification societies, oil company' 
        and other independent interests a ``Ships in Service'' work 
        group. The purpose of this group is to review repair and 
        maintenance procedures, class requirements, and a general 
        assessment of safety margins in tanker structures, particularly 
        in the latter stages of their working lives. This therefore 
        complements work INTERTANKO has initiated with other shipowner 
        groups in joining with classification societies and 
        shipbuilding representatives to review design margins for new 
        ships in order to ensure more robust and fit-for-purpose ships 
        at delivery from the shipyards. This however has no direct 
        bearing with the PRESTIGE accident. We are waiting for an 
        official accident investigation result when, as appropriate, 
        the industry will consider what, if any, further corrective 
        measures may be required.

    Question 5. The volume of oil spilled in U.S. waters and 
internationally has declined significantly over the past thirty years, 
while the amount of oil shipped has continued to increase. To what do 
you attribute the decline in international spills?
    Answer. There are several contributing causes. First, the IMO has 
become an inc reasingly important catalyst for greater international 
cooperation and regulation of marine safety and environmental 
protection. Since 1970, the shipping industry has seen the creation and 
expansion of MARPOL 73/78, the promulgation of numerous new 
requirements under SOLAS, the ratification of the International 
Convention on Standards for the Training, Certification and of Watch-
keeping (STCW), the increased use of radar and adherence to the 
International Convention on the Prevention of Collisions at Sea 
(COLREGS), and acceptance of numerous other conventions, regulations, 
and resolutions concerning marine safety and environmental protection. 
These phased-in requirements have dramatically reduced both operational 
and accidental discharges of oil through enforceable international 
standards regarding design, construction, alteration, repair, 
maintenance, operation, equipping, personnel qualification, and manning 
of vessels. These international standards have contributed 
substantially to prevention of accidents the creation and maintenance 
of resources to respond effectively if an accident were to occur.
    Second, there is greater industry interest and concern over 
protecting the marine environment. The industry reflects the greater 
public concern over the damage caused due to the oil spill.


    Finally, various flag and port states, charterers, insurers, and 
classification societies have developed their own systems to enhance 
safety and environmental protection. This all has contributed to a 
multi-layered ``safety net'' of requirements that has reduced accidents 
and the possibility of discharge of oil into the marine environment.
    As an example, please note the graph below that shows the dramatic 
decrease of pollution accidents after the implementation of the new 
Enhanced Survey Program (ESP) for inspection of tankers. The Inspection 
Program increases the extent and the scope of the inspection in 
accordance with the tanker's age.


    These achievements are similarly reflected by the Port State 
Control detention records, on which the tankers' share is only a 
fraction of the total, with an excellent record in the U.S.


    Question 6. The charts you have submitted with your statement are 
very helpful in explaining the impact of OPA-90, MARPOL 13G, and the EU 
proposal on the phase-out of single-hull vessels. It appears to me that 
today, OPA-90 is effectively the governing law since it generally 
phases out single-hull vessels sooner than the international 
regulations. For the benefit of the Committee, could you explain the 
phase-out under each regulatory regime?
    Answer. The three phase-out systems (OPA-90; MARPOL 13G and the new 
EU proposals) are difficult to compare. Each has its own implementation 
schedule based on size, age and type. In other words, they are similar 
but different. For easy reference, here is a comparison of the single-
hull tanker phase-out, 5,000 dwt and above (by number of tankers) 
between the OPA-90, MARPOL 13G and the new EU proposals.

------------------------------------------------------------------------
  Phase-out year        OPA '90          MARPOL 13 G     EU new proposal
------------------------------------------------------------------------
2002               201                N/A               N/A
2003               120                238               697
2004               99                 173               133
2005               217                184               25
2006               67                 219               62
2007               76                 201               98
2008               56                 123               123
2009               57                 94                94
2010               401                76                563
2011               33                 83                40
2012               28                 83                32
2013               28                 71                21
2014               31                 79                29
2015               159                476               183
N/A*               527
------------------------------------------------------------------------
Grand Total        2,100              2,100             2,100
------------------------------------------------------------------------
* MARPOL 5,000 dwt and above, but OPA 5,000 GT and above OPA-90
  exemptions for LOOP and dedicated lightering areas not taken into
  account for reasons explained above.


    Be aware that OPA deadline in 2002 has already eliminated from the 
U.S. waters quite a lot of single-hull tankers. For instance PRESTIGE 
was not allowed to trade in U.S. Any differences in phase-out would 
have the same effect as far as trading of single hulls to U.S. ports is 
concerned.
    In cases where MARPOL Regulation 13G might phase-out some tankers 
before the OPA-90 schedule, these tankers would anyway have to phase-
out because their Flag Administrations would not give them 
Certificates. As almost all Maritime Administration are Party to 
MARPOL, the IMO deadline is final for single-hull tankers.

    Question 7. Could you explain what actions INTERTANKO has taken to 
improve the transparence of vessel ownership and operation? What 
actions are being undertaken by the international community as a whole?
    Answer. Information regarding the INTERTANKO Membership, the 
tankers registered and who control the ships is public information. We 
provide this information quarterly to the Equasis database. Equasis is 
a database which is administered by EU and which makes available data 
on ships, their operators, information of PSC and Vetting Inspection 
results, etc.
    In December 1999, INTERTANKO took the initiative to promote 
transparency of information within the shipping industry. INTERTANKO 
was actually the first maritime association to adopt a concrete, 
defined transparency policy. The decision was taken by the INTERTANKO 
Council at its meeting in April 2000 in Sydney, Australia. Appendix 3 
gives a more detailed explanation of the INTERTANKO contribution to 
promote transparency.
    The issue of transparency has been given specific attention in IMO 
within the context of the new security regulations. The IMO and its 
Legal Committee will soon promulgate guidance on listing of a 
responsible entity for each ship.
    We hope this information is helpful. Please do not hesitate to 
contact me or our U.S. legal and governmental affairs representative, 
Jonathan Benner (202-274-2880) if you or your colleagues have 
additional questions or require amplification of any of this material.

APPENDIX 1
    General information: M/T PRESTIGE (as on 25 November 2002)
    Ship name and type: M/T PRESTIGE (single-hull crude oil tanker)
    Cargo: Heavy fuel oil (typically used as bunker fuel with specific 
gravity 0.99)
    Load port: Ventspils, Latvia
    Discharge port: Singapore
    Owner: Mare Shipping Inc (registered in Liberia)
    Manager: Universe Maritime Ltd, Greece
    INTERTANKO member: INTERTANKO member of good standing entered in 
1989
    Charterer: Crown Resources
    Flag: Bahamas (since 1994 and white-list flag under Paris MoU)
    Class: American Bureau of Shipping (ABS) built and maintained to 
ABS class
    P&I coverage: London Steamship Owners Association
    IMO number: 7372141
    Year of build: 1976 at Hitachi Shipbuilding & Engineering Co. in 
Japan
    Gross tonnage: 42,820
    Design deadweight: 81,564
    Capacity: 100,813 cubic metres
    Sister vessels: None in service
    Crew: 27 with Greek officers, Filipino and Romanian crew
Regulatory regime
    The PRESTIGE was subject to a comprehensive regime of safety and 
environmental regulations, including those of the main IMO Conventions, 
i.e. the Safety of Life at Sea Convention (SOLAS) and the International 
Convention for the Prevention of Pollution from Ships (MARPOL), to both 
of which the Flag State of the Bahamas is a Party.
Phasing-out of single-hull tankers
    The revised MARPOL Convention contains a timetable by which single-
hull tankers will be phased out in favour of double-hull ships. The 
PRESTIGE was a single-hull tanker built in 1976, that is before the 
MARPOL Convention (which had been adopted in 1973) entered into force 
in 1982. In April 2001, the Parties to the MARPOL Convention agreed to 
accelerate the timetable for phasing out existing single-hull tankers 
in a revised regulation 13G of that Convention. According to the 
revised regulation which entered into force internationally in 
September 2002, single-hull tankers built in 1976 would be required to 
be scrapped by 2005. The PRESTIGE phase-out date was 11 March 2005.
Survey and inspection
    In addition to their routine annual and other surveys, since 1995 
all tankers aged five years and over have been subject to a specially 
enhanced inspection programme which is intended to ensure that any 
deficiencies--such as corrosion or wear and tear resulting from age or 
neglect--are detected. Guidelines on enhanced surveys on tankers are 
contained in IMO Assembly resolution A.744(18) and in 1994 it was given 
mandatory status under the SOLAS Convention. The PRESTIGE was therefore 
subject to the International Association of Classification Societies 
(IACS ) Enhanced Survey Programme (ESP).
    PRESTIGE Class survey:

   special survey No 5 conducted by ABS in Guangzhou, May 2001
   annual survey conducted in Dubai, UAE by ABS and 
        certificates issued on 25 May 2002

    PRESTIGE Port State Control (PSC) inspection:

   Equasis database indicates the last PSC inspection was 
        conducted in Rotterdam on 1 September 1999. There were no 
        detentions (3 deficiencies--2 lifesaving and 1 general)

    PRESTIGE ISM certification:

   Issued by Bureau Veritas from 19 July 2001 to 20 June 2006
Oil spill clean up
    In July 1989, a conference of leading industrial nations in Paris 
called upon IMO to develop further measures to prevent pollution from 
ships. This call was endorsed by the IMO Assembly in November of the 
same year and work began on a draft convention aimed at providing a 
global framework for international cooperation in combating major 
incidents or threats of marine pollution. The International Convention 
on Oil Pollution Preparedness and Co-operation (OPRC) entered into 
force 13 May 1995.
    Parties to the OPRC convention are required to establish measures 
for dealing with pollution incidents, either nationally or in 
cooperation with other countries.
    Ships are required to carry a shipboard oil pollution emergency 
plan. Operators of offshore units under the jurisdiction of Parties are 
also required to have oil pollution emergency plans or similar 
arrangements which must be co-ordinated with national systems for 
responding promptly and effectively to oil pollution incidents.
    Ships are required to report incidents of pollution to coastal 
authorities and the convention details the actions that are then to be 
taken. The convention calls for the establishment of stockpiles of oil 
spill combating equipment, the holding of oil spill combating exercises 
and the development of detailed plans for dealing with pollution 
incidents.
    Parties to the convention are required to provide assistance to 
others in the event of a pollution emergency and provision is made for 
the reimbursement of any assistance provided.
    The Convention provides for IMO to play an important co-ordinating 
role.
    As Parties to OPRC, Spain and Portugal have established a national 
system for dealing with pollution incidents, either nationally or in 
co-operation with other countries.
Oil pollution liability and compensation
    Liability and compensation for spills of oil from tankers are 
covered by two complementary legal regimes adopted by IMO, the 
International Convention on Civil Liability for Oil Pollution Damage, 
1992 and the International Convention on the Establishment of an 
International Fund for Compensation for Oil Pollution Damage, 1992 
(IOPC Fund).
i) CLC 1992--regulating liability and compensation from the shipowner
    The Civil Liability Convention was adopted to ensure that adequate 
compensation is available to persons who suffer oil pollution damage 
resulting from maritime casualties involving oil-carrying ships.
    The Convention places the liability for such damage on the owner of 
the ship from which the polluting oil escaped or was discharged without 
regard to fault.

   For a ship not exceeding 5,000 gross tonnage, liability is 
        limited to 3 million SDR (about U.S.$4.0 million)

   For a ship 5,000 to 140,000 gross tonnage: liability is 
        limited to 3 million SDR plus 420 SDR (about U.S.$559) for each 
        additional unit of tonnage

   For a ship over 140,000 gross tonnage: liability is limited 
        to 59.7 million SDR (about U.S.$79.4 million)

    The Convention covers pollution damage resulting from spills of 
persistent oils suffered in the territory (including the territorial 
sea) of a State Party to the Convention. Included in the scope of the 
Convention is also pollution damage caused in the exclusive economic 
zone (EEZ) or equivalent area of a State Party. The Protocol covers 
pollution damage as before but environmental damage compensation is 
limited to costs incurred for reasonable measures to reinstate the 
contaminated environment. It also allows expenses incurred for 
preventive measures to be recovered even when no spill of oil occurs, 
provided there was grave and imminent threat of pollution damage.
    The Convention covers spills from sea-going vessels constructed or 
adapted to carry oil in bulk as cargo so that it applies to both laden 
and unladen tankers, including spills of bunker oil from such ships.
    A shipowner cannot limit liability if it is proved that the 
pollution damage resulted from the shipowner's personal act or 
omission, committed with the intent to cause such damage, or recklessly 
and with knowledge that such damage would probably result.
    The Convention requires ships covered by it to maintain insurance 
in sums equivalent to the owner's total liability for one incident. The 
PRESTIGE held such insurance cover for oil pollution as all tankers 
engaged in the carriage of persistent oil.
ii) International Oil Pollution Compensation Fund (1992)
    Although the original 1969 Civil Liability Convention provided a 
useful mechanism for ensuring the payment of compensation for oil 
pollution damage, it did not deal satisfactorily with all the legal, 
financial and other questions raised during the Conference adopting the 
CLC Convention.
    Some States objected to the regime established, since it was based 
on the strict liability of the shipowner for damage which they could 
not foresee and, therefore, represented a dramatic departure from 
traditional maritime law which based liability on fault. On the other 
hand, some States felt that the limitation figures adopted were likely 
to be inadequate in cases of oil pollution damage involving large 
tankers. They therefore wanted an unlimited level of compensation or a 
very high limitation figure.
    In the light of these reservations, the 1969 Brussels Conference 
considered a compromise proposal to establish an international fund, to 
be subscribed to by the cargo interests, which would be available for 
the dual purpose of, on the one hand, relieving the shipowner of the 
burden by the requirements of the new convention as very high or 
unlimited liability without regard to fault was untenable and, on the 
other hand, providing additional compensation to the victims of 
pollution damage in cases where compensation under the 1969 Civil 
Liability Convention was either inadequate or unobtainable. This 
conventions was amended in 1992 to broaden its scope and to increase 
the levels of compensation available. Its was also amended in 2000 in 
order to provide for higher levels of compensation (see below).
    The purposes of the Fund Convention are:

   To provide compensation for pollution damage to the extent 
        that the protection afforded by the 1969 Civil Liability 
        Convention is inadequate.

   To give relief to shipowners in respect of the additional 
        financial burden imposed on them by the 1969 Civil Liability 
        Convention as cargo interests were also deemed a party in the 
        transportation venture.

    Under the first of its purposes, the Fund is under an obligation to 
pay compensation to States and persons who suffer pollution damage, if 
such persons are unable to obtain compensation from the owner of the 
ship from which the oil escaped or if the compensation due from such 
owner is not sufficient to cover the damage suffered.
    Under the Fund Convention, victims of oil pollution damage may be 
compensated beyond the level of the shipowner's liability. Where, 
however, there is no shipowner liable or the shipowner liable is unable 
to meet their liability, the Fund will be required to pay the whole 
amount of compensation due.
    Contributions to the Fund should be made by all persons (above a 
threshold of minimum 20,000 tonnes) who receive oil by sea in 
Contracting States.
    Under the 1992 Protocol, the maximum amount of compensation payable 
from the Fund for a single incident, including the limit established 
under the 1992 CLC Protocol, is 135 million SDR (about U.S.$179.6 
million). However, if three States contributing to the Fund receive 
more than 600 million tonnes of oil per annum, the maximum amount is 
raised to 200 million SDR (about U.S.$266 million), but this level have 
not yet been reached.
PRESTIGE incident notes
    November 13, 2002--INTERTANKO received the alert message that the 
PRESTIGE was in trouble. The ship was at that time reported to be 
listing 25 to 30 degrees and in danger of sinking with its cargo of 
fuel oil in the rough seas off the north-west Spanish coast. Twenty 
four crew members were evacuated by helicopter. The Captain, Chief 
Officer and Chief Engineer stayed on board.
    November 14, 2002--The PRESTIGE drifted close to the Spanish coast 
but was stable enough to allow Coast Guard and inspectors aboard for an 
assessment of the condition.
    November 15, 2002--The PRESTIGE was taken in tow by salvage tugs 
away from the Spanish coastline.
    November 18, 2002--The PRESTIGE was towed further out to sea.
    November 19, 2002--The PRESTIGE broke in two at around 0700 hours 
GMT some 160 miles from the shore. The two parts of the ship sank later 
in the afternoon with no loss of life.

Appendix 2
    Membership Criteria as approved at Council meeting November 2002
1. IACS Classification Society
    All members' tankers are to be classified by a Classification 
Society audited and approved by a full member of IACS.
2. Insurance Cover
    All members are to be entered in an International Group P&I Club or 
have an appropriate arrangement for insurance including third party oil 
pollution liability cover.
3. ISM Certification
    A member must have a certified and implemented ISM System. (The 
tanker industry embraced the International Ship Management Code at a 
very early stage.)
4. Ownership Control
    We will hold on the members' area of our web site information 
pertaining to the member's vessels' Owner(s), (or the Registered Owning 
Company(s)), Operator(s), Technical Manager(s), as well as 
identification, which of the above bodies holds' the Company DOC.
5. Detention Criteria
    INTERTANKO shall monitor members' detentions over a continuous 
rolling period of 12 months. The central database of members' 
detentions will be held by the Secretariat.
    If in the opinion of the Vetting Committee Chairman and the Marine 
Manager the detention or repeated detentions are grounds for concern 
then the detention will be referred to the Review Board. The review 
Board will consist of the: Vetting Committee Chairman, ISTEC Chairman, 
Marine Manager INTERTANKO, Technical Director INTERTANKO, Managing 
Director INTERTANKO, General Counsel INTERTANKO.
    In addition the following members may be invited to assist with the 
review as appropriate and depending upon the nature of the detention 
and/or the geographical location of the detention: Chemical Tanker 
Committee Chairman, Latin American Panel Chairman, North American Panel 
Chairman, Hellenic Panel Chairman, Asian Panel Chairman and Secretariat 
expertise as appropriate.
6. Entry with INTERTANKO
    All members tank vessels' having a gross tonnage of 1000 tons or 
over and which is adapted for the carriage of oil in bulk, petroleum 
products and other liquids, including all kinds of combined bulk/tank 
vessels as ore/oil carriers, bulk/oil carriers, shall, in respect of 
all tank vessels which the applicant owns and/or manages including tank 
vessels of affiliated and associated companies be entered with 
INTERTANKO.

Appendix 3

Summary
    The discussion about transparency in shipping is not new. The 
tanker industry considered a voluntary tanker information register 
called VISTA already in 1980. The purpose was to contribute to the 
dissemination of information, possibly to the Port State Control 
authorities and other governmental schemes, charterers and other parts 
of the industry. The transparency issue has regularly been on the 
INTERTANKO agenda in various forms and INTERTANKO has been in the 
forefront of the drive for increased transparency.
Review
    In April 2000 INTERTANKO endorsed the principle of transparency 
with the following definition ``Information on transfers, changes, 
suspensions, and withdrawals of class, including information on all 
overdue surveys, overdue recommendations, overdue conditions of class, 
operating conditions or operating restrictions issued against the 
vessel.'' The definition means that INTERTANKO's members agree that 
Class should disseminate the above information from the normal 
operations on their ships. This information should be made available to 
interested parties, such as PSC, Flag States and charterers.
    INTERTANKO also agreed that, in addition to the information that 
class should provide on a regular basis, members would be encouraged to 
release a number of data in case of a major incident/accident on one of 
their ships. Such a list should be as follows but not limited to:

    Information to be released by Owners after a major incident:

   relevant initial design information
   any significant design modifications (which, when and where/
        by which yard)

   Flag, Class, Authority issuing DOC and SMC Certificate
   details of the voyage when incident occurred
   historical record of the last 24 months PSC inspections 
        table with:

          all previous names
          all owners/managers and the time for each of these periods
          all flags and time period
          all class societies and time period
          all significant casualties (what, when, where)
          all significant repairs (what, when, where/by which yard)

    In August 2002, a Transparency Working Group was established to 
examine how progressively increasing and structured transparency could 
serve to enhance safety and quality, while mitigating any negative 
impact of the isolated information that the industry is now required to 
make public. The Working Group would also assist in suggesting 
responses to questions regarding the INTERTANKO position on 
transparency.
INTERTANKO position
    INTERTANKO recognises and supports the need for transparency in 
tanker shipping and indeed in the entire shipping industry INTERTANKO 
encourages and supports initiatives aimed at ensuring that transparency 
is promoted to enhance the efficiency of tanker operations and provide 
value to the industry and benefits to the consumers and the 
environment.
    INTERTANKO considers that there should be an accountable entity 
(``the company'') having the necessary expertise for the ownership, 
operation and management of the ship. (The definition of ``the 
Company'' is contained within the ISM SOLAS IMO etc. This definition 
also encompasses owner, manager and operator.)
    INTERTANKO supports the use of the continuous synopsis record. IMO 
is currently considering whether this should be made mandatory. This 
encompasses the name of the ship, flag, registered owner, company and 
class/recognised organization.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. John McCain to 
                            Robert N. Cowen
    Question 1. What effect would U.S. adoption of the EC proposal have 
on your company?
    Answer. The EU Commission has recommended that the EU Council and 
Parliament adopt an outright ban, effective immediately, on the use of 
any single-hull vessel to carry fuel oil or certain heavy grades of 
crude oil into EU ports. The Commission has also proposed to ban the 
oldest single-hull tankers (so called Pre MARPOL tankers which are 
generally those built before 1982) when they reach 23 years of age and 
to ban all single-hull tankers effective 2010.
    Because OSG's international tanker fleet consists primarily of 
modern double-hull vessels, the EU rules will have only a limited 
effect on the trading life of our fleet.
    Most of the single-hull vessels in OSG's international flag fleet 
do not carry fuel oil or the heaviest grades of crude. Accordingly, 
these vessels are not impacted by the immediate ban on single-hull 
vessels carrying such cargoes. Rather, OSG's relatively modern single-
hull vessels, many with double sides, are likely to have their trading 
lives shortened by only a few years if the new EU rules are made 
applicable to the U.S.
    OSG's Very Large Crude Carrier fleet (vessels of over 200,000 
deadweight tons that typically move long haul cargoes from the Middle 
East and West Africa) of 21 vessels includes 17 double-hull tankers 
that would not be affected at all by the new rules. The remaining four 
vessels are single-hull vessels that were built in 1990 (one vessel) 
and 1993 (three vessels); two have double sides. If the proposed EU 
rules were made applicable to the U.S., these four vessels could not 
carry certain heavier crudes to the U.S. Gulf and could not trade to 
the U.S. Gulf at all after 2010; under existing rules they would be 
permitted to trade to the U.S. Gulf until 2015.
    Similarly, OSG's 14 vessel fleet of Aframax crude carriers (100,000 
deadweight ton) includes 13 modern double-hull units that would not be 
affected by the EU rules. The remaining Aframax is a double-sided 
vessel built in 1992 that can trade to the U.S. under current rules 
until 2015; under the EU rules it could no longer carry certain heavier 
crudes and would be barred from trading in 2010.
    OSG has eight double-sided international flag product carriers that 
would be classified as single-hull vessels under the EU rules. They 
range in age from 14 to 17 years. Under existing U.S. and international 
rules, these vessels phase-out between 2012 and 2015. Under the EU 
proposal, these vessels would all phase-out in 2010, thereby losing 
between two and five years of trading life.
    OSG has one single-hull Suezmax (145,000 deadweight ton) crude 
carrier built in 1989. Under the new EU rules, it would no longer be 
permitted to carry certain grades of heavy crude, but it would not 
otherwise be affected because it is barred from trading to the U.S. 
beginning in 2010 in any event by the Oil Pollution Act of 1990 (``OPA-
90'').
    OSG's U.S. flag fleet of tankers includes four crude carriers 
engaged in the Alaskan trade which cease to be eligible for U.S. 
trading between 2004 and 2006 under the existing phase-out rules 
mandated by OPA-90. OSG also operates two U.S. flag single-hull product 
carriers with double bottoms that were built in 1982 and 1983. OSG 
bareboat charters these vessels under long-term charters expiring in 
2011. If the EU rules were to apply to these vessels, they would lose 
approximately one year of trading eligibility and would have to leave 
the Jones Act trade in 2010.

    Question 2. Do single-hull vessels operating off the coast of 
Louisiana at LOOP or at lightering areas off-shore pose the same level 
of risk as single-hull ships entering U.S. ports?
    Question 2a. Isn't it because the risk of collision or grounding is 
significantly lower that these vessels are allowed to continue in those 
operations until 2015 under OPA-90?
    Answer. The risk of grounding is no doubt reduced dramatically when 
tankers are operating offshore in the U.S. Gulf, whether trading to 
LOOP or operating in designated lightering areas 60 miles offshore. 
However, the risk of collision certainly remains if such vessels are 
moving in established trade lanes and approaching active lightering 
areas and offloading facilities such as LOOP. Moreover, the process of 
lightering itself necessarily places two vessels in close proximity to 
each other.
    The recent disastrous pollution incidents involving the sinking of 
the ERIKA in 1999 off the coast of France and the PRESTIGE in 2002 off 
the coast of Spain, however, demonstrate clearly that collision and 
grounding are not the only environmental risks associated with 
operating older, single-hull vessels. While the precise cause of the 
break-up and sinking of the PRESTIGE has not yet been officially 
established, there is a general consensus that structural failures 
associated with these older single-hull vessels were major factors in 
both incidents. The PRESTIGE came apart over 130 miles from shore and 
yet it poses a continuing source of pollution and grave environmental 
damage for the Atlantic coast of Spain and France. Clearly, a 
structural failure of this nature, or a mechanical failure, involving 
an older single-hull vessel in the U.S. Gulf, whether 18 miles off the 
coast of Louisiana at LOOP or 60 miles off the U.S. Gulf coast in a 
designated lightering area, could have dire environmental consequences.

    Question 2b. Do you have any single-hull tankers involved in those 
operations?
    Answer. As noted, OSG's fleet of 21 VLCCs includes four single-hull 
vessels. Three of these vessels, all built in 1993, typically move 
crude cargoes to the U.S. Gulf Coast where they are lightered. OSG's 
Aframax fleet includes one single-hull vessel that may from time to 
time engage in lightering activities in the U.S. Gulf.

    Question 3. In your written testimony, you state that you operate a 
fleet of 50 vessels. How many are operated under the U.S. Flag?
    Answer. OSG's fleet includes nine vessels registered under the U.S. 
flag. This includes four crude tankers engaged in the Alaskan oil 
trade: the Overseas Washington, Overseas Chicago, Overseas New York and 
Overseas Boston. All four are single-hull tankers, but three of them 
have double bottoms. OSG also operates two U.S. flag product tankers, 
the Overseas Philadelphia and Overseas New Orleans, which are single-
hull vessels with double bottoms. OSG's remaining three U.S. flag 
vessels are not tankers. These include two dry bulk carriers and one 
car carrier.

    Question 3a. What flag are the remaining vessels registered under?
    Answer. OSG's international tanker fleet is primarily registered 
under the flag of the Marshall Islands, a U.S. protectorate. The only 
exceptions are three vessels registered under the Panamanian flag, five 
vessels under the flag of the Bahamas and three vessels under the 
Liberian flag.

    Question 3b. What type of safety and security requirements do those 
other flag states impose on your vessels? Are they substantially 
different from the requirements imposed on vessels under the U.S. flag?
    Answer. OSG vessels comply with the rules of the International 
Maritime Organization and all applicable international conventions 
included SOLAS (Safety of Life at Sea) and MARPOL (Marine Pollution) 
OSG's vessels also comply with all regulations and requirement of 
relevant classification societies, and with all flag state and port 
state requirements. Almost all of OSG's international flag tankers come 
to U.S. ports, LOOP or the U.S. Gulf lightering areas on a regular and 
frequent basis and, therefore, must comply with all U.S. Coast Guard 
requirements. OSG vessels are subject to frequent inspections both by 
the U.S. Coast Guard and by other port state authorities throughout the 
world. OSG serves all of the major oil companies and is subject to 
frequent vetting inspections by their operational staffs.
    Because OSG's international flag tankers must regularly pass 
inspections by the U.S. Coast Guard as well as by other port state 
authorities, classification societies and charterers, our international 
flag vessels are effectively subject to the same rigorous operating, 
safety and security requirements and standards as apply to OSG's U.S. 
flag fleet.

    Question 3c. How many of your vessels are Jones Act qualified? Do 
those vessels cost more to operate?
    Answer. OSG operates two Jones Act product tankers engaged in the 
domestic coastwise trade and four U.S. flag crude carriers engaged in 
the Alaskan crude trade. Jones Act vessels are typically much more 
expensive to own and operate than foreign flag vessels, reflecting both 
substantially higher capital costs associated with U.S. construction as 
well as higher operating costs. OSG estimates that the cost of 
operating a tanker under U.S. flag is approximately $8,000 to $10,000 
per day higher than the cost of operating under a foreign flag.

                                  
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