[Federal Register Volume 60, Number 26 (Wednesday, February 8, 1995)]
[Proposed Rules]
[Pages 7652-7658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3039]




[[Page 7651]]

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Part III





Department of Transportation





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Office of the Secretary



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33 CFR Part 137



Limit of Liability for Deepwater Ports; Proposed Rule

  Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / 
Proposed Rules   
[[Page 7652]] 

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

33 CFR Part 137

RIN 2105-AC01


Limit of Liability for Deepwater Ports

AGENCY: Department of Transportation.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Department of Transportation proposes to establish a limit 
of liability for deepwater ports in general and for the Louisiana 
Offshore Oil Port (LOOP) specifically. These limits apply only to 
certain negligent oil spills for which a deepwater port would be 
entitled to limit its liability under section 1004 of the Oil Pollution 
Act of 1990 (OPA 90) (33 U.S.C. 2704). The proposed limits do not alter 
a deepwater port's unlimited liability for spills caused by gross 
negligence, willful misconduct, or violation of certain Federal 
regulations. LOOP is the only U.S. deepwater port in operation at this 
time; specific liability limits for other, future deepwater ports will 
be established through separate rulemakings as necessary.

DATES: Comments must be received on or before April 10, 1995.

ADDRESSES: Comments may be mailed to Docket 50112, Office of 
Documentary Services (C-55), U.S. Department of Transportation, PL-401, 
Northeast Corner, 400 Seventh Street, SW., Washington, DC 20590-0001. 
To expedite consideration of the Docket, please submit an original and 
five copies. Certain studies referenced in this notice may be ordered 
from the National Technical Information Service, Springfield, VA 22161; 
phone orders (703) 487-4650 (Visa, Mastercard and American Express 
accepted).

FOR FURTHER INFORMATION CONTACT:
For general questions, contact Mr. Robert Stein, OST/P-13, at (202) 
366-4846. For engineering questions, contact Mr. Thomas Jordan, U.S. 
Coast Guard OPA 90 Staff, at (202) 267-6751.

SUPPLEMENTARY INFORMATION: 

Request for Comments

    This notice of proposed rulemaking (NPRM) presents three proposed 
options within a $50 million to $350 million range for LOOP's limit of 
liability. The Department of Transportation seeks public comment on the 
issue of limits of liability for deepwater ports in general and LOOP in 
particular. We have numbered specific discussion paragraphs throughout 
this NPRM and would appreciate it if commenters would reference those 
numbers in their responses.
    The Department plans no public hearing. Persons may request a 
public hearing by writing to the address listed under ADDRESSES. The 
request should include reasons why a hearing would be beneficial. If 
the Department determines that the opportunity for oral presentations 
will aid this rulemaking, it will hold a public hearing at a time and 
place announced by a later notice in the Federal Register.

Statutory Basis and Purpose

    The purpose of this regulatory action is to establish an 
appropriate limit of liability for deepwater ports in accordance with 
section 1004 of OPA 90.
    Section 1004 sets the limit of liability for deepwater ports at 
$350 million. However, it also allows the limit to be adjusted to a 
lower amount as appropriate (but not less than $50 million), subject to 
a study of the relative operational and environmental risks of 
transporting oil to the United States by deepwater ports compared to 
other ports.
    The relative risk study, entitled the ``Deepwater Ports Study,'' 
has been completed and forwarded to Congress. The study concluded that 
deepwater ports represent a lower operational and environmental risk 
for delivering crude oil to the United States than the three other 
common modes of crude oil delivery (direct vessel deliveries, 
lightering, and offshore mooring stations).
    At present, the only deepwater port in operation in the United 
States is LOOP. However, other deepwater ports may be built in the 
future. Because there may be significant engineering and environmental 
differences between different deepwater ports, the Department has 
determined that it is necessary to review any deepwater port 
individually before setting its limit of liability within the statutory 
limits of $50 million and $350 million. Limits for other deepwater 
ports may be different from LOOP's limit.
    Therefore, in accordance with its authority under section 
1004(d)(2)(C) of OPA 90 (33 U.S.C. 2704(d)(2)(C)), and for reasons 
explained in this preamble, the Department proposes to establish an 
appropriate limit of liability for LOOP.

Background and Discussion of Proposed Regulations

1. Deepwater Ports

    A deepwater port is a man-made offshore marine terminal located in 
waters deep enough to accommodate Very Large and Ultra Large Crude 
Carrier tankers (VLCCs and ULCCs) that are too large to enter the local 
mainland port. A deepwater port marine terminal generally consists of 
several tanker mooring buoys connected by seafloor pipelines to a 
nearby pumping platform. The pumping platform is connected by seafloor 
pipeline(s) to a mainland terminal. A tanker at a mooring buoy pumps 
its cargo oil to the pumping platform, which then pumps the oil ashore. 
The marine terminal complex typically contains operating stations, 
booster pumps, control valves and manifolds, crew accommodations 
(feeding and berthing), helicopter pad, radar and communication 
facilities, and on-site pollution response equipment.
    Although there are several deepwater ports around the world, at the 
present time there is only one in the United States: the Louisiana 
Offshore Oil Port, located in the Gulf of Mexico approximately 18 miles 
off the Louisiana coast.

2. Louisiana Offshore Oil Port (LOOP)

    The LOOP deepwater port has been in operation since May, 1981. The 
total LOOP complex consists of the offshore marine terminal (pumping 
platform, control platform, and three tanker mooring buoys with 
pipelines connecting to the pumping platform), the 21-mile offshore 
pipeline (connecting the marine terminal to a booster station on the 
beach), the 22-mile onshore pipeline (crossing Mississippi River delta 
bayous and marshes), an underground salt dome storage facility, and 
overland pipelines connecting LOOP to various other inland pipeline 
systems. As defined by the Deepwater Ports Act (Pub. L. 93-627), 
however, only LOOP's marine terminal (including operations at the 
terminal) and offshore pipeline are considered to be the actual 
deepwater port. Therefore, the onshore portions of the complex are not 
covered by this rulemaking.
    LOOP is strictly a crude oil off-loading facility, receiving cargo 
oil from tankers and pumping it ashore to the Clovelly Dome storage 
facility. In 1992, crude oil deliveries to LOOP averaged 816,000 
barrels per day, accounting for 15 percent of the total amount 
delivered by vessel to the United States for that year (excluding 
Alaskan crude oil deliveries).
    In the 12 years that LOOP has been in operation a total of 894 
barrels of oil have been spilled from the deepwater port portion of 
LOOP, the largest spill being 399 barrels (from data through December 
31, 1992). [[Page 7653]] 

3. Deepwater Ports Study

    Section 1004(d) of OPA 90 directs the Secretary to conduct a study 
of the relative operational and environmental risks posed by the marine 
transportation of oil to deepwater ports versus other ports. If that 
study finds that the risks are lower at deepwater ports, then the 
Secretary is to initiate a rulemaking that establishes an appropriate 
level of liability for deepwater ports (but not less than $50 million). 
The Deepwater Ports Study has been completed and forwarded to Congress. 
A copy of the study is available for reading in the public docket for 
this rulemaking, and additional copies may be ordered from the National 
Technical Information Service (publication number PB94-124054; see 
ADDRESSES section of this notice for more details).
    The Deepwater Ports Study examined the four basic modes of 
delivering crude oil to ports in the United States: (1) Direct vessel 
deliveries, by tankers small enough to enter U.S. ports directly; (2) 
lightering, whereby tankers too large to enter port are off-loaded at 
offshore locations onto smaller tankers or barges that carry the oil 
cargo into port; (3) offshore mooring stations, whereby tankers moor at 
a special buoy generally located within two miles of the beach and pump 
their cargo ashore through seafloor pipelines; and (4) deepwater ports.
    The study concluded that crude oil deliveries via deepwater ports 
represent a lower risk to the environment than the other three delivery 
modes. This is principally because the delivery tankers remain far 
offshore, well away from most environmentally-sensitive waters, and 
because the seafloor pipeline is relatively protected from the kinds of 
damage that cause large oil spills. Furthermore, the total quantity of 
oil in the deepwater port's pipeline system is less than the total 
amount that could be spilled from a single typical tank ship.

4. Liability for Oil Spill Pollution

    Section 311 of the Federal Water Pollution Control Act, as amended 
by section 1002 of OPA 90, establishes that parties responsible for oil 
pollution are liable for all cleanup costs, third-party compensation 
claims, and natural resource damages as follows:
    (a) A responsible party is totally liable (i.e., its liability is 
unlimited) for spills resulting from gross negligence, willful 
misconduct, or violation of certain Federal regulations;
    (b) A responsible party's liability is limited if the spill is the 
result of negligence, other than gross negligence, willful misconduct, 
or violation of certain Federal regulations;
    (c) A responsible party is totally absolved from liability for 
spills caused solely by acts of God, war, unforeseeable acts of third 
parties (except contractors and so long as the responsible party 
exercised due care and took precautions against foreseeable acts of 
third parties), or a combination of the three.

5. Limits of Liability

    In general, section 1004 of OPA 90 (33 U.S.C. 2704) allows limited 
liabilities for parties responsible for oil spills under certain 
circumstances (essentially spills due to negligence other than gross 
negligence, willful misconduct, or violation of certain Federal 
regulations). Section 1004(a) sets specific limits for five categories 
of vessels and facilities: tank vessels, other vessels, onshore 
facilities, offshore facilities, and deepwater ports. For deepwater 
ports, the limit of liability was set at $350 million. However, section 
1004(d) recognizes that $350 million might be an inappropriately high 
limit for deepwater ports and requires that, following a study of the 
relative risks, a rulemaking be initiated for establishing an 
appropriate liability limit for deepwater ports (but not less than $50 
million).
    It should be noted that other provisions in section 1004(d) of OPA 
90 may also result in future adjustments of limits of liability for all 
facilities, including deepwater ports. These adjustments may be made 
from time to time to reflect significant increases in the Consumer 
Price Index (CPI) since 1990.

6. Oil Spill Liability Trust Fund

    The Oil Spill Liability Trust Fund (hereafter the ``Pollution 
Fund'') is a Federally-managed trust fund for several oil pollution-
related purposes. It is funded by a 5-cent-per-barrel levy on domestic 
crude oil and all imported oil (crude and product).
    One of the Pollution Fund's more important purposes is to pay 
cleanup costs, claims, and damages after the responsible party has met 
its limit of liability for an accidental spill, or in the event that 
the responsible party is totally absolved from liability (for spills 
caused by acts of war, God, etc.). This ensures that innocent parties 
injured by a spill are compensated for their losses, regardless of the 
responsible party's liability. The Pollution Fund, in turn, is limited 
in its liability to $1 billion per incident.

7. Factors for Determining an Appropriate Limit of Lliability

    The Department of Transportation has determined that it is 
appropriate national policy that the limit of liability for a deepwater 
port should be sufficiently high enough to cover all costs associated 
with the maximum credible negligent spill for which the port would be 
liable. A ``credible accident'' would be one that was the result of 
negligence other than gross negligence, willful misconduct, or 
violation of applicable Federal regulations. A facility experiencing a 
credible accident would have limited liability. Costs for a negligent 
spill would be borne by the Pollution Fund once the deepwater port has 
met its limit of liability.
    Setting a limit of liability in accordance with this policy entails 
two studies: a risk analysis of the deepwater port to determine its 
maximum credible spill, and an economic analysis to determine the costs 
(cleanup, third party compensation, and natural resource damages) of 
such a spill.
    The risk analysis should consider the following factors:

--Physical layout and condition of the deepwater port,
--On-site spill response capability,
--Spill history of the deepwater port,
--The pipeline leak detection system,
--Section-by-section pipeline analysis of credible spill scenarios, and
--Other spills for which the deepwater port might be solely or jointly 
liable (such as tanker spills).

    The economic analysis should consider:

--Spill trajectories for the maximum credible spill,
--Potential response (cleanup) costs,
--Potential third party damage costs, and
--Potential natural resource damage costs.

8. Risk Analysis of LOOP

    LOOP does not have any crude oil storage capacity within its 
legally-defined boundaries as a deepwater port. Therefore, the two 
largest sources of potential oil spillage for which LOOP might be 
solely or jointly responsible are its pipeline system, and a tanker 
calling at the port. Each of these were analyzed in a risk analysis.
    Based upon engineering information provided by LOOP concerning the 
pipeline system and tanker operations at the port, the Coast Guard has 
prepared a risk analysis of the LOOP deepwater port in order to 
determine the credible spillages that could occur under accidental 
circumstances. This analysis, entitled ``Risk Analysis for the 
Louisiana Offshore Oil Port (LOOP),'' is available in the public docket 
for this rulemaking. [[Page 7654]] 
    The risk analysis examined each oil transferring component of the 
LOOP deepwater port, from the floating hoses that connect the tanker at 
an SPM to the main oil pipeline connecting the marine terminal to the 
mainland. For each of these components, the analysis considered all 
credible accident scenarios that could violate its oiltight integrity. 
These scenarios included adverse weather, overruns by surface vessels, 
propeller and anchor damage, material defects or failures, maintenance 
mishaps, and corrosion leaks. For each scenario the leakage rate, 
detection time, and consequential oil spillage were determined.
    The risk analysis also looked at tanker spill scenarios where LOOP 
might be solely or jointly responsible for accidental spills from a 
tanker.
    Scenarios based upon damage caused by acts of war, God, or third 
parties were not evaluated because a deep-water port is not liable for 
such spills.

9. LOOP's Pipeline System

    LOOP's pipeline system is designed to transfer crude oil at rates 
up to 100,000 bph (barrels per hour). However, the actual transfer rate 
at any given time is dependent upon the cargo pumping capacity of the 
discharging tanker. Most of the tankers calling at LOOP cannot 
discharge at the maximum rate; LOOP estimates that the maximum transfer 
rate actually occurs less than 10 percent of the time.
    The pipeline system consists of two floating hoses that connect the 
tanker to a single-point mooring (SPM) buoy, and a buried 56-inch 
diameter seafloor pipeline that connects the SPM to the LOOP pumping 
platform. There are three SPMs at the LOOP marine terminal (but only 
one at a time actually transfers oil). A 21-mile, 48-inch diameter 
seafloor pipeline connects the pumping platform to the Fourchon booster 
station (located 3 miles inland from the beach) and then to the 
Clovelly Dome storage facility (another 23 miles away). The pipelines 
are constructed of \1/2\-inch-thick steel. Offshore, the tops of the 
pipelines are buried at least 4 feet below the seafloor; as the 
pipeline approaches the beach it is buried even deeper.
    The two floating hoses are approximately 1,100 feet long; their 
volumetric capacity is 570 barrels each. The SPM pipeline is 8,150 feet 
long; its volumetric capacity is approximately 25,400 barrels. The main 
oil pipeline is approximately 18 miles long from the marine terminal to 
the beach; its volumetric capacity is 213,000 barrels. During a 
transfer operation, the total pressurized pipeline fill from tanker to 
beach, including the SPM and pumping platform components, is 
approximately 240,000 barrels (the two other SPMs are not pressurized 
and are isolated by control valves). By way of comparison, the total 
cargo capacity of the EXXON VALDEX was 1.6 million barrels.
    However, there is no credible accident that can split open any 
pipeline along its entire length and completely spill its contents. A 
more creditable scenario is a local rupture or fracture of the 
pipeline. High leakage rates can only occur while the pipeline is 
pressurized during transfer operations, when the internal oil pressure 
is considerably higher than the external mud and seawater pressure. The 
leakage rate will depend upon (1) The cross-sectional shape and area of 
the rupture, and (2) the internal or external pressure differential, 
which may be 200 to 450 psi (pounds per square inch) depending upon how 
far offshore the leak occurs. The total amount of spillage will depend 
upon how much time elapses before the leak is detected (or suspected) 
and the pipeline is shut down and depressurized.

10. LOOP's Leak Detection System

    LOOP's main oil pipeline (from the offshore marine terminal to the 
Clovelly Dome storage facility 45 miles away) is computer-monitored by 
a Supervisory Control And Data Acquisition (SCADA) system which 
provides flow volume and leak detection service. LOOP's SCADA system 
consists of 140 temperature, pressure, density, and other sensors that 
provide oil flow data from three field sites along the pipeline: the 
marine terminal, the Fourchon booster station, and Clovelly Dome. Each 
field site has two redundant SCADA computers. Although one computer is 
designated as primary and the other as backup, both computers are on-
line simultaneously and independently process all data. In addition to 
performing normal data processing, both computers also monitor system 
integrity to detect any component or system malfunctions (including 
cross-checking each other several times per minute). Electrical power 
to the computers and sensors is from uninterruptable power sources 
(UPSs). The field site computers communicate with the computers at the 
LOOP Operations Center via microwave transmissions. The SCADA system 
can immediately detect any pipeline malfunction or anomaly and trigger 
alarms at the Operations Control Center. The Operations console is 
manned around the clock with two persons (Oil Movement Controllers, 
OMCs) whenever oil transfer operations are occurring. From the 
Operations console, the OMCs can shut down the pipeline by remotely 
closing various control valves and tripping pumps off-line.
    The pipeline sensors are scanned every 3 to 5 seconds by the SCADA 
computers, which immediately compare them to allowable high and low 
values. A major rupture of the pipeline system will cause out-of-bounds 
readings at several different sensors, and trigger alarms at the 
Operations Control Center.
    To detect smaller leaks that do not cause out-of-bounds readings, 
the SCADA computer also continuously compares the actual metered inflow 
volume at the marine terminal with the estimated flow volume at various 
points in the pipeline (as calculated from the sensor data), looking 
for volumetric discrepancies. Short-term discrepancies of 50 cubic 
meters (314 barrels) in 13 minutes or 80 cubic meters (503 barrels) in 
one hour will trigger an alarm. Even smaller leaks will be detected on 
the basis of long-term discrepancies of 200 cubic meters (1,257 
barrels) in 48 hours, based upon the metered inflow at the offshore 
terminal and the metered outflow at Clovelly Dome. This threshold is 
the limit of the line surveillance sensitivity.
    LOOP investigates a discrepancy by performing calibration checks of 
the sensors and meters. If these do not reveal any malfunctions or 
resolve the imbalance, then a special pipeline overflight will be 
initiated to visually search for any leakage. If necessary, the 
pipeline can also be pressure-tested in conjunction with the 
overflight. A pressure test would consist of stopping the oil flow, 
statically pressurizing the pipeline to 200 psi, and monitoring the 
pressure for a minimum of 1 hour. Any loss in pressure would indicate a 
leakage. In its 12-year operating history, LOOP has never had to 
pressure test the main pipeline due to a volumetric flow discrepancy. 
(The pipeline has been pressure-tested twice for other reasons not 
related to volumetric discrepancies, and the floating hose and SPM 
sections of the pipeline are routinely pressure-tested as part of post-
maintenance integrity verification before being put back into service).
    In addition to the SCADA system, LOOP also conducts weekly 
overflights of the entire 45-mile pipeline right-of-way for visual 
detection of any leaks and to ensure that no unauthorized third-party 
activity (ashore or afloat) is occurring which may damage the pipeline. 
Such activity might be a dredging operation in the marshes or an oil 
drilling rig being positioned in the vicinity of the LOOP pipeline.
    The floating hose and SPM seafloor pipeline section between tanker 
and [[Page 7655]] pumping platform (approximately one and a half miles) 
is not directly computer-monitored. A major pipeline rupture along this 
section will create an abnormal pressure drop at the suction side of 
the booster pumps on the pumping platform, detectable by the SCADA 
sensors. Such a pressure drop would also be apparent to personnel on 
watch in the tanker's cargo control room, who would initiate a shutdown 
of the tanker's cargo pumps. A minor leak will create a surface slick, 
visually detectable from the tanker, pumping platform, or service 
vessels always operating around the Marine terminal. Whenever a tanker 
is discharging at an SPM, a LOOP service vessel also conducts sunrise 
and sunset inspections each day along the SPM pipeline and around the 
tanker.

11. Major Pipeline Spill Scenarios

    Major pipeline spill scenarios are based upon total severance of 
the pipeline during a full-capacity transfer operation at 100,000 bph 
flow rate. There are two points in the pipeline system where maximum 
spills could occur: Severance of the main oil pipeline (which connects 
the terminal to shore), and severance of a floating hose (that connects 
the tanker to the SPM).
    (a) Severance of main oil pipeline: The scenario assumed complete 
severance and offset of the pipeline by 48 inches, allowing full, 
unimpeded discharge from the severed end. This severance was assumed to 
occur at the midway point (56,000 feet) between the marine terminal and 
the Fourchon booster station, which is the furthest distance (10.6 
miles) from any of the SCADA sensors. This represents the longest time 
delay (16 seconds) before the transient pressure wave would reach a 
sensor. The water depth at that point is 50 to 60 feet, well within the 
working range of divers to effect repairs.
    The failure analysis determined that, within 24 seconds of the 
rupture, the SCADA computer would identify abnormal pressure data at 
both the marine terminal and Fourchon booster station sensors and 
trigger alarms at the LOOP Operation Control Center. Full system 
shutdown (tripping booster pumps off-line, hydraulically closing 
control valves, and depressurization of the pipeline) would be 
accomplished in 3 minutes from rupture. The estimated spillage during 
this shutdown period would be 2,785 barrels.
    After shutdown, and because its density is heavier than crude oil, 
seawater will begin to flow into the ``offshore'' ruptured pipemouth, 
displacing an equal volume of crude oil out of the pipe. Because the 
seafloor gradient is nearly flat (110 feet of water depth over 18 miles 
of pipeline length), this will be a low-energy displacement process. 
For the first few minutes after rupture the displacement rate will be 
approximately 1,366 bph, but will slow down rapidly as the seawater 
intrudes deeper into the pipeline and must overcome the increasing 
resistance (viscosity and other frictional losses) of displacing oil 
back out of the pipe. After 14 minutes the displacement rate would be 
approximately 877 bph, and after 5 hours it would be approximately 367 
bph. Over a 5-hour period it is estimated that the seawater will 
intrude approximately 2,150 feet into the pipeline, displacing 2,409 
barrels of crude oil.
    Depressurization of the ``onshore'' pipeline (from rupture to 
Clovelly Dome 33 miles away) would take 51 seconds, during which time 
approximately 500 barrels of seawater will be sucked into the ruptured 
pipemouth. LOOP would keep the shoreside pumps on line in order to 
maintain suction on the pipeline and continue drawing in seawater; 30 
minutes of this suction would assure a full water plug in the pipeline, 
precluding any oil backflow out of that ruptured pipemouth (a full 
water plug would be approximately 3,868 barrels).
    In the meantime, LOOP will also activate its response plan for 
locating and plugging a pipeline rupture. LOOP maintains a service 
vessel and a team of divers continuously on-duty at the marine 
terminal. The service vessel can transit the 18-mile offshore distance 
in less than 2 hours, following the pipeline and searching for the 
surface slick. Once located, divers would be able to temporarily seal 
off the open pipemouth within 3 hours. Complete repairs to the pipeline 
would be accomplished without further spillage, using pipe stoppling 
and repair techniques already developed by industry.
    Therefore, the maximum spillage expected from severance of the main 
oil pipeline is not more than 5,194 barrels.
    (b) Severance of a floating hose: Two 24-inch ID floating hoses 
connect the tanker to the pipeline manifold located on the seafloor at 
the base of the SPM. Each hose string is designed for a flow rate of 
50,000 bph, and is approximately 1,100 feet long, made up of 24 to 26 
hoses bolted together. The wall construction of a hose is an inner 
liner of \1/4\-inch-thick rubber, surrounded by \3/4\ inches of multi-
ply cord reinforcement (either steel wire or poly cord), two helix 
windings of \1/2\-inch steel wire, a \1/4\-inch outer liner, and a \1/
4\-inch reinforced rubber covering.
    Total severance of a floating hose would cause a substantial 
pressure drop in the pipeline. This pressure drop would be detected by 
the SCADA sensors at the suction side of the booster pumps on the 
pumping platform, triggering alarms at the LOOP operations center. 
Simultaneously, the pressure drop would also be apparent to the cargo 
officer in the pump room aboard the tanker. The risk analysis 
determined that emergency shutdown and depressurization would take 3 
minutes (1 minute for failure recognition, 2 minutes to trip pumps 
offline and close control valves on the tanker and SPM manifolds). 
Pressurized outflow during that period is estimated to be 1,667 
barrels. Assuming complete volumetric loss of the hose contents itself 
(570 barrels) and the SPM manifold (96 barrels), the total spillage 
would be 2,333 barrels.

12. Other Pipeline Spills

    The leak detection thresholds of the SCADA system are 314 barrels 
within 13 minutes, 503 barrels within 1 hour, and 1,257 barrels within 
48 hours. Thus, the SCADA system is expected to detect any leak of 26 
bph or more, for a maximum spillage of 1,257 barrels before discovery.
    Leaks of a lesser rate would be below the detection level of the 
SCADA system and would therefore have to be detected visually as 
surface slicks, discovered from service vessels or overhead flights. 
Because of the high level of service vessel activity around the port, 
the risk analysis assumes that surface slicks within the LOOP safety 
zone will be discovered within 24 hours. Because of the high level of 
aviation (helicopter) activity around the waters of the Gulf, the risk 
analysis assumes that slicks in open water will be discovered within 72 
hours. These discovery time delays are conservatively long, allowing 
for periods of night (when visual detection is unlikely) and also 
recognizing that small leaks from a seafloor pipeline (in 100 feet of 
water) may be thinly dispersed, and therefore more difficult to notice, 
by the time the oil reaches the surface. However, once discovered, 
leakages would be reduced to trickle amounts by shutting down and 
depressurizing the pipeline.
    The LOOP risk analysis determined that small pipeline spills could 
result from corrosion pits, failure of bolted connections (gasket or 
flange leaks), lesser pipeline ruptures, or maintenance mishaps.
    Leakage from corrosion pits in the pipeline would depend upon the 
size of the corrosion hole and the oil pressure within the pipeline. 
Initially, the hole [[Page 7656]] would be no more than a pinhole in 
size, but would enlarge over time. The leakage rate from a \1/8\-inch 
diameter hole at a pressure of 172 psi would be 6 bph. If the leak 
occurred within the safety zone (i.e., discovered within 24 hours), 
spillage would be no more than 144 barrels. If the leak occurred in 
open water somewhere between terminal and shore (i.e., discovered 
within 72 hours), spillage would be no more than 432 barrels.
    Total failure of a bolted connection (i.e., complete separation) is 
considered unlikely because of the number of bolts involved. More-
likely are partial failures resulting in gasket or flange leaks; at 
normal working pressures, leakage rates are estimated to be 8 bph. All 
bolted pipeline connections are within the safety zone; therefore, 
leaks would be discovered within 24 hours. A leaking connection from a 
floating hose might spill 204 barrels before discovery. However, many 
of the bolted connections are on the tanker or pumping platform where 
leaked oil would be contained by spill coamings or troughs and 
discovered during normal watchkeeping rounds.
    Another possible spill source would be from a floating hose if run 
over by a service craft or fishing vessel that slashes the hose with 
its propellers. The risk analysis determined that the steel-reinforced 
wall construction of the hoses makes it unlikely that they could be 
fully severed by the propellers of service vessels. Rather, a slash 
might penetrate through the inner wall of the hose. Such a slash would 
leak only when the pipeline was pressurized; total leakage is estimated 
to be not more than 165 barrels.
    The largest maintenance accident would be spillage of the entire 
contents of a floating hose and the SPM base (approximately 667 
barrels).

13. Tanker Spill Analysis

    OPA 90 relieves a deepwater port of any liability for tanker spills 
caused solely by the tanker. Thus, LOOP is not responsible for spills 
solely caused by malfunctioning tanker equipment (such as valves or 
seachests), or human error by tanker personnel (such as discharge of 
oily bilgewater), or from other accidents aboard the tanker (such as 
fire or explosion) which are not caused by LOOP.
    For most of the time during its call at LOOP, a tanker is under 
sole command and control of its master and officers, who are 
responsible for safe operation and maintenance of their vessel and its 
equipment, and for compliance with all applicable Federal regulations. 
However, there are certain tanker spill scenarios for which LOOP might 
be liable (solely, or jointly with the tanker). These scenarios arise 
during those periods when the tanker is under joint navigational 
responsibility of LOOP and its own master, or joint transfer 
responsibility during discharge of the tanker's cargo oil. Because of 
these joint responsibility situations, LOOP's potential liability for a 
tanker spill must be reviewed as part of this rulemaking.

14. Navigation-Related Tanker Spill

    Joint navigational responsibility exists when the tanker is 
maneuvering within the port's safety zone under direction of LOOP's 
Vessel Traffic Controller, or is maneuvering to or from the SPMs with 
the LOOP mooring master on board. (Although LOOP reports that the 
mooring masters are independent contractors to LOOP, OPA 90 does not 
limit or relieve the liability of a responsible party for acts or 
omissions by its agents or contractors.)
    The most serious navigation-related accident that could occur at a 
deepwater port would be a collision between a tanker and another tanker 
or platform. A possible cause for such a collision could be mechanical 
failure of the tanker's steering system. In 1990, LOOP conducted a risk 
analysis that examined steering and propulsion failure scenarios of 
tankers maneuvering around the safety zone. As a result of this study, 
LOOP contracted a purpose-built tractor tug that is specifically 
designed for controlling disabled tankers. This tractor tug, the LOOP 
RESPONDER, has been in service at LOOP since 1992.
    Lesser navigation-related tanker spills, resulting from bona fide 
accidents where LOOP might be found solely or jointly liable, are more 
possible. One of these is a mooring overrun where the tanker runs over 
the SPM while maneuvering to or from the buoy. The risk analysis 
determined that the worst-case outcome for a mooring overrun would be 
severance of the two floating hoses, spilling a maximum of 209 barrels. 
Because of the slow tanker speeds during mooring and unmooring 
operations (less than 5 knots), and the heavy fendering arrangements on 
the SPM buoy, rupture of the tanker's hull (by impact with the SPM 
buoy) is not expected.
    Another possible accident is a collision between a service vessel 
and a tanker. Once again, however, the tanker hull is not expected to 
be ruptured because of the slow relative speeds and fendering 
arrangements on the service vessels.
    The risk analysis concluded that it was not possible to predict a 
maximum spill size from an accident involving a tanker. This is because 
there are too many circumstances and variables that influence the 
outflow. However, it is unlikely that such accidents could occur 
without being in violation of Federal regulations, particularly those 
governing tanker movements within the safety zone. In such a case, the 
responsible party (LOOP or the tanker) would not be allowed to limit 
its liability, regardless of the limits established by this rulemaking.

15. Transfer-Related Tanker Spill

    Joint transfer responsibility occurs when the tanker operates its 
cargo pumping system in response to directions from LOOP's Oil Movement 
Controller. A tanker spill during transfer operations is expected to be 
associated with the bolted connections where LOOP's floating hoses 
connect to the tanker's cargo manifold. Because LOOP furnishes the 
gaskets and bolts used in making the connection, and oversees the 
bolting and unbolting of the hoses, LOOP is potentially liable for any 
spillage from the connection.
    The risk analysis determined that complete failure (separation) of 
the bolted connection was improbable because of the size and number of 
bolts used. It is more likely that spills would be caused by leaks 
resulting from a poorly-sealed connection. The risk analysis determined 
that such spills would be less than 10 barrels (the most serious being 
the result of a gasket failure).

16. Historical Spill Costs

    At this time there is no economic model for projecting costs of an 
oil spill along the Louisiana Gulf coast. There have been some recent 
crude oil spills in those waters, but the final costs are not yet 
known. Accordingly, estimating the cost of a maximum credible spill 
must be done from broader historical data on U.S. spills.
    The Coast Guard and Volpe National Transportation Systems Center 
(TSC) commissioned the Unisys Corporation and Mercer Management, Inc. 
to study and develop oil spill cleanup costs, third-party compensation, 
and natural resource damage data.
    The results are presented in the draft Interim Report ``OPA 90: 
Regulatory Impact Analysis Review--Spill Unit Values,'' dated September 
15, 1992. The study researched all tank vessel oil spills of over 
100,000 gallons (2,381 barrels) that occurred in U.S. waters between 
1980 and 1990. The study's oil spill database contains cost information 
for some 59 incidents, representing 76 percent of the total volume 
spilled from [[Page 7657]] 1980 to 1990, and 89 percent of all oil 
spilled in incidents of at least 100,000 gallons. Although cleanup 
costs and third-party damages are well documented, natural resource 
damage settlements are relatively few.
    The study determined that location of a spill was a significant 
factor in cleanup and third party costs. For example, the weighted 
average cost for a dirty product spill in internal or headland waters 
was $41,652 per metric ton but only $8,364 per metric ton for spills 12 
to 200 miles offshore (costs in 1992 dollars for U.S. spills 1980-1990, 
weighted by spill size). The study developed a range of unit cost 
values for ``clean'' and ``dirty'' product spills. For dirty product 
spills, which would include crude oil, the range of unit values was 
from $121 to $264 per gallon ($5,082 to $11,088 per barrel).
    It is noted that several recent spills are in the process of 
litigation or settlement, and may therefore provide more-current cost 
data by the time of the final rule for this rulemaking. Accordingly, 
the Department may find it appropriate to use the more current cost 
data for its limit of liability determination.

17. LOOP's certification of financial responsibility

    Under the original Deepwater Port Act of 1974 (DPA), the deepwater 
port had a liability limit of $50 million except for spills caused by 
gross negligence or willful misconduct, whereupon liability was 
unlimited. Section 18 of the DPA required the deepwater port to ``carry 
insurance or give evidence of other financial responsibility in an 
amount sufficient to meet the liabilities imposed by [the DPA].'' In 
1980, LOOP and the Department of Transportation signed a memorandum of 
understanding (MOU) which established that LOOP must provide annually 
evidence of financial responsibility in the amount of $150 million. The 
MOU outlines a two-part requirement: that LOOP must maintain 1) a net 
worth, including fixed assets, of $50 million, and 2) a combination of 
working capital and insurance totalling $100 million (after deducting 
any claims and insurance deductibles). Shortfalls in these minimum 
levels must be made up with insurance. Thus, the MOU established a 
minimum financial worth of LOOP of $150 million. LOOP submits quarterly 
reports to the Department demonstrating that it is meeting the minimum 
requirements as set forth in the MOU. Although OPA 90 revised the DPA 
(specifically deleting section 18) and established a new liability 
limit at $350 million, the terms of the MOU are still being observed, 
pending the outcome of this rulemaking.
    Adoption of a $150 million liability limit would confirm DOT's past 
requirement for LOOP's financial responsibility. DOT's assessment was 
that $150 million would suffice for most oil spills. A liability limit 
in the $150 million range would not cause additional expense for LOOP.

18. Background on the $350 million statutory limit on liability for 
negligence

    OPA 90, Section 1004, establishes a liability limit of $350 million 
``for any onshore facility and a deepwater port.'' In the context of 
the Exxon Valdez oil spill which significantly influenced the shaping 
of OPA 90, Congress decided that the $350 million level of liability 
fitted into the other liability provisions of OPA 90, in particular the 
liability for tank vessels. The Congress believed that the risk of oil 
spills of deepwater ports warranted a $350 million limit and it 
believed that insurance would be available to support liability up to 
this level. For damages above the $350 million limit OPA granted the 
deepwater ports the benefit of payment of the damage claims out of the 
Oil Spill Liability Trust Fund. Deepwater ports have been subject to 
this level of liability for their negligence since 1990.
    In OPA 90, Section 1004(d), Congress gave the Executive Branch 
authority to adjust the liability limit for onshore and deepwater port 
facilities downwards if such an adjustment could be justified. The 
assumption of OPA 90 is that the liability limit set by the law remains 
as provided by the statute, unless good reason can be established for a 
lower limitation. At this time, the limit of liability for onshore 
facilities remains at $350 million.
    Congress did not require the Executive Branch to study adjustment 
of the limit for onshore facilities within any specific time limit. The 
authority to study may be used at any time. However, in regard to 
deepwater ports, OPA 90 requires a study of oil spill risks in one year 
after enactment of OPA 90. The results of that study are described 
elsewhere in this NPRM. Thus the question becomes whether the DOT study 
has uncovered new information which would cause the Secretary to 
establish liability limits lower than those established by Congress. If 
new information of sufficient weight and magnitude showing that the 
risk of ``transportation of oil by vessel results in a lower 
operational or environmental risk than the use of other ports,'' then 
the Secretary may initiate rulemaking to find the level of liability 
which is more appropriate than the level established by the statute.

19. Proposed Sec. 137.603  Limit of Lability

    The Department has determined that it is not appropriate to assign 
a single, universal limit of liability for all deepwater ports. Rather, 
a limit should be set individually for each deepwater port, on the 
basis of its design, location, spillage risk, and estimated costs 
(clean up costs, third party compensation, and natural resource 
damages). Therefore, through this proposed rule, the Secretary of 
Transportation would establish an appropriate limit of liability for 
negligence, between the statutory limits of $350 million and $50 
million, for individual deepwater ports.
    Although the regulatory text section of this NPRM proposes a range 
of possible limits of liability for LOOP ($50-$350 million), the 
Department is particularly focusing on three possible limits, as 
follows:
    (1) Maintain the present limit of liability for negligence at $350 
million, as established by OPA 90; or
    (2) Establish a limit of liability for negligence at $58 million, 
based on LOOP's maximum pipeline spill of 5,194 barrels and the TSC 
recommended worst-case cost of $11,088 per barrel for dirty product 
spills; or
    (3) Establish a limit of liability for negligence at $150 million, 
reflective of the 1980 memorandum of understanding between the 
Department and LOOP. It reflects DOT's risk assessment in 1980, based 
upon the TSC range of spill unit costs for dirty products ($5,082 to 
$11,088 per barrel), this limit of liability would provide for a spill 
of 13,500 barrels to 29,500 barrels.
    The Department presents these three limits, but may select a limit 
within the $50-$350 million range in the final rule after reviewing 
specific public comments on these limits. Additionally, the Department 
seeks comments on whether it should reassess and possibly readjust the 
liability limit at fixed time intervals.
    It is reiterated here that the unlimited liability provisions of 
the law are not affected by this rulemaking. LOOP would not be allowed 
to limit its liability for spills caused by gross negligence, willful 
misconduct, or violation of certain Federal regulations in accordance 
with section 1004 of OPA 90 (33 U.S.C. 2704). [[Page 7658]] 

Regulatory Analysis and Notice

DOT Regulatory Policies and Procedures

    This NPRM is considered to be a significant rulemaking under DOT 
Regulatory Policies and Procedures, 44 FR 11040, because of substantial 
industry interest.

Executive Order 12866

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 12866, and it has been determined 
that it is not an economically significant rulemaking.

Executive Order 12612

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 12612, and it has been determined 
that it does not have sufficient federalism implications to warrant the 
preparation of a Federalism Assessment.

Regulatory Flexibility Act

    The Department must consider whether this proposal will have a 
significant impact on a substantial number of small entities.
    This proposal only affects a single company, Louisiana Offshore Oil 
Port (LOOP), Inc., which owns and operates the only deepwater port in 
the United States at present. Neither LOOP specifically, nor deepwater 
ports in general, qualify as small business concerns. Accordingly, the 
Department has determined that this proposal does not affect any small 
business entities.
    If a company affected by the proposed regulations thinks it 
qualifies as a small entity, and that the proposed regulations will 
have an adverse economic impact, then it should submit a comment (see 
ADDRESSES) explaining why it qualifies as a small entity, and in what 
way and to what degree the proposed regulations will affect it.

Paperwork Reduction Act

    This NPRM contains no collection of information requirements under 
the Paperwork Reduction Act.

Assessment

    The original Deepwater Port Act of 1974 (DPA) (33 U.S.C. 1501, et 
seq. and 43 U.S.C. 1333) set the limit of liability for a deepwater 
port at $50 million, except for unlimited liability for spills caused 
by gross negligence or willful misconduct. Under a 1980 Memorandum of 
Understanding (MOU) between LOOP and the Department of Transportation, 
LOOP has been periodically certifying to the Department that it is 
maintaining a combined total of $150 million of insurance, working 
capital and net worth. This is the amount that the Department 
determined to be necessary to ensure that LOOP could meet all of its 
liabilities (limited and unlimited) in accordance with the DPA.
    OPA 90 established a new, $350 million limit of liability for the 
negligence of deepwater ports, but allows for the Secretary to set 
lower limits as appropriate (but not less than $50 million). This NPRM 
presents three proposed limits of liability under consideration for the 
LOOP deepwater port within the range $50-$350 million: (1) $350 million 
(the status quo limit set by OPA 90), (2) $58 million (based upon the 
worst-case cost of maximum pipeline spill), and (3) $150 million 
(reflective of the total financial worth requirement per the MOU).
    Selecting either the $58 million or $150 million options would have 
minimal economic effect because LOOP is already required to maintain a 
minimum worth of $150 million. Selecting the $350 million may or may 
not have an impact on LOOP, depending upon its present net worth, 
working capital, and insurance coverage. None of the options, 
regardless of which one is selected, is likely to affect the general 
private sector, consumers, or Federal, state or local governments. 
Accordingly, the anticipated impact of this proposal is considered so 
minimal that it does not warrant a full regulatory assessment or 
evaluation.

National Environmental Policy Act

    The Department has determined that this rulemaking is 
administrative in nature and therefore is categorically excludable from 
further environmental assessment.

List of Subjects in 33 CFR Part 137

    Claims, Harbors, Insurance, Oil pollution.

    For the reasons set out in the preamble, the Department proposes to 
amend 33 CFR part 137 as follows:
SUBCHAPTER M--MARINE POLLUTION FINANCIAL RESPONSIBILITY AND 
COMPENSATION

PART 137--DEEPWATER PORT LIABILITY FUND

    1. The authority citation for 33 CFR part 137 is revised to read as 
follows:

    Authority: 33 U.S.C. 1509(a), 1512(a), 1517(j)(1)), 2704; 49 CFR 
1.46.

    2. Subpart G is added as follows:

Subpart G--Limits of Liability

Sec.
137.601  Purpose.
137.603  Limits of Liability

Subpart G--Limits of Liability


Sec. 137.601  Purpose.

    (a) This subpart sets forth the limits of liability for U.S. 
deepwater ports in accordance with section 1004 of the Oil Pollution 
Act of 1990 (33 U.S.C. 2704).
    (b) In general, the limits of liability for U.S. deepwater ports 
will be established by the Secretary of Transportation on a port-by-
port basis, after reviewing a spill risk analysis and associated costs 
for which the port could be liable. The limit for negligence of the 
deepwater port will not be less than $50 million or more than $350 
million.


Sec. 137.603  Limits of Liability.

    (a) The limit of liability for negligence of the deepwater port 
licensed and operated by Louisiana Offshore Oil Port (LOOP), Inc., is 
(range $50,000 to $350,000).
    (b) [Reserved]

    Dated: February 2, 1995.
Federico Pena,
Secretary of Transportation.
[FR Doc. 95-3039 Filed 2-3-95; 8:45 am]
BILLING CODE 4910-62-M