[Congressional Record Volume 140, Number 148 (Wednesday, November 30, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: November 30, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                CERTIFICATES OF FINANCIAL RESPONSIBILITY

                                 ______


                            HON. JACK FIELDS

                                of texas

                    in the house of representatives

                       Tuesday, November 29, 1994

  Mr. FIELDS of Texas. Mr. Speaker, I am concerned about the effects of 
the initial implementation date of the Coast Guard's Interim Final Rule 
requiring certificates of financial responsibility for vessels. The 
Interim Final Rule, published July 1, 1994, implements the requirement, 
under section 1016 of the Oil Pollution Act of 1990 (33 U.S.C. 2716) 
(OPA 90), for owners or operators of vessels to obtain evidence of 
insurance or other evidence of financial responsibility to cover their 
potential oil spill liability under OPA 90. The interim final rule 
[IFR] requires United States and foreign oil tankers in U.S. waters to 
provide evidence of financial responsibility by December 28, 1994.
  I am most concerned that the compliance deadline for oil tankers may 
cause a serious disruption in our Nation's imported oil supply. With no 
insurance scheme or other solution available to the majority of tanker 
owners as the deadline approaches, there has already been an impact on 
charter arrangements for oil shipments from the Persian Gulf to the 
United States. I understand that it takes approximately 37 days for a 
vessel to arrive in the Gulf of Mexico from the Persian Gulf. It also 
takes approximately 2 weeks to complete charter arrangements for an oil 
shipment. This does not include the additional days needed for 
lightering and transshipment of oil to U.S. ports. We are clearly 
within the timeframes necessary to complete chartering arrangement and 
for laden tankers to be en route from the Persian Gulf. While not every 
charter arrangement has been blocked by the inability of tanker owners 
and operators to comply with the IFR, the uncertainty over compliance 
will continue to create problems in the charter market that may 
ultimately impact our imported oil supply. No one can state with 
certainty when all U.S. and foreign oil tankers must obtain evidence of 
financial responsibility if a disruption of our imported oil supply is 
to be avoided, but we are obviously nearing the date when such a 
disruption is inevitable if methods for complying with the IFR are not 
widely available.
  The effects of a disruption in our foreign oil supply would be 
disastrous. Close to 75 percent of the crude oil and approximately two-
thirds of the refined product imported into the United States in recent 
years was carried aboard independently owned vessels. If independent 
tanker owners cannot comply with the Coast Guard IFR because of the 
unavailability of affordable insurance, there will be a major shortfall 
in our oil supply. If the supply of oil to independent refineries is 
disrupted, shortages will occur not only in gasoline and heating oil, 
but also in jet fuels, fuels for military aircraft, and generation of 
electric power. The gasoline lines in this country following the 1973-
74 Arab oil embargo were caused by a shortfall of less than 6 percent 
of the Nation's domestic consumption. Obviously, there is a potential 
for a much greater disruption under the present circumstance.
  Despite expressions of concern by industry and other interested 
parties, the Coast Guard remains firm in its belief that the market 
will develop solutions to the lack of affordable insurance cover. The 
solutions that have arisen thus far, however, are not generally 
available to the average independent tanker owner at an affordable cost 
or at an acceptable risk. To the extent that any of the proposals may 
eventually provide a viable solution to most tanker owners or 
operators, it is not at all clear that any of these proposals will 
become a fully functional, reliable facility by the deadline.

  Moreover, there are additional solutions that have not been fully 
explored but that may provide better protection both for the tanker 
owner or operator and the U.S. taxpayer. I strongly favor ratification 
of the 1992 International Oil Spill Protocols, with implementing 
legislation similar to that proposed by the House Conferees who 
developed OPA 90. The international nature of oil transportation 
requires a comprehensive, global approach to the problem of oil 
pollution. Ratification of the protocols will assure safe, reliable 
transportation of oil to supply the needs of the citizens of our 
country.
  Another proposed solution to the problem is the Mandatory Excess 
Insurance Facility supported by the Greek, Norwegian, and Swedish 
shipowners' associations, as well as INTERTANKO. The MEIF was developed 
by shipowners themselves to solve the financial responsibility problem 
and to provide excess insurance above that currently available in the 
market at an affordable cost without disrupting existing commercial 
insurance capacity. This proposal will most likely be considered by the 
next Congress as part of any proposed amendments to OPA 90.
  Because none of the insurance options that have arisen appear to be 
generally available to most vessel owners, I am concerned that there 
may be many responsible vessel owners with excellent safety records who 
are unable to comply with the Coast Guard's IFR. The regulations 
implementing the financial responsibility requirement of OPA 90 should 
not cause U.S. or foreign vessel owners who consistently operate safely 
in U.S. waters to go out of business. This would concentrate control of 
oil transportation resources and have an anticompetitive impact in the 
world oil market. If safety is not an issue, market forces should 
control who operates in the international oil transportation business. 
Implementation of OPA 90 should not control the supply of vessels that 
are available to transport oil to the United States. To the extent that 
implementation of the IFR will have this effect, the Coast Guard should 
consider a delay in its effective date to allow all options to be fully 
explored and developed.

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