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

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 offloading 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).
Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Proposed Rules 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 legallydefined 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.
7654 Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Proposed Rules

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 deepwater 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 pressuretested 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-ofway 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
Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Proposed Rules 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
7656 Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Proposed Rules

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 steelreinforced 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 purposebuilt 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
Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Proposed Rules 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 § 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).
7658 Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Proposed Rules

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

§ 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.

§ 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 Pen ̃ a,

Secretary of Transportation.

[FR Doc. 95–3039 Filed 2–3–95; 8:45 am]

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