[Federal Register Volume 62, Number 7 (Friday, January 10, 1997)]
[Rules and Regulations]
[Pages 1622-1637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-471]



[[Page 1621]]

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Part III





Department of Transportation





_______________________________________________________________________



Coast Guard



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33 CFR Part 157



Structural Measure to Reduce Oil Spills From Existing Tank Vessels 
Without Double Hulls; Final Rule

Federal Register / Vol. 62, No. 7 / Friday, January 10, 1997 / Rules 
and Regulations

[[Page 1622]]



DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 157

[CGD 91-045c]
RIN 2115-AF27


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

AGENCY: Coast Guard, DOT.

ACTION: Final rule.

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

SUMMARY: This final rule represents the last phase in the Coast Guard's 
three-phased effort to establish economically and technologically 
feasible structural and operational measures to reduce the threat of 
oil spills from tank vessels without double hulls, as required by the 
Oil Pollution Act of 1990. No structural measures are contained in this 
final rule because the Coast Guard has determined that there are no 
interim structural measures that are both technologically and 
economically feasible for existing tank vessels without double hulls.

DATES: This final rule is effective February 10, 1997.

ADDRESSES: Unless otherwise indicated, documents referenced in this 
preamble are available for inspection or copying at the office of the 
Executive Secretary, Marine Safety Council (G-LRA/3406), U.S. Coast 
Guard Headquarters, 2100 Second Street SW., room 3406, Washington, DC 
20593-0001, between 9:30 a.m. and 2 p.m., Monday through Friday, except 
Federal holidays. The telephone number is (202) 267-1477.

FOR FURTHER INFORMATION CONTACT: LCDR Suzanne Englebert, Project 
Manager, Project Development Division, at (202) 267-6490.

SUPPLEMENTARY INFORMATION:

Regulatory History

    Section 4115(b) of the Oil Pollution Act of 1990 (OPA 90) directs 
the Coast Guard to develop structural or operational requirements for 
tank vessels of 5,000 gross tons (GT) or more without double hulls that 
will serve as regulations until the year 2015. After 2015, all tank 
vessels operating in U.S. waters will be required to have double hulls 
under section 4115(a) of OPA 90 (46 U.S.C. 3703a). Regulations issued 
under the authority of section 4115(b) must provide as substantial 
protection to the environment as is economically and technologically 
feasible. A detailed review of structural measure issues, as they 
pertain to the Congressional mandates of OPA 90, appears in the 
supplemental notice in proposed rulemaking (SNPRM) entitled 
``Structural Measures to Reduce Oil Spills from Existing Tank Vessels 
without Double Hulls'' published on December 28, 1995 (60 FR 67226).
    This final rule represents the final phase of the Coast Guard's 
three-phased effort to reduce oil pollution from certain existing tank 
vessels. The first phase was completed on August 5, 1994, by issuing a 
final rule entitled ``Emergency Lightering Equipment and Advanced 
Notice of Arrival Requirements for Existing Tank Vessels Without Double 
Hulls'' (59 FR 40186), which requires the carriage of emergency 
lightering equipment and the inclusion of the vessel's International 
Maritime Organization number in the advance notice of arrival report. 
The second phase was completed on July 30, 1996, by issuing a separate 
final rule entitled ``Operational Measures to Reduce Oil Spills from 
Existing Tank Vessels without Double Hulls'' (61 FR 39769). That rule, 
which focused on reducing the risk of groundings, collisions, or fires, 
requires existing tank vessels without double hulls to comply with 
certain operational measures until the year 2015.
    To complete the third phase, the Coast Guard evaluated several 
different structural measures to determine their economical and 
technological feasibility. Such measures included retrofitting double 
bottoms or sides, implementing hydrostatic balance loading (HBL) for 
all vessel configurations, and restricting certain existing tanks from 
carrying cargo or retrofitting spaces so that they are located 
protectively around tanks carrying oil as cargo. As a result of further 
economic cost-benefit analysis and the comments on the SNPRM, the Coast 
Guard is not requiring structural measures. The Coast Guard has 
determined that structural measures are not economically feasible and 
that the measures required under phase one and two of this rulemaking 
meet the Congressional mandate of OPA 90 section 4115(b).

Discussion of Comments

    Background information on proposed structural measures for existing 
vessels without double hulls is provided in the preambles to the 
advanced notice of proposed rulemaking (56 FR 56284; November 1, 1991), 
the notice of proposed rulemaking (58 FR 54870; October 22, 1993), and 
the SNPRM (60 FR 67226; December 28, 1995). The Coast Guard received a 
total of 29 letters on the SNPRM. These letters addressed several 
issues and presented more than 180 comments. Twelve comments supported 
operational measures and two comments supported emergency lightering 
measures as finalized. The remaining comments discussed issues related 
to reducing oil outflow after an accident occurs on an existing tank 
vessel and are addressed in the following sections. All comments 
received on this rulemaking are available for inspection in docket [CGD 
91-045c] at the address listed under ADDRESSES. For the purposes of 
this preamble discussion, the term ``single-hull'' means an existing 
tank vessel without a double hull. Pre-MARPOL vessels are defined as 
vessels that are not required to meet the pollution prevention 
requirements of the 1973 International Convention for the Prevention of 
Pollution from Ships (MARPOL 73). MARPOL 73/78 vessels are defined as 
vessels that meet the requirements of the MARPOL 73 convention and 
vessels that meet the MARPOL 73 convention as amended by the 1978 
Protocol (MARPOL 78). The term ``Regulation 13G'' refers to Regulation 
13G of Annex I of MARPOL 73 as amended by the 1978 Protocol.

I. Applicability

    Twenty-three comments pertained to the application of structural 
measures. Nine comments made general remarks on the applicability of 
structural measures and the OPA 90 mandated phase-out schedule's 
relationship to the implementation of structural measures. The 
remaining comments suggested that the Coast Guard exempt various types 
of vessels from the application of structural measures.
    Two comments shared the opinion that the current OPA 90 phase-out 
schedule effectively creates an orderly transition to a future double-
hull fleet, thus making additional measures unnecessary. One of these 
comments specifically noted that tank barges, in particular, would 
accrue no benefit from structural measures due to impending OPA 90 
phase-outs. A separate comment agreed that the Coast Guard should 
maintain OPA 90 phase-out dates, but did not request that vessels be 
excluded from the application of structural measures or that structural 
measures not be required.
    Five comments recommended that the Coast Guard require structural 
measures for all existing tank vessels, including non-petroleum oil 
carriers and tank barges. The comments stated that non-petroleum 
carriers may periodically transport petroleum and that non-petroleum 
oil spills pose an equal or greater risk to the environment as 
petroleum oil spills. In addition, the comments claimed that standards

[[Page 1623]]

should be uniform throughout industry to encourage equal competition 
and an even distribution of costs.
    Two comments suggested alternatives to the broad application of 
structural measures. One comment encouraged the use of company 
historical performance as a basis for requiring implementation of 
structural measures. For example, the comment claimed that companies 
with a history of minimal oil spillage should not be required to 
implement structural measures to the same degree as frequent offenders. 
The second comment recommended that the Coast Guard establish an 
enforceable performance standard, as opposed to a one-size-fits-all 
approach, for the implementation of specific measures to ensure a high 
degree of spill prevention.
    During this rulemaking, the Coast Guard extensively researched the 
cost and benefit of requiring a multitude of measures on single-hull 
tankships and tank barges prior to their phase-out dates. No tank barge 
or tankship company commented that their sole cargo carriage consisted 
on non-petroleum products. Consequently, all tank vessels, including 
those with the ability to transport non-petroleum products for one 
charter and change to carrying petroleum products for the next, were 
considered for this rulemaking.
    The anticipated cost to single-hull tank vessels until 2015, or 
their phase-out dates, was strictly taken into account for this final 
rule assessment. The OPA 90 phase-out dates and current differences 
between U.S. and international fleet pollution prevention requirements 
were also considered in the cost and benefit analysis. Because this 
rulemaking addresses out-flow prevention measures typically requiring 
architectural or loading changes, and not human performance factors 
that are usually the reason for a company's lower spill record, the 
Coast Guard did not consider equivalencies or exemptions based on 
individual company performance.
    Several comments claimed vessels trading at deepwater ports or 
offshore lightering zones should be exempt from the application of 
structural measures because most already operate with protection 
adequate for trading in these low risk areas and would experience no 
benefit from the use of structural measures. Other comments requested 
exemptions for vessels carrying non-petroleum oil or product cargo 
because most are already equipped with double bottoms and pose an 
insignificant risk to the environment. Comments also recommended 
excluding all tank vessels equipped with double bottoms from the 
implementation of structural measures since these already have the 
ability to reduce oil outflow due to grounding incidents. Comments 
suggested that spill response tank barges, which transport oil for a 
limited purpose only, be held to lower standards than structural 
measures for routine oil carriers. In addition, several comments 
requested that clean product tankers less than 30,000 deadweight tons 
(dwt) be exempt from structural measures because spillage from these 
vessels has historically proven to be less damaging and less difficult 
to contain than spills from other vessels. Finally, some comments 
claimed that vessels which meet the requirements of MARPOL 78, should 
be exempt from these requirements because they already meet the highest 
international standards.
    Vessels that are solely engaged in oil spill response are already 
exempt from the structural measures required by 33 CFR 157.08. Vessels 
operating at deepwater ports, offshore lightering zones, and those 
vessels fitted with double bottoms were considered in this rulemaking 
because, although groundings are less frequent, collisions and 
structural failures remain potential hazards. Non-petroleum carrying 
vessels were included in this rulemaking because the Coast Guard has 
determined that bulk spills of animal fat, vegetable oil, and other 
non-petroleum oil can be damaging to the environment. The cost and 
benefit of applying structural measures to single-hull tank vessels 
were separately identified by deadweight tonnage categories in this 
final rule regulatory assessment to determine if tank vessels, such as 
those product carriers operating at 30,000 dwt or less, were 
disproportionately affected. MARPOL 73/78 vessels were also considered 
separately in the regulatory analysis for this final rule to ensure 
anticipated benefits from any structural measures accurately reflected 
their currently pollution prevention construction.
    Several comments requested exemption of specific vessels from 
implementation of HBL because it is not technically feasible for their 
operation. Specific vessels included: Type 2 Bulk Chemical/Integrated 
Cargo parcel tankers, which encounter difficulties in implementing HBL 
when dealing with heterogeneous cargoes; and vessels engaged in multi-
port voyages, due to problems resulting from the implementation of HBL 
multiple times during a single voyage.
    The Coast Guard agrees that the difficulty of implementing HBL 
directly correlates with cargo variety and discharge schedules. The 
technical feasibility analysis for the structural measures SNPRM 
assumed tank vessels were carrying homogeneous cargoes and had limited 
off-loads. Small tankships, such as parcel tankers and vessels making 
multiple port discharges, have valid concerns about the practical 
application of HBL to their operations, and would most likely incur 
voyage delays or higher cargo shutout rates than originally assumed in 
the SNPRM for HBL. The regulatory assessment for this final rule 
analyzed the effect that HBL, assuming a higher cargo shutout cost and 
expense of delayed operations for a product or parcel tankship, would 
have on the cost-benefit ratio.

2. Consistency With International Standards

    The Coast Guard received 12 comments expressing support for the 
development or adoption of regulations that are equivalent to 
international standards such as Regulation 13G and International 
Maritime Organization (IMO) standards. Arguments in favor of 
harmonization included concerns that country-specific legislation would 
be difficult for industry to implement, and would introduce technical 
risks and disproportionate costs. Another comment specifically noted 
that the combination of protectively located void spaces (PL/Spaces) 
and HBL analyzed in the SNPRM would be too expensive and complex to 
implement. Consequently, the comment recommended adoption of Regulation 
13G because it permits use of HBL or PL/Spaces on an individual basis. 
Another comment stated that a requirement to fit PL/Spaces would be 
onerous to the international fleet because it affects a vessel's 
ability to trade, unlike HBL, even when not trading in U.S. waters.
    Other comments encouraged the Coast Guard to work in cooperation 
with the IMO to ensure high standards of environmental performance for 
all newly-built tank vessels. One comment also encouraged the Coast 
Guard to consider enforcement issues when preparing a structural 
measures regulation, stressing the importance of maintaining 
competition on an equal level.
    In contrast, only one comment disagreed that uniformity would be 
achieved by drafting measures commensurate with international 
standards. This comment reasoned that, theoretically, Regulation 13G 
and OPA 90 express somewhat opposing objectives, since Regulation 13G 
works to extend the operating life of single-hull vessels, while OPA 90 
limits the operating life of single-hull vessels by setting a maximum 
retirement date.

[[Page 1624]]

Consequently, it was suggested that other options be considered, 
including an alternative PL/Space configuration that splits the 
protected area between the side and bottom of the vessel.
    The Coast Guard's goal is to implement its statutory mandates in 
regulations that are consistent with international standards wherever 
doing so is lawful, appropriate, and practical. Based on comments from 
the SNPRM, the Coast Guard considered adoption of international 
regulations including Regulation 13G, as well as other requirements not 
presently required by IMO. However, based on the revised cost and 
benefit analysis of these structural measures for existing tank 
vessels, the Coast Guard has determined that no measures, international 
or otherwise, are economically feasible.

3. Congressional Intent

    Four comments argued that Congress directed the Coast Guard to 
consider implementation of both structural and operational measures for 
existing tank vessels without double hulls, but did not require the 
adoption of both types of measures. Three of the four comments also 
stated that no structural measures are required to be implemented 
unless they are both economically and technologically feasible. Another 
comment stated that Congress mandated strict standards to protect our 
nation's waters, obligating the Coast Guard to develop measures that 
closely approximate the protective effect of double hulls on single-
hull tank vessels.
    The Coast Guard has done extensive research on the requirements of 
section 4115(b) of OPA 90, including an analysis of the Congressional 
guidance offered for its implementation. The three final rules 
promulgated under CGD 91-045 make up a comprehensive evaluation of 
section 4115(b) that implements those measures the Coast Guard deems 
are both economically and technologically feasible as required by law.

4. Alternative Measures and Economic Incentives

    The Coast Guard received five comments that encouraged the adoption 
of alternative systems to reduce oil outflow. One comment recommended 
that intermediate oil tight decks (IOTD) be required or offered as an 
equivalent measure for compliance with structural measures. The comment 
challenged the Coast Guard's refusal to consider IOTD on the basis of 
its alleged failure to meet the benchmark equivalency for alternative 
compliance found in Regulation 13G. The comment argued that the Coast 
Guard's interpretation of the Regulation 13G standards was misleading 
and incorrect as it pertained to IOTD. According to the comment, the 
estimated installation costs for IOTD, $2 million per vessel, would be 
approximately identical to fitting PL/Spaces. However, the comment 
asserted that cargo shutout amounts would vary from 2 percent for an 
IOTD equipped tanker to 19 percent for a tankship fitted with PL/
Spaces. The comment also contended that the IOTD concept should be 
considered equivalent to a double hull.
    The basis of the Coast Guard's determination of appropriate 
alternative measures for single-hull tank vessels in this final rule 
remains as stated in the SNPRM: the alternative must be approved by 
IMO's Marine Environment Protection Committee (MEPC) as an alternative 
structural arrangement meeting the requirements of Regulation 13G. 
Although IMO has accepted the concept of IOTD as a method for complying 
with the HBL alternative to Regulation 13G, this acceptance was not the 
only factor considered for this rulemaking. This final rule's 
regulatory assessment found that PL/Spaces, a combination of PL/Spaces 
and HBL, and HBL alone are all economically infeasible for pre-MARPOL 
tank vessels. A separate analysis using the IOTD shutout estimate of 2 
percent and the refit costs of fitting PL/Spaces over 30 percent of the 
cargo tank area revealed that even with the reduced cargo shutout of 
IOTD, the cost-benefit of such a measure is not economically feasible. 
Calculations from this analysis estimated that the cost-benefit of 
implementing IOTD for vessels operating on U.S. coastal voyages ranged 
from $62,200 to $211,000, and from $32,200 to $159,300 per barrel of 
unspilled oil on those vessels operating on international voyages. The 
Coast Guard estimates that these ranges are a conservative 
representation of the IOTD's cost-benefit because the cost of fitting 
IOTD for the entire cargo area would be substantially higher than the 
cost of fitting bulkheads or double bottoms over 30 percent of the 
cargo area. The determination of equivalency between IOTD and a double 
hull is outside the scope of this rulemaking.
    Another comment suggested that the Coast Guard adopt the American 
Underpressure System. This comment claimed that this inert gas 
controlled system dynamically controls the underpressure in the tank 
ullage space and would prevent oil spills above the line of rupture. 
This comment reasoned that since the Coast Guard has endorsed HBL and 
PL/Spaces it should also accept alternative concepts, such as the 
American Underpressure System, that are similarly effective and result 
in comparable levels of risk regardless of IMO approval. According to 
the comment, the American Underpressure System is comparable in 
performance to the double hull, is significantly more effective than 
either HBL or PL/Spaces, and introduces no unmanageable risks. The 
comment estimated that the cost of implementing the American 
Underpressure System would be between 1 and 1.5 percent of the 
construction cost required to build a new single-hull tanker, while the 
cost to install a double hull would be between 30 to 40 percent of the 
construction cost required to build a new single-hull tanker. In 
addition, the comment claimed that the out-of-service time to retrofit 
the American Underpressure System was 1 to 3 weeks, compared to the 6 
to 12 months typically required to install a double hull. Considering 
the loss of cargo capacity that would result from the installation of 
the double hull, as well as the comparison between the refit cost and 
out-of-service time required for the implementation of both measures, 
this comment concluded that no quantitative support exists to exclude 
the American Underpressure System as a viable alternative measure.
    While underpressure systems could be less costly than PL/Spaces or 
HBL, they were not included in the regulatory assessment for this final 
rule because they have not been approved by IMO as an alternative to 
comply with Regulation 13G. Underpressure systems were specifically 
examined and discussed by IMO. These systems were expressly rejected by 
IMO due to various safety concerns.
    Two comments recommended that the Coast Guard require emergency 
transfer systems (ETS). Another comment suggested that the Coast Guard 
develop industry-wide economic incentives that encourage companies to 
employ spill-reduction measures such as effective combinations of PL/
Spaces and HBL prior to the regulatory phase-in dates and to engage in 
further development of promising new measures such as Underpressure 
Systems and ETS.
    While ETS could be less costly than PL/Spaces or HBL, they were not 
included in the regulatory assessment for this final rule because they 
have not been approved by IMO as an alternative to comply with 
Regulation 13G and there are indications that, in some instances, they 
may be unsafe. The Coast Guard is using IMO approval of Regulation 13G 
alternatives as a benchmark because it provides international 
consistency as well as

[[Page 1625]]

general operational and safety requirements. Alternative measures 
creating conditions such as exposure of the tankship to stress, 
creation of fire or explosion hazards, stability considerations, and 
loading requirements are not approved by IMO. The Coast Guard's 1995 
report to Congress entitled, ``The Feasibility of Using Segregated 
Ballast Tanks (SBT) for Emergency Transfer of Cargo and Storage of 
Recovered Oil,'' concludes that when a vessel casualty occurs, 
fundamental changes in the vessel's stability often result. These 
stability changes make it potentially unsafe and inadvisable to use SBT 
for the emergency transfer of cargo. The Coast Guard did not consider 
an economic incentive program because it is beyond the scope of this 
rulemaking and Section 4115(b) does not provide the authority for 
incentives.

5. Phase-In Alternatives

    The Coast Guard received 15 comments on phase-in alternatives. Four 
comments claimed they could meet the 3-year phase-in period in the 
SNPRM, but would rather have one of the following options: (1) A phase-
in period commencing no earlier than the date of a tank vessel's first 
scheduled dry docking following issuance of the final rule; (2) a 
requirement for industry to begin compliance in 1997 at a vessel's next 
scheduled dry dock, but no later than the year 2000; (3) a phase-in 
period no earlier than 1999 to 2001 for PL/Spaces to avoid substantial 
economic hardships on U.S. coastwise crude trading resulting from 
reduced cargo-carrying capacity; or (4) a phase-in for PL/Spaces at the 
vessel's next scheduled or emergency dry docking period, or at the next 
Certificate of Inspection renewal following issuance of the final rule, 
if dry docking is not required. Another comment urged the Coast Guard 
to delay the implementation of structural measures until at least 2000, 
which is the time when pre-MARPOL tank vessels reaching 25 years of age 
are required to comply with international standards. This comment 
explained that if the implementation dates were delayed, it would be 
easier for industry to meet the requirements, and, in addition, the 
Coast Guard would not have to account for the cost of implementing 
structural measures on these vessels in its final rule regulatory 
assessment. Another comment did not express support for structural 
measures, but suggested a standardized implementation period for 
domestic and foreign fleets.
    In contrast, five comments strongly urged the Coast Guard to 
implement structural measures immediately. Two of these comments 
limited their request to the implementation of HBL only, while another 
recognized the potential for delays in implementing structural measures 
on the pre-MARPOL fleet. One comment claimed that companies presently 
operating double-hull tank vessels are already providing higher levels 
of environmental protection, and consequently, are suffering economic 
penalties because single-hull tank vessels are still operating. Another 
comment alleged that the Coast Guard has failed to provide substantial 
protection to the environment by neglecting to promulgate a rulemaking 
within the deadlines established by OPA 90 and has harmed the public.
    The Coast Guard has taken action to implement interim measures for 
existing tank vessels by issuing regulations for emergency lightering 
equipment and advanced notice of arrival requirements (59 FR 40186; 
August 5, 1994), and operational measures (61 FR 39769; July 30, 1996). 
These efforts reduce the risk of oil discharges from existing single-
hull tank vessels. In order to ensure the equal consideration of 
economic burden on each facet of the industry, this final rule did not 
consider a staggered implementation schedule across the single-hull 
fleet. The regulatory assessment for this final rule analyzes the costs 
and benefits of implementing HBL on MARPOL as well as pre-MARPOL 
vessels starting in 1997. The assessment also considers implementation 
of PL/Spaces with ballast on pre-MARPOL vessels starting in 1997, 
assuming completion by 2000. The Coast Guard notes the comment 
pertaining to the OPA 90 deadline.

6. Increased Potential for Environmental Harm

    The Coast Guard received a total of 17 comments suggesting that the 
implementation of structural measures would lead to a greater risk of 
oil outflow, resulting in an increased risk of environmental harm. 
Eight comments attributed the greater environmental risk to the 
reduction in cargo capacity. Reduced cargo capacity would lead to more 
vessels or voyages necessary to transport cargo, thus increasing tank 
vessel traffic. Increased tank vessel traffic would create a greater 
potential for accidents, in opposition to the objectives of OPA 90.
    Six comments claimed that complications resulting from physical 
structural modifications would increase the risk of vessel damage and 
instability, eventually leading to a greater probability of structural 
failure. The three remaining comments suggested that the implementation 
of structural measures would pose an increase in safety hazards for 
vessel personnel.
    Estimated cargo shutout from measures similar to Regulation 13G 
revealed that the resultant increase in the tank vessel traffic would 
be about 12 percent. This represents an approximate 2 percent increase 
in the total U.S. port deep draft traffic volume. The Coast Guard 
assumes that this small increase in traffic volume would be offset by 
the accident reduction measures implemented through operational 
measures. The Coast Guard agrees that some measures studied would 
modify the distribution of hull girder stresses and shear forces. In 
some instances, vessel owners may have to conduct additional structural 
analyses to determine how these stresses change the vessel's structural 
integrity. In those cases where the stresses would not be within 
allowable tolerances, additional structural safeguards such as swash 
bulkheads may be required. In the cost analysis for this final rule, 
refitting expense was considered for all measures, including HBL on 
MARPOL tankships. The Coast Guard recognizes that material stresses on 
a vessel's hull can develop due to hot work, specifically from the 
marriage of large areas of new metal to existing plate or framing. In 
some cases, this type of material stress has contributed to structural 
failure. If however, proper shipyard procedures are followed and there 
is thorough oversight of vessel construction or refits by the Coast 
Guard inspectors or classification societies, material stresses can be 
prevented. Corrosion damage due to converting cargo tanks to ballast 
tanks is valid and the cost to coat tanks has been considered in the 
regulatory assessment for this final rule. The Coast Guard disagrees 
with the claim that structural measures would pose a safety hazard for 
vessel personnel. Oil outflow reduction measures are incorporated 
directly into the vessel's design or provide passive protection with 
little human interface.

7. State Regulation

    The Coast Guard received four comments regarding Federalism issues. 
Two comments urged the Coast Guard to unambiguously declare that 
regulations promulgated for structural measures preempt State laws to 
avoid confusion arising from many independent laws. In contrast, two 
remaining comments strongly recommended that the Coast Guard declare 
that Federal law does not preempt State law on structural measures. The 
Coast Guard believes the clear and manifest purpose of Congress

[[Page 1626]]

is to confer upon the Federal government, through the Coast Guard, the 
exclusive authority to set structural standards for vessels to protect 
the environment from harm. The Coast Guard has determined that no 
additional structural measures are required for single-hull tank 
vessels. Nevertheless, the Coast Guard believes that States are 
precluded from imposing structural measures on tank vessels operating 
in interstate or foreign commerce.

8. Technical Feasibility of PL/Spaces and HBL

    Seven comments addressed implications of required implementation of 
PL/Spaces. One comment suggested that the Coast Guard consider 
alternative PL/Space configurations such as splitting the protected 
area between the vessel's side and bottom as an option. Another between 
the vessel's side and bottom as an option. Another comment encouraged 
the Coast Guard to conduct further studies on potential PL/Space 
configurations prior to mandating MARPOL requirements for the sake of 
uniformity. In addition, another comment recommended that the Coast 
Guard designate the location of PL/Spaces to ensure all vessels have 
the same built-in protection. One comment specifically urged the Coast 
Guard not to require PL/Spaces as this modification would lead to a 
greater demand on the ship-building industry, resulting in the 
production of inferior vessels. In contrast, one comment asserted that 
PL/Spaces are technologically feasible and recommended that PL/Spaces 
be required on all single-hull vessels.
    For most tank vessel designs, the most technologically feasible 
place to install PL/Spaces is in the tankship's midbody. However, due 
to unique design considerations and the need to vary a vessel's draft 
or cargo-carrying capacity, the Coast Guard researched and analyzed the 
cost and benefit of allowing the owner to designate the location of PL/
Spaces on their vessels. The Coast Guard assumes that by mandating the 
location of PL/Spaces for all tank vessels, the installation costs and 
benefits realized would be similar to those realized in the event that 
vessel owners were able to choose the PL/Space locations. While the 
Coast Guard has determined that PL/Spaces are technologically feasible, 
fitting them on pre-MARPOL tankships is economically infeasible.
    A total of 15 comments were received pertaining to HBL. Eight 
opposed HBL for reasons including the following: (1) The implementation 
of HBL would place pre-MARPOL vessels at a competitive disadvantage 
with MARPOL vessels, because they are already required to contain PL/
Spaces under Regulation 13G; (2) HBL would be practically impossible to 
use because, depending on the type of cargo carried, problems may arise 
due to variances in density, tank coating compatibility, heating and 
cooling requirements, and permissible last cargoes; (3) HBL would 
necessitate revisions to vessel manuals and equipment; and (4) HBL 
would represent a significant regulatory challenge requiring strong, 
effective operational enforcement through Coast Guard oversight of 
industry compliance. Additionally, two comments suggested that HBL 
would provide only minimal oil outflow protection during groundings. 
One of these comments specifically explained that based on the static 
model used by the Coast Guard to test HBL's effectiveness, HBL may 
indicate a theoretical reduction in oil outflow for some grounding 
scenarios. However, after an accident, HBL may have limited 
effectiveness due to highly dynamic situations, such as weather-related 
impacts, tide ranges, and changes in ship trim and heel. Another two 
comments contended that HBL is not a structural measure requiring 
physical modifications, but an operational measure requiring a skilled 
knowledge of certain operating procedures.
    In contrast to the opposing comments, the Coast Guard received 
seven comments supporting implementation of HBL. One comment noted that 
compliance with HBL requirements could be easily verified by tank 
gauging report examinations and draft mark inspections. Another comment 
recommended implementation of HBL on all single-hull vessels. An 
additional two comments suggested employment of HBL in all vessel cargo 
tanks, as opposed to only those tanks that are probabilistically 
located. One comment based this recommendation on two assumptions: (1) 
HBL would be easy to implement immediately as structural refits would 
be unnecessary; and (2) HBL would effectively reduce oil outflow in 
grounding incidents.
    The Coast Guard has determined that HBL, in general, is technically 
feasible for single-hull tankships. Multi-port voyages and complex 
cargo carriage operations make HBL more time-consuming and difficult to 
meet. Also, some vessels would have costs attributable to HBL that are 
beyond the cargo shutout costs assumed in the SNPRM regulatory 
assessment. The regulatory assessment for this final rule accounts for 
some costs associated with HBL measures on smaller tankships since 
these vessels are most likely to have difficulty implementing HBL. The 
effectiveness estimates associated with HBL in reducing the outflow of 
oil in a grounding were not changed for this final rule assessment 
because the Coast Guard deems the estimates to be representative of 
static, as well as limited dynamic conditions. The Coast Guard 
recognizes that enforcement of HBL would require its direct oversight 
to ensure compliance by all single-hull vessel owners or operators and 
that tank gauging reports could be used as tools. Since no structural 
measures are economically feasible, the Coast Guard will be using its 
resources to ensure operational measures are met. The Coast Guard did 
not analyze the cost-benefit of requiring tank vessel owners or 
operators to use HBL in all cargo tanks. However, if the cost to 
benefit ratio of applying HBL to those cargo tanks that are located in 
areas of higher damage risk is prohibitive, then the cost to benefit 
ratio for applying HBL to all cargo tanks is also infeasible.
    Four comments suggested that the Coast Guard require a combination 
of PL/Spaces and HBL. One comment suggested a combination of PL/Spaces 
covering 30 percent of the vessel's side or bottom with HBL for the 
remaining tanks to the extent necessary for compliance with Regulation 
13G. Another comment recommended employment of PL/Spaces covering 100 
percent of center tank bottoms, if HBL is used in wing tanks.
    The Coast Guard has analyzed the cost and the resultant oil outflow 
benefits attributable to a combination of fitting PL/Spaces and 
applying HBL measures to pre-MARPOL tankships in accordance with 
Regulation 13G. The cost for this measure when compared to its benefits 
make this measure economically infeasible. If the combination of PL/
Spaces and HBL is not cost-effective, then employing the more onerous 
requirement of 100 percent PL/Spaces would also be infeasible.

Amendments to 33 CFR 157

    This final rule amends the subpart G, H, and I heading to reflect 
that no structural measures are required as interim measures for 
existing tank vessels without double hulls to meet the requirements of 
Section 4115(b) of the Oil Pollution Act of 1990. The measures required 
under subparts G, H, and I are all measures the Coast Guard has 
determined are economically and technologically feasible for enhancing

[[Page 1627]]

the oil pollution prevention efforts of existing single-hull tank 
vessels.

Assessment

    This rule is a significant regulatory action under section 3(f) of 
Executive Order 12866 and has been reviewed by the Office of Management 
and Budget under that Order. It required an assessment of potential 
costs and benefits under section 6(a)(3) of that Order, and is 
significant under the regulatory policies and procedures of the 
Department of Transportation (44 FR 11040; February 26, 1979). An 
Assessment has been prepared and is available in the docket for 
inspection or copying where indicated under ADDRESSES. The Assessment 
is summarized in the following discussion.
    This rulemaking applies to all existing vessels of 5,000 gross tons 
(GT) or more that do not have double hulls and that carry oil, animal 
fat, vegetable oil, and other non-petroleum oil in bulk as cargo. An 
estimated 995 existing tankships (51 U.S. tankships, 944 foreign 
tankships) that will be operating on U.S. navigable waters in 1997 were 
considered to be affected by this rulemaking.
    This final rule assessment revises the benefits assumptions and 
calculations of the regulatory assessment conducted for the 
supplemental notice of proposed rulemaking (SNPRM). Cost estimates were 
appropriately reduced to account for implementation of Regulation 13G 
of Annex I of the International Convention for the Prevention of 
Pollution from Ships, 1973, as modified by the Protocol of 1978 
(Regulation 13G) within the international fleet. Costs were also 
revised where comments indicated that costs were underestimated or 
omitted in the SNPRM analysis. The vessel population not required to 
meet the pollution prevention requirements of the 1973 International 
Convention for the Prevention of Pollution from Ships (pre-MARPOL) was 
also reassessed and reduced based on port call data and certificate of 
financial responsibility applications. The cost and benefits for 
vessels meeting the requirements of the 1973 International Convention 
for the Prevention of Pollution from Ships (MARPOL 73) and vessels 
meeting the MARPOL 73 convention as amended by the 1978 Protocol 
(MARPOL 78), were combined in this final assessment. MARPOL 73/78 
refers to vessels meeting MARPOL 73 and vessels meeting MARPOL 78 
requirements.

General Comments on the SNPRM Regulatory Assessment

    The Coast Guard received 36 comments addressing general regulatory 
assessment issues. Most of the comment criticized the Coast Guard's use 
of oil spill data from accidents occurring prior to the promulgation of 
the Oil Pollution Act of 1990 (OPA 90), because using this data 
resulted in the underestimation of costs and overestimation of 
benefits. The majority of these comments were based on a general 
impression that little benefit would result from the implementation of 
proposed structural measures in relation to the extensive costs 
involved. One comment specifically noted that studies performed by the 
International Maritime Organization (IMO), the Coast Guard, and Herbert 
Engineering Corporation failed to indicate that these measures were 
cost-effective.
    The Coast Guard has revised its regulatory assessment for this 
final rule. The major difference between its assessment for the SNPRM 
and this final rule is the recalculation of anticipated oil outflow 
benefits based on the accident data for single-hull tankships from 1990 
through 1994. This five-year period indicates a reduction of single-
hull tankship accidents and reflects many of the improvements industry 
has made to reduce oil spills since OPA 90.
    Another comment contended that a cost-benefit analysis was not 
authorized by OPA 90. The comment asserted that OPA 90 requires the 
Coast Guard to adopt measures providing the maximum protection to the 
environment that are economically feasible, not the ones that are least 
costly. Two other comments argued that economic feasibility should not 
be determined solely by a limited cost-benefit analysis. One of these 
comments maintained that economic feasibility should be based on 
whether the costs are wholly disproportionate to the benefits on an 
industry-wide scale, with the fate of one isolated firm or facility 
immaterial to the outcome of the rule. The other comment contended that 
economic feasibility should be based on the industry's ability to pass 
on or absorb costs without threatening the competitive structure of the 
industry.
    Several requirements to conduct a cost-benefit analysis exist in 
law. One law requiring such analysis, which is specifically applicable 
to this rulemaking, is the Small Business Regulatory Enforcement 
Fairness Act of 1996. For this final rule, an evaluation of cost and 
its relationship to the anticipated benefits was performed with respect 
to structural measures. The evaluation included a review of the 
potential impact of such measures on small entities, as well as a 
comparison of the impact on domestic versus international fleet 
vessels. The disproportionate cost to U.S. tankship companies operating 
on coastal routes, considering the little anticipated benefit in oil 
outflow reduction, was key in the Coast Guard's determination of 
economic infeasibility for structural measures.

Industry Costs

    This final rule reassessed the cost of implementing structural 
measures in order to estimate the cost-benefit of requiring pre-MARPOL 
tankships to meet the requirements of Regulation 13G earlier than the 
25 year age limit it imposes. In addition, costs were also reassessed 
to reflect the range of cargo shutout amounts realized by vessels 
depending on the type of cargo carried, i.e., crude or product. 
Finally, to ensure that a thorough examination of the cost to benefit 
ratio was conducted, costs were broken down by deadweight tonnage.

Cost Comments on the SNPRM Regulatory Assessment

    (a) General: The Coast Guard received over 40 comments regarding 
various cost issues. Only two of the comments believed that the 
proposed structural measures would be economically feasible. One of 
these comments specifically disagreed with the hydrostatic balance 
loading (HBL) cost estimates attributed to vessels complying with the 
Ports and Waterways Safety Act or otherwise equipped with segregated 
ballast tanks (SBT). The comment argued that HBL would not result in a 
loss of cargo capacity for either vessel type.
    The majority of the comments claimed that structural measures would 
not be economically feasible due to the excessive cost resulting from 
the reduction in cargo capacity. Most comments predicted a cargo 
capacity reduction of between 8 and 25 percent, but a few indicated 
that cargo capacity would be reduced by as much as 30 to 50 percent. If 
measures were applied to all vessels, one comment contended that a 
level economic playing field could be achieved throughout the industry 
and the high costs of cargo shutout could be adequately offset by an 
indirect distribution of costs to the public. Other comments stated 
that the cost estimates for structural measures did not adequately 
address opportunity costs (such as lost transportation time), time 
charter rates, dry dock fees, depreciation losses, and transportation, 
delivery, crew, fuel, financing, and insurance

[[Page 1628]]

costs. In addition, four comments claimed that some vessels would be 
unable to continue operations to U.S. ports if structural measures were 
implemented. Five more comments stated that the proposed measures would 
not be economically feasible for their fleet because their vessels 
would be phased-out of service shortly after incurring the cost of any 
structural measures. One of these comments suggested that rather than 
depleting limited financial resources to implement structural measures, 
vessel owners and operators should use the finances to support their 
fleet's transition to double hulls, which will become effective in 
2015.
    Another comment claimed that HBL-related cargo shutout amounts for 
the pre-MARPOL fleet were overestimated by the Coast Guard, and would 
amount to only 8 percent or less, as opposed to the 19 percent 
estimated in the SNPRM regulatory assessment. Consequently, this 
comment believed that HBL would be economically feasible, and that 
structural measures would cause a relatively insignificant 1.5 percent 
increase in tonnage demand on the international, import-trading fleet. 
In contrast, four other comments strongly stated that when costs are 
reviewed with respect to freight rates and worldwide tonnage capacity, 
the implementation of structural measures would not be economically 
feasible. Two comments stated that the SNPRM cost analysis 
substantially underestimated costs by not recognizing the cost of 
replacing lost oil-carrying capacity, and by not accounting for an 
increase in charter rates (and oil prices) caused by the consequent 
loss of capacity in the world fleets. The comments further explained 
that while there is some slack cargo carriage capacity remaining in the 
world's very large crude carrier (VLCC) tankship fleet, it is 
disappearing rapidly as older ships continue to retire, and any 
requirement reducing cargo capacity would inevitably exert substantial 
upward pressure on charter rates and transportation costs worldwide. 
The comments also calculated that the world scale spot charter market 
rate would increase as much as four times the cost attributed by the 
SNPRM to a VLCC tankship owner implementing HBL. Another comment 
estimated that the significant increase in daily time charter rates 
(from 27 to 78 percent to recover the costs of implementing 
protectively-located spaces (PL/Spaces) to its pre-MARPOL fleet, and 
from 6 to 32 percent to recover the costs of fitting double sides to 
its MARPOL 73/78 fleet) on their tankships of less than 30,000 dwt 
would severely impact their ability to recover their capital 
investment. Consequently, the comment stated this would reduce its 
current fleet of 42 tankships trading in U.S. waters to 6 tankships. 
The fourth comment calculated that the total tonnage available for the 
U.S. trades in the 25,000 to 30,000 dwt product carrier category would 
be reduced 45 percent because of increased charter rates and reduced 
cargo-carrying capacity. The comment went on to state that due to the 
costs associated with the implementation of structural measures, 8 
clean product tankers currently providing 64 percent of the clean 
product to the U.S. Gulf and East Coast would be forced from U.S. 
trade.
    The Coast Guard has revised the cost and benefit calculations for 
this final rule in consideration of the comments submitted to the 
docket. This final rule assessment is extensive and uses factors such 
as cargo loss, or lack thereof for vessel's fitted with SBT, 
opportunity costs, and a wide range of costs a company might incur from 
refitting a vessel. Financing, insurance costs, vessel depreciation, 
the replacement of lost tonnage (resulting in time charter rate 
increases), and a vessel's limited remaining life under the OPA 90 
phase-out schedule were used, in general, to evaluate the cost-
effectiveness of replacing single-hull vessels with double hull vessels 
earlier than their OPA 90 mandated dates. Concerns such as the loss of 
a substantial portion of a company's fleet due to structural measures, 
as well as the possibility of disproportionate indirect costs to 
consumers in geographic areas dependent on a single oil source were key 
in the Coast Guard's determination of economic infeasibility.
    (b) Pre-MARPOL Tank Vessels: Two comments supplied specific data 
for their international pre-MARPOL vessels between 5,000 to 29,000 dwt. 
One of these comments estimated a cargo shutout of 25 to 27 percent and 
refit costs of $225,000 per vessel to implement structural measures on 
these smaller product tankers. The second comment indicated that each 
of their parcel tankers would be subjected to a cargo shutout of 35 
percent with an average refit cost of $10.3 million. Another comment 
supplied only cargo shutout information for international pre-MARPOL 
product tankers of 5,000 to 50,000 dwt. This comment calculated a cargo 
shutout of 20 to 25 percent for PL/Spaces, with HBL increasing the 
shutout to 28 to 35 percent. One comment estimated that the 
implementation of HBL would result in a cost of $2 million per vessel 
for the pre-MARPOL fleet. Another comment contended that the cost to 
pre-MARPOL tankships operating as very large crude carriers (VLCC) was 
overestimated in the SNPRM regulatory assessment, and that the pre-
MARPOL VLCC tanker model used in the SNPRM regulatory assessment was 
not representative of a typical tanker of that size. As a result, 
according to this comment, the Coast Guard's assumption that all VLCC 
pre-MARPOL tankships will have to refit PL/Spaces to meet the 
requirements of Regulation 13G is false. This comment indicated that 
five vessels researched would be able to meet the requirements of 
Regulation 13G by using the HBL criteria approved as an IMO 
alternative. In a similar vein, another comment disagreed with the 
Coast Guard's assumption that pre-MARPOL tankers reaching the age of 25 
before 2002 would have to implement PL/Spaces to meet Regulation 13G. 
This comment explained that these tankers can implement HBL to meet the 
international requirement of 13G and continue to trade; thus, if PL/
Spaces are mandated without allowing for the HBL alternative, the cost 
to fit such spaces on pre-MARPOL tankers reaching 25 years old before 
2002 should be included in the regulatory analysis.
    For this final rule, the Coast Guard reassessed the costs and 
benefits of implementing different structural measures on the 
international pre-MARPOL tankship fleet. Measures studied for this 
reassessment included the combination of PL/Spaces and HBL, the use of 
HBL only in order to meet the requirements of Regulation 13G, and the 
implementation of HBL requirements on the identical timeline required 
by Regulation 13G. The per vessel, per voyage cost for implementing HBL 
in the final assessment varied depending on deadweight tonnage and 
ranged from $121,000 to $2.4 million. The Coast Guard recognizes that 
the assessment for the SNPRM only reflected cargo shutout cost for 
crude carriers. In the assessment for the final rule, costs were broken 
down by deadweight tonnage. A separate analysis was done to estimate 
the effect higher cargo shutout amounts realized by small product 
tankers may have on the cost-effectiveness of each of the structural 
measures researched. The Coast Guard did not increase the refit cost 
assumed in the SNPRM for small tankships because it deems the original 
onetime refit cost estimate of $328,000 to be reasonable.
    (c) MARPOL 73/78 Tank Vessels: Three comments supplied information 
on U.S. coastal fleet, MARPOL 73/78 vessels. For product tankers in the 
5,000

[[Page 1629]]

to 49,000 dwt category, one comment submitted cargo shutout amounts 
approximating 207,515 long tons (LT) per year (yr), and opportunity 
costs (which include structural refit costs needed to meet the HBL 
requirement) of $1 to $3 million per vessel. Another comment supplied 
shutout percentages for product vessels carrying heavy (bunker C), 
medium (diesel oil), and light (gasoline) cargoes, using three 
different variations of structural measures. According to their 
calculations, shutout using HBL only would equal 5.5 percent for heavy 
cargo, 19.5 percent for medium weight cargo, and 38 percent for light 
cargo. Clean ballast tanks (CBT) with HBL would impose cargo shutouts 
of 29 percent, 41.6 percent, and 50 percent, respectively. Ballasted 
empty wing tanks with HBL would result in shutouts amounting to 53.6 
percent, 59.2 percent, and 64.5 percent, respectively.
    A comment estimated that crude-carrying U.S. MARPOL 73/78 vessels 
ranging from 5,000 to 49,000 dwt would experience shutouts of 113,077 
LT/yr, and refit costs of $1 to $3 million per vessel following the 
implementation of structural measures. For crude-carrying tankers of 
the 50,000 to 89,000 dwt category, shutouts were approximated at 
326,195 LT/yr, with refit costs again ranging from $1 to $3 million per 
vessel. Crude-carrying vessels operating in the 90,000 to 199,000 dwt 
range were estimated to potentially experience shutout amounts of 
724,655 LT/yr and refit costs of $1 to $3 million per vessel following 
implementation of structural measures. For those crude-carrying vessels 
comprising 200,000 dwt or greater, a comment indicated that shutout 
would amount to 861,785 LT/yr plus $1 to $3 million in refit costs per 
vessel.
    Two comments supplied information relating to the international 
MARPOL 73/78 fleet. For product-carrying vessels of 30,000 to 49,000 
dwt, a cargo shutout cost was calculated to be $300,000 per year (or 
$1.5 million for the remainder of the ship's life). For parcel tankers 
operating in the 5,000 to 29,000 dwt category, cargo shutout was 
estimated at 34 percent for the implementation of HBL, plus 10 percent 
for the implementation of PL/Spaces when required, while refit costs 
amounted to an average $7.4 million per vessel. Calculations submitted 
for parcel tankers operating in the 30,000 to 49,000 dwt category, 
showed 34 percent shutout using HBL, plus an additional 10 percent for 
PL/Spaces where required, with refit costs averaging $11.9 million per 
vessel.
    For this final rule, the Coast Guard reassessed the costs and 
benefits of implementing HBL on the MARPOL 73/78 tankship fleet. A 
range of cargo shutout amounts was used to demonstrate the variance 
between the cost of implementing HBL on crude-carrying and product-
carrying vessels. Per vessel, per voyage cargo shutout estimates for 
implementing HBL in this final assessment also varied depending on a 
vessel's deadweight tonnage, and ranged from $151,000 to $2.4 million. 
The Coast Guard recognizes that the assessment for the SNPRM did not 
include a refit cost for MARPOL 73/78 vessels. Onetime refit costs to 
MARPOL 73/78 vessels for swash bulkheads or other associated structural 
changes were added to the cost estimates for this final assessment. 
This onetime refit cost was assumed for MARPOL 73/78 vessels between 
5,000 and 50,000 dwt in order to account for the practical application 
of HBL to these smaller tankships, which would necessarily have to fit 
some proportion of PL/Spaces to account for the high shutout 
consequences of HBL. Refit costs were not included for larger MARPOL 
73/78 vessels because it was assumed that these vessels have sufficient 
CBT or PL/Spaces to practically apply HBL, assuming the cargo shutout 
amounts estimated in this final rule's regulatory assessment.
    (d) Tank Barges: One comment estimated that for tank barges, the 
installation of PL/Spaces would impose average costs of $3 million per 
tank barge, while the implementation of HBL would reduce cargo capacity 
by 33 to 50 percent, and in some cases, 100 percent per barge. This 
comment went on to explain that such costs are not readily absorbed, 
and are even exacerbated by the limited service life remaining for some 
of these barges, the enormous capital expenditure necessitated by the 
OPA-mandated transition to double hulls, and the diminution in value of 
the existing barge fleet brought on by the OPA-mandated replacement 
schedule. Another comment surmised that is was not technologically 
feasible for barges to meet the requirements of PL/Spaces or HBL 
without eliminating cargo tanks or performing major modifications at a 
significant cost. This comment estimated that PL/Spaces would reduce 
cargo capacity by 25 percent on barges with three longitudinal 
bulkheads, while HBL would impose a cargo shutout of 50 percent for 
barges with one longitudinal bulkhead. In addition, the costs of 
installing longitudinal bulkheads were estimated at $800,000 to $1.2 
million per barge, ballast systems and tank coatings at $400,000 to 
$500,000 per barge, and opportunity costs at $600,000 to $800,000 per 
barge.
    The Coast Guard reviewed and reassessed the cost for U.S. tank 
barge owners to comply with PL/Spacing requirements using either added 
bulkheads or existing tanks, and HBL requirements. The costs analyzed 
for the PL/Space options were similar to those used in the SNPRM 
assessment, but the costs studied for HBL measures were estimated by 
using figures provided in the comments. The phase-out dates for these 
barges were also factored into this cost analysis, along with costs 
similar to those incurred by the pre-MARPOL fleet. Through this final 
rule, the Coast Guard verifies that because of the high cost of 
implementing structural measures on tank barges, such measures are not 
economically feasible.

Final Rule Cost Assessment

    The cost assessment for this final rule, as presented in Table 1, 
provides an estimate of costs for each tank vessel category (pre-MARPOL 
or MARPOL 73/78) and deadweight tonnage range. In general, these costs 
were calculated using a methodology similar to that done for the SNPRM 
assessment. However, additional analyses were used to calculate the 
projected costs of several variations of measures researched for the 
SNPRM including: (1) Implementation of Regulation 13G on the pre-MARPOL 
fleet in 1997, 1998, or 1999; (2) implementation of Regulation 13G on 
the pre-MARPOL fleet using the same timeline mandated by that 
regulation; (3) implementation of the HBL alternative allowed under 
Regulation 13G on the pre-MARPOL fleet; and (4) implementation of HBL 
on tank barges. An estimated range of costs was also developed to 
represent the difference in cargo shutout amounts attributable to 
vessels carrying crude oils (low number) and vessels carrying lighter 
products (high number). As a summary, the present-value cost of 
implementing certain structural measures in 1997 is presented in Table 
1.

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[[Page 1630]]

[GRAPHIC] [TIFF OMITTED] TR10JA97.028



BILLING CODE 4910-14-C

[[Page 1631]]

Benefits

    The benefit analysis for this final assessment, in general, uses a 
methodology similar to that used in the SNPRM for evaluating the 
incremental reduction in volume of oil spilled as a result of 
structural measures. Although effectiveness ratios for international 
pre-MARPOL vessels were reevaluated based on the implementation of 
Regulation 13G, other effectiveness ratios remained the same as those 
reported in the SNPRM assessment. However, the volume of oil spilled 
due to accidents was estimated based on revised historical oil spill 
data reflecting: (1) The accident history of single-hull tankships 
since the enactment of OPA 90; (2) the anticipated reduction in oil 
spills due to the effect of the operational measures final rule on the 
frequency and severity of future accidents; and (3) the elimination of 
operational discharge benefits from the calculation, since operational 
discharge is not allowed in U.S. navigable waters.

Benefit Comments on the SNPRM Regulatory Assessment

    Six comments included remarks regarding the potential environmental 
benefits that may result from the implementation of structural 
measures. Three comments urged the Coast Guard to provide equal or 
greater consideration to the environmental benefits derived from the 
use of structural measures. Yet another comment contended that the 
SNPRM regulatory assessment failed to properly assess the benefits of 
the measures considered, citing the Coast Guard's failure to state the 
value of avoiding spills in comparable terms such as cleanup costs, 
natural resource damages, restoration costs, and commercial and 
recreational losses. Another comment urged the Coast Guard to include 
the potential reduction of both environmental and economic damages from 
oil not spilled in its regulatory analysis.
    Although the Coast Guard recognizes the value of assessing benefits 
in terms of the cost of third-party cleanup and damage to natural 
resources, the Coast Guard, for all OPA 90 rulemakings, has reviewed 
benefits from the perspective of the amount of oil not spilled, rather 
than a dollar value figure. Details on the extensive work that NOAA has 
done on this subject can be found in its final rule entitled, ``Natural 
Resource Damage Assessments'' published in the Federal Register on 
January 5, 1996 (61 FR 440). When calculating benefits using NOAA 
natural resource guidance, a wide range of benefits can be estimated 
depending on the sensitivity of the habitat, restoration costs, 
compensable value, and damage assessment costs. However, the inclusion 
of these factors would not significantly increase the benefits 
resulting from the implementation of structural measures to make them 
cost-effective.
    The remaining comments minimized the potential benefits that may 
arise from the use of structural measures, and essentially concluded 
that structural measures would contribute little to the reduction of 
oil spill volume in U.S. waters. One comment noted that the 
environmental benefits resulting from the implementation of PL/Spaces 
would likely be minimal because the most cost-effective location for 
such spaces, the vessel's mid-body, would not provide adequate 
protection to the fore and aft sections of the vessel, which are the 
areas most likely to sustain damage in collisions. Another comment 
contended that the Coast Guard overestimated operational discharge 
benefit amounts by wrongly assuming that foreign tankers are not 
operating to the same operational discharge criteria as U.S. tankers, 
explaining that discharge criteria established by the 1973 
International Convention for the Prevention of Pollution from Ships was 
brought into force in the late 1970s and applies to over 90 percent of 
the world's tanker tonnage. Two comments argued that the Coast Guard 
overestimated benefits for pre-MARPOL vessels by using the MARPOL 73 
maximum allowable discharge amounts and underestimated the operational 
discharge benefits from MARPOL 73/78 vessels, which were incorrectly 
assumed to have no discharges. One of these comments questioned the 
Coast Guard's incorporation of operational discharges into the 
regulatory assessment for the SNPRM in the first place, because all 
operational discharge is forbidden in U.S. waters. Therefore, the 
comment asserted that the quantities of unspilled oil occurring from 
operational discharge were significantly overestimated in the SNPRM 
regulatory assessment and should be removed from the benefit 
calculations. The other comment calculated that the quantity of oil not 
spilled from operational discharges from pre-MARPOL vessels when 
converting to SBT/CBT was overestimated by the Coast Guard by a factor 
of 10 to 20.
    A total of nine comments challenged the Coast Guard's use of pre-
OPA 90 oil spill data in the regulatory assessment for the SNPRM, 
primarily on the grounds that it did not reflect the significant gains 
achieved in oil spill reduction within recent years. In addition, 
several comments recommended that the Coast Guard consider the 
following when reviewing post-OPA 90 data: oil released from accidents, 
instead of oil released from operational discharges; and, accident data 
involving groundings or structural failures. In contrast, other 
comments stated that the Coast Guard should specifically exclude the 
following data from the economic assessment for structural measures: 
spill data in international waters; lightering zone data; and barge and 
tanker spill data unrelated to groundings, collisions, and structural 
failures.
    The Coast Guard has extensively reassessed the anticipated benefits 
for structural measures in this final rule. This reassessment was done 
because the Coast Guard recognized the substantial decrease in oil 
spill volume from the tank vessel industry since 1990. The Cost Guard 
agrees that oil spill amounts attributed to operational discharges 
should not be included as a benefit for structural measures. The Coast 
Guard deems this final rule benefit assessment a reasonable estimate of 
oil outflow reduction amounts achieved through the implementation of 
structural measures.

Final Rule Benefit Assessment

    Oil spill amounts attributed to single-hull tankships and tank 
barges during the 5-year period of 1990 through 1994 were taken from 
the regulatory assessment for the operational measures final rule if 
the spills were caused by groundings, collisions, or structural 
failures. Based on this accident data, an average annual oil spill 
amount from single-hull tankships was estimated at 11.52 barrels per 
vessel. The average annual oil spill amount from single-hull tank 
barges over 5,000 GT was estimated to be 72.4 barrels per barge. Using 
a combination of the phase-out schedule and the build dates of the 
affected vessel population, as calculated in the SNPRM assessment, an 
estimated present value of oil spilled due to groundings, collisions, 
or structural failures was calculated to be 52,369 barrels for single-
hull tankships and 21,487 barrels for barges. Based on anticipated oil 
spill prevention resulting from the implementation of operational 
measures, this present value oil spill amount was reduced appropriately 
and estimated to be between 16,768 and 32,520 barrels spilled between 
1997 and 2015 for tankships and between 18,055 and 19,865 barrels 
spilled for tank barges. The average of this present value oil spill 
amount was then proportioned out between the four tankship categories 
based on vessel population as follows: (1) International pre-MARPOL 
(11,735

[[Page 1632]]

barrels); (2) U.S. pre-MARPOL (558 barrels); (3) International MARPOL 
73/78 (11,742 barrels); and (4) U.S. MARPOL 73/78 (608 barrels). For 
U.S. and international tank barges, the average present value of 18,960 
barrels spilled was used in this analysis. As done in the SNPRM, the 
U.S. fleet consists of vessels that only operate in U.S. coastwise 
trade. If a U.S. flagged vessel also trades between international 
ports, it was accounted for in the international population.
    To estimate benefits in terms of oil unspilled, each structural 
measure's ability to reduce oil outflow in a grounding, collision, or 
structural failure accident was calculated and translated into an 
effectiveness ratio similar to those developed for the SNPRM 
assessment. This effectiveness ratio was then multiplied by the 
anticipated annual oil spill amount for each of the three accident 
types to calculate the anticipated benefits of the implementation of 
structural measures.
    Because comments received on the SNPRM stated that the cost to 
benefit ratio was disproportionate for smaller tankship operations, 
anticipated oil spill benefits were further broken down by deadweight 
tonnage. Benefits were also calculated for pre-MARPOL fleets where HBL 
was instituted to meet the requirements of Regulation 13G. The Coast 
Guard recognizes that PL/Spaces must be ballasted down in order to 
provide oil outflow benefits, despite the fact that Regulation 13G does 
not articulate this requirements. Consequently, for this final rule 
assessment, benefits for the measure combining PL/Spaces and HBL were 
calculated based on the assumption that the spaces were ballasted down. 
The benefits estimated for this final rule are significantly less than 
those estimates used in the SNPRM, because the recalculation of 
benefits did not include consideration of operational discharge 
benefits for pre-MARPOL vessels, and because the spill history used for 
all tankships reflects post-OPA 90 accident data. Table 2 is a summary 
of the present-value benefits estimated for this final rule with 
respect to vessel type and deadweight tonnage based on an 
implementation date of 1997.

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[[Page 1633]]

[GRAPHIC] [TIFF OMITTED] TR10JA97.029



BILLING CODE 4910-14-C

[[Page 1634]]

Cost-Benefit

    Cost-benefit calculations were completed using the revised cost and 
benefit estimates calculated for each structural measure. Based on the 
cost-benefit analysis performed for this final rule, structural 
measures, in particular, pose the greatest economic challenge to the 
U.S. coastal fleets. Post OPA-90 benefits combined with the high cost 
to U.S. coastal vessels to refit PL/Spaces or to implement HBL 
requirements that meet Regulation 13G requirements make the cost-
effectiveness of implementing structural measures on these vessels 
questionable. In addition, given the disproportionate cost impact of 
structural measures on that portion of the fleet operating as small 
product tankers crucial to certain ports, economically feasible 
structural measures for these vessels cannot be attained.

Cost-Benefit Comments on the SNPRM Regulatory Assessment

    The Coast Guard received six comments on the cost-effectiveness of 
implementing structural measures. One comment estimated that a 
refinement of the SNPM regulatory assessment using post-OPA 90 data, 
excluding operational discharges in whole or in part (since such 
discharges occur far from U.S. waters in amounts substantially less 
than assumed in the SNPRM regulatory assessment), and including the 
cost of fitting PL/Spaces to pre-MARPOL tankers (since many vessels can 
satisfy the requirements of Regulation 13G using light-loading only), 
would result in costs in excess of $50,000 per barrel of oil not 
spilled, as opposed to actual spill costs of $2,000 to $10,000 per 
barrel spilled. Another company evaluated the true cost-benefit of 
implementing structural measures to their corporation in light of the 
company's historical non-spill performance. Based upon their 
calculations, a 3-year phase-in period would result in cargo shutout 
and onetime modification costs totaling $17.7 million for their fleet 
of product and crude-carrying vessels, while the net present value cost 
per barrel of spilled oil avoided would be $1 million per barrel. 
Consequently, this comment estimated the potential cost to this 
particular corporation as being 28 to 84 times greater than that 
indicated in the SNPM regulatory assessment. Another comment provided 
extensive documention and analysis on the cost-effectiveness of the 
proposed measures by using oil spill data from 1991 through 1994, 
estimating the operational discharge benefits based on actual vessel 
discharge records, and including an estimate of clean-up and 
retribution costs. Using National Oceanic and Atmospheric 
Administration (NOAA) damage assessment and restoration settlement data 
and oil spill data from spills recorded within U.S. waters in the Oil 
Spill Intelligence Report, this comment estimated that the average 
damage amount per barrel should be $18,580, and explained that in order 
for a requirement to be cost-effective, its cost-benefit should be less 
than this amount. According to this comments analysis, no structural 
requirement is cost-effective.
    The Coast Guard agrees with the comments and has calculated the 
benefits for this final rule using post-OPA 90 accident data and 
excluding the benefits gained from eliminating operational discharges. 
The recalculated benefits for this final rule do not include estimates 
in terms of the amount of money saved by eliminating oil spill clean-up 
costs. To remain consistent with all other OPA 90 assessments, the 
Coast Guard has considered benefits in terms of oil unspilled. Because 
the cost-benefit ratios presented in this final rule are much higher 
than $2,000 or $18,580 per barrel as referenced in the comments, the 
Coast Guard deems that even if clean-up cost savings were included in 
this cost-benefit analysis, the cost-benefit ratios would not fall 
below these thresholds.
    Three more comments specifically discouraged the Coast Guard from 
implementing the least costly structural measure. Two of these comments 
noted that the Coast Guard proposed PL/Spaces in light of its low cost, 
despite findings that another alternative requiring HBL would prevent 
the spillage of significantly more oil. Specifically, the comment 
estimated that the HBL alternative would present spillage of 164,000 
barrels of oil which is nearly 8 times the 21,000 barrels of spillage 
prevented by PL/Spaces. One of the comments also conceded that the HBL 
alternative would cost approximately $3 billion to implement from 1998 
to 2015, which amounts to nearly 5 times the estimated cost of 
implementing PL/Spaces, $579 million, but explained that as compared to 
the cost of cleanup under California law, $18,900 per barrel, the 
feasibility of HBL in terms of avoided costs is economically favorable.
    The Coast Guard has reassessed the cost to benefit ratio for 
various structural measures. The costs for this final assessment 
closely correlate the costs used in the SNPRM assessment; however, the 
benefits have been significantly reduced, and no longer correlate. If 
the cost to benefit ratio of $18,900 per barrel of unspilled oil is 
compared to this final rule assessment, none of the measures can be 
deemed cost-effective. However, the Coast Guard determination of 
economic infeasibility is not based solely on the dollar per barrel 
unspilled ratio. While the numbers certainly support a determination of 
economic infeasibility, the impact on small entities and geographic 
areas dependent on a single oil source also weighted in favor of this 
decision.

Final Rule Cost-Benefits

    The Coast Guard has extensively researched both the cost and the 
resultant benefits of implementing structural measures on single-hull 
tank vessels. In accordance with current Office of Management and 
Budget guidance, program costs and benefits are discounted at 7 percent 
back to 1990. A summary of the cost-benefit ratios, which were computed 
by dividing the cost of each structural measure by its associated 
benefit, it presented in Table 3, and reflects a 1997 implementation 
date. These ratios are categorized by international and U.S. coastal 
fleets.

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[GRAPHIC] [TIFF OMITTED] TR10JA97.030



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    An analysis of the cost to benefit ratio for requiring 
implementation of Regulation 13G on pre-MARPOL tankships on the same 
timeline as required by Regulation 13G (25 years after the vessel's 
build date) was also completed for this final rule regulatory 
assessment. Because those pre-MARPOL vessels on international routes 
were assumed to comply with this requirement, no cost or benefit was 
assigned to these vessels for implementing this requirement. The cost 
for implementing Regulation 13G on pre-MARPOL tankships was estimated 
to be $13.5 million and would be placed solely on those tankships 
operating on U.S. coastal routes until 2015. The benefit from this 
requirement was not specifically calculated. The Coast Guard estimated 
a benefit lower than the attained by the HBL requirement on U.S. 
coastal pre-MARPOL tankships because the implementation date would be 
later than 1997 (the date assumed for the HBL calculations). Therefore, 
the cost-benefit to the U.S. coastal fleet would be higher than 
$240,642 per barrel of unspilled oil. Because the financial burden of 
this measure reduces the ability of U.S. ships to compete with foreign 
shipping interests and the cost-benefit ratio is extremely high, the 
Coast Guard deems this measure to be economically infeasible.
    Similar cost-benefit calculations were also conducted for varying 
implementation years ranging from 1998 to 2001. These calculations show 
that the cost-benefit ratio becomes higher with each implementation 
year proposed due to the short benefit time-frame resulting from the 
aggressive vessel phase-out schedule created by OPA 90. The inability 
to recoup financial losses, as well as the effectiveness of operational 
measures for existing tank vessels for reducing oil spills, supports a 
determination that the costs of structural measures outweigh the 
benefits.
    The total present value cost of structural measures over the 18-
year period of this final rule would range from $896 million to $1.1 
billion. Total present value of the benefits for structural measures 
over the 18-year period of this final rule would range from 5,718 to 
10,386 barrels of unspilled oil. As a benchmark for this analysis, the 
Coast Guard used cost-benefit of $24,000 per barrel of unspilled oil, 
which was the estimated cost-benefit of the double hull requirements 
mandated by OPA 90 in Section 4115(a) to which these interim 
requirements are linked. Because the cost-benefit estimates for the 
measures are well over $24,000 per barrel of unspilled oil, and the 
measures would impose substantial costs to the industry over the 
estimated 18-year period, no measures are required. Some regulatory 
text is contained in this final rule to clearly indicate that the Coast 
Guard considers the operational measures and lightering equipment 
requirements to be the only feasible interim requirements for existing 
tank vessels without double hulls, and that these requirements, as 
promulgated, satisfy section 4115(b) of OPA 90.

Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601, et seq.), the 
Coast Guard must consider whether this rule will have a significant 
economic impact on a substantial number of small entities. ``Small 
entities'' may include: (1) Small businesses and not-for-profit 
organizations that are independently owned and operated and are not 
dominant in their fields; and (2) governmental jurisdictions with 
populations of less than 50,000. The Coast Guard has determined that 
this rule will not have a significant economic impact on a substantial 
number of small entities because no structural measures are being 
imposed in this rule. Therefore, the Coast Guard certifies under 
section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601, et 
seq.) that this rule will not have a significant economic impact on a 
substantial number of small entities.

Unfunded Mandate

    Under the Unfunded Mandates Reform Act (Pub. L. 104-4), the Coast 
Guard must consider whether this rule will result in an annual 
expenditure by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million (adjusted annually for 
inflation). The Act also requires (in Section 205) that the Coast Guard 
identify and consider a reasonable number of regulatory alternatives 
and, from those alternatives, select the least costly, most cost-
effective, or least burdensome alternative that achieves the objective 
of the rule.
    After extensive review of several alternatives, all with varying 
cost and effectiveness ratings, the Coast Guard has determined that no 
structural measures are cost-effective, and is therefore not requiring 
any in this rule. Consequently, this rule will not result in estimated 
costs of $100 million or more to either State, local, or tribal 
governments in the aggregate, or to the private sector.

Collection of Information

    This rule contains no collection-of-information requirements under 
the Paperwork Reduction Act (44 U.S.C. 3501, et seq.).

Federalism

    The Coast Guard has analyzed this rule under the principles and 
criteria contained in Executive Order 12612 (October 26, 1987) and, 
because of the long-standing and judicially recognized need for uniform 
rules regulating the design and construction of vessels engaged in 
interstate and international commerce, has determined that this rule 
does not have sufficient federalism implications to warrant the 
preparation of a Federalism Assessment.

Environment

    The Coast Guard considered the environmental impact of this final 
rule and concluded that preparation of an Environmental Impact 
Statement was not necessary. As discussed in the Environmental 
Assessment, the final rule's Regulatory Assessment, and the Operational 
Measures final rule Regulatory Assessment provide sufficient evidence 
and analysis for determining that structural measures are not 
economically feasible; and therefore, should not be promulgated under 
Section 4115(b) of OPA 90. Because no structural measures are required, 
an Environmental Impact Statement is not required under the National 
Environmental Policy Act. An Environmental Assessment and a Finding of 
No Significant Impact are available in the docket for inspection or 
copying where indicated under ADDRESSES.

List of Subjects in 33 CFR Part 157

    Cargo vessels, Oil pollution, Reporting and recordkeeping 
requirements.

    For the reason set out in the preamble, the Coast Guard amends 33 
CFR part 157 as follows:

PART 157--RULES FOR THE PROTECTION OF THE MARINE ENVIRONMENT 
RELATING TO TANK VESSELS CARRYING OIL IN BULK

    1. The authority citation for part 157 continues to read as 
follows:

    Authority: 33 U.S.C. 1903; 46 U.S.C. 3703, 3703a (note); 49 CFR 
1.46. Subparts G, H, and I are also issued under section 4115(b), 
Pub. L. 101-380, 104 Stat. 520; Pub. L. 104-55, 109 Stat. 546.

    2. The subpart heading of subpart G is revised to read as follows:

[[Page 1637]]

Subpart G--Interim Measures For Certain Tank Vessels Without Double 
Hulls Carrying Petroleum Oils

    3. The subpart heading of subpart H is revised to read as follows:

Subpart H--Interim Measures For Certain Tank Vessels Without Double 
Hulls Carrying Animal Fat or Vegetable Oil

    4. The subpart heading of subpart I is revised to read as follows:

Subpart I--Interim Measures For Certain Tank Vessels Without Double 
Hulls Carrying Other Non-Petroleum Oil

    Dated: January 3, 1997.
Robert E. Kramek,
Admiral, U.S. Coast Guard Commandant.
[FR Doc. 97-471 Filed 1-9-97; 8:45 am]
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