Industry Balks at Proposed Tanker Law : Officials Say Double Hulls Would Triple Headaches, Scuttle Rebound

Shipping and oil industry executives said Monday that a possible law requiring double hulls on oil tankers would come at a time when the shipping industry is just beginning to recover from years of losses and would complicate plans to replenish the aging tanker fleet.

In addition, any such law would be costly and could have unintended effects on an industry dominated by foreign carriers, executives said.

Because old tankers would be exempted from the requirement, it is conceivable that foreign shippers might opt to send their older ships to U.S. waters, while building new, cheaper, single-hull tankers for use elsewhere.

“Mandating to the international community without broad support from the international maritime community creates problems that may be hard to sort out,” said Douglas Wolcott, president of Chevron Shipping Co., the marine transportation unit of Chevron U.S.A.

A bill introduced by Sen. Brock Adams (D-Wash.) would require all new oil tankers over 20,000 tons dead weight to be equipped with double hulls. That would include both U.S. and foreign carriers operating in U.S. waters.

The bill already has cleared one Senate panel. Adams said oil spills are inevitable. “So you try to avoid that by making your vessels safer, your response time quicker, and having equipment at hand to begin the cleanup immediately,” said Adams, a former Transportation Secretary and longtime proponent of regulations requiring double-hulled tankers.

Of the world’s estimated 3,200 tankers, oil companies operate about 332 ships of at least 10,000 tons dead weight each; foreign governments and their companies operate 799, and independent companies--including giants in Hong Kong, Japan and Europe--operate the rest, said Arthur McKenzie, a tanker consultant and director of the Tanker Advisory Center.

Only a fraction of the tankers are registered in the United States. Far more common are so-called “registries of convenience” in countries from Liberia to Panama to Uruguay.

Studies by the Coast Guard, the Office of Technology Assessment and others have reached varying conclusions about whether a double-hull design would lessen the effects of spills like the one at Valdez, Alaska, or those that took place in the waters off Pennsylvania, Rhode Island or Texas over the weekend.

But shipping analysts agree that requiring new tankers to have double hulls would add significantly to the cost of building new tankers.

A new supertanker of 250,000 tons costs about $70 million to $80 million, analysts said.

“It’s quite expensive to add a second skin,” said James Winchester, shipping industry analyst with Mabon, Nugent & Co. in New York. “It would add on the order of another $16 million,” he estimated.

Requiring that new tankers have a second hull could affect the shipping industry’s decisions about replenishing its aging tanker fleet. For many operators, “freight rates do not even justify building a single-hull tanker,” Winchester said.

The pace of new tanker building is far below that of the late 1970s, when a supertanker building boom resulted in overcapacity, helping to drive shipping rates to rock-bottom. A few years ago, freight rates were running about $5,000 to $6,000 per day and shippers believed that they were better off selling their tankers for scrap than operating them, observers said.

Now, “The overbuilding that occurred in the 1970s is being used up quite rapidly, and probably we’ll see some building beginning,” said Jerry Aspland, a tanker captain and president of Arco Marine Inc., the shipping unit of Atlantic Richfield Co.

$30,000 or More Per Day

Shippers are encouraged in part by freight rates that have begun climbing again as the surplus capacity has shrunk to 42.4 million tons in February from 93.6 million tons in 1985, McKenzie reported. At the same time, the tanker fleet is aging--the average age of a tanker is about 13.5 years, McKenzie said.

Chevron, which owns 41 tankers and charters another 20 to 30, has four new tankers on order at the moment, Wolcott said.

Still, to cover the costs of building a new freighter, a shipper must charge freight rates of $30,000 or more per day, Winchester estimated. Current rates are averaging about $16,000 per day, he said.

“If the international oil industry and the tanker market were to agree from now on to build only double-hull vessels, we would see the ultimate freight rate build that much higher, somewhere around $40,000 a day. The market absolutely won’t support that,” Winchester said.

As a result, the new law “would make the U.S. market a different market than other foreign markets, unless other countries follow suit,” one shipping executive said. “And that could mean . . . that the U.S. gets the older tankers . . .”

“If (a foreign shipper’s) choice is to spend a considerable amount more for a double-hulled vessel or to save the money and simply send their new (single-hulled) vessel somewhere else, economically, they may be forced to send the old grandfathered vessels here, because someone else will do that and undercut them.”

Requiring double hulls could ultimately reduce the available shipping tonnage, with resulting increases in freight rates, said Karl Meyer, chairman of Marine Transport Lines, one of the larger independent shippers in the United States.

“Any kind of environmental or safety response, any way to upgrade vessels . . . (will be) passed on to the end user, and that will be the oil company,” McKenzie said.