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UBC Theses and Dissertations

Economic evaluation of alternate pollution control policies for tankers Verrier, Thierry Marie Joseph 1976

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ECONOMIC EVALUATION OF ALTERNATE POLLUTION CONTROL POLICIES FOR TANKERS BY THIERRY MARIE JOSEPH VERRIER A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUSINESS ADMINISTRATION in the Fa c u l t y of Commerce and Business A d m i n i s t r a t i o n We accept t h i s t h e s i s as conforming to the requ i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA J u l y 1976 (5) Thierry Marie Joseph V e r r i e r In presenting th i s thes is in pa r t i a l fu l f i lment of the requirements for an advanced degree at the Un ivers i ty of B r i t i s h Columbia, I agree that the L ibrary sha l l make it f ree ly ava i l ab le for reference and study. I fur ther agree that permission for extensive copying of th i s thesis for scho lar ly purposes may be granted by the Head of my Department or by his representat ives. It is understood that copying or pub l i ca t ion of th is thes is fo r f i nanc ia l gain sha l l not be allowed without my writ ten permission. Department of The Univers i ty of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1 W 5 ABSTRACT The r o u t i n e operations o f tankers discharge a considerable amount of o i l i n t o the sea. This o i l i s the residue from tank c l e a n i n g as well as the discharge of o i l y b a l l a s t water while a t sea. There are a number o f p o l i c i e s a v a i l a b l e to con t r o l operational discharges o f o i l by tankers. This study describes c u r r e n t p r a c t i c e s and a l t e r n a t e p o l i c i e s , and provides a method and data base to evaluate the c o s t - e f f e c t i v e n e s s o f these p o l i c i e s . This method and data base are used to evaluate the c o s t - e f f e c t i v e n e s s of applying the p r o v i s i o n s o f the "1973 Convention f o r the Prevention o f P o l l u t i o n from Ships" to the tankers engaged i n the f u t u r e Alaskan o i l trade. The main conclu s i o n i s that the value o f o i l saved by p o l l u t i o n control w i l l more than cover the costs of p o l l u t i o n c o n t r o l measures. However, the use o f segregated b a l l a s t tankers i s economically j u s t i f i e d only i f i t i s impossible to enforce the r e t e n t i o n of o i l y wash on board the s h i p . I f e f f e c t i v e enforcement i s p r a c t i c e d , then the incremental cost o f segregated b a l l a s t ships i s not covered by the value o f the small amount o f a d d i t i o n a l o i l saved. - i i -i i i TABLE OF CONTENTS Page LIST OF TABLES v LIST OF EXHIBITS v i i i CHAPTER 1 INTRODUCTION 1 Obj e c t i v e s o f the Study 2 Reasons f o r and Importance of the Study 2 L i m i t a t i o n s o f the Study 12 Ou t l i n e . . . . . . 15 2 TANKER OPERATIONAL POLLUTION CONTROL 18 General 18 The Case o f No P o l l u t i o n Control 20 Techniques f o r C o n t r o l l i n g Tanker Operational P o l l u t i o n 27 Current P r a c t i c e s . . 33 The LOT System 36 A l t e r n a t i v e s to Current P r a c t i c e s . 46 Summary 55 3 TECHNIQUES TO CONTROL TANKER OPERATIONAL POLLUTION 60 Improved LOT 60 Segregated B a l l a s t Tankers 65 Crude O i l Washing 79 Shore Treatment F a c i l i t i e s 89 The Enforcement Problem 99 Summary 103 4 ECONOMIC EVALUATION OF THE ALTERNATIVES, METHODOLOGY . . . . 106 C o s t - E f f e c t i v e n e s s Framework 106 Costs of Operational P o l l u t i o n Control 109. Estimation Procedure I l l 5 THE ALASKA TRADE 128 Supply and Demand f o r Alaskan O i l 128 C h a r a c t e r i s t i c s o f Alaskan trade route 130 Vessel Costs 135 Summary 135 i v -CHAPTER Page 6 COST-EFFECTIVENESS OF IMCO ALTERNATIVE ON ALASKAN ROUTE . . 138 Introduction . .- 138 Reference A l t e r n a t i v e 140 IMCO A l t e r n a t i v e . 151 Cos t - E f f e c t i v e n e s s o f IMCO A l t e r n a t i v e . . 160 BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . 169 ANNEX A 174 B 175 C 178 -v-LIST OF TABLES TABLE Page 1 Estimates o f O i l P o l l u t i o n Imputs to the World's Oceans from a l l Sources . . . . . . . . . . . . . . . . . 5 2 Ship Operational Discharges o f O i l . . . . . . . . . . . . . . 19 3 Average Discharge During D e b a l l a s t i n g Operations without P o l l u t i o n c o n t r o l Procedures . . . . . . . . . . . . . . . 24 4 Average Discharge During Tank Cleaning Operations without P o l l u t i o n Control Procedures . . . . . . . . . . . . . . . 29 5 Operational Discharge per T r i p without P o l l u t i o n Control Procedures . . . . . . . . . . . . . . . . . . . . . . . . 30 6 Average O i l P o l l u t i o n Inputs with LOT . . . . . . . . . . . . 44 7 There i s no Table 7 8 E f f e c t i v e n e s s o f Properly Used Improved LOT Procedures . . . . 62 9 Impact o f Improved LOT on Throughput and B i l l - o f - L a d i n g Weight 66 10 O i l Discharge from D e b a l l a s t i n g Segregated Tanker with Improved LOT 69 11 O i l Discharging from Tank Cleaning Segregated Tanker with Improved LOT 70 12 Average O i l Discharge from Segregated Tanker with Improved LOT 72 13 Percentage Increase i n C o n s t r u c t i o n Cost f o r Segregated Tanker 74 14 Impact of Segregated B a l l a s t on Throughput 76 15 O i l Discharges from Cleaning with Crude Washing and Improved LOT 6 81 16 O i l Discharges from D e b a l l a s t i n g with Crude Washing and Improved LOT 83 17 Average Discharges with Crude Washing and Improved LOT . . . . 84 - v i -T A B L E Page 18 Impact of Crude Washing on Throughput . . . . . . . 86 19 Average Discharge of Segregated Tanker with Crude Washing and Improved LOT 88 20 Impact of Crude Washing on Throughput, Segregated Tanker . . 90 21 Oil Discharges from Deballasting with Shore F a c i l i t y . . . . 92 22 Oil Discharges from Cleaning with Shore F a c i l i t y . . . . . . 94 23 Average Oil Discharges with Shore F a c i l i t y . . . . . . . . . 96 24 Cost and Effectiveness of U.S. Shore F a c i l i t i e s . . . . . . 98 25 Impact of Enforcement . 101 26 Destination of Alaskan Oil 131 27 Size Constraints i n Ports 133 28 Operating Conditions on Alaskan Route 134 29 Vessel Costs on Alaskan Route 136 30 Vessel Throughput under Reference A l t e r n a t i v e 142 31 Vessel Costs under Reference A l t e r n a t i v e 144 32 Unit Transport Costs under Reference A l t e r n a t i v e 145 33 Tanker f l e e t under Reference A l t e r n a t i v e 146 34 O i l Discharge under Reference A l t e r n a t i v e 148 35 C h a r a c t e r i s t i c s of Discharges under Reference A l t e r n a t i v e . 149 36 Vessel Throughput, IMCO A l t e r n a t i v e 152 37 Vessel Costs, IMCO Al t e r n a t i v e 154 38 Unit Transport Cost, IMCO Al t e r n a t i v e . 155 - v i i -TABLE Page 39 Tanker F l e e t , IMCO A l t e r n a t i v e . . . . . . . . 156 40 C h a r a c t e r i s t i c s o f Discharges, IMCO A l t e r n a t i v e . . . . . . 158 41 Annual Cost, IMCO A l t e r n a t i v e . . . 159 42 Economic Cost o f the IMCO A l t e r n a t i v e on the Alaska Trade Route . . . . . . . . . . . . . . 161 43 Incremental Cost o f Requiring Segregated B a l l a s t on New Tankers on the Alaskan t r a d e . . . . . . . . . . . . . . 163-164 - v i i i -LIST OF EXHIBITS EXHIBITS Page 1 Ballast Treatment Fac i l i ty '„ 91a 2 Parameters Affecting the Costs of Tanker Operational Pollution 107 3 Impact of Tanker Operational Pollution Control on the Amounts of Crude Oil Transported, Processed and Consumed Annually 112 4 Costs Incurred By Tanker Owners 115 5 Annual Capital Cost of an Existing Vessel Description ... 119 6 The Estimation Procedure 125 CHAPTER I INTRODUCTION 1.1 OBJECTIVES OF THE STUDY In recent years many countries in the world have expressed concern over o i l p o l l u t i o n from tankers. This concern may have been promoted by some spectacular tanker o i l s p i l l s ; or i t may come from a more global concern over marine p o l l u t i o n by o i l and i t s e f f e c t on the world's ecology. Whatever the case, tanker o i l p o l l u t i o n control has become an important issue. Like many i n d u s t r i e s , in p a r t i c u l a r l i k e other shipping i n d u s t r i e s , the tanker industry pollutes the marine environment. According to a back-ground report on tanker p o l l u t i o n prepared in 1975 f o r the U.S. Congress, "recent estimates are that one t h i r d of a l l o i l p o l l u t i o n of the world's oceans i s caused by a c t i v i t i e s generally characterized as marine transportation. Tankers understandably are the sing l e l a r g e s t contributor of such p o l l u t i o n O i l p o l l u t i o n from tankers originates from two p r i n c i p a l sources: (1) Tanker accidents and (2) Normal tanker operations such as tank cleaning deballasting and other operational reasons for, p e r i o d i c a l l y discharging overboard."^ This study i s primarily concerned with operational discharges of o i l from tankers. Its basic objectives are to provide background information and to develop a methodology to be used in the economic evaluation of alternate p o l i c i e s to control these operational discharges. The p a r t i c u l a r objectives may be detai l e d as follows: -1--2-a) To bring together a v a i l a b l e information on the various means f o r c o n t r o l l i n g o p e r a t i o n a l discharges o f o i l from tankers, t h e i r economic cost and e f f e c t i v e n e s s ; and to describe the a l t e r n a t e control p o l i c i e s c u r r e n t l y contemplated. b) To develop a method to assess the economic cost and e f f e c t i v e -ness of a l t e r n a t e control p o l i c i e s on a given trade. c) To apply t h i s method to estimate the economic cost and e f f e c t i v e n e s s of a l t e r n a t e control p o l i c i e s i n the case o f the f u t u r e Alaska crude o i l trade between Valdez, Alaska, and the U.S. West Coast. 1.2 REASON FOR AND IMPORTANCE OF THE STUDY C o n t r o l l i n g operational discharges o f o i l from tankers i s important to many of the world's c o u n t r i e s . An economic e v a l u a t i o n o f a l t e r n a t e c o n t r o l p o l i c i e s i s e s s e n t i a l to promote e f f i c i e n t and p r a c t i c a l p o l i c i e s . The major co n t r o l techniques have already been evaluated i n d i v i d u a l l y i n economic terms but a v a i l a b l e r e s u l t s are widely dispersed. In a d d i t i o n , the stud i e s done in t h i s area were p r i m a r i l y attempting to develop s p e c i f i c data on s p e c i f i c techniques so that no general method has been developed f o r the economic e v a l u a t i o n o f complex p o l i c i e s i n v o l v i n g d i f f e r e n t techniques and standards. This study proposed such method and provides the necessary i n p u t s , using a v a i l a b l e information. Besides, the a p p l i c a t i o n o f the method i n the p a r t i c u l a r case o f the Alaska trade w i l l provide r e s u l t s o f i n t e r e s t f o r a l l o f those (not only i n Canada and the United States) concerned with tanker p o l l u t i o n . These points are not developed i n d e t a i l . -3-1.2.1 C o n t r o l l i n g Operational Discharges from Tankers: An  Important Issue. When a tanker has discharged i t s cargo at the p o r t , i t takes b a l l a s t water i n t o some o f i t s tanks to ensure proper immersion and seakeeping c h a r a c t e r -i s t i c s on the r e t u r n t r i p . The water mixes with the residues o f o i l i n the tank to form what i s c a l l e d the d i r t y b a l l a s t . This d i r t y b a l l a s t must be discharged to the sea p r i o r to a r r i v i n g i n a port unless s p e c i a l procedures are adopted. In a d d i t i o n , tankers t y p i c a l l y wash some o f t h e i r cargo tanks on the r e t u r n t r i p . The o i l y washwaters are a l s o discharged overboard unless a l t e r n a t i v e procedures are followed. Understandably, the r e s u l t i n g o i l p o l l u t i o n p r i m a r i l y a f f e c t s the regions surrounding tanker trade routes. The c h r o n i c nature of t h i s p o l l u t i o n i s considered by some to have a more d e l e t e r i o u s e f f e c t on l o c a l c oastal and e s t u a r i n e ecosystems than acute dosing ( U.S. Congress, p. 31). "Weather, winds and c u r r e n t s , as well as migratory habits of marine l i f e can a l s o spread and propagate i n i t i a l damages" (U.S. Congress, p. 31) so that i t i s the global marine ecosystem which i s u l t i m a t e l y a f f e c t e d ; e s p e c i a l l y as m i l l i o n s of tons o f o i l already reach the oceans from other sources. In a comprehensive r e p o r t on marine p o l l u t i o n by o i l , the U.S. National Academy of Sciences concluded: A basic question that remains unanswered i s : At what l e v e l of petroleum hydrocarbon input to the ocean might we f i n d i r r e v e r s i b l e damage occuring? The sea i s an enormously complex system about which our knowledge i s very imperfect. The ocean may be able to accommodate petroleum hydrocarbon inputs f a r above those o c c u r r i n g today. On the other hand, the damage l e v e l may be w i t h i n an order o f magnitude o f present inputs to the sea. U n t i l we can come c l o s e r to answering t h i s basic question, i t seems wisest to continue our e f f o r t s i n the i n t e r n a t i o n a l c o n t r o l of inputs and to push forward research to reduce our current l e v e l of uncertainty.2 -4-TABLE 1 which i s based on the above r e p o r t , shows estimates of the various o i l p o l l u t i o n inputs to the world's oceans. I t i s c l e a r from these estimates that tanker operational discharges are a major source of marine p o l l u t i o n by o i l and t h e r e f o r e deserve s p e c i a l c o n s i d e r a t i o n i n the c o n t r o l of such p o l l u t i o n . In Summary, the c o n t r o l of tanker operational discharges i s important in the f o l l o w i n g respects: 1) Tanker operational p o l l u t i o n i s a major source of p o l l u t i o n f o r some regions~6f:the .worT.d. 2) The c o n t r o l of such p o l l u t i o n i s one o f the major means to c o n t r o l the global o i l p o l l u t i o n input to the world's oceans. The appropriate control p o l i c y r e a l l y depends upon which of these two aspects i s emphasized. I f the o b j e c t i v e i s to reduce the global o i l p o l l u t i o n i n p u t , the e v a l u a t i o n of a l t e r n a t e p o l i c i e s should be made on a worldwide b a s i s ; and the p o l i c y s e l e c t i o n should be made in view of what can be done to reduce the worldwide o i l p o l l u t i o n input from other sources. The "best" p o l i c y might be to do nothing as regards tanker operational discharges, and to devote a v a i l a b l e resources to the control o f other sources of o i l p o l l u t i o n . On the other hand, i f the o b j e c t i v e i s to reduce o i l p o l l u t i o n damages from tanker operational discharges, some p o s i t i v e a c t i o n s are needed to c o n t r o l these discharges. These a c t i o n s w i l l reduce the global o i l input to the world's oceans. But t h i s i s i n c i d e n t a l and of l i m i t e d relevance when s e l e c t i n g an appropriate p o l i c y , as b e t t e r measures of the impact o f a l t e r n a t e p o l i c i e s on environmental c o n d i t i o n s can be achieved by e v a l u a t i n g each p o l i c y on a region by region b a s i s . This study attempts to show how t h i s can be done i n p r a c t i c e . -5-TABLE 1 ESTIMATES OF OIL POLLUTION INPUTS TO THE WORLD'S OCEANS FROM ALL SOURCES SOURCE INPUT RATE ( M i l l i o n s o f tons per year) PERCENT OF TOTAL Natural seeps Offshore production Coastal r e f i n e r i e s Atmosphere Coastal municipal wastes C o a s t a l , non r e f i n i n g i n d u s t r i a l wastes Urban.runoff ^ s t V i River r u n o f f Marine t r a n s p o r t a t i o n -non tankers - tanker accidents - tanker operational discharges Total Input 0.600 0.080 0.200 0.600 0.300 0.300 0.300 1.600 0.450 0.200 1.380 6.113 9.8 1.3 3.3 9.8 4.9 4.9 4.9 26.2 7.4 3.3 22.6 Source: U.S. National Academy of Sciences, 1975, p. 6 -6-I t may be argued that the u l t i m a t e o b j e c t i v e should not be to reduce the global o i l p o l l u t i o n input to the world's oceans, or to reduce o i l p o l l u t i o n damages from tanker operational discharges, but, more g e n e r a l l y , to reduce damages from marine o i l p o l l u t i o n . To achieve the more general o b j e c t i v e of reducing damages from marine o i l p o l l u t i o n , i t would be s u i t a b l e to have an i n t e g r a t e d approach i n v o l v i n g a l l sources of marine o i l p o l l u t i o n and a l l aspects of such p o l l u t i o n ( i n p u t s , l o c a t i o n , frequency, e f f e c t s ). Such an approach w i l l not be p r a c t i c a b l e , however, u n t i l enough information i s a v a i l a b l e as regards the c o n t r o l of marine o i l p o l l u t i o n from each p a r t i c u l a r source. The optimal p o l i c y to c o n t r o l p a r t i c u l a r sources of marine o i l p o l l u t i o n may become 'suboptimal' when the focus s h i f t s to the control of marine o i l p o l l u t i o n as a whole. Whatever the focus, however, the i n v e s t i g a t i o n of a l t e r n a t e p o l i c i e s to c o n t r o l tanker operational p o l l u t i o n i s e s s e n t i a l . 1.2.2 Importance of the Economic Evaluation of A l t e r n a t e Control  P o l i c i e s A l t e r n a t e p o l i c i e s are a v a i l a b l e to c o n t r o l operational p o l l u t i o n from tankers. I t i s known that the most e f f e c t i v e ones would cost b i l l i o n s o f d o l l a r s . The magnitude of t h i s cost makes i t c l e a r that some p o l i c i e s would have a s i g n i f i c a n t impact on the balance of payment and economy of many c o u n t r i e s . Decisions regarding the c o n t r o l o f tanker operational discharges are important, t h e r e f o r e , to i n d i v i d u a l c o u n t r i e s . An economic e v a l u a t i o n of a l t e r n a t e c o n t r o l p o l i c i e s , i n d i c a t i n g the s i z e and d i s t r i b u t i o n of the costs and b e n e f i t s should g r e a t l y help those c o u n t r i e s i n making d e c i s i o n s about p o l l u t i o n c o n t r o l . -7-Decisions regarding the co n t r o l o f tanker p o l l u t i o n are made p r i m a r i l y through a process o f i n t e r n a t i o n a l n e g o t i a t i o n s under the auspices of the Inter-Governmental Maritime C o n s u l t a t i v e Organization (IMCO), a . United Nations agency e s t a b l i s h e d i n 1959. The economic e v a l u a t i o n of a l t e r n a t i v e control p o l i c i e s i s e s s e n t i a l to IMCO as i t may s i g n i f i c a n t l y improve the or g a n i z a t i o n ' s d e c i s i o n s i n the f o l l o w i n g two re s p e c t s : 1) The economic e v a l u a t i o n o f a l t e r n a t e c o n t r o l p o l i c i e s should promote e f f i c i e n t d e c i s i o n s , that i s d e c i s i o n s which cannot be modified without i n c r e a s i n g the co s t s to the i n t e r n a t i o n a l community more than the b e n e f i t s . 2) The economic ev a l u a t i o n of a l t e r n a t e c o n t r o l p o l i c i e s should promote p r a c t i c a l d e c i s i o n s , that i s , d e c i s i o n s which can be r a t i f i e d and implemented without excessive delay. The f i r s t point i s q u i t e obvious. But the second may r e q u i r e some exp l a n a t i o n , as the p r a c t i c a l i t y o f c o n t r o l " ! p o l i c i e s i s p r i m a r i l y a matter of i n t e r n a t i o n a l p o l i t i c s , the economic dimension being only-one f a c t o r among others. The p r a c t i c a l i t y o f a given p o l i c y depends upon such f a c t o r s as the a t t i t u d e and i n f l u e n c e o f the p u b l i c and i n d u s t r y i n the various c o u n t r i e s concerned. I t a l s o depends upon the global n e g o t i a t i n g context i n which d e c i s i o n s regarding tanker p o l l u t i o n c o n t r o l are made: These d e c i s i o n s are g e n e r a l l y not made in i s o l a t i o n , but as part o f a ' p o l i c y package' r e l a t i n g to a wider i s s u e , such as the p o l l u t i o n from ships or the law o f the sea, so that the p r a c t i c a l i t y of a s i n g l e d e c i s i o n r e a l l y depends upon the content of the whole package. Such ' p o l i c y packages' are not n e c e s s a r i l y defined i n a formal way. They may grow up n a t u r a l l y as -8-several i n t e r n a t i o n a l i s s u e s , being discussed i n d i f f e r e n t p l a c e s , come to i n t e r f e r e with each other, and i n d i v i d u a l c o u n t r i e s s t a r t to compromise and to engage i n t r a d i n g o f support p r a c t i c e s . ^ I t i s c l e a r , t h e r e f o r e , that the economic e v a l u a t i o n o f a l t e r n a t e tanker p o l l u t i o n c o n t r o l p o l i c i e s may not be e x c l u s i v e l y r e l i e d upon to p r e d i c t the p r a c t i c a l i t y o f these p o l i c i e s . However, such an e v a l u a t i o n i n f l u e n c e s the a t t i t u d e s o f i n d i v i d u a l c o u n t r i e s i n a p r e d i c t a b l e d i r e c t i o n . I t a l s o reduces the range o f p o s s i b l e outcomes, as i t becomes c l e a r that some p o l i c i e s are economically i m p r a c t i c a l . A c c o r d i n g l y , the economic e v a l u a t i o n could f a c i l i t a t e and improve p r e d i c t i o n s as to the chances of e f f e c t i v e implementation o f the contemplated p o l i c i e s and, t h e r e f o r e , as to t h e i r p r a c t i c a l i t y . 1.2.3 Reasons f o r the study The nature o f the co s t s and b e n e f i t s generated by tanker p o l l u t i o n control made i t appropriate to use a c o s t - e f f e c t i v e n e s s framework, which w i l l be described i n Chapter 4 to evaluate a l t e r n a t e control p o l i c i e s . P r i o r to the 1973 IMCO Conference, which r e s u l t e d i n the '1973 Convention f o r the Prevention of P o l l u t i o n from ship s ' (subsequently r e f e r r e d as the 19733Convention), several t e c h n i c a l s t u d i e s ^ were c a r r i e d out under the auspices of IMCO on the cost and e f f e c t i v e n e s s o f the major techniques f o r preventing tanker operational discharges. These stu d i e s were a very valuable input to the 1973 conference as they provided a data base from which a general assessment of a l t e r n a t e p o l i c i e s could be made. The 1973 conference and other events, such as the considerable increase i n the value o f o i l , the appearance o f a l a r g e tanker s u r p l u s , the development of new techniques to prevent tanker operational p o l l u t i o n , -9-and a number o f tanker explosions which were probably caused by tank c l e a n i n g operations brought about f u r t h e r s t u d i e s on the subject. While these s t u d i e s and the IMCO stud i e s contain much valua b l e information, they may not be r e a d i l y used f o r e v a l u a t i n g a l t e r n a t e c o n t r o l p o l i c i e s i n economic terms. There are two reasons: a) The f i r s t reason i s simply that a v a i l a b l e information and data are extremely d i s p e r s e d . b) The second reason i s that these s t u d i e s are p r i m a r i l y t e c h n i c a l i n nature, as new techniques and equipments had to be t e s t e d and i n v e s t i g a t e d p r i o r to estimating t h e i r cost and e f f e c t i v e n e s s . The main focus was not on the economic e v a l u a t i o n i t s e l f . These stu d i e s e s s e n t i a l l y provide a data base on the cost and e f f e c t i v e n e s s of i n d i v i d u a l techniques to c o n t r o l tanker operational p o l l u t i o n but do not provide any p r e c i s e assessment of complex c o n t r o l p o l i c i e s , i n v o l v i n g m u l t i p l e techniques and standards. A c c o r d i n g l y , t h i s study may be viewed as a complement to the above s t u d i e s . I t attempts to bring together a v a i l a b l e information, and to develop and i l l u s t r a t e a method f o r the economic e v a l u a t i o n of a l t e r n a t e p o l i c i e s . I t does not attempt, however, the economic a n a l y s i s of c o n t r o l s on tanker o p e r a t i o n a l discharges as such a n a l y s i s has been c a r r i e d out by g other. The main points of the a n a l y s i s may be summarized as f o l l o w s : 1) The economically optimal c o n t r o l p o l i c y should minimize the t o t a l s o c i a l c o s t a s s o c i a t e d with tanker p o l l u t i o n , that i s , the sum of the s o c i a l cost of p o l l u t i o n plus the s o c i a l cost of p o l l u t i o n c o n t r o l . 2) Complete bans or uniform r e g u l a t i o n s f o r a l l v e s s e l s on a l l the routes are not l i k e l y to be the optimal p o l i c y . Indeed, the greater the p o l l u t i o n problem on a given trade route, the s t r i c t e r the standards which -10-shbuld apply on t h i s route; on the other hand, lower standards should apply on those routes and ships where i t i s more c o s t l y to reduce p o l l u t i o n . According to the f i r s t p o i n t , t h i s study accounts e x p l i c i t l y f o r enforcement costs which are c l e a r l y part o f the s o c i a l c o s t of p o l l u t i o n prevention. This aspect has been c o n s i s t e n t l y disregarded i n the p r e v i o u s l y mentioned s t u d i e s . Yet, Burrows, Rowley and Owen showed i n an i n t e r e s t i n g a r t i c l e t h a t the i n c l u s i o n of these costs may a f f e c t the r e s u l t s and conclus i o n o f the economic e v a l u a t i o n . 7 " According to the second p o i n t , t h i s study focuses on i n d i v i d u a l trades and allows f o r d i f f e r e n t vessel types. This introduces a great f l e x i b i l i t y i n p o l i c y d e f i n i t i o n as the proposed standards and techniques may vary with trade and vessel c h a r a c t e r i s t i c s . In a d d i t i o n , t h i s permits an assessment o f a l t e r n a t e p o l i c i e s on a trade by trade b a s i s , or on a few t y p i c a l t r a d e s , r a t h e r than on a broad worldwide b a s i s , and t h e r e f o r e , to achieve a b e t t e r measure of c o s t - e f f e c t i v e n e s s . 1.2.4 The relevance o f the Alaska Trade Major petroleum reserves were discovered i n 1968 i n Prudhoe Bay on the Alaska North Slope. Increasing U.S. energy needs, and the pro-clamation o f U.S. energy s e l f - s u f f i c i e n c y as a national g o a l , l e d to the d e c i s i o n to develop these reserves to supply U.S. western s t a t e s . This d e c i s i o n r e s u l t e d i n the c o n s t r u c t i o n o f the Trans-Alaska p i p e - l i n e from the North Slope south to Aaldez, Alaska. The p i p e - l i n e i s scheduled to begin operations i n the t h i r d quarter o f 1977. From Valdez the p i p e - l i n e ' s throughput w i l l be shipped by tanker to the U.S. West Coast p o r t s . At the time the d e c i s i o n s were made, they were the object of many c o n t r o v e r s i e s . The tanker p o l l u t i o n problem was a major poin t o f concern. -11-The U.S. Coast Guard i s the r e g u l a t o r y body r e s p o n s i b l e f o r e s t a b l i s h i n g and e n f o r c i n g U.S. tanker r e g u l a t i o n s . These r e g u l a t i o n s apply to U.S. tankers and to f o r e i g n tankers i n U.S. waters. In October 1975, the Coast Guard made p u b l i c a set of r e g u l a t i o n s applying to U.S. tankers engaged i n domestic trade. These w i l l apply to v e s s e l s engaged i n the Alaska t r a d e . ^ The preparation and p u b l i c a t i o n o f these r e g u l a t i o n s brought about many comments and r e a c t i o n s from the o i l and shipping i n d u s t r y , the environmental groups, the concerned governmental agencies, the U.S. Congress, and i n d i v i d u a l coastal s t a t e s . Thus, during the l a s t f i v e y e a r s , tanker p o l l u t i o n c o n t r o l on the Alaska trade has been very much debated. Various c o n t r o l p o l i c i e s have been proposed. These are described i n the Fi n a l Environmental Impact Statement issued by the U.S. Coast Guard p r i o r to the p u b l i c a t i o n o f the U.S. domestic trade r e g u l a t i o n s , and i n the comments attached to the 9 statement. The Coast Guard based i t s r e g u l a t i o n s on the 1973 IMCO Convention, on the ground that t h i s convention, although not p e r f e c t , o f f e r e d "the p o t e n t i a l f o r e f f e c t i v e l y c o n t r o l l i n g o i l p o l l u t i o n inputs from tanker operations and reducing them to acceptable l e v e l s " and "deserved wholehearted U.S. support" (U.S. Coast Guard, p. 6). The r e s u l t i n g increase i n t r a n s -p o r t a t i o n costs was estimated to be l e s s than 0.2 cents per g a l l o n of crude or l e s s than 0.6 per cent of the CIF p r i c e o f crude o i l (U.S. Coast Guard, Table 9). I t i s f u r t h e r estimated that the new r e g u l a t i o n s should reduce operational p o l l u t i o n inputs from tankers engaged i n U.S. domestic trade by 90 perccent (U.S. Coast Guard, Table 6). The cost and e f f e c t i v e n e s s o f a l t e r n a t e sets of standards have not been estimated. -12-This study w i l l permit to compare the U.S. Coast Guard p o l i c y to control tanker operational discharges with a l t e r n a t e p o l i c i e s . The Coast Guard views the recent r e g u l a t i o n s as one step in a continuing process. Future d e c i s i o n s should be made e a s i e r by t h i s study. The impact o f a given c o n t r o l p o l i c y on operational p o l l u t i o n r e a l l y depends upon the s p e c i f i c c o n d i t i o n s p r e v a i l i n g on the trade ( c l i m a t e , b i o t a , d e n s i t y of t r a f f i c , ) I t i s the author's view, however, that the impacts o f a given c o n t r o l p o l i c y on c o s t s , as well as on the c h a r a c t e r i s t i c s o f operational discharges (volume o f o i l discharged per t r i p , c oncentration of the discharges ) do not d i f f e r s u b s t a n t i a l l y between the Alaska trade and other medium to long-haul crude o i l trades. A c c o r d i n g l y , the conclusions that w i l l be drawn f o r the Alaska trade should be of use and relevance f o r other trades. 1.3 LIMITATIONS OF THE STUDY 1.3.1 Methodological l i m i t a t i o n s Tanker operational p o l l u t i o n and tanker a c c i d e n t a l p o l l u t i o n are interdependent. For example, the use of an e f f e c t i v e s a f e t y f e a t u r e preventing explosions during tank c l e a n i n g may enable the crew to use b e t t e r c l e a n i n g methods that would be dangerous otherwise, with s i g n i f i c a n t b e n e f i t s f o r op e r a t i o n a l p o l l u t i o n . Operational p o l l u t i o n from b a l l a s t i n g operations and tanker s a f e t y are a l s o interdependent. B a l l a s t i s taken i n t o the tanks to provide s u i t a b l e seakeeping c h a r a c t e r i s t i c s . A reduction i n the amount of b a l l a s t reduces operational p o l l u t i o n from b a l l a s t discharge but i t increases the r i s k o f a ccident. On the other hand, s p e c i a l tanker designs may reduce operational discharges from b a l l a s t i n g operations and, at the same time reduce a c c i d e n t a l discharges i n case of c o l l i s i o n or grounding. As a c c i d e n t a l and operational p o l l u t i o n are interdependent, they cannot be d e a l t with s e p a r a t e l y when eva l u a t i n g tanker p o l l u t i o n c o n t r o l p o l i c i e s . To evaluate the impact of some control p o l i c y on o p e r a t i o n a l , and then on a c c i d e n t a l p o l l u t i o n , however, c o n s i s t s o f two very d i s t i n c t tasks i n v o l v i n g v e r y y d i s t i n c t methods and data bases. This study i s only concerned with those c o n t r o l p o l i c i e s which p r i m a r i l y a f f e c t operational p o l l u t i o n and does not propose any e v a l u a t i o n method or estimate as regards any secondary e f f e c t s these p o l i c i e s might have on a c c i d e n t a l p o l l u t i o n . 1.3.2 Data l i m i t a t i o n s The c o n d i t i o n s i n which tankers operate, as well as the operating p r a c t i c e s o f i n d i v i d u a l ship's masters are very d i v e r s e . The cost and e f f e c t i v e n e s s o f most tanker p o l l u t i o n c o n t r o l p o l i c i e s depend to a l a r g e extent upon these c o n d i t i o n s and p r a c t i c e s . Previous s t u d i e s provide and use " t y p i c a l " f i g u r e s t h a t are considered to be r e p r e s e n t a t i v e o f the wide d i v e r s i t y o f s i t u a t i o n s worldwide. While such an approximation i s made necessary by the l a c k of data and the need to keep c a l c u l a t i o n s manageable, i t i s a p o t e n t i a l source of c o n t r o v e r s i e s and a d e f i n i t e source o f u n c e r t a i n t y as regards the r e s u l t s of the c a l c u l a t i o n s . This must be added to the f a c t that a l l data are subject to considerable inherent u n c e r t a i n t y with regard to f u t u r e c o n d i t i o n s , as the o i l and tanker i n d u s t r i e s are e v o l v i n g i n a very unpredictable world. It i s reasonable, however, to consider that c o n d i t i o n s and p r a c t i c e s are not too di v e r s e and t h a t f u t u r e c o n d i t i o n s are not too unpred i c t a b l e when focusing on a s p e c i f i c trade. Thus c o s t - e f f e c t i v e n e s s estimates should not be too c o n t r o v e r s i a l or un c e r t a i n . This i s another reason f o r focusing on s p e c i f i c trades. The only problem i n t h i s regard i s that data r e l a t i n g -14-to s p e c i f i c trades are often u n a v a i l a b l e so that the usual " t y p i c a l " f i g u r e s have to be used i n s t e a d . These f i g u r e s which are considered to be r e p r e s e n t a t i v e o f c o n d i t i o n s p r e v a i l i n g worldwide are not n e c e s s a r i l y v a l i d on s p e c i f i c trades so that the r e s u l t s are s t i l l s ubject to much un c e r t a i n t y . For a l l these reasons, a s e n s i t i v i t y a n a l y s i s would be a very useful complement to t h i s study as i t could show the areas where a d d i t i o n a l information i s most needed. Besides, such a n a l y s i s would i n d i c a t e the most s i g n i f i c a n t v a r i a b l e s a f f e c t i n g the c o s t - e f f e c t i v e n e s s o f a l t e r n a t e control p o l i c i e s . 1.3.3 Other l i m i t a t i o n s This study i s a l s o incomplete i n the f o l l o w i n g respects: An important aspect of the economic e v a l u a t i o n r e l a t e s to the d i s t r i b u t i o n of the costs and ben.edlftss • While the ev a l u a t i o n of a l t e r n a t e p o l i c i e s onaa trade basis conveys much information as to the d i s t r i b u t i v e impact of a l t e r n a t e p o l i c i e s among regions i t does not r e a l l y say who i s going to bear the economic c o s t of p o l l u t i o n abatement unless such aspects as f l e e t ownership, port p o l i c i e s and national p o l i c i e s are i n v e s t i g a t e d . These i n v e s t i g a t i o n s are not attempted i n t h i s study. This study contemplates only a few t y p i c a l p o l i c i e s which are being or have been supported or implemented by concerned groups. As a r e s u l t , i t i s p o s s i b l e that promising a l t e r n a t i v e s w i l l be overlooked. However, t h i s study i s concerned with the i l l u s t r a t i o n o f the proposed i e v a l u a t i o n methodology rather than with the systematic e v a l u a t i o n of a l t e r n a t e p o l i c i e s . Indeed, the p o l i c i e s contemplated here are s u f f i c i e n t l y d i v e r s e to permit a proper i l l u s t r a t i o n of the general methodology. -15-S i m i l a r l y , the e v a l u a t i o n o f a l t e r n a t e c o n t r o l p o l i c i e s on several trades with e n t i r e l y d i f f e r e n t c h a r a c t e r i s t i c s would be very i n s t r u c t i v e , but i s beyond the task of the present study. 1.4 OUTLINE OF THE STUDY This study i s i n four p a r t s ; the f i r s t p art presents a v a i l a b l e data and information on the control of operational p o l l u t i o n , and the cost and e f f e c t i v e n e s s o f a v a i l a b l e techniques. The second part describes the c o s t - e f f e c t i v e n e s s framework used f o r economic e v a l u a t i o n purposes and o u t l i n e s the methodology used to a r r i v e at the c o s t - e f f e c t i v e n e s s estimates. The economic e v a l u a t i o n of a l t e r n a t e p o l i c i e s on the Alaska trade i s done i n the t h i r d p a r t . The l a s t part contains a b r i e f summary as well as the main conclusions of the study. FOOTNOTES CHAPTER 1 'U.S. Congress, O f f i c e of Technology Assessment, O i l T r a n s p o r t a t i o n by Tankers: An A n a l y s i s of Marine P o l l u t i o n and Safety Measures (Washington D.C, 1975) p . l . U.S. National Academy of Sciences, Petroleum i n the Marine  Environment (Washington, D.C, January 1975). 3 F o r a c a p t i v a t i n g d e s c r i p t i o n of the i n t e r n a t i o n a l p o l i t i c s of tanker p o l l u t i o n c o n t r o l , see Zacher M. ( U n i v e r s i t y o f B r i t i s h Columbia), the P o l i t i c s of I n t e r n a t i o n a l Environmental Regulation; The case of o i l p o l l u t i o n c o n t r o l , (to be published) 4 S e e IMCO, Report on Study 1. Segregated B a l l a s t Tankers, Report by the United S t a t e s , 1972 IMCO, Report on part 2 o f study 1, Segregated B a l l a s t aboard Product  tankers and smal1er crude c a r r i e r s , Report by the United S t a t e s , 1973 IMCO, Report on Study 3, Retention on board, Report by the United Kingdom, 1973 IMCO, Report on study 4, Clean B a l l a s t i n g before s a i l i n g from  Discharging Port (by P. Theobald), /Report by France, 1973 IMCO, Report on study 5, Retaining d i r t y b a l l a s t on board f o r  Port D i s p o s a l , Report by I s r a e l , 1973 5 See U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Port  C o l l e c t i o n and Separation f a c i l i t i e s f o r o i l y wastes, Report by F r e d e r i c R. H a r r i s , Inc., Washington D.C, 1973. U.S. Department of Commerce Maritime A d m i n i s t r a t i o n , Tanker Tank  Cleaning Research Program, Report by MSA Research Corporation, Washington, D.C. 1974. Maybourn, R. Crude O i l Washing, Proceedings of the IMCO Symposium on Prevention of P o l l u t i o n from s h i p s , Acapulco, March 1976. Gray, W.O., Segregated B a l l a s t and Related Aspects of Tanker design. Proceedings o f the IMCO Symposium on Prevention of p o l l u t i o n from s h i p s , Acapulco, March 1976. IMCO, Introduction o f segregated b a l l a s t i n e x i s t i n g Tankers, Report by Greece, I t a l y and Norway to the IMCO Marine Environment P r o t e c t i o n committee, May 1976. -16--17-See i n p a r t i c u l a r Heaver, T.D. and Waters, W.G., An Economic  A n a l y s i s of c o n t r o l s on the discharges of oi1 at sea. Proceedings of the Canadian T r a n s p o r t a t i o n Research Forum, Quebec C i t y , May 1974. ^Burrows and others, "Operational dumping and the p o l l u t i o n of the sea by o i l : An e v a l u a t i o n of preventive measures" Journal of  Environmental Economics and Management, 1: 202-218, 1974. Q By U.S. law, U.S. Domestic trade i s open to U.S. v e s s e l s only. g U.S. Coast Guard, F i n a l Environmental Impact Statement: Regulations  f o r tank v e s s e l s engaged i n the c a r r i a g e o f o i l i n domestic trade. (Washington D.C. August 1975) CHAPTER 2 TANKER OPERATIONAL POLLUTION CONTROL 2.1 GENERAL Tanker operational o i l p o l l u t i o n mainly a r i s e s through the disposal o f the o i l and water mixtures generated during tank c l e a n i n g and b a l l a s t i n g operations. Tankers, l i k e other ships a l s o develop o i l y - w a t e r mixtures i n t h e i r machinery b i l g e s and these mixtures c r e a t e p o l l u t i o n problems. While these b i l g e discharges are a source of p o l l u t i o n , they are not d e a l t with i n t h i s study as they are not s p e c i f i c to tankers. Tankers are only r e s p o n s i b l e f o r a l i m i t e d f r a c t i o n o f b i l g e discharges (as shown i n t a b l e ( 2 ) ) . Tanker operations a l s o generate a i r and sea p o l l u t i o n by o i l •p through cargo evaporation and fuel combustion."' TABLE 2 i n d i c a t e s that cargo evaporation a c t u a l l y represents a s i g n i f i c a n t amount of o i l r e l a t i v e to the t o t a l amount of o i l discharged o p e r a t i o n a l l y by tankers. While t h i s i s not considered as a s i g n i f i c a n t source of marine p o l l u t i o n , i t may create s e r i o u s a i r p o l l u t i o n problems i n harbour areas. Regarding f u e l 2 combustion, a v a i l a b l e estimates suggest that the amount of unburned o i l emitted as a r e s u l t o f fue l combustion i s n e g l i g i b l e . In any event, these l a s t two sources of p o l l u t i o n have been given very l i t t l e a t t e n t i o n and there does not seem to be any attempt to c o n t r o l them. Accodingly, they are not considered here. -19-TABLE 2 SHIP OPERATIONAL DISCHARGES OF OIL SOURCE SOURCE ESTIMATED OIL INPUT TONS/YEAR Tanker c l e a n i n g and b a l l a s t i n g 9 ( i n c l u d i n g drydocking) Tanker machinery b i l g e s 9 Machinery b i l g e s from other ships' Tanker cargo evaporation losses' 5 Fuel combustion' 3 (unburned f u e l ) 1,330,000 50,000 450,000 300,000 n e g l i g i b l e Source: National Academy of Sciences, 1975, p.6. ^These estimates are derived from U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Survey o f ship discharges, 1974. -20-Focusing now on tank c l e a n i n g and b a l l a s t i n g operations, i t must be noted t h a t , while a l l o i l tankers have to perform these operations r o u t i n e l y , the b a l l a s t i n g and c l e a n i n g requirements and methods d i f f e r widely depending on whether the vessel i s a crude o i l tanker, a product tanker c a r r y i n g r e f i n e d o i l products, or a combination c a r r i e r (or 0B0 tanker) a l t e r n a t i n g o i l and other bulk products, such as ore or g r a i n . This study focuses mainly on crude o i l tankers, since the crude o i l t r a f f i c represents more than 80 per cent o f a l l o i l t r a f f i c . However, the p o l l u t i o n control techniques a v a i l a b l e f o r product or 0B0 tankers can be a p p l i e d to crude o i l tankers (the reverse being not t r u e ) . These techniques are d e a l t with here, t h e r e f o r e , and the s p e c i f i c problems posed by 0B0 and product v e s s e l s discussed although i n r a t h e r more general terms. 2.2 THE CASE OF NO POLLUTION CONTROL A t y p i c a l o p e r a t i o n a l scheme f o r a tanker not p r a c t i c i n g p o l l u t i o n control procedures would be as f o l l o w s . (1) S t a r t i n g a f t e r o r during cargo unioa'd.ingaattthe/port, the appropriate q u a n t i t y of baillast-fwater i s loaded d i r e c t l y i n t o cargo tanks so as to ensure safe o p e r a t i o n o f the ship and proper p r o p e l l e r immersion. The b a l l a s t water mixes with the o i l y residues i n the tanks to form d i r t y b a l l a s t . (2) A s u i t a b l e number o f tanks are cleaned while at sea with the o i l y washwaters being discharged to the sea. (3) In order to avoid considerable p o l l u t i o n o f harbour waters 4 at the loading port, the d i r t y b a l l a s t i s dumped while a t sea. At the same time, the proper q u a n t i t y of c l e a n b a l l a s t water i s taken i n t o cleaned tanks so that the t r i p may be completed i n good c o n d i t i o n s . -21-(4) The clean b a l l a s t , which i s g e n e r a l l y s u i t a b l e f o r disposal i n harbour waters i s discharged a t the port p r i o r to or during cargo l o a d i n g . (5) On the r e t u r n t r i p , the tanker i s f i l l e d with cargo;} tank c l e a n i n g or b a l l a s t i n g i s no longer needed. 2.2.1 Clingage The commonly used term of "cling a g e " r e f e r s to the t o t a l amount of o i l l e f t i n the vessel a f t e r discharge. I t includes the cargo r e t a i n e d on tank s u r f a c e s , the sludge deposits on tank bottoms and i n s i d e s t r u c t u r e s and the o i l remaining i n the p i p i n g system a f t e r cargo discharge. The c l i n g a g e may be as low as .1% of deadweight (DWT) f o r l i g h t o i l s and as high as 1.5% of DWT f o r very heavy products such as r e s i d u a l fu e l o i l . 5 For crude o i l s , a t y p i c a l f i g u r e i s .4% ofi DWT, or 800 tons, on a 200^000 DWT tons VLCC; 6 but i t can vary h i g h l y depending on the f o l l o w i n g f a c t o r s . (a) Type o f o i l - - A high wax content w i l l y i e l d waxy sediments. A high v i s c o s i t y or a high pour point w i l l make i t d i f f i c u l t to s t r i p the tanks at the end of cargo discharge. (b) Internal s t r u c t u r e o f the tanks—Smooth surfaces l i m i t the build-up of resid u e s . The cli n g a g e tends to be r e l a t i v e l y smaller i n center tanks than i n the s t r u c t u r a l l y more complex wing tanks. (c) Type o f tank c o a t i n g — T h i s a f f e c t s the adherence of the o i l on tank s u r f a c e s . (d) S t r i p p i n g c a p a b i l i t y and c o n d i t i o n s — T h e drainage o f the tanks may be more or l e s s e f f e c t i v e depending on the type of s t r i p p i n g pumps, and the c o n d i t i o n s (temperature, vessel t r i m ) during discharge. -22-(e) S t r i p p i rig procedure—General 1y the procedure used to s t r i p the cargo maximizes the amount of o i l discharged ashore and, t h e r e f o r e , minimizes the amount r e t a i n e d i n the ship. In p a r t i c u l a r , the l a r g e r cargo l i n e s are drained i n t o a tank where the s t r i p p i n g pumps are employed to send as much of the o i l as p o s s i b l e ashore. Some sh i p s , however, d e l i b e r a t e l y c u r t a i l the s t r i p p i n g procedure p a r t i c u l a r l y when tanker time i s considered to be at a greater primium than the r e c e i p t o f the l a s t p o s s i b l e ton o f cargo. ( f ) T r i p c o n d i t i o n s — T h e amount o f waxy deposits i s a f u n c t i o n of time the cargo i s i n the ship and the temperature of the cargo. Long voyages and low temperatures r e s u l t i n higher c l i n g a g e values. 2.2.2 B a l l a s t i n g Operations B a l l a s t i s needed to provide the ship with proper manoeuvrability and s t a b i l i t y c h a r a c t e r i s t i c s , to avoid s t r u c t u r a l damages under severe weather c o n d i t i o n s , and to ensure general crew comfort. B a l l a s t i n g p r a c t i c e s vary widely from ship to ship as they depend upon the ship's c h a r a c t e r i s t i c s , such as s i z e and p r o p o r t i o n s , and the shipmaster/s experience. According to various s o u r c e s / the volume of b a l l a s t c a r r i e d aboard the ship under current p r a c t i c e may be as low as 20% and as high as 65% of the 8 ship's deadweight c a p a c i t y . However, there appears to be two basic c o n d i t i o n s , one f o r normal weather (Beaufort 5 or l e s s ) and the other f o r wough weather. On the average, the amount of b a l l a s t w i l l be roughly between 35% and 40% of the deadweight c a p a c i t y under good weather c o n d i t i o n s and between 50% and 60% when heavy weather i s expected (with the lower f i g u r e under each case g e n e r a l l y corresponding to the l a r g e r s h i p s ) . -23-A l l t h i s b a l l a s t i s not c a r r i e d i n d i r t y cargo tanks. Most ships are provided with s p e c i a l tanks p r i m a r i l y f i t t e d t o reduce the maximum st r e s s e s but capable o f c a r r y i n g some clean b a l l a s t , known as the segregated b a l l a s t . The segregated b a l l a s t c a p a c i t y t y p i c a l l y represents 10-12% of the deadweight c a p a c i t y on a conventional VLCC and 15-20% on smaller ships. As a r e s u l t the d i r t y b a l l a s t w i l l amount to 20-25% of the deadweight c a p a c i t y under good weather c o n d i t i o n s and 35-40% when rough weather i s expected, whatever the ship s i z e . Q I t has been estimated that 80% of the c l i n g a g e remaining i n the tank i s discharged to the sea when d i r t y b a l l a s t i s discharged overboard i n the absence of p o l l u t i o n c o n t r o l procedures. In a d d i t i o n , most of the o i l l e f t i n the ship's piping system w i l l be washed out upon d e b a l l a s t i n g . This o i l may represent up to 90% of the t o t a l c l i n g a g e f o r l i g h t o i l t a n k e r s ^ while according to one e x p e r t ^ a t y p i c a l f i g u r e would be 10 per cent f o r crude o i l tankers. TABLE (3) summarizes the above f i g u r e s and shows the average o i l discharge from d e b a l l a s t i n g operations f o r a conventional crude o i l tanker not p r a c t i c i n g p o l l u t i o n c o n t r o l procedures. Given that none of the r e l e v a n t parameters (clingage value, d i r t y b a l l a s t requirements...) i s s i g n i f i c a n t l y a f f e c t e d by tanker s i z e , i t i s c l e a r from the c a l c u l a t i o n s described i n TABLE (3) that the average o i l discharge from d e b a l l a s t i n g operations i s roughly proportional to tanker s i z e . A c c o r d i n g l y , the c a l c u l a t i o n s are only made here f o r a basic s i z e of 100,000 deadweight tons. They show that a 100,000 DST tanker discharges 105 to 148 tons of o i l (per t r i p ) i n the average, during d e b a l l a s t i n g , unless p o l l u t i o n control procedures are followed. A 200,000 DWT tanker would discharge twice as much. -24-TABLE 3 AVERAGE DISCHARGE DURING DEBALLASTING OPERATIONS FOR A 100,000 DWT CRUDE OIL TANKER NOT PRACTICING POLLUTION CONTROL PROCEDURES GOOD WEATHER BAD WEATHER CIingage - Tanks - Piping system - Total 360 tons 40 tons 400 tons 360 tons 40 tons 400 tons Capacity o f d i r t y B a l l a s t  tanks (DBT) as a percentage  o f deadweight c a p a c i t y 20-25% 35-40% Average o i l discharge during  d e b a l l a s t i n g operations - pip i n g system - d i r t y b a l l a s t (80% per cent of cli n g a g e i n DBT) - Total 40 t o n s / t r i p 65 t o n s / t r i p 105 t o n s / t r i p 40 t o n s / t r i p 108 t o n s / t r i p 148 t o n s / t r i p -25-2.2.3 Tank CIeaninq Operations The need f o r c l e a n i n g cargo tanks a r i s e s f o r the f o l l o w i n g reasons: a) To prepare the cargo tanks intended f o r clean b a l l a s t . b) To prevent or minimize the accumulation of cargo sediments. c) To allow r o u t i n e tank i n s p e c t i o n and maintenance i n s a f e - f o r -men c o n d i t i o n s . d) To prepare the cargo tanks f o r a new cargo (change of cargo) e) To prepare the ship f o r shipyard r e p a i r and p e r i o d i c a l overhaul (tanker drydocking). 2.2.3.1 Tanker Drydocking A ship entering drydock f o r r e p a i r or overhaul has to be completely f r e e o f o i l y r e s i d u e s . Ships not p r a c t i c i n g p o l l u t i o n c o n t r o l procedures w i l l be cleaned e n t i r e l y while at sea and the o i l y washwaters w i l l be discharged overboard. According to T h e o b a l d , ^ "although i t has been claimed that with modern p a i n t i n g s ships w i l l drydock once very 13 months or even every 2 y e a r s , the experience so f a r shows that on account o f breakdowns, i n c i d e n t s and other c o n t i n g e n c i e s , ships undergo a r e p a i r work On average every year." Therefore, assuming as p r e v i o u s l y that the c l i n g a g e represents .4% of the deadweight, a 100,000 DWT crude o i l tanker not p r a c t i c i n g p o l l u t i o n c o n t r o l procedures w i l l discharge on the average 400 tons of o i l per year due to drydocking requirements. 2.2.3.2 Change of Cargo In g e n e r a l , product tankers can not mix the next cargo with the residues o f the previous one. (This i s a l s o true f o r 0B0 tankers s h i f t i n g -26-from crude o i l to another bulk product. In such cases, the tanks p r e v i o u s l y used f o r o i l have t o be cleaned during the b a l l a s t voyage, p r i o r to loading the new cargo). This means that the c l i n g a g e (100 to 1,500 tons of o i l f o r a 100,000 DWT tanker) i s discharged overboard unless co n t r o l procedures are adopted. On the other hand, i t i s not necessary on crude o i l tankers to clean a l l the tanks p r i o r to l o a d i n g because i t i s p o s s i b l e to mix a crude o i l cargo with residues from another one. As a r e s u l t , on crude o i l tankers the number of tanks to be cleaned on a r o u t i n e voyage w i l l not exceed that req u i r e d f o r sediment c o n t r o l , r o u t i n e maintenance and clean b a l l a s t . 2.2.3.3 Routine c l e a n i n g on crude o i l tankers According to the above s e c t i o n on b a l l a s t i n g o p e r a t i o n s , the tank c a p a c i t y to be washed f o r clean b a l l a s t purposes represents under current p r a c t i c e , 20-25% of the deadweight c a p a c i t y i n good weather and 35-40% when rough weather i s expected. Some a d d i t i o n a l tanks may a l s o have to be cleaned f o r sediment c o n t r o l or r o u t i n e maintenance. "Where sediment buildup does not c r e a t e severe o p e r a t i o n a l problems, washing f o r sediment c o n t r o l may be concentrated on the l a s t few voyages before scheduled shipyard r e p a i r " . ^ The most common p r a c t i c e , however, i s to wash several tanks on each b a l l a s t voyage so t h a t a l l tanks are washed every f i v e to s i x voyages. Since center tanks are most e a s i l y cleaned, they are g e n e r a l l y washed i n r o t a t i o n f o r clean b a l l a s t . T y p i c a l l y one a d d i t i o n a l p a i r of wing tanks, representing 5-10% of the deadweight c a p a c i t y i s a l s o washed, p r i m a r i l y f o r residue c o n t r o l and r o u t i n e maintenance but i t i s used f o r clean b a l l a s t i n case of bad weather. On v e s s e l s not p r a c t i c i n g p o l l u t i o n c o n t r o l procedure, the t o t a l i t y of the c l i n g a g e remaining i n the tank i s discharged to the sea when the tank -27-i s washed. TABLE 4 d e s c r i b e s the r e s u l t i n g p o l l u t i o n : A 100,000 DWT tanker discharges-108: to 135 tons of o i l (.per t r i p ) , on the average, during c l e a n i n g , unless p o l l u t i o n control procedures are followed. 2.2.4 The case of No P o l l u t i o n C o n t r o l : Summary Product tankers (and 0B0 v e s s e l s s h i f t i n g from crude o i l to another bulk product) have to get r i d of the o i l l e f t i n the tanks and p i p i n g system. Depending on the c l i n g a g e t h i s represents between 100 and 1,500 tons of o i l f o r a 100,000 DWT tanker. These are simply dumped over-board i n the absence o f p o l l u t i o n c o n t r o l procedures. A crude o i l tanker s a i l i n g f o r drydock a l s o has to get r i d of a l l i t s o i l y r e s i d u e s . T y p i c a l l y , the r e s u l t i n g discharges f o r a 100,000 DWT crude o i l tanker not p r a c t i c i n g p o l l u t i o n c o n t r o l procedures contains something i n the order of 400 tons of o i l . This happens approximately once a year. On a r o u t i n e voyage, however, crude o i l tankers discharge only a f r a c t i o n o f t h e i r c l i n g a g e at sea even i n the absence of p o l l u t i o n control procedures. TABLE 5 summarizes these r o u t i n e discharges f o r a 100,000 DWT crude o i l tanker. According to t h i s TABLE, depending on the weather, 50 to 75% of the clingage (or 200 to 300 tons of o i l f o r 100,000 DWT tanker) w i l l be discharged on the b a l l a s t voyage unless c o n t r o l procedures are adopted. Bad weather increases the discharge o f o i l by about one t h i r d . 2.3 TECHNIQUES FOR CONTROLLING TANKER OPERATIONAL POLLUTION: A GENERAL REVIEW There are two b a s i c ways to reduce tanker operational discharges o f o i l . T h e s f i r s t one c o n s i s t s o f processing the o i l y water mixtures generated -28-TABLE 4 AVERAGE DISCHARGE DURING TANK CLEANING OPERATIONS FOR A'100,000 DWT CRUDE OIL TANKER NOT PRACTICING POLLUTION CONTROL PROCEDURES Good Weather Bad Weather Total c l i n g a g e i n tanks 360 tons 360 tons Tank Capacity to be cleaned (% of DWT) - Clean B a l l a s t 20-25% 35-40% - Residue control 5-10% 0% and r o u t i n e maintenance - Total 25-35% 35-40% Average o i l discharge during tank c l e a n i n g (100% o f c l i n g a g e i n cleaned tanks) 108 t o n s / t r i p 135 t o n s / t r i p -29-TABLE 5 OPERATIONAL OIL DISCHARGE PER TRIP FOR A 100,000 DWT CRUDE OIL TANKER NOT PRACTICING POLLUTION CONTROL PROCEDURES Good Weather Bad Weather Total c l i n g a g e (.4% o f DWT) 400 t o n s / t r i p 400 tons/ t r i p O i l discharge from  d e b a l l a s t i n g operations - p i p i n g system - d i r t y b a l l a s t tanks - t o t a l 40 t o n s / t r i p 65 t o n s / t r i p 105/tons/trip 40 t o n s / t r i p 108 t o n s / t r i p 148 t o n s / t r i p O i l discharge from  c l e a n i n g operations 108 t o n s / t r i p 135 t o n s / t r i p Total operational oid» discharge 213 t o n s / t r i p 283 t o n s / t r i p -30-by b a l l a s t i n g and c l e a n i n g operations i n order to reduce the o i l content of these mixtures before discharge. The second way addresses the problem a t i t s source. I t b a s i c a l l y c o n s i s t s of reducing the amounts of d i r t y b a l l a s t and washwaters to be handled or the amount o f o i l that may enter i n contact with water. In other words, i t reduces p o t e n t i a l p o l l u t i o n . 2.3.1 Treatment of o i l y mixtures D i r t y b a l l a s t and o i l y washwaters may be t r e a t e d e i t h e r on the shore or on the s h i p , or on both. Treatment on the shore i n v o l v e s s p e c i a l f a c i l i t i e s where the o i l i s separated from the water by some chemical or p h y s i c a l process. Most s h i p s , however are equipped to t r e a t t h e i r o i l mixtures d i r e c t l y on board through the "retention-on-board" system (ROB). Under t h i s system, the mixtures are allowed to s e t t l e f o r a s u f f i c i e n t time so that the o i l separates from the water. Thus, only r e l a t i v e l y c l e a n water i s drawn o f f from the bottom o f the s e t t l i n g tanks. The r e t a i n e d o i l , and i t s r e s i d u a l s altwater may then be discharged ashore f o r f u r t h e r treatment and processing. In f a c t , however, s i n c e the r e s i d u a l mixture of crude o i l and saltwater i s g e n e r a l l y compatible with a new cargo of crude o i l , most crude o i l tankers use a v a r i a n t of the ROB system, c a l l e d the "Loan-on-Top" system (LOT) under which the r e t a i n e d residues are blended i n t o the new cargo loaded on top of the r e s i d u e s . 2.3.2 Reducing p o t e n t i a l tanker operational p o l l u t i o n The most obvious way to reduce the p o t e n t i a l p o l l u t i o n from b a l l a s t i n g operations i s to reduce t o t a l b a l l a s t requirements; l i g h t e r -31-tanker b a l l a s t i n g p r a c t i c e s are indeed s e r i o u s l y contemplated by present 14 tanker operators. A l t e r n a t i v e l y , d i r t y b a l l a s t requirements may be reduced by equipping the ship with a d d i t i o n a l segregated b a l l a s t c a p a c i t y . This technique has been given considerable a t t e n t i o n s i n c e 1970. The 1973 IMCO Convention f o r the Prevention of p o l l u t i o n from ships r e q u i r e s i t s implements a t i o n f o r new tankers over 70,000 DWT tons. The implementation on e x i s t i n g 15 v e s s e l s i s p r e s e n t l y discussed at IMCO. A t h i r d way would be to "back-carry" an adequate amount of o i l to serve as b a l l a s t . Given the present tanker surplus c a p a c i t y , t h i s i s p r e s e n t l y considered as one p o s s i b l e short-term s o l u t i o n to the b a l l a s t p o l l u t i o n problem. C l e a r l y , these techniques would a l s o reduce tank c l e a n i n g r e q u i r e -ments as the number of tanks to be cleaned f o r clean b a l l a s t would be reduced. However, even assuming t h a t the clean b a l l a s t problem i s completely e l i m i n a t e d , tanker operators would s t i l l be faced with the problem of c l e a n i n g f o r residue c o n t r o l , r o u t i n e maintenance, shipyard r e p a i r and change of cargo. As a r e s u l t , other techniques have been sought to reduce c l e a n i n g requirements. A r e c e n t l y developed technique has proven to be very e f f e c t i v e i n t h i s regard. This i s the crude washing t e c h n i q u e ^ under which crude o i l i s used as the washing f l u i d to wash cargo tanks during cargo discharge. A c t i n g as a s o l v a n t , crude o i l d i s s o l v e s sludge and sediments and allows t h e i r movement out of the tank with the cargo being discharged. Crude washing i s g e n e r a l l y s u f f i c i e n t f o r c o n t r o l l i n g sediment build-up and preparing the tanks f o r r o u t i n e maintenance. Since some f r e e o i l remains i n the tanks a f t e r crude washing, water washing i s s t i l l r e q u i r e d f o r c l e a n b a l l a s t o r drydocking. In t h i s case, however, i t may be kept to a minimum due to the absence of sludge and sediments. F i n a l l y , the o i l -32-content of d i r t y b a l l a s t and washwaters w i l l be small a f t e r crude washing due to the reduced c l i n g a g e . This makes subsequent treatment e a s i e r . There are other techniques to reduce the c l i n g a g e . Smoother tank designs, s p e c i a l tank coatings and more e f f i c i e n t tank s t r i p p i n g at the unloading port may a l s o achieve t h i s r e s u l t , a n d , t h e r e f o r e , reduce the frequency o f water cleaning and the contamination of whatever o i l y mixtures are generated. F i n a l l y , an a t t r a c t i v e technique to reduce the amount of o i l y washwater to be handled i s to use a c l o s e d washing system which r e c i r c u l a t e s the washwater, thus reducing the amount to be handled by up to 10 times. A s i m i l a r r e s u l t may be achieved by using s t r i p p i n g pumps ins t e a d of eductors^ to s t r i p tank washings from the tanks being washed. This w i l l e l i m i n a t e the need f o r contaminating the l a r g e amounts of f r e s h seawater which are r e q u i r e d to d r i v e the eductors. It must be noted that the use of crude washing or c l o s e d washing techniques may a f f e c t tanker s a f e t y because they create an explosion hazard. In f a c t , these techniques may only be used on tankers equipped with a s p e c i a l a n t i - e x p l o s i o n system c a l l e d i n e r t gas system. 2.3.3 Other techniques The above two basic approaches to reduce tanker operational p o l l u t i o n can c l e a r l y be combined. For example, t h i s may i n v o l v e the use of ROB procedures and shore treatment f a c i l i t i e s together with crude washing and segregated b a l l a s t techniques. One p a r t i c u l a r technique, however, i s i n i t s e l f a combination of both approaches. I t c o n s i s t s of c l e a n i n g the tanks at the unloading port before b a l l a s t i n g , using a shorettreatment f a c i l i t y to handle the o i l y washwaters. An i n t e r e s t i n g f e a t u r e of t h i s -33-technique, which i s c u r r e n t l y implemented i n a major mediterranean port,' i s that i t reduces or e l i m i n a t e s the need f o r d i r t y b a l l a s t . Other techniques have been imagined but these are g e n e r a l l y not considered as p r a c t i c a l a t t h i s time. For example, there have been experiments of breeding micro-organisms which w i l l attack and break down o i l mixed with water. The f e a s i b i l i t y o f t h i s approach i s s t i l l q u i t e u n c e r t a i n and i t i s not considered here. The p o s s i b i l i t y of f i t t i n g the tanks wwith f l e x i b l e impermeable membranes to i s o l a t e o i l from tank surfaces has a l s o been considered. This would e l i m i n a t e the d i r t y b a l l a s t problem and reduce c l e a n i n g requirement to the occasional c l e a n i n g o f the membranes. However, due to the complex i n t e r n a l s t r u c t u r e o f the tanks, t e c h n i c a l 19 d i f f i c u l t i e s made t h i s approach i n a p p r o p r i a t e . I t must be noted to conclude t h i s s e c t i o n , t h a t the above techniques may be, and are alread y i n p r a c t i c e , combined i n a number o f ways. The next s e c t i o n s w i l l examine current p r a c t i c e s , problems and proposals, which w i l l make i t p o s s i b l e to i s o l a t e r e l e v a n t a l t e r n a t i v e s f o r f u r t h e r i n v e s t i g a t i o n . 20 2.4. Current p r a c t i c e s The disposal of o i l from tankers had been a matter of i n t e r n a t i o n a l concern f o r many years. Yet, the f i r s t i n t e r n a t i o n a l conference to-produce a n ^ i n t e f n a t i o n a l , : t r e a t y on the t o p j c y was only held i n 1954. This t r e a t y , t h e " I n t e r n a t i o n a l Convention f o r the Prevention of P o l l u t i o n o f the Sea by O i l 1 entered i n t o f o r c e i n 1958. In 1962, IMCO convened another i n t e r n a t i o n a l conference to strengthen the 1954 r e g u l a t i o n s . The 1954 Convention, as amended i n 1962, became i n t e r n a t i o n a l law i n 1967. I t i s s t i l l e x i s t i n g law on the s u b j e c t t o f tanker operational p o l l u t i o n . -34-I t i s widely recognized in government as well as i n i n d u s t r y c i r c l e s t h a t t h i s law has had no s i g n i f i c a n t impact on tanker p o l l u t i o n . T h i s i s f o r the f o l l o w i n g reasons. a) The 1954 convention and 1962 amendments are only concerned with s o - c a l l e d p e r s i s t e n t or heavy o i l s , t h a t i s , crude o i l , f u e l o i l , heavy d i e s e l o i l and l u b r i c a t i n g o i l . There i s no l i m i t a t i o n on the discharge of non p e r s i s t e n t l i g h t o i l s . b) As regards p e r s i s t e n t o i l s , the 1954 convention, as amended i n 1962, permits any discharge having an o i l content l e s s than 100 parts per m i l l i o n (100 ppm). More importantly, a l l tankers b u i l t p r i o r to entry i n t o f o r c e (1967) and a l l new tankers under 20,000 gross tons are permitted to dump u n l i m i t e d q u a n t i t i e s o f o i l o u t s i d e o f s p e c i f i e d p r o h i b i t e d zones (50 to 100 miles from l a n d ) . c) For new tankers above 20,000 gross tons compliance with the law may be achieved i n two ways: (1) the o i l y water mixtures are discharged i n t o some shore f a c i l i t y or (2) the o i l y mixtures are handled through the LOT system, using an o i l - i n - w a t e r monitor to keep the o i l content o f the discharge below the 100 ppm l i m i t . A c c o r d i n g l y , compliance with the law i s g e n e r a l l y not p o s s i b l e since the r e q u i r e d shore f a c i l i t i e s are u s u a l l y l a c k i n g or inadequate and s i n c e only a few ships are equipped with a r e l i a b l e monitor (monitors are not r e q u i r e d under current law). d) The use of a shore f a c i l i t y i n v o l v e s a d d i t i o n a l costs and delays. Even when such f a c i l i t y i s a v a i l a b l e , i t i s always f i n a n c i a l l y p r e f e r a b l e to handle o i l y mixtures while at sea. U n t i l implementation o f the LOT system, most common p r a c t i c e was simply to dump at sea. Given a v a i l a b l e technology, i t was, and i t i s s t i l l , extremely d i f f i c u l t to prove v i o l a t i o n of the 100 ppm l i m i t . In any case, sanctions are r a r e l y severe as -35-they are l e f t to the d i s c r e t i o n of the f l a g - s t a t e a d m i n i s t r a t i o n . Coastal and port s t a t e s are powerless unless the v i o l a t i o n i s proved to have occurred in t h e i r t e r r i t o r i a l waters (12 miles from the shore). In the e a r l y 60's i t became evident to the o i l and shipping i n d u s t r y t h a t , i n view o f the dramatic growth i n tanker t r a f f i c , the ever i n c r e a s i n g tanker s i z e and the r i s i n g p u b l i c concern over p o l l u t i o n matters, something had to be done to c o n t r o l e f f e c t i v e l y tanker operational p o l l u t i o n . To prevent i n d i v i d u a l c o u n t r i e s taking severe and c o s t l y measures to p r o t e c t t h e i r marine environment, the i n d u s t r y began to promote the use of the LOT system. In 1969 the IMCO assembly adopted amendments to the 1954 Convention. The amendments e s t a b l i s h e d standards w i t h i n which the use of LOT would be p o s s i b l e . By s p e c i f y i n g a l i m i t a t i o n on t o t a l q u a n t i t y of o i l discharged by b a l l a s t voyage (1/15000 of deadweight) i t made the use of ROB procedures^ compulsory i n p r a c t i c e . By p r o h i b i t i n g any discharge w i t h i n 50 miles frcom l a n d , i t made enforcement e a s i e r s i n c e i t was no longer necessary to measure the o i l content to prove v i o l a t i o n w i t h i n the 50 miftes zone. A d e t a i l e d o i l record book was a l s o r e q u i r e d which would f u r t h e r s i m p l i f y enforcement as routtine i n s p e c t i o n s of the vessel and o i l record book made i t p o s s i b l e to prove d e f i n i t e v i o l a t i o n s . F i n a l l y , o u t s i d e of the 50 miles zone, no dumping of o i l was permitted and the 100 ppm l i m i t f o r l a r g e r tankers was replaced by a "60 l i t e r s of o i l per m i l e " l i m i t f o r a l l tankers, which prevented a vessel to discharge l a r g e q u a n t i t i e s of o i l while at anchor. Despite the f a c t t h a t most tankers are now p r a c t i c i n g r e t e n t i o n 21 on board procedures, the 1969 amendments have not come i n t o f o r c e y e t . T h i s i s due to the f o l l o w i n g reasons: -36-- A l a r g e number of signatures are needed before the 1969 amendments are e f f e c t i v e twelve months l a t e r (at l e a s t 32 nations must r a t i f y ) . - The process of implementation of i n t e r n a t i o n a l conventions has always been slow, because of governmental and parliamentary i n e r t i a . - The use of LOT i s impossible i n some cases (short voyages, drydocking, cargo change) so that the 1969 amendments imply the c o s t l y use o f expensive shore f a c i l i t i e s . - Some c o u n t r i e s are not s a t i s f i e d with the LOT system because i t i s subject to i n t e r n a t i o n a l and a c c i d e n t a l f a i l u r e s , and t h e r e f o r e viewed as u n e f f e c t i v e to p r o t e c t the marine environment. In view o f the previous f a c t s , i t i s now appropriate to look i n some d e t a i l a t the LOT system. This w i l l ^ p e r m i t a b e t t e r understanding of current proposals. 2.5 THE LOT SYSTEM 2.5.1 The LOT procedure The basic LOT procedure may be described as f o l l o w s : 1) At the p o r t , the a p p r o p r i a t e q u a n t i t y o f b a l l a s t water i s loaded i n t o d i r t y tanks and the remaining o i l i n the piping system i s f l u s h e d i n t o these tanks. 2) A s u i t a b l e number o f tanks are cleaned with water. The o i l y washwater i s sent to a holding tank c a l l e d the slop tank. In the s l o p tank, the o i l separates from the water and the r e l a t i v e l y c l e a n water i s drawn r e g u l a r l y from the bottom of the tank so that there i s always enough c a p a c i t y l e f t i n the tank. 3) New b a l l a s t i s taken i n t o c l e an tanks and the c l e a n p a r t of the -37-s e t t l e d d i r t y b a l l a s t i s drawn from the bottom of the d i r t y b a l l a s t tanks. The o i l y l a y e r on the top o f the d i r t y b a l l a s t i s sent to the slop tank f o r f u r t h e r s e paration. 4) The o i l y residues or slops t r a n s f e r r e d to the slop tank are allowed to separate out, and again the r e l a t i v e l y c l e an water i s discharged to the sea. 5) At the load i n g p o r t , the c l e a n b a l l a s t i s pumped out and the new cargo i s loaded on top o f the s l o p s . A l t e r n a t i v e l y , the slops may be discharged to a slop r e c e p t i o n f a c i l i t y on the shore. 2.5.2 The e f f e c t i v e n e s s o f the LOT system I f enough time i s provided f o r the o i l y mixtures i n the slop and d i r t y b a l l a s t tanks to separate out, i t i s g e n e r a l l y agreed that the c o r r e c t operation o f LOT r e s u l t s i n only one to f i v e per cent o f the o i l contained i n d i r t y b a l l a s t and washwaters being discharged to the sea. In other words, LOT i s 95 to 99 per cent e f f e c t i v e when used p r o p e r l y a f t e r 22 s u f f i c i e n t s e t t l i n g time. The actual e f f e c t i v e n e s s o f the LOT system i s g e n e r a l l y lower than i n d i c a t e d by the above f i g u r e s . This i s g e n e r a l l y due to one or more of the f o l l o w i n g problems. 2.5.2.1 The short-haul problem It i s estimated that depending on weather and clin g a g e c o n d i t i o n s 23; two to fo u r days are necessary f o r a proper LOT operations o " " ' On some; trades such as those taking place w i t h i n the Mediterranean or B a l t i c Seas, -38-the b a l l a s t voyage re q u i r e s l e s s than 4 days unless the vessel i s slowed down or d i v e r t e d at a cost i n time and money. In such cases, the separation process may not always be completed w i t h i n the time a v a i l a b l e so that l a r g e q u a n t i t i e s o f o i l are discharged with the s e t t l e d water. 2.5.2.2 D e s t i n a t i o n of the slops On most r o u t i n e voyages, the slops are simply destined to be mixed with the next cargo. I f , however, t h i s i s impossible f o r some reason, the ship has to get r i d o f i t s slops somewhere. This i s p a r t i c u l a r l y r e l e v a n t f o r tankers preparing f o r drydock or a change o f cargo s i n c e they must be u l t i m a t e l y f r e e o f s l o p s . This may a l s o be a problem f o r v e s s e l s on the spot market as those are o f t e n required to a r r i v e f r e e of slops at the l o a d i n g port. In such cases, small tankers u s u a l l y dump t h e i r slops i n a non-prohibited zone while l a r g e r v e s s e l s are r e q u i r e d under the e x i s t i n g law to use a s l o p r e c e p t i o n f a c i l i t y at the port. Quite o f t e n , however, the f a c i l i t y i s inadequate or simply not a v a i l a b l e so that the ship must go to another port or wait. To save time and money, many ships simply p r e f e r to dump t h e i r slops while at sea. In t h i s regard, Theobald i n d i c a t e d i n 1972 that i n r e p a i r harbours south of Brest more than 50 per cent of a l l 24 tankers used to dump a l l t h e i r slops while at sea. 2.5.2.3 Problems f o r tankers on r o u t i n e long-haul t r i p s Even on r o u t i n e long-haul voyages.? i t he actual e f f e c t i v e n e s s of the LOT system i s not as high as could be t h e o r e t i c a l l y expected. In 1971 major o i l companies i n v e s t i g a t e d a l l tankers loading at two major load i n g terminals -39-over a 6 months period. V i r t u a l l y a l l v e s s e l s were operating on long-haul trades and purporting to perform LOT. But the i n v e s t i g a t i o n showed t h a t , i n f a c t , roughly "one-third of tankers inspected appeared to have performed LOT adequately, o n e - t h i r d were suspected o f i n d i f f e r e n t performance and the 25 remaining t h i r d had made no attempt to r e t a i n t h e i r r e s i d u e s " Therefore the tankers surveyed were d i s c h a r g i n g , as a global average, about 50 per cent o f the o i l contained i n d i r t y b a l l a s t and washwaters instead of the one to f i v e per cent t h e o r e t i c a l l y expected. This global performance was due to one or more of the f o l l o w i n g causes: a) Human e r r o r s under d i f f i c u l t c o n d i t i o n s — U n d e r d i f f i c u l t c o n d i t i o n s of sludge and wax accumulation or i n u n s u i t a b l e weather c o n d i t i o n s adequate cle a n i n g and separation are made longer and more arduous. As the men get t i r e d , short cuts become more a t t r a c t i v e and e r r o r s are made e a s i l y . I f discharge i s attempted before the separation process i s complete so that the o i l water i n t e r f a c e i s imprecise or i n a c c u r a t e l y detected, serious p o l l u t i o n may occur. b) D e l i b e r a t e discharges--L0T may not only be arduous to operate i t may a l s o c o s t money and time. The cost i s however not n e c e s s a r i l y the same f o r a l l ships. Neither i s the d e s i r a b i l i t y to avoid p o l l u t i o n . As a consequence, under the same operating c o n d i t i o n s , some ships w i l l be l e s s r e l u c t a n t than others to discharge t h e i r o i l y r e s i d u e s . The " w i l l i n g n e s s to r e t a i n " w i l l be determined by the f o l l o w i n g f a c t o r s . b l ) Refinery p olicy—Some r e f i n e r i e s are not equipped to handle o i l with some s a l t water content and are r e l u c t a n t t h e r e f o r e to accept s l o p contaminated crude. In such a case, the ship tends to minimize the amount of slops to be mixed with normal cargo. However, as some major o i l f i e l d s get depleted saltwater -40-i s now found q u i t e o f t e n i n normal cargo so that most r e f i n e r i e s are now equipped to handle s a l t contaminated cargo. In a d d i t i o n , with the dramatic increase i n the p r i c e o f o i l , the value of the slops has g r e a t l y increased. As t h i s material i s not included i n the b i l l o f l a d i n g the r e f i n e r y at most pays the f r e i g h t on i t , which makes i t a very p r o f i t a b l e material f o r t h i s r e f i n e r y . As a r e s u l t most r e f i n e r i e s no longer emphasize slop minimization. Company p o l i c y — S o m e companies are more disposed than others to i n s i s t upon the e f f e c t i v e use of LOT in the i n s t r u c t i o n s given to the ships they c o n t r o l . This may come from a genuine concern f o r the environment or from the d e s i r e to maintain a good image i n the p u b l i c and to i n h i b i t the e f f o r t s o f environmentalist lobbying groups. In t h i s regard i t i s g e n e r a l l y considered that some o i l companies are more anxious to preserve t h e i r image than s p e c i a l i z e d shipping firms because they are g e n e r a l l y the f i r s t to s u f f e r from the p u b l i c ' s resentment. This i s a c t u a l l y one of the reasons why i n t e g r a t e d o i l i n t e r e s t s have se t up a r o u t i n e loading port i n s p e c t i o n at the terminals whrich they operate. The i n s p e c t i o n a p p l i e s to o i l company owned ships as well as to chartered ships and permits the i d e n t i f i c a t i o n of ships which d e f i n i t e l y do not use LOT e f f e c t i v e l y by comparing the content of the slop tank with 26 a t h e o r e t i c a l minimum der i v e d from a simplesformula. Repeated low performances give r i s e to p r o t e s t a t i o n to the s h i p , i t s owner -41-or i t s c h a r t e r e r , as appropr i a t e . This puts a d e f i n i t e pressure on ships c o n t r o l l e d by o i l companies while other ships may more e a s i l y ignore the p r o t e s t . In t h i s regard, according to Holdsworth, the o i l company route i n s p e c t i o n scheme showed that i n 1975 o i l companies owned ships were r e t a i n i n g roughly 50 per cent more slops than other ships (.45 per cent of the deadweight c a p a c i t y versus .30 per cent on the average). Assuming no s i g n i f i c a n t d i f f e r e n c e s i n operating c o n d i t i o n s between both types of ships and assuming that o i l company owned ships always operate LOT p r o p e r l y , that i s , they are roughly 95 per cent e f f e c t i v e , the other ships would be approximately 65 per cent e f f e c t i v e . on the average. Given that o i l companies owned tankers only represent o n e - t h i r d o f the world's tanker f l e e t a global estimate would be that LOT i s only 75 per cent e f f e c t i v e i n p r a c t i c e on route long-haul t r i p s . To compare the National Academy of Sciences used a 90 per cent f i g u r e t o reach i t s 27 worldwide o i l input estimates. The o i l company operated r o u t i n e i n s p e c t i o n scheme p a r t l y explains why o i l company ships tend to achieve b e t t e r LOT performances than other s h i p s . Another explanation i s that good LOT performances have become f i n a n c i a l l y d e s i r a b l e f o r ships c o n t r o l l e d by in t e g r a t e d o i l i n t e r e s t s s i n c e they generate p r o f i t s at the r e f i n e r y . On the contra r y , the LOT performance i s at best f i n a n c i a l l y i n d i f f e r e n t f o r independent shipping firms i f the f r e i g h t i s paid on the slops and d e f i n i t e l y undesirable i f t h i s f r e i g h t i s not piad. -42-b3) P o l l u t i o n prevention r u l e s and enforcement—Current i n t e r -national law provides very l i t t l e i n c e n t i v e to use LOT p r o p e r l y . Some c o u n t r i e s , however, have already implemented the 1969 amendments which e s s e n t i a l l y r e q u i r e the proper use of LOT and p r o h i b i t any discharge w i t h i n 50 miles from land. Ships s a i l i n g under the f l a g or i n the waters o f these c o u n t r i e s w i l l tend to be more r e l u c t a n t to discharge t h e i r slops than other s h i p s . This a l s o holds f o r the 1973 convention which, i n t e r a l i a , reproduces the 1969 amendments. The actual impact of the 1969 amendments and 1973 convention on LOT performances w i l l depend u l t i m a t e l y upon the enforcement p o l i c i e s of the r a t i f y i n g c o u n t r i e s . 2.5.3 Improving LOT performances It i s g e n e r a l l y considered i n o i l and shipping i n d u s t r y c i r c l e s t h a t whenever LOT can be p r o p e r l y used and enforced, i t i s the most p r a c t i c a l and l e a s t expensive s o l u t i o n to the operational p o l l u t i o n problem. According to t h i s view LOT should be the cornerstone of any c o n t r o l p o l i c y : other means such as segregated b a l l a s t tanks and shore treatment f a c i l i t i e s are j u s t useful to supplement LOT and s i m p l i f y i t s operation. Hence, a l l steps should be taken to improve the e f f e c t i v e n e s s of LOT and promote i t s c o r r e c t use. This would keep i n d i v i d u a l c o u n t r i e s from imposing u n n e c e s s a r i l y c o s t l y measures and p r o t e c t the good tanker operators a g a i n s t i r r e s p o n s i b l e ones. 28 To improve LOT performances, the i n d u s t r y and some governments have undertaken various programs to make the operation o f LOT e a s i e r . These i n v o l v e the development of control and monitoring equipment, such as o i l - w a t e r -43-separators, o i l content monitors and o i l - w a t e r i n t e r f a c e d e t e c t o r s . The separation process may a l s o be speeded up through improved pumping systems and slop tank design which prevent the formation o f d i f f i c u l t - t o - b r e a k o i l - w a t e r emulsions. A l l these equipments and improvements c o n s t i t u t e what may be r e f e r r e d to as the improved LOT (or ROB) system. Under t h i s improved LOT system, u n i n t e n t i o n a l discharges during LOT operations should be v i r t u a l l y e l i m i n a t e d . I t must be noted, however, that f u l l y r e l i a b l e c o n t r o l and monitoring equipment i s s t i l l not a v a i l a b l e . It i s g e n e r a l l y considered i n the o i l and shipping i n d u s t r y that voluntary i n s p e c t i o n schemes at o i l company operated ports only have l i m i t e d r e s u l t s s i n c e the i n d u s t r y has no compelling sanction i n most cases. In a d d i t i o n , a m a j o r i t y of crude loa d i n g ports are now under governmental c o n t r o l . For these reasons, the i n d u s t r y supports any move towards govern-mental enforcement and i n p a r t i c u l a r towards the e f f e c t i v e implementation of the 1969 amendments ( or 1973 Convention). This may take some time, however, and i t i s f e l t i n the i n d u s t r y that f u r t h e r progress should be made i n the i n t e r i m period to prevent s t r i n g e n t u n i l a t e r a l r e g u l a t i o n s by i n d i v i d u a l c o u n t r i e s . Thus, another voluntary scheme has been r e c e n t l y developed under which the owner and c h a r t e r e r may agree as part of t h e i r c o n t r a c t , to conduct a l l operations under t h e i r r e s p e c t i v e c o n t r o l i n 29 accordance with good ROB standards. This r e q u i r e s i n p a r t i c u l a r the c h a r t e r e r to pay the owner any i n c u r r e d d e a d f r e i g h t or l o s s of time, as well as the f r e i g h t on the s l o p s . Thus, there should be no f i n a n c i a l i n c e n t i v e f o r the chartered vessel to discharge i t s slops (and provided the ROB or LOT operation i s easy enough, no i n c e n t i v e at a l l ) . -44-TABLE 6 Average O i l P o l l u t i o n Inputs f o r a 100,000 DWT Crude O i l Tanker Using LOT or ROB procedures on medium to Long-haul trades Good Weather Bad Weather EFFECTIVE ENFORCEMENT Conventional LOT 95% e f f e c t i v e 10.5 t o n s / t r i p 3% e f f e c t i v e 28 t o n s / t r i p Improved LOT 97% e f f e c t i v e 6.4 t o n s / t r i p 97% e f f e c t i v e 8.5 t o n s / t r i p NO EFFECTIVE ENFORCEMENT Conventional LOT 85% e f f e c t i v e 32 t o n s / t r i p 75% e f f e c t i v e 70 t o n s / t r i p Improved LOT 90% e f f e c t i v e 21 t o n s / t r i p 85% e f f e c t i v e 42 t o n s / t r i p -45-2.5.4 LOT (sor ROB) discharges According to the above c o n s i d e r a t i o n s , a vessel purporting to use LOT or ROB procedures may be d i s c h a r g i n g anything between 1% and 100% of the o i l contained i n d i r t y b a l l a s t and washwaters depending on the length o f haul, the d e s t i n a t i o n of the s l o p s , the a v a i l a b i l i t y of adequate shore r e c e p t i o n f a c i l i t i e s , the weather and sludge c o n d i t i o n s , the v e s s e l ' s equipment, the v e s s e l ' s company and c h a r t e r c o n t r a c t , the r u l e s and enforcement p o l i c i e s to which the vessel i s submitted, and f i n a l l y the a b i l i t y of the crew. On medium to long-haul trades, b a r r i n g d e l i b e r a t e slop discharges, i t i s reasonable to assume t h a t the conventional LOT or ROB system i s 85 to 99% e f f e c t i v e depending on weather and sludge c o n d i t i o n s while the 30 improved LOT or ROB system should be 95 to 99% e f f e c t i v e . An e f f e c t i v e enforcement p o l i c y should preclude d e l i b e r a t e discharges. In the absence of enforcement, however, roughly 50 per cent of the v e s s e l s s a i l i n g f o r dry-dock dump t h e i r slops at sea and v e s s e l s on r o u t i n e voyages are something l i k e 75 to 90 per cent e f f e c t i v e on the average. TABLE 6 shows reasonable e f f e c t i v e n e s s estimates and the corresponding o i l p o l l u t i o n inputs f o r a 100,000 DWT crude o i l tanker. According to t h i s t a b l e , an e f f e c t i v e enforcement p o l i c y and the use of improved LOT procedures and equipments would reduce LOT discharges by 80 to 90 perccent. In the absence of an e f f e c t i v e enforcement p o l i c y , however, the use of improved LOT reduces LOT discharges by only 30 to 40 per cent. -46-2.6 ALTERNATIVES TO CURRENT PRACTICES 2.6.1 The 1973 Convention The i n t e r n a t i o n a l Convention f o r the Prevention o f P o l l u t i o n from s h i p s , 1973, which w i l l r e place the 1954 Convention and amendments when coming i n t o e f f e c t , has adopted the LOT system as i t s primary means f o r p o l l u t i o n prevention. However, i t d i f f e r s s u b s t a n t i a l l y from the 1969 31 amendments i n the f o l l o w i n g r e s p e c t s . a) Discharges from non p e r s i s t e n t o i l tankers are subject to the same l i m i t a t i o n s as f o r other tankers. b) The 1973 Convention r e q u i r e s that a l l tankers w i l l be able to use improved LOT (or ROB) procedures, t h a t i s , they w i l l be provided with approved discharge monitoring and c o n t r o l equipment and with s p e c i a l pumping system and slop tank arrangements. In a d d i t i o n a l l tankers must maintain a d e t a i l e d o i l record book. c) New tankers over 70,000 DWT tons must be provided with s u f f i c i e n t segregated b a l l a s t c a p a c i t y so that they do not have to c a r r y d i r t y b a l l a s t except i n very severe c o n d i t i o n s . New tankers are those ordered a f t e r December 31, 1975 or d e l i v e r e d a f t e r December 31, 1979. This requirement i s t h e r e f o r e not dependent upon entry i n t o f o r c e of the convention (provided the convention w i l l be r a t i f i e d u l t i m a t e l y ) . d) Within s p e c i a l areas (Mediterranean, B a l t i c , Black and Red Seas and Persian G u l f ) no discharge a t a l l w i l l be permitted subject to the p r o v i s i o n of adequate r e c e p t i o n f a c i l i t i e s e f o r d i r t y b a l l a s t and washwater i n s p e c i a l areas. Governments are r e q u i r e d to ensure the p r o v i s i o n of these f a c i l i t i e s . In the absence o f adequate f a c i l i t i e s , the use of LOT or ROB procedures i s r e q u i r e d subject to the discharge standards applying outside of s p e c i a l areas.--47-e) The discharge standards outside of s p e c i a l areas are almost the same as under the 1969 amendments (except t h a t they w i l l a l s o apply to a l l tankers c a r r y i n g r e f i n e d o i l s ) . Under these standards discharges are p r o h i b i t e d u n l e s s : (1) the tanker i s proceeding en route; (2) i t i s more than 50 miles from land; (3) the r a t e o f discharge does not exceed 60 l i t r e s per n a u t i c a l m i l e ; (4) the t o t a l q u a n t i t y of o i l discharged does not exceed 1/15,000 of the cargo tonnage f o r e x i s t i n g v e s s e l s and 1/30,000 f o r new tankers. f ) B a l l a s t and washwater r e c e p t i o n f a c i l i t i e s are r e q u i r e d at product loading t e r m i n a l s , r e p a i r port areas, as well as at crude o i l loading terminals where tankers w i l l have a r r i v e d without s u f f i c i e n t time to have completed the LOT operations. This i s s p e c i f i e d as a b a l l a s t voyage of l e s s than 1000 miles or 72 hours. Governments are r e q u i r e d to ensure the p r o v i s i o n o f these f a c i l i t i e s . g) C o n t r a c t i n g s t a t e s would be permitted to deny port entry to f o r e i g n v e s s e l s which are not in conformance with the convention r e g a r d l e s s of whether they are r e g i s t e r e d i n c o n t r a c t i n g s t a t e s . h) F i n a l l y , the implementation and amendment process i s con-s i d e r a b l y s i m p l i f i e d compared to previous agreements. In s p i t e of the s i m p l i f i e d implementation process, there s t i l l seems to be l i t t l e chance that the 1973 convention w i l l be r a t i f i e d i n the near f u t u r e . The main o b s t a c l e i s the requirement f o r the port r e c e p t i o n f a c i l i t i e s . Such f a c i l i t i e s are d i f f i c u l t to s i t e due to s a f e t y , environ-mental and space a v a i l a b i l i t y problems. They are a l s o very expensive. As i n t e r n a t i o n a l cooperation i s required to l o c a t e and f i n a n c e these f a c i l i t i e s , p o l i t i c a l issues come to i n t e r f e r e , e s p e c i a l l y i n such regions as the Mediterranean or Persian Gulf areas. As a r e s u l t , the problem i s l i k e l y to remain f o r many years. -48-The p r o v i s i o n s o f the 1973 Convention d e f i n e a p o s s i b l e a l t e r n a t i v e to current p r a c t i c e s . This a l t e r n a t i v e , which w i l l be r e f e r r e d to as the IMCO a l t e r n a t i v e b a s i c a l l y r e f l e c t s the views of the i n t e r n a t i o n a l community. To summarize, i t may be described as f o l l o w s : - a d d i t i o n a l Segregated B a l l a s t Capacity on new tankers (ordered a f t e r December 31, 1975 or d e l i v e r e d a f t e r December 31, 1979) aver 70,000 DWT Tons. - Shore Reception F a c i l i t i e s i n s p e c i a l areas, on short haul trades and i n drydocking p o r t s . - Improved LOT on medium to long-haul trades 2.6.2 The " i n d u s t r y a l t e r n a t i v e " Members o f the i n d u s t r y g e n e r a l l y view the 1973 convention as a major step forward i n the prevention o f p o l l u t i o n from s h i p s . However, since l i m i t e d port r e c e p t i o n f a c i l i t i e s are l i k e l y to hinder r a t i f i c a t i o n f o r many more years, they argue that i t i s p r e f e r a b l e to r e l y on a l t e r n a t e methods and to b u i l d only a minimum number of small f a c i l i t i e s to handle whatever residues cannot be handled otherwise. A l t e r n a t e methods b a s i c a l l y i n v o l v e the use of improved LOT procedures together with one or more of the f o l l o w i n g techniques. a) As a short-term s o l u t i o n , given c u r r e n t l y depressed market c o n d i t i o n s , ships may slow down or d i v e r t to allow s u f f i c i e n t s e t t l i n g time. b) This u n p r o f i t a b l e p r a c t i c e becomes very d i f f i c u l t to enforce as the market recovers. In the long-run, however, the d i r t y b a l l a s t problem w i l l be reduced as new tankers w i l l be provided with a d d i t i o n a l segregated b a l l a s t c a p a c i t y . In a d d i t i o n , even on short haul routes, tank washings may be p r o p e r l y d e a l t with, provided t h e i r volume i s kept small enough. In t h i s -49-regard the use of crude washing or r e c i r c u l a t o w y water washing should c o n s i d e r a b l y s i m p l i f y the ROB procedure. In p a r t i c u l a r , the combined use of crude washing and s u f f i c i e n t segregated b a l l a s t c a p a c i t y would even e l i m i n a t e the need f o r ROB operations except i n very severe weather. I t must be noted, however, that crude washing and r e c i r c u l a t o r y washing techniques r e q u i r e an i n e r t gas system to prevent p o s s i b l e explosions. I t i s often argued i n the i n d u s t r y that most explosions have been caused by the high pressure washing pumps used on l a r g e r v e s s e l s so that i t i s not necessary to i n e r t smaller tankers. According to various i n d u s t r y sources, most of the ships over 150,000 DWT ordered a f t e r a s e r i e s o f explosions had 32 destroyed three VLCC's i n l a t e 1969 are equipped with an i n e r t gas system. To summarize, the "i n d u s t r y a l t e r n a t i v e , " which e s s e n t i a l l y r e f l e c t s c u r r e n t i n d u s t r y trends, may be described as f o l l o w s : - a d d i t i o n a l segregated b a l l a s t f o r new ve s s e l s (ordered a f t e r December 31, 1975 or d e l i v e r e d a f t e r December 31, 1979 over 70,000 DWT Tons (same as IMCO). - i n e r t gas, crude washing and washwater r e c i r c u l a t i o n on tankers d e l i v e r e d a f t e r 1970 and exceeding 150,000 DWT tons, - On short-haul routes, other v e s s e l s are d i v e r t e d when necessary t o cHow siift6ca1:;l:6wtsuffi'oitentTtimelbfowpLrOItto1..be operated. - Improved LOT f o r a l l v e s s e l s 2.6.3 The "Environmentalists'" a l t e r n a t i v e " The 1973 Convention has been p r i m a r i l y c r i t i c i z e d by environmentalists on the ground that i t does not go f a r enough toward achieving the goal set up by the United Nations Conference on the Human Encironment, 1972, that i s , complete e l i m i n a t i o n o f oper a t i o n a l p o l l u t i o n by o i l and other harmful substances and -50-the minimization of a c c i d e n t a l discharges of such substances by the end of the present decate. According to t h i s view, the best tanker p o l l u t i o n c o n t r o l p o l i c y i s the one that minimizes p o l l u t i o n . As a r e s u l t , they c r i t i c i z e the 1973 Convention on the f o l l o w i n g p o i n t s : a) Adequacy o f the 1973 Convention s t a n d a r d s — T h e environmentalists contend that one should not r e l a y on ROB procedure or on port r e c e p t i o n f a c i l -i t i e s to c o n t r o l tanker operational p o l l u t i o n . They consider that the c r e a t i o n o f shore r e c e p t i o n f a c i l i t i e s b a s i c a l l y t r a n s f e r the p o l l u t i o n problem from the vessel to the shore, not to mention the f a c t that t h e i r c o n s t r u c t i o n poses d i f f i c u l t p r a c t i c a l problems. Regarding LOT or ROB p r a c t i c e s , they question in the f i r s t place whether the t h e o r e t i c a l e f f e c t i v e n e s s of t h i s system-is s u f f i c i e n t to p r o t e c t the environment. Going a step f u r t h e r , they argue that r e l i a n c e on such p r a c t i c e s should be kept to an absolute minimum as t h e o r e t -i c a l e f f e c t i v e n e s s w i l l not be achieved due to the d i f f i c u l t y o f enforcement and lack o f adequate c o n t r o l and monitoring systems. The environmentalists view the segregated b a l l a s t technique as the most e f f e c t i v e way to prevent operational p o l l u t i o n because t h i s e l i m i n a t e the b a l l a s t problem. They f u r t h e r argue t h a t i n the absence o f d i r t y b a l l a s t , the e f f e c t i v e n e s s of ROB p r a c t i c e s would be enhanced s i n c e the volume of tank washings may be kept small enough to permit an easy c o n t r o l o f s l o p tank discharges (while the c o n t r o l of huge d i r t y b a l l a s t tank discharges i s much more d i f f i c u l t ) . b) Segregated B a l l a s t and the Problem o f "Grandfather r i g h t s " — T h e environmentalists are not s a t i s f i e d with the 1973 Convention "Grandfather c l a u s e " according to which o n l y new v e s s e l s have to meet the segregated b a l l a s t requirements. They argue t h a t , given the present tanker surplus c a p a c i t y , no new tanker w i l l be b u i l t u n t i l some time i n the 1980 1s so that the segregated b a l l a s t requirements w i l l not have any s i g n i f i c a n t impact on tanker p o l l u t i o n f o r many more years. They f u r t h e r argue that -51-t h i s grandfatehr clause w i l l create an a r t i f i c i a l i n c e n t i v e f o r tanker owners to prolong the use of t h e i r o l d e r and l e s s environmentally d e s i r a b l e v e s s e l s . A c c o r d i n g l y , they propose to convert e x i s t i n g vessels to segregated b a l l a s t v e s s e l s by converting some cargo tanks to segregated b a l l a s t tanks, arguing that the present massive surplus c a p a c i t y provides an opportunity to r e a l i z e the conversion a t minimum co s t . c) Double bottoms—Having advocated the g e n e r a l i z a t i o n o f segregated b a l l a s t requirements, the environmentalists f u r t h e r contend t h a t on new ve s s e l s part o f the a d d i t i o n a l segregated b a l l a s t c a p a c i t y should be provided by means of a double-bottom. In t h e i r view, double-bottoms reduce the r i s k o f a c c i d e n t a l outflow i n case o f stranding and they should c o n t r i b u t e a f u r t h e r reduction to pperatdonalppoll .u tTon' :for-the f o l l o w i n g reasons: - the presence of double bottoms y i e l d s a smoothetank bottom so that the sludge b u i l d up i s e f f e c t i v e l y m i t i g a t e d and the need to wash the tank p e r i o d i c a l l y i s much reduced. - double bottom makes i t p o s s i b l e to s t r i p the o i l residues a t the unloading port from below the tank. This f e a t u r e makes the s t r i p p i n g system more e f f i c i e n t so that the clingage i s f u r t h e r reduced. d) Inert gas s y s t e m — F i n a l l y , the environmentalists claim that the 1973 convention should have r e q u i r e d a l l tankers to provided with an 33 i n e r t gas system to prevent explosions. While t h i s claim i s p r i m a r i l y made f o r s a f e t y reasons, i t may be f u r t h e r j u s t i f i e d by arguing that crude washing may only be used on i n e r t tankers. -52-On the other hand, the p r o v i s i o n o f a crude washing system on double bottom tankers reduces the advantages of double bottoms as regards operational p o l l u t i o n , since the sludge buildup may be e a s i l y removed anyway. Acc o r d i n g l y , the double-bottom requirement may be viewed e s s e n t i a l l y as a s a f e t y f e a t u r e , and disregarded from now on. To summarize, the "environmentalists' a l t e r n a t i v e " which r e f l e c t s the lobbying e f f o r t s o f environmentalist groups may be described as f o l l o w s : - a d d i t i o n a l segregated b a l l a s t f o r a l l v e s s e l s . - i n e r t gas and crude washing f o r a l l v e s s e l s . - improved LOT and r e c i r c u l a t i o n o f washwater f o r o c c a s i o n a l ' b a l l a s t i n g and cleaning requirements. 2.6.4 Industry views of Environmentalists' Proposals The views of the environmentalists as regards IMCO and in d u s t r y proposals have been described i n the previous s e c t i o n . I t i s now i n t e r e s t i n g to d e s c r i b e the views of the in d u s t r y on the environmentalist's proposals. a) Segregated B a l l a s t Tankers—Segregated b a l l a s t tankers are expensive but t h e i r c o s t may be o f f s e t by the f o l l o w i n g advantages: - segregated b a l l a s t tankers are much e a s i e r to operate: f i r s t , due to the segregated p i p i n g system, b a l l a s t i n g and d e b a l l a s t i n g operations can be done co n c u r r e n t l y with loading or unloading cargo and t h e i r i s no r i s k of p o l l u t i n g port waters with cargo or residues l e f t i n the p i p i n g system. Thus, time i s saved and •enafejmpdKtt^ the operation o f LOT i s much s i m p l i f i e d on segregated b a l l a s t tankers and good LOT performances are e a s i e r to achieve, e s p e c i a l l y i f crude washing i s a l s o used. -53-- Segregated b a l l a s t tanks provide some p r o t e c t i o n i n case o f c o l l i s i o n or grounding. In a d d i t i o n segregated b a l l a s t tankers are l e s s subject to s t r u c t u r a l f a i l u r e s because the presence of segregated b a l l a s t tanks w i l l reduce s t r u c t u r a l s t r e s s e s . ( I t i s a l s o known that the mixing o f o i l and water i n d i r t y b a l l a s t tanks creates c o r r o s i v e chemicals which are one of the causes o f s t r u c t u r a l f a i l u r e s . ) - As long as the segregated b a l l a s t requirement a p p l i e s i n a: uniform way to a l l tanker f l e e t s , i t s net cost w i l l be passed upon to ori'l consumers. For these reasons, the segregated b a l l a s t p r o v i s i o n o f the 1973 Convention i s g e n e r a l l y viewed i n the in d u s t r y as an acceptable p r i c e t hat h had to be paid to reach a necessary concensus. Extensions o f t h i s p r o v i s i o n to new ve s s e l s under 70,000 DWT tons and to e x i s t i n g v e s s e l s are r e j e c t e d however on the f o l l o w i n g grounds: - smaller tankers ( l e s s than 70,000 DWT Tons) are g e n e r a l l y used f o r products so that the p r o v i s i o n o f a d d i t i o n a l segregated b a l l a s t c a p a c i t y would not reduce c l e a n i n g requirements. - In view o f the very slow process o f implementation of i n t e r n a t i o n a l d e c i s i o n s , the worldwide conversion o f e x i s t i n g tankers to segregated b a l l a s t tankers before the surplus c a p a c i t y stsituatiionahasldd.s^^ asBes6l..tr;>-s<i those c o u n t r i e s or companies implementing the proposal would be put at an unacceptable disadvantage. In a d d i t i o n , the implementation o f the proposal would i n v o l v e l a r g e c a p i t a l outlays which would be very hard to finance a f t e r a lengthy -54-period o f poor market c o n d i t i o n s ; c l e a r l y , the conversion would 34 speed up market recovery, but the industry g e n e r a l l y argues that the b e n e f i t s from increased f r e i g h t r a t e s are u n l i k e l y to occur r a p i d l y enough to o f f s e t the high i n i t i a l c o s t s o f c c o n v e r s i o n . Understandable the proposal r e c e i v e s some support from the s h i p b u i l d i n g i n d u s t r y and from a number of independent shipowners (which own most of the c u r r e n t l y idO?e tanker c a p a c i t y . ) b) Inert gas, crude washing and r e c i r c u l a t i o n — B e c a u s e crude washing reduces the clin g a g e (and t h e r e f o r e increases the payload) and d r a m a t i c a l l y s i m p l i f i e s the clea n i n g task, i t i s i n c r e a s i n g l y considered i n the i n d u s t r y that i t s implementation on i n e r t e d tankers pays f o r i t s e l f . The use of crude washing i s p a r t i c u l a r l y valuable when the ship has to be cleaned completely p r i o r to drydock. In the absence of crude washing, the voyage to drydock does not g e n e r a l l y allow s u f f i c i e n t time f o r c l e a n i n g a l l the tanks while using LOT properly. Thus, LOT i s not used, or used improperly, which means considerable p o l l u t i o n ; or, several days are l o s t i n port to cfliean the tanks that could not be cleaned while at sea, which involves a high cost i n terms o f time, port charges and whatever manpower and f a c i l i t i e s are requi r e d to handle hundreds o f tons o f re s i d u e s . On the co n t r a r y , the use of crude washing p r i o r to drydock re q u i r e s at most one a d d i t i o n a l day at the uni&adi.ng; p o r t ; ^ iLThenva simpl el LOT procedure while a t sea permits the vessel to be completely c l e a n when e n t e r i n g drydock. As an a d d i t i o n a l b e n e f i t to i n t e g r a t e d o i l companies, the residues end up at the company«si r e f i n e r y r r a t h e r than at sea or at the drydock r e c e p t i o n f a c i l i t y . -55-The i n t r o d u c t i o n of a r e c i r c u l a t o r y washing system f u r t h e r s i m p l i f i e s the LOT and c l e a n i n g tasks and i t i s s i m i l a r l y considered as b e n e f i c i a l on i n e r t e d tankers. Yet the d e c i s i o n to i n e r t a ship i s p r i m a r i l y taken on the basis of cost and s a f e t y c o n s i d e r a t i o n s . In t h i s regard, shipowners g e n e r a l l y do not consider the p r o v i s i o n of an i n e r t gas system on smaller ships as economically warranted because explosions p r i m a r i l y occur on l a r g e r s h i p s . The p r o v i s i o n of an i n e r t gas system on o l d e r ships i s a l s o considered to be uneconomic given the l i m i t e d time a v a i l a b l e to recover the investment, and the increased cost of r e t r o f i t t i n g compared to the cost of i n s t a l l i n g the same system on a new ship (taking i n t o account the time l o s t i n s h i p y a r d ) . As a f i n a l p o i n t regarding a l t e r n a t i v e s to current p r a c t i c e s i t should be noted that the above c o n t r o v e r s i e s leave room f o r compromises. One p o s s i b i l i t y would be to implement the environmentalist's a l t e r n a t i v e on short=haul routes and w i t h i n s p e c i a l areas while the i n d u s t r y a l t e r n a t i v e would apply to other routes and areas. This would place r e s t r i c t i o n s , however, on the t r a n s f e r s of tankers between trades. 2.7 Summary This chapter has described a l t e r n a t e p o l i c i e s now a v a i l a b l e to c o n t r o l tanker operational p o l l u t i o n . Three basic a l t e r n a t i v e s are i d e n t i f i e d . These are (1) the IMCO a l t e r n a t i v e (2) the Industry a l t e r n a t i v e (3) the e n v i r o n m e n t a l i s t s ' a l t e r n a t i v e . Depending on the a l t e r n a t i v e , a given vessel may use one or more of the f o l l o w i n g techniques: -56-- LOT system - A d d i t i o n a l segregated b a l l a s t tanks - Inert gas + Crude washing + r e c i r c u l a t i o n - Shore f a c i l i t i e s In the next chapter, each of these techniques i s described i n some d e t a i l to provide the background data to be used i n the economic e v a l u a t i o n of the a l t e r n a t i v e s . -57-FOOTNOTES CHAPTER 2 Cargo evaporation l o s s e s p r i m a r i l y occur during cargo loading and b a l l a s t i n g operations a t the crude l o a d i n g t e r m i n a l . See U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Survey of Ship Discharges, Report by EMXON Research and Engineering Company, Washington D.C, J u l y 1974, pp. 6-15. 2 I b i d . , Compare Table 6 and Table 17. 3 IMCO, Report on Study 4, p.4. ^This i s a c t u a l l y a p o l l u t i o n prevention procedure. ^ V i c t o r y , 6, The L6ad-on-Top System, Present and Future, Proceedings of the Symposium on Marine Pollution-Royal I n s t i t u t i o n of Naval A r c h i t e c t s , London, 1973. See a l s o ; U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker Tank Cleaning Research Program, p. 3-21 and 3-22. Van Cleave H.D. and others, Techniques f o r C o n t r o l l i n g O i l  Discharge from Product o i l Tankers, Proceedings o f the IMCO Symposium on Prevention of P o l l u t i o n from Ships, Acapulco, March 1976. 6VLCC = Very Large Crude C a r r i e r 7See i n p a r t i c u l a r IMCO, Report on Study 4, Clean B a l l a s t i n g  Before S a i l i n g from Discharging Port, Schedule 18. o In other words, the b a l l a s t e d displacement i s roughly comprised between 30% and 70% of the f u l l load displacement. 9U.S. Coast-Guard, Regulations f o r U.S. Tank Vessels Carrying O i l i n Foreign Trade and Foreign Trade Vessels that enter the Navigable waters  of the United S t a t e s , Appendix A. ^ V a n Cleave and others ^ C a p t a i n Davies P a t r i c k - ( S h e l l Company) Personal Interview, London, A p r i l 1976. 1 2IMC0, Report on Study 4 (by P. Theobald), Section 5.3.4 13U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker  Tank Cleaning Research Program, Section 3.2.2.2 '/-'~: ;T-VK,. t-;„Q., Segregated SaHest.Eir.d t t e l a ^ -58-14 See Gray, W.O., Segregated B a l l a s t and Related Aspects o f  Tanker Design, IMCO Symposium, Acapulco, 1976. 1 5 S e e IMCO, Introduction o f Segregated B a l l a s t i n Exi s t i ng Tankers. 1 6 S e e Maybourn, R. Crude O i l Washing, IMCO Symposium, 1976. ^ E d u c t o r s create a high v e l o c i t y flow o f seawater that draws the tank s t r i p p i n g s to the slop tank. 18 Port of M a r s e i l l e , France (According to the World Tanker F l e e t  Review, December 1975). p. 11. 19 Heaver, T.D. and Water, W.G.,An Economic A n a l y s i s of Controls  on the Discharges o f O i l at Sea. 2 0 T h i s s e c t i o n r e l i e s h e a v i l y on: Gray, W.O., The 1973 Convention: A Tanker Operator's viewpoint, Proceedings o f the 1975 Conference on Prevention and Control o f O i l P o l l u t i o n , San F r a n c i s c o , March 1975 and V i c t o r y , G. The Load on Top System Present and Future, and Zacher, The  P o l i t i c s o f I n t e r n a t i o n a l Environmental Regulation: The Case of O i l P o l l u t i o n C o n t r o l . 21 According to G. V i c t o r y , the LOT system i s coping with more than 80 per cent of a l l crude o i l t r a f f i c (Personal interview, London, March 1976. Sources: G. V i c t o r y , Personal Interview, London, March 1976 and C.L. Crane (EXXON Corporation) Personal Interview, New York, November, 1975. 23 G. V i c t o r y , Personal Interview, London, March 1976. 2 4IMC0, Report on Study 4 (by P. Thsobald), Section 9.3. ^Holdsw o r t h , M.P. Loading Port Inspection o f Cargo Residue  Retention by Tankers i n B a l l a s t , Proceedings o f the IMCO Symposium on Prevention o f P o l l u t i o n from Ships, Acapulco, March 1976. 26 This i s an empirical formula given i n the OCIMF/ICS Guide Monitoring Load-on-Top (London, 1973). OGIMF * O i l companies I n t e r n a t i o n a l Marine Forum. 2 7 See Table 1 i n t h i s study Table III 28 In p a r t i c u l a r the U.S. and French Government 2 9 S e e the P o l l u t i o n Prevention Cole ( o i l Tankers) prepared by ICS, London, A p r i l 1976. 3 0 I t i s estimated i n the next chapter (TABLE 8) that improved LOT i s at l e a s t 98 per cent e f f e c t i v e when used properly. -59-31 See Gray, W.O., The 1973 IMCO Convention: A Tanker Operator's  Viewpoint, f o r a d e t a i l e d d i s c u s s i o n o f the Convention. 32 Walder, C A . (OCIMF) and Cawley ( B r i t i s h Petroleum), Personal Interviews, London, March 1976. 33 In 1974 IMCO requ i r e d new tankers above 100,000 DWT to be provided with an i n e r t gas system. (1974 IMCO Convention f o r Safety o f 1 i f e at sea). 34 The balance o f supply and deamdn would be achieved about two years e a r l i e r (See IMCO, Introduction o f Segregated B a l l a s t i n E x i s t i n g  Tankers.) Also Personal Interview with M. Holdworth, London, A p r i l 1976. CHAPTER 3 TECHNIQUES TO CONTROL TANKER OPERATIONAL POLLUTION The o b j e c t i v e o f t h i s chapter i s to describe the various techniques to control tanker operational p o l l u t i o n and to provide a data base f o r the economic e v a l u a t i o n o f a l t e r n a t i v e c o n t r o l p o l i c i e s . The f i r s t s e c t i o n s provide estimates o f costs and o i l p o l l u t i o n inputs f o r each technique (or combination of techniques), assuming that these techniques are used p r o p e r l y (so t h a t i n t e n t i o n a l ! discharges are kept to a minimum). The actual c o s t s and o i l p o l l u t i o n inputs depend upon the enforcement p o l i c y . T h is i s developed i n the l a s t s e c t i o n . 3.1 IMPROVED LOT 3.1.1 Routine o i l discharges with improved Lot The e f f e c t i v e n e s s of the LOT system may be improved s i g n i f i c a n t l y by i n s t a l l i n g on the ship r e l i a b l e c o n t r o l and monitoring equipment, such as i n t e r f a c e d e t e c t o r s , o i l content monitors, o i l y water separators and automatic shutdown systems. Heavy o i l s (crude o i l s and fue l o i l s ) and l i g h t a o i l s (or nonpersistent o i l s ) have d i f f e r e n t p hysical and chemical p r o p e r t i e s so that i t has not been p o s s i b l e y e t to design u n i v e r s a l equip-ment that could be used with any s o r t o f o i l . The 1973 Convention r e q u i r e s a monitoring instrument f o r a l l tankers. In t h i s regard, Gray noted ( i n 1975): -60--61-Though seemingly a simple problem i t has proven very d i f f i c u l t to r e l i a b l y o b tain accurate real time measure-ments o f small q u a n t i t i e s of o i l i n water. The problem i s compounded by d i f f e r e n c e s i n o i l make up, weathering, and the d i f f e r e n c e between d i s s o l v e d and f r e e o i l i n emulsion. Despite these drawbacks we f e e l t h at with the a d d i t i o n a l importance given to monitoring by the new convention, these problems should be capable of s o l u t i o n within a few years a t l e a s t f o r heavy or p e r s i s t e n t o i l s . In the case o f non p e r s i s t e n t (or l i g h t ) o i l s , the monitoring problem i s f u r t h e r compounded: so much so i n f a c t that the 1973 convention contains a waiver i f no monitoring instrument i s a v a i l a b l e . ' The operation and c o n t r o l of the LOT (or ROB) system can be f u r t h e r s i m p l i f i e d by i n s t a l l i n g a f i x e d p i p i n g system to allow t r a n s f e r of d i r t y b a l l a s t residues and tank washings from the cargo tanks to the slop tank. P i p e l i n e terminations may a l s o be arranged to permit v i s u a l observation of discharges. F i n a l l y the slop tank c a p a c i t y may be increased to allow a longer s e t t l i n g time. Provided t h a t (1) the discharge i s monitored p r o p e r l y (2) the pumping r a t e i s reduced when the rate of o i l discharge approaches 60 l i t r e s per n a u t i c a l mile (IMCO standards) and (3) the discharge i s stopped to allow a d d i t i o n a l s e t t l i n g time before the 60 l i t r e s l i m i t i s exceeded, the o i l content of the s l o p tank discharge i s about 150 ppm while the o i l content 2 of the d i r t y b a l l a s t discharge i s about 30 ppm. The t o t a l o i l p o l l u t i o n input c l e a r l y depends upon the amount of contamfnated&water:toirbeshandiHedch The tank washings can be s t r i p p e d from cargo tanks to the slop tanks using e i t h e r s t r i p p i n g pumps or eductors. Eductors r e q u i r e l a r g e amounts of d r i v e water and, t h e r e f o r e , generate three to four times as much contaminated water as s t r i p p i n g pumps. TABLE 8 shows average o i l p o l l u t i o n inputs on r o u t i n e t r i p s f o r a conventional 100,000 DWT crude o i l tanker. The c a l c u l a t i o n s are made i n annex A. TABLE 8 shows that when the improved LOT procedure i s used p r o p e r l y , i t i s , on the average, more -62-TABLE 8 THE EFFECTIVENESS OF PROPERLY USED IMPROVED LOT PROCEDURES Improved LOT without Eductbrs - Amount o f o i l discharged GOOD WEATHER BAD WEATHER 1/5 t o n s / t r i p b 2.4 t o n s / t r i p b E f f e c t i v e n e s s r e l a t i v e to no p o l l u t i o n c o n t r o l 99.3% a 99.2% € Improved LOT with Eductors - Amount o f o i l discharged 3/2 t o n s / t r i p b 4.4 t o n s / t r i p b E f f e c t i v e n e s s r e l a t i v e to no p o l l u t i o n control 98.5% 98.4% a..._. Using Table 5; The e f f e c t i v e n e s s i s the percentage of o i l r e t a i n e d r e l a t i v e to no p o l l u t i o n c o n t r o l . See Annex A -63-than 98 per cent e f f e c t i v e , even when eductors are used. To compare, provided that i n t e n t i o n a l discharges are kept to a minimum, the conventional LOT procedure ( v i s u a l checking of discharges, no automatic c o n t r o l of pumping r a t e ) i s 85 to 99 per cent e f f e c t i v e , on the average, depending on weather, c l i n g a g e c o n d i t i o n s , and crew a b i l i t y . 3.1.2 The cost of Improved LOT a) Equipment costs--The U.S. Coast Guard r e c e n t l y estimated the cost of p i p i n g changes and monitoring and c o n t r o l equipment at $200,000 per ship ( f o r a l l t a n k e r s ) . b) Operating c o s t s — T h e f o l l o w i n g d e f i n i t i o n s w i l l be used i n t h i s study to estimate the impact of p o l l u t i o n control techniques on tanker operating c o s t s . - deadweight: a measure of the t o t a l c a r r y i n g c a p a c i t y of a tanker i n metric tons. The deadweight tonnage includes the weight of a l l cargo o i l plus the weight of f u e l , stores water and crew. - cargo c a r r y i n g c a p a c i t y : A measure of the maximum amount of o i l that can be c a r r i e d i n a tanker ( i n metric t o n s ) . The cargo c a r r y i n g c a p a c i t y i s approximately equal to 95 per cent of the s h i p i s deadweight. - throughput (per t r i p or per y e a r ) : A measure of the amount of o i l a c t u a l l y d e l i v e r e d (per t r i p or per year) by a tanker ( i n metric t o n s ) . - B i l l - o f - i l . a d i n g weight: a measure of the amount of o i l loaded on a tanker at the loading port ( i n metric tons) This i s the measure used to c a l c u l a t e f r e i g h t payments to tanker owners and payments to o i l producers. -64-P o l l u t i o n c o n t r o l does not a f f e c t the ship's deadweight or cargo c a r r y i n g c a p a c i t y but i t reduces the ship's throughput and b i l l - o f - l a d i n g weight. When the LOT system i s used, the slops remaining i n the slop tank a f t e r f i n a l r e duction contain approximately o n e - t h i r d of water. This water, which w i l l be r e f e r r e d to as deadfreight water, and the clingage l e f t i n the ship a f t e r discharge reduce the shipss throughput. In a d d i t i o n , the slops and the clingage l e f t i n the ship a f t e r the b a l l a s t voyage reduce the b i l l -o f - l a d i n g weight. The impact of improved LOT procedures on the throughput and bi 11-of-1 adding weight of a 100,000 DWT crude o i l tanker i s c a l c u l a t e d i n TABLE 9. TABLE 9 shows t h a t , when improved LOT i s used p r o p e r l y , the ship's throughput i s reduced by 105 to 139 tons per t r i p , on the average, r e l a t i v e to the case of no p o l l u t i o n c o n t r o l . This i s e n t i r e l y due to the deadfreight water i n the slop tank. The b i l l - o f - l a d i n g weight i s reduced by 315 to 418 tons per t r i p , on the average, due to the slops i n the slop tank. 3 At c u r r e n t f r e i g h t r a t e s (at most $5 to $6 per ton of crude ), the 315-318 tons reduction i n the b i l l - o f - l a d i n g weight means at most a $1,500 to $2,500 l o s s per t r i p to the shipowner and say two to f i v e times as much during b e t t e r market c o n d i t i o n s . The d i f f e r e n c e between the b i l l - o f - l a d i n g weight and the shipss throughput i s the amount o f o i l discharged to the sea each t r i p . T h i s i s a l s o the amount l o s t by the r e f i n e r y company each t r i p . For a 100,000 DWT ;: crude o i l tanker t h i s amount i s 213 to 283 tons per t r i p , on the average, i n the absence of p o l l u t i o n c o n t r o l , and 2 to 4 tons per t r i p when improved LOT i s used properly. A c c o r d i n g l y , the r e f i n e r y company saves 209 to 281 tons of -65-o i l per t r i p when improved LOT i s used properly. At cu r r e n t CIF p r i c e s of crude o i l (about $80 per ton) the proper use o f LOT on a 100,000 DWT crude o i l tanker means a $16,500 to $22,500 gain to the r e f i n e r y company, ne g l e c t i n g a d d i t i o n a l processing c o s t s . When the r e f i n e r y pays the f r e i g h t on the slops or when the ship and the r e f i n e r y are owned by the same company s t h e - g a i h tO;the.refinery.; company i s the sum of the above gains and l o s s e s , that i s , at l e a s t $14,000 per t r i p at cu r r e n t f r e i g h t rates and, at l e a s t , $4,000 per t r i p when market co n d i t i o n s improve ( f o r a 100,000 DWT crude o i l t a n k e r ) , n e g l e c t i n g a d d i t i o n a l r e f i n e r y processing c o s t and the costs o f operating improved LOT properly. To conclude, the proper use of LOT procedures i s not only environmentally suriitable but a l s o f i n a n c i a l l y d e s i r a b l e to r e f i n e r y companies and i n t e g r a t e d o i l companies, provided that the a d d i t i o n a l r e f i n e r y processing c o s t s and the costs of operating LOT properl y are n e g l i g i b l e (or s u f f i c i e n t l y s m a l l ) . The proper use of L O T i i s f f i n a n c i a l l y u n d e s i r a b l e , however, to independent shipping companies, unless the f r e i g h t i s paid on the s l o p s , and the costs o f operating LOT properl y are n e g l i g i b l e , ( i n which case i t i s f i n a n c i a l l y i n d i f f e r e n t ) . 3.2 SEGREGATED BALLAST TANKERS 3.2.1 Routine o i l discharges by segregated b a l l a s t tankers 3.2.1.1 B a l l a s t i n g p r a c t i c e s H i s t o r i c a l l y , the amount of b a l l a s t has been 35 to 40 per cent of the deadweight under good weather c o n d i t i o n s and 50 to 60 per cent when heavy weather was expected. -66-TABLE 9 IMPACT OF IMPROVED LOT ON THE THROUGHPUT AND BILL-OF-LADING WEIGHT OF A 100,000 DWT CRUDE OIL TANKER Tons/Trip NO POLLUTION CONTROL •SGO.OD WEATHER BAD WEATHER Throughput per t r i p - cargo c a r r y i n g c a p a c i t y 95,000 95,000 - l e s s s c l i n g a g e l e f t a f t e r cargo discharge 400 400 - t o t a l 94,600 94,600 B i l l of Lading - cargo c a r r y i n g c a p a c i t y 95,000 95,000 - l e s s c l i n g a g e l e f t a f t e r the b a l l a s t voyage 187 a 117 a - t o t a l 94,813 94,883 IMPROVED LOT—PROPERLY USED  Throughput per t r i p - cargo c a r r y i n g c a p a c i t y 95,000 95,000 - l e s s c l i n g a g e l e f t e r a f t e r cargo discharge 400, 400. - l e s s d e a d f r e i g h t water 105 D 139° - t o t a l 94,495 94,461 B i l l o f Lading .- cargo c a r r y i n g c a p a c i t y 95,000 995^000 - l e s s s c l i n g a g e l e f t e r a f t e r the b a l l a s t voyage 187 117 - l e s s slops 315° 418 C - t o t a l 94,498 94,465 I n i t i a l c l i n g a g e l e s s p o t e n t i a l o i l p o l l u t i o n — T a b l e 5 b 0 n e - t h i r d o f the s l o p s — S e e footnote c c1.5 .985 of the o i l p o l l u t i o n input shown i n Table 5 (assuming o n e - t h i r d o f dead f r e i g h t water and Improved LOT 98.5% e f f e c t i v e ) . -67-The 1973 IMCO Convention provides that new tankers above 70,000 DWT be constructed with s u f f i c i e n t segregated b a l l a s t c a p a c i t y to enable operation i n normally severe weather. The Convention contains formulas which are intended t o provide t e c h n i c a l c r i t e r i a and guidance f o r s a t i s -f a c t o r y segregated tanker designs. Tankers b u i l t i n accordance with these formulas w i l l have t h e i r segregated b a l l a s t c a p a c i t y comprised between 30 and 40 per cent o f the deadweight. 4 Under current b a l l a s t i n g p r a c t i c e IMCO segregated b a l l a s t tankers s t i l l have to take d i r t y b a l l a s t on board (about 15-20% of DWT) except i n good weather (only 30% of the voyages from 5 Europe to the Persian Gulf ). I f new tankers are to avoid d i r t y b a l l a s t except i n abnormally severe c o n d i t i o n s (say 5% of a l l voyages from Europe to the Persian G u l f ) , l i g h t e r b a l l a s t i n g p r a c t i c e s become d e s i r a b l e . Recent experiment showed t h a t i t i s p o s s i b l e to operated at IMCO segregated b a l l a s t l e v e l s , without taking on d i r t y b a l l a s t , on more than 90 per cent o f a l l b a l l a s t voyages. L i g h t e r b a l l a s t i n g p r a c t i c e s had not been t r i e d e a r l i e r because there was no c o s t penalty a s s o c i a t e d with u n l i m i t e d amounts o f b a l l a s t (except ifiofc the adverse e f f e c t on speed, which was n e g l i g i b l e u n t i l the recent l a r g e increases i n fue l p r i c e s ) . Heavy b a l l a s t i n g p r a c t i c e s now in v o l v e l a r g e r segregated b a l l a s t c a p a c i t i e s and t h e r e f o r e s i g n i f i c a n t l y higher c o n s t r u c t i o n c o s t s . 3 ; 3.2.1.2 D e b a l l a s t i n g operations TABLE 10 summarizes the previous f i g u r e s and shows the average o i l discharges from d e b a l l a s t i n g f o r a 100,000 DWT crude o i l segregated b a l l a s t tanker using improved LOT. No o i l i s discharged i n good weather. In bad weather, the discharge depends on the b a l l a s t i n g p r a c t i c e and the e f f e c t i v e n e s s -68-of improved LOT. Two cases are considered: (1) A l l ships used improved LOT p r o p e r l y and i t i s 98.5 per cent e f f e c t i v e i n the average; and (2) some ships do not operate improved LOT p r o p e r l y and i t i s 85 to 90 per cent e f f e c t i v e , on the average, depending on weather c o n d i t i o n s . These two cases correspond to the cases o f e f f e c t i v e enforcement and u n e f f e c t i v e enforcement considered i n Chapter. TABLE 10 shows t h a t a 100,000 DWT crude o i l tanker discharges .6 to 8.6 tons of o i l during d e b a l l a s t i n g i n bad weather c o n d i t i o n s , depending on the e f f e c t i v e n e s s of improved LOT. 3.2.1.3 Cleaning operations Segregated B a l l a s t tankers w i l l have to clean t h e i r tanks f o r r o u t i n e maintenance, residue c o n t r o l , drydocking or change of cargo. On crude o i l segregated b a l l a s t tankers, a l l tanks have to be washed every f i v e to s i x voyages. In a d d i t i o n , some a d d i t i o n a l tank c a p a c i t y must be cleaned to take on clean b a l l a s t i n heavy weather. TABLE 11 shows the average o i l discharges during tank c l e a n i n g f o r a 100,000 DWT crude o i l segregated b a l l a s t tanker using improved LOT. Between 1.6 tons and 2.6 tons of o i l are discharged each t r i p , when improved LOT i s 98.5% e f f e c t i v e ; 10.3 to 26.2 tons of o i l are discharged when improved LOT i s only 85 to 90 per cent e f f e c t i v e . 3.2.1.4 Summary TABLE 12 summarizes previous r e s u l t s and shows the average o i l discharges f o r a 100,000 DWT crude o i l segregated b a l l a s t tanker using improved LOT. A t o t a l of 1.6 to 3.5 tons o f o i l are discharged each t r i p , when improved LOT i s 98.5 per cent e f f e c t i v e . But the o i l discharge i s comprised between 10.3 tons and 34.8 tons per t r i p when improved LOT i s only -69-TABLE 10 AVERAGE OIL DISCHARGE FROM DEBALLASTING OPERATIONS FOR A 100,000 DWT CRUDE OIL SEGREGATED BALLAST TANKER USING IMPROVED LOT Very Good Bad Heavy Weather Weather Weather Seg. b a l l a s t c a p a c i t y (IMCO standards) 35% dwt 35% dwt 35% dwt TRADITIONAL BALLASTING PRACTICE D i r t y b a l l a s t 0 20% dwt 20% dwt O i l i n d i r t y b a l l a s t 9 0 72 tons 72 tons P o t e n t i a l o i l p o l l u t i o n 1 3 0 58 tons 58 tons O i l P o l l u t i o n during  D e b a l l a s t i n g - imp. LOT i s 98.5% e f f e c t i v e 0 .9 tons .9 tons - imp. LOT i s 85 to 90% e f f e c t i v e 0 8.6 tons 8.6 tons LIGHTER BALLASTING PRACTICE D i r t y b a l l a s t 0 0 15% dwt O i l i n d i r t y b a l l a s t 0 0 54 tons P o t e n t i a l o i l p o l l u t i o n 0 0 43 tons O i l P o l l u t i o n during  D e b a l l a s t i n g - imp. LOT 98.5% e f f e c t i v e 0 0 .6 tons - imp. LOT 85 to 90% e f f e c t i v e 0 0 6.5 tons a t h e t o t a l tank c l i n g a g e i s 360 tons (Chapter 2) b T h i s i s the amount of p o l l u t i o n when LOT i s not used a t a l l (LOT zero per cent e f f e c t i v e ) . 80% of the o i l i n d i r t y b a l l a s t i s discharged to the sea. -70-TABLE il.il' AVERAGE OIL DISCHARGES FROM TANK CLEANING FOR A 100,000 DWT CRUDE OIL SEGREGATED BALLAST TANKER USING IMPROVED LOT Tfad1ifeii:6&aiaBallasifcd'n§fBcactvisee Very Good Heavy Heavy Weather Weather Weather % of dwt to be a v a i l a b l e f o r clean b a l l a s t 0 20% dwt 20% dwt Total tank c a p a c i t y to be cleaned (clean b a l l a s t plus residue c o n t r o l ) 15-20% dwt 35-40% dwt 35-40% dwt Clingage i n tanks to be c l e a n e d 3 63 tons 135 tons 135 tons Clingage i n pi p i n g system 9 40 tons 40 tons 40 tons P o t e n t i a l p o l l u t i o n * 5 103 tons 175 tons 175 tons P o l l u t i o n with improved LOT 98.% e f f e c t i v e 1.6 tons 2.6 tons 2.6 tons P o l l u t i o n with improved LOT 85% e f f e c t i v e (heavy weather) 90% e f f e c t i v e (good weather) 10.3 tons 26.2 tons 26.2 tons -71-TABLE 11 (Continued) AVERAGE OIL DISCHARGES FROM TANK CLEANING FOR A 100,000 DWT CRUDE OIL SEGREGATED BALLAST TANKER USING IMPROVED LOT L i g h t e r B a l l a s t i n g P r a c t i c e Good Heavy Weather Weather Very Heavy Weather % of dwt to be a v a i l a b l e f o r clean b a l l a s t 0 0 15% dwt Total tank c a p a c i t y to be cleaned (clean b a l l a s t plus r e s i d u a l c o n t r o l ) 15-20% dwt 15-20% dwt 30-35% dwt Clingage i n tanks to be c l e a n e d 3 63 tons 63 tons 117 tons Clingage i n p i p i n g system 3 40 tons 40 tons 40 tons P o t e n t i a l p o l l u t i o n 1 3 103 tons 103 tons 157 tons P o l l u t i o n with improved LOT 3 3.98.5%vetfective 1.6 tons 1.6 tons 2.4 tons P o l l u t i o n with improved LOT 85% e f f e c t i v e (heavy weather) 90% e f f e c t i v e (good weather) 10.3 tons 15.4 tons 23.5 tons aThe t o t a l c l i n g a g e i n tank i s 360 tons. The t o t a l c l i n g a g e i n pipi n g system i s 40 tons. Clingage from cleaned tanks i s c a l c u l a t e d on mean o f per cent deadweight to be cleaned. bThus the amount of p o l l u t i o n when LOT i s not used at a l l (100% of the o i l i n tanks to be cleaned and in pip i n g system i s discharged to the sea. -72-TABLE 12 AVERAGE OIL DISCHARGES FOR A 100,000 DWT CRUDE OIL SEGREGATED BALLAST TANKER USING IMPROVED LOT (Tons/Routine T r i p ) Very Good Heavy Heavy Weather Weather Weather TRADHIQNAIl BALLASTING PRACTICE P o t e n t i a l o i l p o l l u t i o n 9 103 233 233 ACTUAL OIL POLLUTION - LOT 98.5% e f f e c t i v e 1.6 3.5 3.5 - LOT 85 to 90% e f f e c t i v e 10.3 34.8 34.8 LIGHTER BALLASTING PRACTICE P o t e n t i a l o i l p o l l u t i o n 9 103 103 200 ACTUAL OIL POLLUTION - LOT 98.5% e f f e c t i v e 1.6 1.6 3.0 - LOT 85 to 90% e f f e c t i v e 10.3 15.4 30.0 9 o i l p o l l u t i o n when improved LOT i s not used at a l l . The qua n t i t y of o i l i s the sum o f o i l i n d i r t y b a l l a s t (Table 10) plus the o i l from tank c l e a n i n g f o r clean b a l l a s t and f o r residue c o n t r o l (Table 11) -73-85-90>per cent e f f e c t i v e . To compare, a 100,000 DWT conventional crude o i l tanker discharges 213 to 283 tons of o i l per t r i p , on the average, i n the absence of p o l l u t i o n c o n t r o l . 3.2.2 The cost of segregated bal1ast tankers 3.2.2.1 New Ships a) C o n s t r u c t i o n c o s t s — T h e c o n s t r u c t i o n costs of segregated b a l l a s t tankers were estimated i n one of the major studies c a r r i e d out f o r IMCO p r i o r to the 1973 c o n f e r e n c e . 7 These estimates, as well as those 8 obtained i n the U.K. by Crighton and T e l f e r are summarized in TABLE 13. The increase i n c o n s t r u c t i o n costs to comply with IMCO segregated b a l l a s t requirements i s l e s s than 5 per cent f o r small ships ( l e s s than 100,000 DWT tons) and between 4 and 9 per cent f o r l a r g e ships. In i t s background report on t a n k e r s , 9 the U.S. Congress provides actual increases in shipyard p r i c e f o r double-bottom tankers. These actual increases (2.5% to 4% f o r v e s s e l s i n the 90,000 to 200,000 DWT tons range) suggest that the estimates i n TABLE 13 are too high s i n c e , a l l other things being equal, double-bottom tankers are known to be g e n e r a l l y more expensive than conventional segregated b a l l a s t tankers. This may not always be true s i n c e some shipyards may become s p e c i a l i z e d f o r double-bottom designs and r e q u i r e a higher p r i c e f o r conventional segregated b a l l a s t designs (segregated b a l l a s t i n wing tanks or center tanks). In a d d i t i o n , these low actual increases i n shipyard p r i c e s f o r double-bottom tankers may provide biased estimates o f the a d d i t i o n a l c o s t brought about by double-bottom designs s i n c e as the double-bottom design i s r e q u i r e d by some i n d i v i d u a l c o u n t r i e s , i t w i l l take a long time before new tankers are ordered). F i n a l l y i t i s not -74-TABLE 13 PERCENTAGE INCREASE IN CONSTRUCTION COST FOR SEGREGATED BALLAST TANKERS Segregated B a l l a s t Capacity (percentage o f deadweight) Ship's 30 35 40 50 55 Deadweight (M. tons) 21 a 2% - - - -75 b -215 b - 8% - -250 a - - 4% -385 b -450 a - 9% b 550 -IMCO, Report on Study I D C r i g h t o n and T e l f e r , Segregated B a l l a s t Tankers, Proceedings of the Symposium on Marine P o l l u t i o n (Royal I n s t i t u t i o n o f Naval A r c h i t e c t s , London, 1973. -75-c l e a r to the w r i t e r whether the segregated b a l l a s t c a p a c i t y of the double-bottom tankers i n v e s t i g a t e d i s i n compliance with IMCO requirements. As a r e s u l t , no d e f i n i t e c o n c l u s i o n can be drawn from the actual f i g u r e s quoted above. In t h i s study anuniform 5 per cent increase i n co n s t r u c t i o n cost has been assumed f o r new segregated b a l l a s t tankers complying with IMCO requirements. b) C o n s t r u c t i o n d e l a y s — T h e segregated b a l l a s t design does not generate any delays i n shipyards unless the c o n s t r u c t i o n has already began when the d e c i s i o n to b u i l d a d d i t i o n a l segregated b a l l a s t c a p a c i t y i s made and l a s t minute changes have to be made i n work scheduling and material orders. c) Operating c o s t s — D u e to the more complex pi p i n g system and the increased i n t e r n a l tankage area, maintenance and r e p a i r costs are higher f o r segregated b a l l a s t tankers. Based on IMCO study 1, a 6 per cent increase i s assumed i n t h i s study. On the other hand, s i n c e b a l l a s t i n g and d e b a l l a s t i n g operations may be performed while loading or unloading cargo without r i s k i n g port p o l l u t i o n (due to the segregated b a l l a s t p i p i n g system) segregated b a l l a s t tankers tend to spend l e s s time i n po r t . To avoid the r i s k of port p o l l u t i o n , conventional tankers must spend an a d d i t i o n a l 3 to 6 hours i n 10 each port. I t i s assumed i n t h i s study that segregated b a l l a s t tankers save 5 hours per round t r i p on the average. Segregated b a l l a s t tankers generate l e s s slops than conventional tankers. This has some impact on the ship's throughput. This impact i s c a l c u l a t e d i n TABLE 14 f o r a 100,000 DWT crude o i l segregated b a l l a s t tanker using improved LOT. The l o s s o f throughput r e l a t i v e to the case o f no p o l l u t i o n c o n t r o l i s 52 to 115 tons per t r i p depending on weather and b a l l a s t i n g (that i s , the amount of dead f r e i g h t water). -76-TABLE 14 IMPACT OF SEGREGATED BALLAST ON THE THROUGHPUT OF A 100,000 DWT CRUDE OIL TANKER Tons/Trip Very Good Bad Heavy Weather Weather Weather TRADITIONAL BALLASTING PRACTICE Cargo c a r r y i n g c a p a c i t y 95,000 95,000 95,000 l e s s c l i n g a g e a f t e r cargo discharge 400 400 400 l e s s d e a d f r e i g h t 3 water 52 115 115 Total throughput 94,548 94,485 94,485 l o s s o f throughput r e l a t i v e to no p o l l u t i o n control 52 115 115 LL'IGHTER BALLASTING PRACTICES Cargo c a r r y i n g c a p a c i t y 95,000 95,000 95,000 l e s s c l i n g a g e a f t e r cargo discharge 400 400 400 l e s s d e a d f r e i g h t water 9 52 52 90 Total throughput 94,548 94,548 94,510 l o s s of throughput r e l a t i v e to no p o l l u t i o n c o n t r o l 52 52 90 a T h i s i s 50 per cent of ( p o t e n t i a l o i l p o l l u t i o n l e s s actual o i l p o l l u t i o n , as c a l c u l a t e d i n TABLE 12) assuming that the slops contain o n e - t h i r d of deadfreight water. The c a l c u l a t i o n s are made assuming that LOT i s operated prope r l y (98.5% e f f e c t i v e ) . The amount of deadfreight water i s 10-15% smaller i f Lot i s 85-90% e f f e c t i v e . -77-d) Operating c o n s t r a i n t s — T h e segregated b a l l a s t design w i l l r e s u l t i n increased ship's dimensions. For l a r g e r s h i p s , t h i s may preclude access to some port s . In such cases, i t i s necessary to l i g h t e n i n t o smaller tankers or to o f f l o a d part o f the cargo a t a previous c a l l . This c l e a r l y puts extra c o n t r a i n t s on the f l e e t operator. These c o n s t r a i n t s may only be met at some cost i n terms of a d d i t i o n a l ships or voyages and i n terms of port investments (dredging, berth extensions) and increased port charges. e) Port charges—Even when the segregated b a l l a s t design does not put any r e s t r i c t i o n on port access, a d d i t i o n a l tugs and bigger l o a d i n g / discharge arms may be r e q u i r e d at the ports because of increased ship's dimensions. On the other hand the p r e v i o u s l y mentioned time savings w i l l reduce port congestion and t h e r e f o r e the need f o r new port f a c i l i t i e s . H According to one expert the segregated b a l l a s t design should not a f f e c t port charges. 3.2.2.2 E x i s t i n g ships The cost o f converting e x i s t i n g tanker to segregated b a l l a s t tankers i s made up of the f o l l o w i n g elements: - l o s s o f c a r r y i n g c a p a c i t y - shipyard conversion cost - l o s s o f time during conversion - operating costs and b e n e f i t s due to conversion These costs have been i n v e s t i g a t e d i n depth i n a recent study c a r r i e d out f o r IMCO, the r e s u l t s are summarized below. a) E f f e c t on c a r r y i n g c a p a c i t y — T h e r e are two a l t e r n a t i v e s f o r converting an e x i s t i n g tanker t o a segregated b a l l a s t tanker. The " e x i s t i n g arrangement s o l u t i o n " b a s i c a l l y converts cargo tanks to segregated b a l l a s t -78-tanks at a l i m i t e d investment c o s t . This w i l l reduce the ship's c a r r y i n g 12 c a p a c i t y by 15 to 25 per cent. The second s o l u t i o n c o n s i s t s of int r o d u c i n g a d d i t i o n a l s t r u c t u r e s and strengthening e x i s t i n g ones. T h i s i n v o l v e s a l a r g e r investment c o s t but the c a p a c i t y l o s s i s reduced to 10-18 per cent o f the i n i t i a l c a p a c i t y f o r smaller ships ( l e s s than 100,000 dwt tons) and 10-15 per cent f o r l a r g e r s h i p s J 3 I t must be noted that the t o t a l segregated b a l l a s t c a p a c i t y w i l l be higher under the f i r s t s o l u t i o n , although both are in compliance with IMCO r e g u l a t i o n s . The second s o l u t i o n i s t h e r e f o r e r e f e r r e d to as the "minimum b a l l a s t s o l u t i o n " . b) Shipyard c o s t — T h e shipyard c o s t under the e x i s t i n g arrangement s o l u t i o n i s comprised between $100,000 and $900,000 regardless of s h i p s i z e ; . 14 $500,000 per ship i s a t y p i c a l f i g u r e . The cost i s much higher f o r the minimum b a l l a s t s o l u t i o n . I t v a r i e s between $1 m i l l i o n and $5.2 m i l l i o n s per ship and tends to increase with ship s i z e . T y p i c a l f i g u r e s would be 1.5 m i l l i o n per ship f o r those between 150,000 and 300,000 dwt tons and more f o r those above 300,000 dwt tons. Under both s o l u t i o n s , c o r r o s i o n p r o t e c t i o n of the segregated b a l l a s t tanks could amount to an a d d i t i o n a l $250,000 or more; depending on the method a p p l i e d . c) Shipyard d e l a y s — T i m e a t shipyard f o r conversion may vary between a few days and a month.^ The cost of tanker's time during conversion (that i s the b e n e f i t s foregone during conversion) i s small i f the work i s performed before the tanker f r e i g h t market recovers. d) Operating costs and b e n e f i t s — T h e conversion of e x i s t i n g ships should bring about time savings i n port, As i n the case of new s h i p s , a fi v e - h o u r ' s saving per round t r i p i s assumed i n t h i s study. Maintenance and r e p a i r costs should a l s o be a f f e c t e d i n much the same way f o r both new and e x i s t i n g ships ( 6 per cent i n c r e a s e ) . -79-I t i s estimated t h a t , f o r a given d r a f t , converted ships w i l l have a l a r g e r cargo c a r r y i n g c a p a c i t y (10-20 per cent higher i n most cases) A c c o r d i n g l y , the conversion should not r e s t r i c t port access but extend i t . Port charges are l i k e l y to decrease f o r converted ships as the amount o f cargo to be handled and the time spent i n port are reduced. This impact i s assumed to be n e g l i g i b l e i n t h i s study. 3.3 CRUDE OIL WASHING Research i n t o crude o i l washing goes back over three years. The technique has been developed to such an extent that i t has been p o s s i b l e f o r at l e a s t one company, the B r i t i s h Petroleum (B.P.) to adopt i t as the 1 -j standard tank washing procedure i n a l l owned VLCC's. 3.3.1 Routine O i l Discharges with crude o i l washing 3.3.1.1 Cleaning operations Crude o i l washing allows the residues on h o r i z o n t a l members of the tank s t r u c t u r e to be removed with the cargo being discharged, which acts as a s o l v e n t , d i s s o l v i n g sludge and sediments. A f t e r crude washing, i n t e r n a l tank s t r u c t u r e s are coated with a l i g h t f i l m of crude o i l , r epresenting say o n e - t h i r d of the i n i t i a l c l i n g a g e and no more water c l e a n i n g i s needed f o r residue c o n t r o l . Maybourn reports t h a t tank i n s p e c t i o n s can a l s o be c a r r i e d out without any need to water wash. This supposes that the tank atmosphere i s v i r t u a l l y f r e e of hydrocarbon gas. "Gas f r e e " atmospheres: may be achieved through v e n t i l a t i o n . Since most of the c l i n g a g e has been removed, the gas does not regenerate and entry i s p o s s i b l e . B.P. however issued s t r i n g e n t s a f e t y r e g u l a t i o n s on t h i s procedure. -80-Crude washing does not e l i m i n a t e the need f o r cleaning the tanks intended f o r clean b a l l a s t , but due to the very low c l i n g a g e , the c l e a n i n g and ROB operations are much e a s i e r . This p a r t i c u l a r l y a p p l i e s when the ship has to be e n t i r e l y cleaned p r i o r to drydock. Water clea n i n g i s al s o needed to wash out the o i l l e f t i n the p i p i n g system. This o i l i s sent to a d i r t y b a l l a s t tank or to the slop tank. As crude o i l washing c r e a t e s an exp l o s i o n hazard, the p r o t e c t i o n of an e f f e c t i v e i n e r t gas system i s e s s e n t i a l . With the i n e r t gas system, washwater r e c i r c u l a t i o n may be used, which f u r t h e r s i m p l i f i e s the clea n i n g and ROB operations, as i t reduces the amount o f contaminated water to be handled. T y p i c a l l y , a l l tanks f o r clean b a l l a s t are washed plus a t l e a s t 1 p h a l f o f the remainders so that no water c l e a n i n g i s needed f o r residue c o n t r o l and r o u t i n e maintenance and clean b a l l a s t c l e a n i n g may be kept to a minimum. TABLE 15 shows the average o i l discharges from cle a n i n g operations f o r a 100,000 DWT crude o i l tanker using crude o i l washing. Conventional tankers using crude o i l washing w i l l not r e c e i v e much b e n e f i t from l i g h t e r b a l l a s t i n g p r a c t i c e s and these p r a c t i c e s are not considered here. TABLE 15 shows that a 100,000 DWT crude o i l tanker using crude washing w i l l discharge 1 to 14.1 tons o f o i l during tank c l e a n i n g , depending on weather and e f f e c t i v e -ness o f improved LOT. 3.3.1.2 D e b a l l a s t i n g operations An e n t i r e crude washing c y c l e r e q u i r e s about one a d d i t i o n a l day in the port. The most common p r a c t i c e i s to wash a l l tanks intended f o r clean b a l l a s t on every occasion plus as many other tanks as i s p o s s i b l e without i n c u r r i n g delays. I f cargo unloading i s s u f f i c i e n t l y slow a l l -81-TABLE 15 AVERAGE OIL DISCHARGES FROM CLEANING FOR A CONVENTIONAL 100,000 DWT CRUDE OIL TANKER USING CRUDE WASHING AND IMPROVED LOT Good Weather Bad Weather Tank c a p a c i t y intended f o r clean b a l l a s t (% of dwt) 20-30% 40-50% Tank c a p a c i t y crude washed (% o f dwt) 70% 70% O i l l e f t i n tanks intended f o r clean b a l l a s t a f t e r crude washing 3 30 tons 54 tons O i l l e f t i n piping system 9 40 tons 40 tons P o t e n t i a l o i l p o l l u t i o n ' 3 70 tons 94 tons O i l p o i1ution during c l e a n i n g Improved LOT 9 8 . 5 % % e f f e c t i v e 1.0 tons 1.4 tons Improved LOT 85 to 90% e f f e c t i v e 7.0 tons 14.4 tons a Before crude washing there i s 360 tons o f o i l l e f t i n tanks and 40 tons i n p i p i n g system. Crude washing removes 66 per cent o f the c l i n g a g e l e f t i n the tank. b 100% of the o i l l e f t i n p i p i n g system and i n the tanks intended f o r clean b a l l a s t . -82-d i r t y b a l l a s t tanks may be washed but t h i s i s not always the case. Assuming (as i n TABLE 15) that 70 per cent o f the tanks are crude ... washed, i t may be considered that a l l d i r t y b a l l a s t tanks are washed in good weather and only 50 per cent i n bad weather. The r e s u l t i n g average o i l discharges from d e b a l l a s t i n g are shown in TABLE 16 f o r a 100,000 dwt crude o i l tanker using crude washing. The average discharge i s comprised between 1.0 and 14.1 tons depending on weather and e f f e c t i v e -ness o f improved LOT. 3.3.1.3 Summary TABLE 17 shows the average o i l discharges f o r a conventional 100,000 dwt crude o i l tanker:on~a:routine t r i p . These discharges are comprised between 1.4 tons and 27.1 tons depending on weather and e f f e c t i v e n e s s o f improved LOT. I t must be noted that crude o i l washing generates hydro carbon gas which i s e x p e l l e d to the atmosphere during b a l l a s t i n g . This may create serious problems i n port areas. This aspect i s not d e a l t with i n t h i s study. 3.3.2 The cost o f crude o i l washing 3.3.2.1 Equipment requirements Due to the high o i l pressures r e q u i r e d to c a r r y out crude o i l washing operations, portable c l e a n i n g machines with f l e x i b l e hoses are i n a p p r o p r i a t e . Fixed washing machines must be used. I f the ship i s already equipped with f i x e d washing machines, as i s the case f o r most VLCC's, the number o f d r i v e u n i t s r e q u i r e d to d r i v e these machines f o r water washing at sea must be increased f o r crude o i l washing i n order to 19 avoid delays. -83-TABLE 16 AVERAGE OIL DISCHARGES DURING DEBALLASTING FOR A 100,000 DWT CRUDE OIL TANKER USING CRUDE WASHING AND IMPROVED LOT Good Weather Bad Weather c a p a c i t y o f d i r t y b a l l a s t tanks (% o f dwt) Percentage o f d i r t y b a l l a s t tanks crude washed O i l l e f t i n d i r t y b a l l a s t tanks a f t e r crude washing 9 P o t e n t i a l o i l p o l l u t i o n ' 3 20-30% 100% 30 tons 24 tons 40-50% 100% 108 tons 86 tons O i l p o l l u t i o n during D e b a l l a s t i n g improved LOT 98.5% e f f e c t i v e improved LOT 85 to 90% e f f e c t i v e .4~tons 2.4 tons 1.3 tons 13.0 tons aSee note a - TABLE 5 b80% o f o i l l e f t i n d i r t y b a l l a s t tanks. -84-TABLE 17 AVERAGE OIL DISCHARGES FOR A 100,000 DWT CRUDE OIL TANKER USING CRUDE WASHING AND IMPROVED LOT (Tons/Routine T r i p ) Good Weather Bad Weather P o t e n t i a l o i l p o l l u t i o n 3 94 180 Actual O i l P o l l u t i o n - Improved LOT 98.5% e f f e c t i v e 1.4 2.7 -Improved LOT 85 to 90% e f f e c t i v e 9.4 27.0 a O i l p o l l u t i o n when improved LOT i s not used at a l l -85-In a d d i t i o n , crude o i l washing re q u i r e s an i n e r t gas system. The cost of such a system i s estimated at $300,000 to $500,000 depending on s i z e . However, the d e c i s i o n to i n e r t a ship i s made f o r s a f e t y reasons and the p o s s i b i l i t y o f using crude washing on i n e r t e d tankers i s i n c i d e n t a l . A c c o r d i n g l y , i t i s unappropriate to in c l u d e i n e r t i n g c o s t s i n t o crude washing equipment c o s t s : the d e c i s i o n to use crude washing supposes that the ship i s alrea d y i n e r t e d ; a ship w i l l not be i n e r t e d i n order to use crude washing. The cost of the a d d i t i o n a l f i x e d washing machines and d r i v e u n i t s i s not known to t h i s w r i t e r . Information i s needed i n t h i s regard. 3.3.2.2 Operating c o s t s and b e n e f i t s The use of crude washing c o n s i d e r a b l y reduces the o v e r a l l time and e f f o r t a p p l i e d to tank c l e a n i n g and LOT operations. However, i t w i l l i n crease the workload during discharge. Since the ship's crew i s requ i r e d f o r the normal vessel o p e r a t i o n s , i t i s necessary to have one to three a d d i t i o n a l men and one extra deck o f f i c e r from the shore to a s s i s t the 20 c h i e f o f f i c e r during cargo discharge. Provided that the crude washing operationi/is properly-pianned* i t ~ o n l y "causes small delays on r o u t i n e voyages. When the e n t i r e ship has to be cleaned p r i o r to drydock, an a d d i t i o n a l day i s needed at the discharge port. This a d d i t i o n a l day makes i t p o s s i b l e to save several days and the cost of h a n d l i f t i n g hundreds of tons of residues at the drydocking port (or to avoid c o n s i d e r a b l e p o l l u t i o n on the voyage to drydock). F i n a l l y , the use o f crude washing reduces the c l i n g a g e and the amount of deadfreight water and, t h e r e f o r e , increases the ship's throughput. The impact of crude o i l washing on the throughput of a 100,000 dwt crude o i l tanker using crude o i l washing i s shown i n TABLE 18. The use of crude -86-TABLE 18 IMPACT OF CRUDE OIL WASHING ON THE THROUGHPUT OF A 100,000 DWT CRUDE OIL TANKER USING IMPROVED LOT ( t o n s / t r i p ) Good Weather Bad Weather Cargo c a r r y i n g c a p a c i t y 95,000 95,000 Less c l i n g a g e a f t e r cargo  discharge - cli n g a g e i n crude washed t a n k s 9 84 84 - cl i n g a g e i n other t a n k s 3 108 108 - clin g a g e i n pip i n g system 40 40 - t o t a l c l i n g a g e 232 232 Less d e a d f r e i g h t w a t e r b 47 90 Total throughput 94,721 94,678 Throughput increase r e l a t i v e to no p o l 1 u t i on c o n t r o l 121 78 a It i s assumed that 70% of the tanks are crude washed. The i n i t i a l tank c l i n g a g e i s 360 tons. Crude washing removes two-thirds o f the c l i n g a g e . b This i s 50 per cent o f ( p o t e n t i a l p o l l u t i o n l e s s actual p o l l u t i o n , as c a l c u l a t e d i n TABLE 12). -87-washing Increases the throughput of a 100,000 DWT crude o i l tanker by 80 to 120 tons, on the average, depending on weather (assuming that improved LOT i s 98.5 e f f e c t i v e . The increase i s s l i g h t l y smaller i f improved LOT i s only 85-90% e f f e c t i v e ) . I n c r e a s i n g l y , i t i s considered i n the o i l i n d u s t r y that crude washing "pays f o r i t s e l f " . Equipment c o s t s , manpower costs at the d i s c h a r g i n g port and small delays i n ports are o f f s e t by time and manpower savings during drydockingg increased ship throughputs and above a l l , much e a s i e r c l e a n i n g and LOT operations, In a d d i t i o n , i t reduces the amount o f o i l l o s t to the sea. From the viewpoint of independent shipowners, crude washing increases the b i l l - o f - l a d i n g weight (by reducing the amount of slops) and makes c l e a n i n g and LOT operations e a s i e r . There i s no f i n a n c i a l gain, however, from reduced o i l discharges or increased ship throughputs. 3.3.3 Crude o i l washing + Segregated B a l l a s t When crude o i l washing i s used on segregated b a l l a s t tankers, water c l e a n i n g i s e l i m i n a t e d except when a d d i t i o n a l clean b a l l a s t i s needed to cope with severe weather c o n d i t i o n s . In the l a t t e r case, however, water c l e a n i n g i s kept to a minimum i f the tanks intended f o r clean b a l l a s t are crude washed. I t i s p o s s i b l e , f o r i n s t a n c e , to use f o r clean b a l l a s t the tanks that have been washed f o r residue c o n t r o l and r o u t i n e maintenance. TABLE 19 shows average o i l discharges f o r a 100,000 dwt segregated b a l l a s t tanker using crude o i l washing and improved LOT. These discharges are comprised between .6 tonsand 18 tons per t r i p , depending on weather, b a l l a s t i n g p r a c t i c e and e f f e c t i v e n e s s of -88-TABLE 19 AVERAGE OIL DISCHARGES FOR A 100,000 DWT CRUDE OIL SEGREGATED BALLAST TANKER USING CRUDE WASHING AND IMPROVED LOT Very Good Heavy Heavy Weather Weather Weather TRADITIONAL BALLASTING PRACTICE Segregated b a l l a s t 35% of dwt 35% dwt 35% dwt D i r t y b a l l a s t and clean b a l l a s t 0 20% dwt 20% dwt Po t e n t i a l o i l p o l l u t i o n 9 40 tons 122 tons 122 tons Actual o i l p o l l u t i o n - improved LOT 98.5% e f f e c t i v e .6 ton 1.8 tons 1.8 tons - improved LOT 85 to 90% e f f e c t i v e 4.0 tons 18 tons 18 tons LIGHTER BALLASTING PRACTICE D i r t y b a l l a s t and clean b a l l a s t 0 0 15% dwt Po t e n t i a l o i l p o l l u t i o n 40 tons 40 tons 101 tons Actual o i l p o l l u t i o n - improved LOT 98.5% e f f e c t i v e .6 ton .6 ton 1.5 tons - improved LOT 85 to 90% e f f e c t i v e 4.0 tons 4.0 tons 15 tons a O i l i n p i p i n g system + 80% of o i l i n d i r t y b a l l a s t tanks + 100% of o i l l e f t i n clean b a l l a s t ( a f t e r crude washing) -89-improved LOT. These f i g u r e s assume that the tanks used f o r clean b a l l a s t are always crude washed. TABLE 20 shows the impact of crude washing on the throughput of a 100,000 dwt segregated b a l l a s t tanker using improved LOT. The throughput i s v i r t u a l l y the same as i n the case of no p o l l u t i o n c o n t r o l . 3.4 SHORE RECEPTION AND TREATMENT FACILITIES Most drydocking ports are equipped with small f a c i l i t i e s to handle the slops o f the tankers coming f o r r e p a i r . But research i n t o the c o s t -e f f e c t i v e n e s s and technology of l a r g e f a c i l i t i e s to handle the bulk of the d i r t y b a l l a s t and washwaters r e a l l y s t a r t e d i n 1971 when complete e l i m i n a t i o n of operational p o l l u t i o n by o i l was e s t a b l i s h e d as a goal by 21 IMCO. Two of the nine IMCO s t u d i e s c a r r i e d out p r i o r to the 1973 22 Conference were focusing on the subject. In 1972, the U.S. government 23 a l s o sponsored a major study to determine requirements f o r c o l l e c t i o n and separation f a c i l i t i e s at U.S. ports (under a "no vessel discharge" assumption) and to show the economic c o s t and f e a s i b i l i t y of such f a c i l i t i e s . Large r e c e p t i o n and treatment f a c i l i t i e s are now being b u i l t i n Valdez, Alaska and M a r s e i l l e , France, but i t has not been p o s s i b l e to obtain any c o s t information from the c o n t r a c t o r s . 3.4.1 Routine o i l discharges with shore f a c i l i t i e s Tankers a r r i v i n g a t the loading port discharge d i r t y b a l l a s t and slops i n t o storage tanks. This material i s then t r e a t e d by chemical and phy s i c a l processes such as g r a v i t y s e p a r a t i o n , skimming, f i l t e r i n g , b i o x i d a t i o n , e t c . . . The recovered o i l may then be blended i n t o the TABLE 20 IMPACT OF CRUDE WASHING ON THE THROUGHPUT OF A 100,000 DWT SEGREGATED BALLAST TANKER USING IMPROVED LOT (tons/routine t r i p ) Very Good Heavy Heavy Weather Weather Weather Cargo Carrying Capacity 95,000 95,000 95,000 TRADITIONAL BALLASTING PRACTICES Less c l i n g a g e l e f t a f t e r cargo discharge 352 352 352 Less deadfreight water 20 60 60 Total throughput 94,628 94,588 94,588 Throughput increase r e l a t i v e to no p o l l u t i o n c o n t r o l 28 -12 -12 LIGHTER BALLASTING PRACTICES Less c l i n g a g e l e f t a f t e r cargo discharge 352 352 352 Less deadfreight water 20 20 50 Total throughput 94,628 94,628 94,698 Throughput increase r e l a t i v e to no p o l l u t i o n control 28 28 -2 a 20% o f the tanks are crude washed f o r residue c o n t r o l and rout i n e maintenance on every voyage. -91-terminal's crude storage tanks while the water with a low o i l content i s discharged back to the sea. A m u l t i - s t e p treatment e n t a i l i n g p r o g r e s s i v e l y more s o p h i s t i c a t e d and c o s t l y methods may be a p p l i e d to the water, depending on the e f f l u e n t q u a l i t y standards applying i n the region. The treatment g e n e r a l l y produces r e s i d u a l sludges t h a t must be disposed of somewhere on shore at some a d d i t i o n a l c o s t . To i l l u s t r a t e , a very simple scheme only i n v o l v i n g 24 g r a v i t y separation i n holding tanks would achieve the f o l l o w i n g performances. Q u a l i t y of o i l recovered: Poor - O i l recovery: Low = 75% of the o i l - O i l y sludge: High = 15-20% of the t r e a t e d o i l - O i l content of the e f f l u e n t : High - 50-100 ppm The scheme to be implemented a t Valdez f o r tankers engaged i n the fu t u r e Alaska trade i s much more complex. I t inv o l v e s a four step treatment process: g r a v i t y s e p a r a t i o n , chemical c o a g u l a t i o n and d i s s o l v e d a i r f l o t a t i o n , PH adjustment and holding before discharge, as shown i n e x h i b i t (1). The performance i s as f o l l o w s : Q u a l i t y of o i l recovered: Very good - O i l recovery: very high: 98% of the o i l - O i l y sludge: Low: 5% of the t r e a t e d o i l ( i n c l u d e s water) - O i l content of the e f f l u e n t : Low 8-12 ppm 3.4.1.1 D e b a l l a s t i n g operations Tankers using a shore r e c e p t i o n and treatment f a c i l i t y discharge a l l d i r t y b a l l a s t i n t o the f a c i l i t y . The r e s u l t i n g discharge i s c a l c u l a t e d i n TABLE 21 f o r a 100,000 dwt crude tanker depending on weather and b a l l a s t i n g p r a c t i c e . This o i l i s discharged i n port waters. Data Sheet 91a B a l l a s t - T r e a t m e n t F a c i l i t y 5 / 7 ! All oily ballast water from the holds of tankers arriving at the terminal of the trans A laska pipel ine at Valdez will be pumped ashore for treatment before being discharged into the Port of Valdez. The water will be c leansed to 8 parts of oil per million on the average, meeting the requirements of both the E.P.A. and State of Alaska. The ballast water wil l be treated in a four-step process involving primary separation, chemical coagulation and dissolved air flotation, pH (alkaline) adjustment, and holding before discharge. can float to the surface. The floating oil will be removed by skimming devices. Upon completion of that process, the ballast water will be discharged into an air-flotation basin. There, a coagulant (alum) and a polyelectrolyte will be mixed with the ballast water, forming particles of oil and chemical ca l led "floe." When the floe has formed, pressurized water containing dissolved air will be mixed with the floc-ballast mixture, causing the floe particles to rise to the surface where they will be skimmed. Solids, such as grit, settle to the bottom of the basin. (alum) will be controlled by the introduction of a dilute caustic (sodium hydroxide). Two pH sensors, an a'utomatic'sampler device and an oil analyzer will be used to monitor water quality in this step before the ballast is transferred to an effluent holding reservoir where final quality control tests will be made. If the final tests show that the ballast has not been treated sufficiently, it wil l be returned to the treatment facility for further processing. Otherwise, it will be discharged into the sea at a depth of between 200 and 375 feet, between 700 and 1,050 feet offshore, to secure maximum mixing with the sea water. In the primary separation stage, the ballast water will be pumped into storage tanks where it will be held in a quiet state, so that free oil After the floated and settled sol ids have been eliminated, the ballast water will flow into the pH adjustment system where the s ide effects from the earlier addition of the coagulant Oi l recovered in theproces s will be cyc led intc the terminal 's oil storage tanks. S ludge wil l be de-watered and d isposed of in a manner acceptable to A laska authorities. Oil Tankers Future Ballast Water StorageTanks Crude Oil Storage Flotation Scum Recovered Crude Oil Recovered Oil Treatment Facility Bal last Water to Flotation 3 Air Flotation Basins - r - n ^ r ^ 1 1 — H -f • a 2 Future Basins Chemical Coagulants pH Control Treated Effluent Discharge Effluent Holding Reservoir Ballast Water Rec la imed Oi l Other Ballast storage capacity: 1.29 million barrels in three 430.000 barre cone-rool lanks. Maximum treatment rate: 800.000 barrels a day. Ballast aging period: 6 to 8 hours. Flotation time: 10 minutes Final pH treatment values: 7.5 to 8.5 011 recovery system: Skimmer tanks, preheaters. electrostatic dehydralors Design: Incon. Inc. Constructor: FluorAlaska Inc ApriI 1975 Headquarters: 1835 South Bragaw Street Anchorage, Alaska 99504 luesko pipeline V # I I SERVICE COMPAN -92-TABLE 21 AVERAGE OIL DISCHARGES FROM DEBALLASTING FOR A 100,000 DWT CRUDE OIL TANKER USING :A SHORE ^ FACIii ItY (Tons/Routine T r i p ) Very Good Heavy Heavy Weather Weather Weather TRADITIONAL BALLASTING PRACTICE Amount of d i r t y b a l l a s t 3 22,500 37,500 37,500 Po t e n t i a l o i l p o l l u t i o n b 65 108 108 O i l p o l l u t i o n ( i n port) .45 .75 .75 O i l recovered at the f a c i l i t y 64.5 107.2 107.2 LIGHTER BALLASTING PRACTICE Amount of d i r t y b a l l a s t 22,500 22,500 37,500 Po t e n t i a l o i l p o l l u t i o n 65 65 108 O i l p o l l u t i o n .45 .45 .75 O i l recovered at the f a c i l i t y 64.5 64.5 107.2 a See Annex A b 80 per cent of the o i l i n d i r t y b a l l a s t -93-3.4.1.2 Cleaning Operations The shore f a c i l i t y e l i m i n a t e s the clean b a l l a s t problem and, th e r e f o r e , c o n s i d e r a b l y reduces tank c l e a n i n g requirements. These may even be e l i m i n a t e d completely by use of crude washing during cargo discharge. A l t e r n a t i v e l y , the clea n i n g operations may be c a r r i e d out using washwater r e c i r c u l a t i o n . Due to the small volume i n v o l v e d , the washwater may be kept e n t i r e l y i n the slop tank f o r discharge i n t o the shore f a c i l i t y . Both the crude washing and the r e c i r c u l a t i o n procedure suppose that the ship i s i n e r t e d . Another way to avoid d i s c h a r g i n g contaminated washwater i s to use a cargo tank o f s u f f i c i e n t c a p a c i t y as slop tank. It has become the p r a c t i c e to use s p e c i a l l y designed tanks (that i s , deep tanks with small cross s e c t i o n area provided with heating c o i l s and c a r e f u l l y l o c a t e d i n l e t s and o u t l e t s ) since the separation and control o f e f f l u e n t q u a l i t y i s d i f f i c u l t when using 25 a normal cargo tank. A c c o r d i n g l y , some changes i n the pip i n g system are needed g e n e r a l l y to use a cargo tank as slop tank. The problem o f inadequate separation i s i r r e l e v a n t here since the contaminated water i s discharged e n t i r e l y i n t o the shore f a c i l i t y . I f none of the above s o l u t i o n s i s used some o i l has to be discharged to the sea. On medium to long-haul trades, the o i l y mixture may beeallowed to s e t t l e before discharge but on short-haul t r a d e s , where most of the shore f a c i l i t i e s w i l l be found i f the 1973 Convention i s implemented, s e t t l i n g w i l l g e n e r a l l y not be p o s s i b l e and considerable p o l l u t i o n may r e s u l t . TABLE 22 "shows the average o i l discharges from c l e a n i n g operations i n various cases f o r a 100,000 dwt crude o i l tanker using a shore f a c i l i t y . When the washwater i s discharged e n t i r e l y i n t o the shore f a c i l i t y , the r e s u l t i n g o i l p o l l u t i o n i n port i s comprised between zero and .18 tons. When -94-TABLE 22 AVERAGE OIL DISCHARGES FROM CLEANING OPERATIONS FOR A 100,000 DWT CRUDE OIL TANKER USING A SHORE FACILITY Good Weather Bad Weather WITH CRUDE WASHING Oi l p o l l u t i o n 0 0 WITH RECIRCULATION Tank c a p a c i t y cleaned 15-20% dwt 15-20% dwt Amount of washwater 9 875 tons 875 tons O i l p o l l u t i o n ( i n p o r t ) b .02 tons .02 ton SLOP TANK OF SUFFICIENT CAPACITY  Amount o f washwater 9 - with eductors 8,820 tons 8,820 tons - no eductors 2,520 tons 2,520 tons O i l p o l l u t i o n ( i n port) - with eductors .18 ton .18 ton - no eductors .05 ton .05 ton TREATMENT-QN-BOARD Po t e n t i a l o i l p o l l u t i o n 62 tons 62 tons O i l p o l l u t i o n (at sea) up to 62 tons up to 62 tons O i l p o l l u t i o n ( i n p o r t ) 0 0-.02 ton 0-.02 ton aSee annex A ^Assuming that the o i l content of the e f f l u e n t i s 20 ppm c Due to remaining slops (2000 t o n s ) . -95-the washwater i s t r e a t e d aboard the s h i p , up to 62 tons of o i l may be discharged (at sea) i f the separation of the o i l and water i s inadequate. 3.4.1.3 Summary TABLE 23 shows average o i l discharge on a r o u t i n e t r i p f o r a 100,000 dwt crude o i l tanker using a shore f a c i l i t y . The average o i l discharge i n port i s comprised between zero and .63 tons depending on b a l l a s t i n g p r a c t i c e and tank c l e a n i n g procedure. There i s no discharge at sea except when the washwater i s t r e a t e d aboard the ship. In the l a t t e r case, the average o i l discharge may be very high i f the mixture i s not allowed to s e t t l e (up to 62 t o n s ) . 3.4.2 The costs of Shore F a c i ! i t i e s The cost o f t r e a t i n g o i l y mixtures i n a shore f a c i l i t y i s known to be h i g h l y v a r i a b l e . Important f a c t o r s are: - the a v a i l a b i l i t y o f space and f a c i l i t i e s (storage tanks, sludge i n c i n e r a t o r s , etc.) i n the port area. - the required e f f l u e n t q u a l i t y standard: complex and c o s t l y procedures must be used to produce high q u a l i t y e f f l u e n t s . - Sludge disposal method: sludge disposal cost may be as high as o n e - t h i r d of the t o t a l treatment c o s t . S a n i t a r y l a n d f i l l i s hard to f i n d and i n c i n e r a t o r s are c o s t l y , e s p e c i a l l y i f a i r p o l l u t i o n i s to be avoided. - D e b a l l a s t i n g procedure: d e b a l l a s t i n g o f o i l y mixtures and loading of cargo are g e n e r a l l y done c o n c u r r e n t l y i n order to minimize ship delays and berth occupancy. This r e q u i r e s an a d d i t i o n a l p i p i n g anand pumping system at each berth to be used i n p a r a l l e l with the v e s s e l ' s p i p i n g and pumping system. In t h i s case, ship delay i s -96-TABLE 23 AVERAGE OIL DISCHARGES FOR A 100,000 DWT CRUDE OIL 'TANKER USING A SHORE FACILITY (Tons/routine t r i p ) Good Weather Bad Weather OILY MIXTURES ARE TREATED ENTIRELY ON THE SHORE O i l p o l l u t i o n ( i n port) - d e b a l l a s t i n g .45 .45-.75 a - c l e a n i n g 0-- 1 8b 0-.18 b - t o t a l .45-.63 .45-.63 o i l p o l l u t i o n at sea 0 0 o i l recovered at the f a c i l i t y 127 127-170 a THE WASHWATER IS TREATED ON BOARD O i l p o l l u t i o n ( i n port) .45-.63 .45-.63 O i l p o l l u t i o n (at sea) up to 62 tons up to 62 tons O i l recovered at the f a c i l i t y 64-127 c 64-170 c a depending on b a l l a s t i n g p r a c t i c e b depending on c l e a n i n g procedure (crude washing, r e c i r c u l a t i o n or use o f a slop tank o f s u f f i c i e n t c a p a c i t y ) . Q depending on b a l l a s t i n g p r a c t i c e and the amount of o i l p o l l u t i o n -97-1imited to about four hours. The a d d i t i o n a l investment c o s t might be unwarranted, however, u n t i l the tanker market recovers. - F a c i l i t y s i z e : Given the c h a r a c t e r i s t i c s of tanker t r a f f i c , and the amounts o f o i l y mixtures c a r r i e d , there i s an optimal f a c i l i t y s i z e . At t h i s optimal s i z e , the cost of expanding the f a c i l i t y exceeds the b e n e f i t s from reduced tanker delay and berth occupancy 1972 estimates of the cost o f c o l l e c t i n g and t r e a t i n g o i l y mixtures (and t r a n s p o r t i n g the recovered o i l to market) are given i n TABLE 24 f o r complex f a c i l i t i e s generating high q u a l i t y e f f l u e n t - (10-15 ppm). The c o s t per recovered b a r r e l o f o i l i s comprised between $1.11 to $2.78 (or $8.4 to $21.0 per ton of o i l recovered using a ton to b a r r e l conversion f a c t o r o f 7.58). Using a 10 per cent annual i n f l a t i o n r a t e , the cost i n 1976 would be comprised between $12.3 and $30.7 per ton of o i l recovered. These estimates do notin'nclude the value of the recovered o i l . They represent the cost to the owner o f the f a c i l i t y and do not take i n t o account the c o s t of tanker delay to tanker owners. I f these estimates are v a l i d and i f the p r i c e of the recovered o i l i s c l o s e from the p r i c e of normal crude (about $90 per ton) i t may be concluded that the operation of a shore f a c i l i t y i s a p r o f i t a b l e business. T h i s does not mean, however, t h a t p o l l u t i o n c o n t r o l using shore f a c i l i t i e s does not cost anything, r e l a t i v e to c u r r e n t p r a c t i c e (conventional LOT) as l a r g e q u a n t i t i e s o f o i l can be recovered using LOT at a small c o s t . The f o l l o w i n g c a l c u l a t i o n s w i l l c l a r i f y t h i s p o i n t . In the absence o f p o l l u t i o n c o n t r o l , the o i l input to the world's oceans from tanker o p e r a t i o n a l p o l l u t i o n would be 4.1 m i l l i o n tons per year. 2* 5 27 Under c u r r e n t p r a c t i c e t h i s o i l input i s about 1.4 m i l l i o n tons per year, which means that 2.7 M i l l i o n tons o f o i l are recovered annually. Now suppose -98-TABLE 24 ESTIMATED COST AND EFFECTIVENESS OF SHORE FACILITY TREATMENT FOR VARIOUS U.S. PORTS A ™ " " * o f o i l o i l content cost p e r 3 o i l y water recovery o f e f f l u e n t recovered (M tons/year) (%) (ppm) barr e l (1972 $/bb1) New Yo r k 5 5,498 98 10-15 1.67 San J u a n c 429 98 10-15 2.41 Houston d 5,883 98 10-15 i . n San F r a n c i s c o e 2,041 98 10-15 1 33 C l e v e l a n d f 894 98 10-15 2.78 SOURCE: U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Port C o l l e c t i o n and Separation F a c i l i t i e s f o r o i l y wastes. aThese costs do not in c l u d e the value o f the recoverd o i l . They represent the c o s t to the owner o f the f a c i l i t y and do not account f o r tanker delays. bSee V o l . 3, Tables 2-3, 2-12, 2-13 CSee V o l . 3, Tables 4-3, 4-10, 4-12, 4-13 dSee V o l . 3, Tables 5-8, 5-1-6, 5-18, 5-19 eSee V o l . 3, Tables 7-3, 7-11, 7-13, 7-14 fSee V o l . 3, Tables, 8-3, 8-11, 8-13, 8-14 -99-that a l l tankers are r e q u i r e d to use shore f a c i l i t i e s f o r a l l d i r t y b a l l a s t and washwater. Suppose that 98 per cent o f the o i l i s recovered ( t h i s i s the percentage shown i n TABLE 24). Then about 4 m i l l i o n tons of o i l would be recovered each year, that i s 1.3 m i l l i o n tons more than under c u r r e n t p r a c t i c e . Suppose that x i s the average cost o f recovering one ton of o i l using a shore f a c i l i t y ( t h i s c o s t i n c l u d e s c o l l e c t i o n and treatment c o s t s , t r a n s p o r t to market costs and the c o s t of tanker d e l a y s ) . Assuming that the value o f the recovered o i l i s about $80 per ton and t h a t the cost o f recovery o i l using conventional LOT i s n e g l i g i b l e , the net cost ( r e l a t i v e to c u r r e n t p r a c t i c e ) of using shore f a c i l i t i e s worldwide i s ( i n $ m i l l i o n per year) X x 4 - 1 . 3 x£80. This net c o s t becomes a net b e n e f i t f o r x smaller than 80 x 1.3 / 4 = $26 per ton of o i l recovered. To compare, i t has been estimated p r e v i o u s l y , using TABLE 24, that the cost o f recovering one toneofffoiil using shore f a c i l i t i e s i n U.S. ports was $12.3 to $30.7 plus the cost of tanker delays. The average c o s t worldwide might be l e s s than $26. In t h i s case p o l l u t i o n c o n t r o l using shore f a c i l i t i e s would cost l e s s than under c u r r e n t p r a c t i c e . 3.5 POLLUTION CONTROL TECHNIQUES AND THE ENFORCEMENT PROBLEM 3.5.1 Routine voyages A p o l i c y to c o n t r o l tanker operational p o l l u t i o n i s not defined only by the p o l l u t i o n c o n t r o l techniques i t r e q u i r e s . I t should a l s o include a set o f standards that (1) c o n s i s t e n t with the r e q u i r e d p o l l u t i o n c o n t r o l techniques, and (2) enforceable. -100-In the case o f e f f e c t i v e enforcement, the r e q u i r e d p o l l u t i o n c o n t r o l techniques are used p r o p e r l y and o i l discharges are kept to a minimum. In the absence of e f f e c t i v e enforcement, there i s l e s s i n c e n t i v e f o r operating p r o p e r l y p o l l u t i o n c o n t r o l procedures and w i l l f u l or uninten-t i o n a l f a i l u r e s become more frequent. I f e f f e c t i v e c o n t r o l and monitoring equipment i s provided, uninten-t i o n a l f a i l u r e s i n the operation o f improved LOT should be e l i m i n a t e d . In the absence of e f f e c t i v e enforcement, however, t h i s equipment may not be provided or i t may not be p r o p e r l y maintained. W i l l f u l s l o p discharges are f i n a n c i a l l y d e s i r a b l e on long-haul trades f o r crude o i l tankers owned by independent shipping f i r m s , unless the f r e i g h t i s paid on the s l o p s . They are f i n a n c i a l l y d e s i r a b l e f o r a l l crude o i l tankers on short-haul trades when too much s e t t l i n g time or the use of a shore f a c i l i t y f o r u n s e t t l e d slops i s r e q u i r e d . F a i l u r e s are not only made when using LOT procedures. Segregated b a l l a s t tankers may c a r r y more d i r t y b a l l a s t than they are allowed to i n order to avoid having to d i v e r t or reduce speed. Tankers using a shore f a c i l i t y may discharge d i r t y washwaters at sea. They may a l s o discharge d i r t y b a l l a s t i n order to reduce delays and port charges, i f the weather improved and some b a l l a s t becomes unnecessary. It i s extremely d i f f i c u l t to p r e d i c t the amount of o i l p o l l u t i o n i n c u r r e d i n the absence o f e f f e c t i v e enforcement. TABLE 25 shows the hypo-t h e t i c a l amounts o f o i l discharged by a 100,000 DWT crude o i l tanker on a r o u t i n e long-haul t r i p f o r a number o f p o l l u t i o n control techniques, assuming that improved LOT i s 98.5 per cent e f f e c t i v e i n the case of e f f e c t i v e enforce-ment and 85 to 90 per cent e f f e c t i v e (depending on the weather), on the average, i n the absence of e f f e c t i v e enforcement. I t should be noted, however, -101-TABLE 25 IMPACT OF ENFORCEMENT ON THE AMOUNT OF OIL POLLUTION CAUSED BY A 100,000 DWT CRUDE OIL TANKER ON A LONG-HAUL TRIP 9 (Tons of o i l discharged per t r i p ) II TECHNIQUES EFFECTIVE ENFORCEMENT NO EFFECTIVE ENFORCEMENT Good Bad Good Bad Weather Weather Weather Weather Improved LOT 3.2 4.2 21.3 42.4 Improved LOT + crude washing 1.4 2.7 9.4 27.0 Improved LOT . + seg. b a l l a s t 1.6 1.6-3.5° 10.3 34.8 C Improved LOT + crude washing , + seg. b a l l a s t .6 .6-1.8° 4 18 c Improved ROB H d P e + b a l l a s t f a c i l i t y .6° .6 6.2 9.3 assuming that improved LOT/ROB i s 98.5% e f f e c t i v e i n the case of e f f e c t i v e enforcement and 85-90% e f f e c t i v e i n the case of no e f f e c t i v e enforcement. ^depending on b a l l a s t i n g p r a c t i c e . cassuming that l i g h t e r b a l l a s t i n g p r a c t i c e w i l l not be followed i n the absence o f e f f e c t i v e enforcement. i n port e.6 tons are discharged i n po r t , the r e s t at sea. -102-that the e f f e c t i v e n e s s of improved LOT should be higher on segregated b a l l a s t t t a n k e r s , or on ships using crude washing than on conventional ships using improved LOT alone due to the smaller amount of contaminated water to be handled. S i m i l a r l y , w i l l f u l s l o p discharges are u n l i k e l y i f the ship has to use a shore f a c i l i t y f o r d i r t y b a l l a s t s ince the slops may e a s i l y be discharged ashore. In other words, i f improved LOT i s say 90 per cent e f f e c t i v e when used alone, i t w i l l be more than 90 per cent e f f e c t i v e when i t i s supplemented with some other technique. According to TABLE 25, the average amount o f o i l discharged by a 100,000 dwt crude o i l tanker on a r o u t i n e t r i p comprised between .6 tons and 4.2 tons i n the case of e f f e c t i v e enforcement, and between 6 tons and 42 tons i n the absence of e f f e c t i v e enforcement. These f i g u r e s are i n d i c a t i v e o f the importance o f enforcement i n tanker operational p o l l u t i o n c o n t r o l . 2.5.2 The drydocking problem A l l the tanks must be clean when the ship enters drydock. The ships using crude washing w i l l wash a l l t h e i r tanks a f t e r cargo unloading and c a r r y out a r a p i d ROB operation while at sea. Other ships w i l l clean a l l the tanks while at sea or at the drydocking port. Assuming that IMCO standards are e f f e c t i v e l y enforced, a l l the slops should be discharged i n t o a slop r e c e p t i o n f a c i l i t y at the drydocking port. I f such f a c i l i t y i s not a v a i l a b l e , the ship should go to another port. In the absence of e f f e c t i v e enforcement, i t may be expected that v i r t u a l l y a l l ships w i l l dump t h e i r slops at sea i f no s l o p r e c e p t i o n f a c i l i t y i s a v a i l a b l e at the drydock while 28 roughly 50 per cent of the ships w i l l use such f a c i l i t y . i f i t i s a v a i l a b l e . -103-2.6 SUMMARY This chapter has provided the background data required f o r the e v a l u a t i o n o f the c o s t - e f f e c t i v e n e s s of a l t e r n a t e c o n t r o l p o l i c i e s . The information contained i n t h i s chapter w i l l be used i n Chapter 6 when i l l u s t r a t i n g the e v a l u a t i o n method (which i s described i n the next chapter). FOOTNOTES Chapter 3 ^Gray, W.O., The 1973 Convention, a Tanker Operator's Viewpoint. 2 V i c t o r y , G. The Load-on-top System, Present and f u t u r e . See a l s o U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Survey of Ship Discharges, pp. 31-36 and U.S. Coast Guard, F i h a l Environmental Impact Statement, p. 53. World Tanker F l e e t Review, December 1975, pp. 23-24 ( f r e i g h t r a t e s on the Arabian Gulf to North Europe t r a d e ) . 4See Gray, W.O. Segregated B a l l a s t and Related Aspects o f tanker  design. See a l s o IMCO, Report on Study IV, p. 32. According to Captain D a v i e s - P a t r i c k (S h e l l Co.), personal i n t e r v i e w , London, A p r i l 1976. 6See Gray, W.O. Segregated B a l l a s t and Related Aspects of Tanker Design. 7IMCO, Report on Study 1 g Crighton and T e l f e r , Segregated B a l l a s t Tankers, Proceeding of the Symposium on Marine p o l l u t i o n (Royal I n s t i t u t i o n of Naval A r c h i t e c t s ) London, 1973. 9 U.S. Congress, Table i v - 3 . ^ A c c o r d i n g to Arthur McKenzie (Tanker Advisory C e n t e r ) , personal i n t e r v i e w , New York, November 1975. ^ C a p t a i n D a v i e s - P a t r i c k ( S h e l l Co.), Personal interview, London A p r i l , 1976. 12IMCO, In t r o d u c t i o n o f Segregated B a l l a s t i n E x i s t i n g Tankers, Annex B Figure 5. 13 I b i d , Annex B, Figure 4. 1 4 I b i d , Annex A, Figure 2. 1 5 I B i d , S e c t i o n i i (d) ( i ) ^ I b i d , Annex A, S e c t i o n 7. Probably because f o r a given deadweight, converted ships have l a r g e r bottom dimensions than non converted ships (so that l e s s d r a f t i s needed to d i s p l a c e the ship's weight of water). 1 7 S e e Maybourn, 12, Crude O i l Washing. -104--105-18 I b i d . , 3 (d) ^ A c c o r d i n g to Maybourn, 4 to 6 d r i v e u n i t s are adequate f o r water washing a t sea while 16 to 25 u n i t s are needed f o r crude washing. on U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Crude  Washing G u i d e l i n e s , Report by EXXON c o r p o r a t i o n , A p r i l 1975. 2 1 S e e IMCO Assembly Resolution A 237 ( V I I ) , 1971. 2 2 S e e IMCO, Report on Study IV, 1973. See IMCO, Report on Study V, 1973. "U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Port  C o l l e c t i o n and Separation F a c i l i t i e s f o r o i l y wastes, 1973. 2 4 I b i d . , V o l . 4, p. 37. 25 See V i c t o r y , G., The Load on Top System, Present and Future. Also Fiocco and Ri d l e y , Slop Tank Design f o r Improved LOT, proceeding o f the 1975 conference on Prevention and Control o f O i l P o l l u t i o n . Using the estimates shown i n U.S. Congress, O i l T r a n s p o r t a t i o n  by tankers: An A n a l y s i s o f Marine P o l l u t i o n and Safety Measures, Table 111-1 and Section I I I - A - I . 2 7 I b i d . 28 See Chapter 2 — S e c t i o n 2.5.2.2. CHAPTER 4 ECONOMIC EVALUATION OF THE ALTERNATIVES OUTLINE OF THE METHOD Thi s chapter i s i n two p a r t s . The f i r s t part describes the c o s t -e f f e c t i v e n e s s framework used to evaluate a l t e r n a t i v e p o l i c i e s to co n t r o l tanker o p e r a t i o n a l p o l l u t i o n . The second part describes the estimation procedure i t s e l f . 4.1 THE COST-EFFECTIVENESS FRAMEWORK The purpose o f the economic e v a l u a t i o n i s to provide estimates o f the costs and b e n e f i t s t h a t w i l l be inc u r r e d by s o c i e t y i f the contemplated p o l l u t i o n c o n t r o l p o l i c i e s are implemented. In other words, i t should provide estimates o f the p o l l u t i o n c o n t r o l c o s t s and p o l l u t i o n costs r e l a t i v e to c u r r e n t p r a c t i c e . Operational p o l l u t i o n costs are f o r a l l p r a c t i c a l purposes impossible to p r e d i c t i n monetary terms, since they i n c l u d e such c o n s i d e r a t i o n s as reduc-t i o n s i n f i s h catches and hazards on the health o f futu r e generations. The co s t e f f e c t i v e n e s s framework used i n t h i s study t h e r e f o r e does not estimate p o l l u t i o n c o s t s i n monetary terms. These costs however, depend upon the c h a r a c t e r i s t i c s of the discharges, such as the qua n t i t y o f o i l discharged or the l o c a t i o n o f the discharges. The e v a l u a t i o n w i l l be l i m i t e d to the impact of a l t e r n a t e c o n t r o l p o l i c i e s on discharge c h a r a c t e r i s t i c s . E x h i b i t 2 summarizes the parameters which a f f e c t the costs o f o i l p o l l u t i o n . The basic parameters are (1) the type o f discharge (2) the l o c a t i o n -106--107-1) Type of discharges - type o f o i l - q u a n t i t y o f o i l discharged - concentration o f the discharge 2) Location o f the discharges - c u r r e n t s , dominant winds - phy s i c a l f e a t u r e s o f the region (open or clos e d water....) - previous exposure to o i l p o l l u t i o n - exposure to other p o l l u t a n t s --fauna and f l o r a o f the area - a v a i l a b i l i t y o f oxygen and b i o l o g i c a l n u t r i e n t s 3) Depth o f the discharge 4) Frequency o f discharges 5) Weather c o n d i t i o n s - temperature - winds and sea s t a t e 6) Season of year EXHIBIT 2 PARAMETERS AFFECTING THE COSTS OF TANKER OPERATIONAL POLLUTION 9 aBased on U.S., National Academy of Sciences, Petroleum i n the Marine Enfironment, Washington, D.C, 1975 -108-and depth of the discharge (3) the frequency of discharges, (4) the weather c o n d i t i o n s and (5) the season o f the year. I t might be p o s s i b l e to contemplate weather or season dependent p o l l u t i o n c o n t r o l methods (e.g. "do not discharge i n good weather or during the summer") but t h i s i s not r e l e v a n t here. A c c o r d i n g l y , the e f f e c t i v e n e s s of a p o l l u t i o n control a l t e r n a t i v e w i l l be c h a r a c t e r i z e d by only three parameters. These are (1) the type of discharge (2) the l o c a t i o n and depth o f the discharge and (3) the frequency o f discharges, This study estimates p o l l u t i o n c o n t r o l c o s t s i n monetary terms, and p o l l u t i o n c h a r a c t e r i s t i c s cih terms of the above three parameters. This c o s t e f f e c t i v e n e s s approach leaves a l a r g e scope f o r value judgments i n the i n t e r p r e t a t i o n o f the r e s u l t s . To i l l u s t r a t e , suppose the e f f e c t i v e n e s s o f a given a l t e r n a t i v e can be expressed simply i n terms of the q u a n t i t y of o i l discharged annually to the oceans. Suppose a l s o that the economic e v a l u a t i o n provides the f o l l o w i n g estimates: P o l l u t i o n E f f e c t i v e n e s s prevention cost (annual o i l discharge) A l t e r n a t i v e A $ 1 m i l l i o n 1000 tons/year A l t e r n a t i v e B $ 2 m i l l i o n 800 tons/year A l t e r n a t i v e C $ 3 m i l l i o n 1500 tons/year In t h i s case A l t e r n a t i v e C i s c l e a r l y i n f e r i o r , i n economic terms, to a l t e r n a t i v e A as i t generates a l a r g e r p o l l u t i o n c o s t . However, there i s no o b j e c t i v e way t o say whether a l t e r n a t i v e B should be p r e f e r r e d or not to a l t e r n a t i v e A. In t h i s regard, the economic e v a l u a t i o n only permits the formulation of the f o l l o w i n g r e l e v a n t questions: -109-- given that 1000 tons are discharged annually, what are the b e n e f i t s of reducing these discharges by 20 per cent? - Do these b e n e f i t s j u s t i f y the a d d i t i o n a l p o l l u t i o n prevention costs? This study does not attempt to answer these questions but i t attempts to f i n d the f a c t s and f i g u r e s that w i l l permit the formulation of the t r a d e - o f f s . The s e l e c t i o n of the best a l t e r n a t i v e i s then a matter f o r judgment based on a v a i l a b l e evidence as regards the e f f e c t s o f o i l p o l l u t i o n on man and the environment. 4.2 THE COSTS OF OPERATIONAL POLLUTION CONTROL. From the e x t r a c t i o n of crude o i l to the f i n a l d e l i v e r y of the processed o i l , a c e r t a i n q u a n t i t y of economic resources are consumed: l a b o r , c a p i t a l , raw m a t e r i a l s and time. The value of these resources to s o c i e t y represents the economic cost o f supplying processed o i l to the consumers. P o l l u t i o n c o n t r o l a f f e c t s t h i s economic c o s t . In the long run, . cost v a r i a t i o n s r e s u l t i n p r i c e v a r i a t i o n s through market mechanisms. Increases i n the market p r i c e s of processed o i l s i n turn reduce the demand f o r such products. Suppose the q u a n t i t y o f processed o i l s o l d i n i t i a l l y i s Ql tons, and the cost of supplying these Ql tons to the consumers i s CI. A f t e r implementation of the p o l l u t i o n c o n t r o l a l t e r n a t i v e , these f i g u r e s become Q2 and C2 and the average value to s o c i e t y of one ton of processed o i l changes from VL to V@, the t o t a l economic c o s t o f p o l l u t i o n prevention i s : EC = (VIQl - V2Q2) + (C2 - CI) -110-Tanker operational p o l l u t i o n c o n t r o l e s s e n t i a l l y a f f e c t s waterborne t r a n s p o r t a t i o n c o s t s . Increases i n t r a n s p o r t a t i o n costs are p a r t i a l l y or f u l l y passed on to the consumers through increased tanker f r e i g h t r a t e s . Tanker f r e i g h t rates represent l e s s than 5-10 per cent of the t o t a l c o s t o f supplying the processed o i l to the consumers. I t i s known that f r e i g h t rates increase as a r e s u l t o f p o l l u t i o n prevention should not exceed 10=15 per cent. Thus, the maximum incre a s e i n the p r i c e of processed o i l w i l l be i n the order o f one per cent. Such increase w i l l hardly a f f e c t the demand f o r processed o i l , c o n s i d e r i n g g t h a t the recent changes i n the p r i c e of crude o i l demonstrated t h i s demand to be con s i d e r a b l y i n e l e a s t i c . Therefore, i t i s assumed i n t h i s study t h a t the demand f o r processed o i l i s not a f f e c t e d by tanker o p e r a t i o n a l p o l l u t i o n c o n t r o l . As the q u a n t i t y and q u a l i t y o f the processed o i l consumed by s o c i e t y are unaffected, the average value to s o c i e t y o f t h i s processed oi 1 remains unchanges. Consequently, the economic cost of p o l l u t i o n c o n t r o l i s simply: E C = C2-C1 where CI and C2 are the cost of supplying processed o i l to the consumers r e s p e c t i v e l y before and a f t e r the implementation o f the p o l l u t i o n control a l t e r n a t i v e . I t has been assumed above that the demand f o r processed o i l i s unaffected by operational p o l l u t i o n c o n t r o l . Suppose that Q tons of crude o i l are needed each year a t the r e f i n e r i e s to supply t h i s demand. Soppose t h a t ql and q2 tons o f o i l are discharged to the sea each year r e s p e c t i v e l y before and a f t e r the implementation o f the p o l l u t i o n c o n t r o l a l t e r n a t i v e . Then the annual cost o f supplying D tons of processed o i l to thecconsumers depend ( i n t e r a l i a ) on the v a r i a b l e s shown i n E x h i b i t 3. -m-Although the amount o f crude o i l to be processed a t the r e f i n e r i e s i s u n a f f e c t e d , operational p o l l u t i o n control techniques may generate some a d d i t i o n a l r e f i n e r y processing costs due to the mixing o f o i l and saltwat e r . However, t h i s impact may be assumed to be n e g l i g i b l e as m o s t 7 r e f i n e r i e s are now equipped to handle saltwater contaminated crude o i l , due to the natural presence of saltwater i n some crude odils."' Operationa;lV-pbil;Tu:t;i;bn controlrohasaspme^impact on land t r a n s p o r t a t i o n costs as the amount of o i l to be transported each year from the e x t r a c t i o n s i t e to the loading port i s reduced by ql-q2. Land t r a n s p o r t a t i o n mainly takes place through p i p e l i n e s . The marginal c o s t of t r a n s p o r t i n g o i l by p i p e l i n e i s very low. The amounts ql and q2 are very small r e l a t i v e to the t o t a l amounts trans p o r t e d . I t may be assumed, t h e r e f o r e , that the impact of p o l l u t i o n c o n t r o l on land t r a n s p o r t a t i o n costs i s n e g l i g i b l e . To summarize, the co s t o f oper a t i o n a l p o l l u t i o n c o n t r o l i s the d i f f e r e n c e between (1) the a d d i t i o n a l ocean t r a n s p o r t a t i o n c o s t and (2) the value to s o c i e t y o f the o i l saved by p o l l u t i o n c o n t r o l . The f o l l o w i n g s e c t i o n s w i l l describe the procedure followed to estimate these two elements. 4.3. THE ESTIMATION PROCEDURE This s e c t i o n w i l l describe the procedure used to estimate the comparative economic cost and e f f e c t i v e n e s s o f a l t e r n a t e c o n t r o l p o l i c y on some trade route. This procedure may be used to evaluate a l t e r n a t e control p o l i c i e s defined a t the worldwide o r regional l e v e l , or on a trade by trade b a s i s . 4.3.1 O u t l i n e o f the procedure Consider some p o l l u t i o n c o n t r o l p o l i c y (say the conversion o f e x i s t i n g tankers to segregate b a l l a s t tankers) to be evaluated on some trade. -112-Before p o l l u t i o n A f t e r p o l l u t i o n control c o n t r o l Amount ofi crude o i l consumed annually Q + ql Q + q2 Amount of crude o i l transported annually - on land to tankers Q + ql Q + q2 - by tankers Q + ql Q + q2 Amount of crude o i l processed annually Q Q EXHIBIT 3 IMPACT OF TANKER OPERATIONAL POLLUTION CONTROL ON THE AMOUNTS OF CRUDE OIL TRANSPORTED, PROCESSED AND CONSUMED ANNUALLY -113-I f the contemplated p o l i c y i s implemented, the throughput (per t r i p or per year) of e x i s t i n g ships w i l l be reduced so that changes i n the composition and a l l o c a t i o n o f the tanker f l e e t w i l l be requ i r e d to supply the demand f o r crude o i l (which has been assumed i n the previous s e c t i o n to be unaffected by opera t i o n a l p o l l u t i o n c o n t r o l ) . New ve s s e l s have to be ordered or some o f the e x i s t i n g tanker surplus c a p a c i t y has t o be used. Shipyards have to b u i l d new v e s s e l s and to convert e x i s t i n g v e s s e l s . Ports may have to e i t h e r buy new equipment to handle the converted v e s s e l s or b u i l d new berths due to increased congestion. F i n a l l y , the or g a n i z a t i o n s (Cost Guards) r e s p o n s i b l e f o r a d m i n i s t r a t i n g p o l l u t i o n c o n t r o l r e g u l a t i o n s have to develop the new design r e g u l a t i o n s , and p o s s i b l y to extend some p o l i c i n g a c t i v i t i e s , such as vessel i n s p e c t i o n . On the b e n e f i t s i d e , the contemplated p o l l u t i o n control p o l i c y w i l l save, say, 10,000 tons o f o i l from waste and avoid p o l l u t i o n costs which are not evaluated here. The procedure to be described now involves the f o l l o w i n g steps: 1) Estimate the composition o f the filieet (number of vesse l s o f each type used on the trade) and i t s a l l o c a t i o n betwwen the various ports i n v o l v e d . 2) Estimate ocean t r a n s p o r t a t i o n costs on the trade ( i n c l u d i n g shipyard, port, v e s s e l , and p o l i c i n g c o s t s . 3) Estimate the c h a r a c t e r i s t i c s o f oper a t i o n a l discharges on the route (annual amount o f o i l p o l l u t i o n , c o n c e n t r a t i o n , l o c a t i o n e t c ). T h i s d e f i n e s the e f f e c t i v e n e s s o f the c o n t r o l p o l i c y . 4) Repeat the above steps f o r the reference a l t e r n a t i v e . 5) Estimate the a d d i t i o n a l t r a n s p o r t a t i o n cost r e l a t i v e to the reference a l t e r n a t i v e . -114-6) Estimate the amount of o i l saved r e l a t i v e to the reference a l t e r n a t i v e . 7) Estimate the t o t a l c o s t o f p o l l u t i o n c o n t r o l , r e l a t i v e to the reference a l t e r n a t i v e . Steps 4 to 8 are s t r a i g h t f o r w a r d . The f o l l o w i n g subsections w i l l develop steps 1 to 3. 4.3.2 Composi t i on and A l 1 o c a t i o n of the tanker f1eet The composition and a l l o c a t i o n of the tanker f l e e t i s decided by i n d i v i d u a l f l e e t operators on commercial v i a b i l i t y grounds. I t i s assumed that on a given period of time the c o s t i n c u r r e d by tanker owners i s minimized, subject to the supply and demand f o r o i l on the trade and the c h a r a c t e r i s t i c s o f the route ( d i s t a n c e , port s i z e l i m i t a t i o n s , e t c . . ) The optimal composition o f the f l e e t may change over time (as supply and demand c o n d i t i o n s or the a v a i l a b i l i t y o f e x i s t i n g tankers evolve over time). Basic periods are d e f i n e d , during which the f a c t o r s a f f e c t i n g the composition of the f l e e t are f i x e d . The optimal f l e e t i s obtained f o r each b a s i c p e r i o d by minimizing the annual c o s t i n c u r r e d by tanker owners. At the beginning of a new p e r i o d some tankers may become suboptimal. I t i s assumed t h a t tankers may be t r a n s f e r r e d to (or from) other trades when they are no longer optimal. This i n v o l v e s a f r i c t i o n a l cost between each p e r i o d , which i s assumed to be n e g l i g i b l e . (Would t h i s c o s t be n e g l i g i b l e , the appropriate procedure to obtain the optimal f l e e t over time i s to minimize the discounted sum o f f u t u r e costs r a t h e r than the annual c o s t i n each b a s i c p e r i o d ) . The costs i n c u r r e d by tanker owners are described i n E x h i b i t 4. It i s d i s t i n g u i s h e d f i r s t between f i x e d and v a r i a b l e c o s t s . The tankers used on -115-FIXED COSTS: Ca p i t a l Costs - Co n s t r u c t i o n c o s t o f new v e s s e l s - Opportunity c o s t o f e x i s t i n g v e s s e l s - P o l l u t i o n Control Investment on e x i s t i n g v e s s e l s . Fixed Operating Costs - Insurance cost - Crew cost - P r o v i s i o n / S t o r e s - Maintenance and r e p a i r - Overhead - Miscellaneous (crew t r a n s p o r t a t i o n , e tc.) VARIABLES COSTS V a r i a b l e Operating Costs - Fuel c o s t - Port charges EXHIBIT 4 COSTS INCURRED BY TANKER OWNERS -116-a trade are not n e c e s s a r i l y used at f u l l c a p a c i t y a l l the time. They may operate at reduced speed or they may be kept i d l e from time to time (unless i t i s p o s s i b l e to t r a n s f e r tankers between trades f o r very short periods of time at small c o s t ; t h i s i s not assumed i n t h i s study). The f u l l v a r i a b l e cost i s incurred only i f a l l tankers are used at f u l l c a p a c i t y . I t i s assumed i n t h i s study that the annual v a r i a b l e cost of a tanker (f u e l cost plus port charges) i s p r o p o r t i o n a l to the number of t r i p s c a r r i e d out. (The impact o f speed on f u e l c o s t s i s not d e a l t with i n t h i s study. ) On the other hand, the f u l l annual f i x e d cost i s i n c u r r e d by the tanker owner whether the tanker has been used at f u l l c a p a c i t y or not during the year. Fixed costs i n c l u d e f i x e d operating costs and c a p i t a l c o s t s . Fixed operating c o s t s are well defined but the concept of c a p i t a l c o s t must be c l a r i f i e d . The c a p i t a l cost of a new vessel to the v e s s e l ' s owner i s simply the c o n s t r u c t i o n cost of t h i s v e s s e l , and the annual c a p i t a l cost of a new vessel i s equal to the standard annual amortization cost which i s obtained by applying the appropriate c a p i t a l recovery f a c t o r and tax r a t e to the v e s s e l ' s c o n s t r u c t i o n cost. The annual c a p i t a l cost of an e x i s t i n g v e s s e l , however, i s not n e c e s s a r i l y equal to the standard annual a m o r t i z a t i o n c o s t . The d e c i s i o n to use an e x i s t i n g vessel does not i n v o l v e any c o n s t r u c t i o n c o s t s i n c e the vessel has a l r e a d y been b u i l t . But i t involves an opportunity c o s t . The annual opportunity c o s t (to the v e s s e l ' s owner) of an e x i s t i n g vessel can be viewed as the highest p r o f i t which the v e s s e l ' s owner can earn by c h a r t e r i n g the vessel f o r one year., C l e a r l y , t h i s p r o f i t v a r i e s c o n s i d e r a b l y , depending on tanker market c o n d i t i o n s . At the long-run e q u i l i b r i u m o o f tanker supply and demand, an e x i s t i n g tanker w i l l earn a "normal" p r o f i t ( j u s t equal to the c a p i t a l c o s t of an i d e n t i c a l new vessel ) and the v e s s e l ' s opportunity -117-cost is-equal to the ve s s e l ' s standard amortization c o s t . When there i s a shortage o f tanker tonnage, higher-than-normal p r o f i t s can be earned by e x i s t i n g v e s s e l s and the opportunity c o s t exceeds the ve s s e l ' s a m o r t i z a t i o n c o s t . On the other hand, the use o f e x i s t i n g v e s s e l s does not in v o l v e any opportunity c o s t when there i s a l a r g e surplus o f e x i s t i n g tonnage, as i s A s c u r r e n t l y the case, s i n c e c h a r t e r r a t e s hardly cover vessel operating costs ). On any given year there may be a surplus o f tankers w i t h i n s p e c i f i c s i z e s ranges (VLCC's, handy tankers, e t c . ) and a shortage w i t h i n other ranges. It i s known that there w i l l be a surplus o f medium s i z e d tankers (45-160 MDWT) and VLCC's (above 160 MDWT), u n t i l 1984-1985 unless s p e c i a l measures are adopted (such as the conversion o f e x i s t i n g tankers to segregated b a l l a s t ) . Pr o j e c t i o n s beyond 1985 are very d i f f i c u l t , however, and they are not attempted i n t h i s study. Consequently fu t u r e opportunity costs cannot be pr o j e c t e d . But the f o l l o w i n g two t h e o r e t i c a l cases are considered. 1) Under the f i r s t case, there i s a permanent surplus o f tonnage f o r a l l types o f ves s e l s ? The opportunity c o s t o f e x i s t i n g v e s s e l s i s n e g l i g i b l e . This s i t u a t i o n may be viewed as an e x t r a p o l a t i o n o f the current s i t u a t i o n . 2) The second case corresponds t o the long-run e q u i l i b r i u m o f tanker supply and demand. The opportunity c o s t o f an e x i s t i n g tanker i s equal t o the c a p i t a l c o s t o f an i d e n t i c a l new v e s s e l . This s i t u a t i o n i s sometimes r e f e r r e d to as "normal" o r "average" s i t u a t i o n . The annual c a p i t a l c o s t o f an e x i s t i n g vessel i s the sum of the ve s s e l ' s annual opportunity c o s t plus the annual c o s t o f p o l l u t i o n c o n t r o l equipment. -118-Thus, i n the f i r s t case, the annual c a p i t a l c o s t of an e x i s t i n g vessel i s simply equal to the annual c o s t of p o l l u t i o n control equipment, amortized over the v e s s e l ' s remaining l i f e . In the second case, two l i m i t s i t u a t i o n s are considered: 1) P o l l u t i o n control equipment i s required on a l l trades worldwide. Thus the annual opportunity c o s t of an e x i s t i n g vessel decreases by an amount equal to the annual cost of p o l l u t i o n c o n t r o l equip-ment (s i n c e the p r o f i t s thatfecan be earned by e x i s t i n g v e s s e l s decrease by the amount on any t r a d e ) . As a r e s u l t , the annual c a p i t a l cost of an e x i s t i n g vessel remains equal to the annual c a p i t a l c o s t of an i d e n t i c a l new v e s s e l . 2) P o l l u t i o n c o n t r o l equipment i s only r e q u i r e d on the contemplated trade. E x i s t i n g ships can be used on other trades where they escape p o l l u t i o n control equipment c o s t s . The annual c a p i t a l cost o f an e x i s t i n g ship i s , t h e r e f o r e , the sum of the annual c a p i t a l cost o f an i d e n t i c a l new vessel plus the annual cost of ; I'polTutionteohtrqTJequipment:; - fsExisting v e s s e l s -are*no longer:;; v optimal on the trade. They are replaced by new v e s s e l s . To summarize, the annual c a p i t a l cost of an e x i s t i n g vessel i s shown in E x h i b i t 5 under each of the above cases and s i t u a t i o n s . Only e x i s t i n g v e s s e l s are used on the trade when there i s a permanent l a r g e surplus (provided the annual cost of p o l l u t i o n c o n t r o l equipment does not exceed the annual c a p i t a l c o s t o f new v e s s e l s ) . On the other hand, only new v e s s e l s are used on the trade at the long-run e q u i l i b r i u m , when p o l l u t i o n c o n t r o l equipment i s not r e q u i r e d on other trades. And both new and e x i s t i n g v e s s e l s are used at the e q u i l i b r i u m when p o l l u t i o n c o n t r o l equipment i s r e q u i r e d worldwide. -119-S i t u a t i o n Case Permanent Large Surplus -1-P o l l u t i o n c o n t r o l Equipment Required Worldwide (il)')' G Annual cost o f p o l l u t i o n c o n t r o l equipment (amortized over the ship's remaining l i f e ) P o l l u t i o n c o n t r o l Equipment not Required on other Trades (2) Annual cost o f p o l l u t i o n c o n t r o l equipment (amortized over the ship's remaining l i f e ) Long-Run E q u i l i b r i u m -2-Annual C a p i t a l c o s t o f an I d e n t i c a l New Vessel Annual C a p i t a l c o s t o f an I d e n t i c a l New Vessel plus Annual cost o f p o l l u t i o n Control Equipment EXHIBIT 5 ANNUAL CAPITAL COST OF AN EXISTING VESSEL DESCRIPTION -120-The optimal composition and a l l o c a t i o n of the f l e e t , and subsequently the economic cost and e f f e c t i v e n e s s of a l t e r n a t e c o n t r o l p o l i c i e s , are estimated under each o f the f o l l o w i n g cases and s i t u a t i o n s . The r e s u l t s w i l l provide probable ranges ( i . e . , the ranges where the actual c o s t and e f f e c t i v e n e s s of a l t e r n a t e c o n t r o l p o l i c i e s are l i k e l y to belong.). The composition and a l l o c a t i o n of the tanker f l e e t under each of the above cases and s i t u a t i o n s i s estimated as f o l l o w s : 1) Estimate the annual f i x e d and v a r i a b l e costs of new and e x i s t i n g tankers, assuming they are used at f u l l c a p a c i t y . This i s done by using a v a i l a b l e estimates of basic vessel c o s t s i n the absence of p o l l u t i o n c o n t r o l (See Table 29) and the p r e v i o u s l y estimated costs of p o l l u t i o n c o n t r o l techniques (See chapter 3). 2) Estimate the annual cargo throughput of new and e x i s t i n g v e s s e l s , assuming they are used at f u l l capacity 1.- This i s done by using the p r e v i o u s l y estimated impacts of p o l l u t i o n c o n t r o l techniques on tanker throughputs (See chapter 3). 3) Estimate the composition and a l l o c a t i o n of the tanker f l e e t under each b a s i c period (a basic period has been defined as a p e r i o d during which the f a c t o r s a f f e c t i n g the optimal composition and a l l o c a t i o n of the tanker f l e e t , such as the supply and demand f o r o i l on the t r a d e , are f i x e d ) . This i s done by means of the o p t i m i z a t i o n model described i n Annex B. This model minimizes the t o t a l annual c o s t i n c u r r e d by vessel owners, subject to the demand and supply of crude o i l on the trade and the c h a r a c t e r i s t i c s of the route (port depth l i m i t a -t i o n s , d i s tances e t c . ) . The model does not consider the -121-p o s s i b i l i t y of m u l t i p l e c a l l s by tankers f o r loading or d i s c h a r g i n g . Nor does i t account f o r r e f i n e r y storage c a p a c i t y c o n s t r a i n t s . However, the model i s a tool to estimate the c o s t and e f f e c t i v e n e s s of a l t e r n a t e c o n t r o l p o l i c i e s r a ther than the optimal tanker f l e e t on a given trade. I t i s an imperfect r e p r e s e n t a t i o n of the r e a l i t y but i t i s thought to be s u f f i c i e n t f o r the purposes of t h i s study. 4.3.3 Ocean Tr a n s p o r t a t i o n Economic Costs. Once the composition and a l l o c a t i o n of the tanker f l e e t have been estimated, the annual f i x e d and v a r i a b l e costs i n c u r r e d by tanker owners (annual insurance c o s t , annual fu e l c o s t , e t c . ) can be estimated over the whole f l e e t , using simple a r i t h m e t i c . The exact procedure i s described i n Annex C. The c o s t i n c u r r e d by vessel owners i s d i s t i n c t from the economic cost of ocean t r a n s p o r t a t i o n . This subsection w i l l e x p l a i n how the l a t t e r c ost can be estimated. The economic c o s t o f ocean t r a n s p o r t a t i o n includes port and s h i p -yard c o s t s , vessel c o s t s and the c o s t of p o l i c i n g a c t i v i t i e s . 4.3.3.1 Port Costs This study assumes that the port charges i n c u r r e d by tanker owners r e f l e c t port c o s t s . This may l e a d to underestimating the t o t a l ocean t r a n s -p o r t a t i o n cost as some port costs might be passed upon only p a r t i a l l y to tanker owners (the r e s t being passed on to other vessel owners, or to the general p u b l i c ) . T his may be the case, f o r instance, i f the tanker t r a f f i c generates increased port congestion f o r non-tankers (unless tanker port charges are increased to compensate non tankers f o r the a d d i t i o n a l d e l a y s ) . -122-4.3.3.2 Shipyard cost This study assumes t h a t the c o n s t r u c t i o n costs i n c u r r e d by tanker owners r e f l e c t shipyard c o s t s . This assumption may a l s o lead to under-estimating the t o t a l ocean t r a n s p o r t a t i o n c o s t , i f shipyard costs (e.g. extension of shipyard f a c i l i t i e s to meet new tanker design r e g u l a t i o n s ) are passed on only p a r t i a l l y to tanker owners. The annual c o n s t r u c t i o n c o s t s i n c u r r e d by tanker owners i s the annual c a p i t a l c o s t s o f new v e s s e l s , plus the annual c a p i t a l c o s t of p o l l u t i o n control equipment on e x i s t i n g v e s s e l s . These c a p i t a l costs may i n c l u d e some taxes. These taxes correspond to a t r a s n f e r at no real resource c o s t . There-f o r e , they w i l l be e l i m i n a t e d when estimating shipyard economic c o s t s . 4.3.3.3 Vessel Costs Excluding port charges, the c a p i t a l c o s t s of new v e s s e l s and the c a p i t a l c o s t of p o l l u t i o n c o n t r o l equipment on e x i s t i n g v e s s e l s (since they are counted as port and shipyard c o s t s ) , vessel costs are the vessel operating c o s t s plus the economic opportunity c o s t o f e x i s t i n g v e s s e l s . The economic opportunity c o s t of e x i s t i n g v e s s e l s may d i f f e r , as a r e s u l t of tanker p o l l u t i o n c o n t r o l , from the opportunity cost i n c u r r e d by tanker owners. Suppose, f o r i n s t a n c e , that a d d i t i o n a l segregated b a l l a s t i s r e q u i r e d on new v e s s e l s . This requirement increases the c a p i t a l c o s t of new v e s s e l s . As a r e s u l t , tankers f r e i g h t r a t e s and, t h e r e f o r e , the opportunity cost of e x i s t i n g v e s s e l s tend to i n c r e a s e . At the long-run e q u i l i b r i u m the opportunity c o s t (to tanker owners) of e x i s t i n g v e s s e l s w i l l i n clude the cost o f p r o v i d i n g new tankers with a d d i t i o n a l segregated b a l l a s t c a p a c i t y . However, no real resource cost i s i n c u r r e d . The increase i n opportunity c o s t r e f l e c t s a t r a n s f e r from s o c i e t y to tanker owners. -123-(In welfare economics terms, tanker owners incre a s e t h e i r share of the economic surplus produced by ocean t r a n s p o r t a t i o n , while the consumer's surplus decreases. The value of ocean t r a n s p o r t a t i o n to s o c i e t y , and t h e r e f o r e , the t o t a l economic su r p l u s , do not change since i t i s assumed that the demand f o r ocean t r a n s p o r t a t i o n i s not a f f e c t e d by tanker p o l l u t i o n c o n t r o l , (See s e c t i o n 4.2)). The increase i n opportunity c o s t due to the c o s t of p o l l u t i o n c o n t r o l on new v e s s e l s must be included when estimating the composition and a l l o c a t i o n o f the tanker f l e e t , but e l i m i n a t e d when estimating the economic cost of ocean t r a n s p o r t a t i o n . 4.3.3.4 P o l i c i n g costs The o b j e c t i v e o f p o l i c i n g a c t i v i t i e s i s to prevent i l l e g a l discharges of o i l . To achieve t h i s o b j e c t i v e , i t i s necessary to e s t a b l i s h a set of standards which are (1) c o n s i s t e n t with the proper use o f r e q u i r e d p o l l u t i o n prevention techniques and (2) enforceable. It has been seen that c u r r e n t p r a c t i c e (the reference a l t e r n a t i v e i n t h i s study) i s c h a r a c t e r i z e d by the absence of c o n s i s t e n t and enforceable standards. A c c o r d i n g l y , there i s no p o l i c i n g a c t i v i t y and no p o l i c i n g c o s t under the reference a l t e r n a t i v e . It i s assumed that proper standards have been e s t a b l i s h e d under the other a l t e r n a t i v e s and that p o l i c i n g a c t i v i t i e s w i l l ensure the proper use of the r e q u i r e d techniques. The f o l l o w i n g assumptions and data w i l l be used to estimate the corresponding p o l i c i n g c o s t . - A l l v e s s e l s using LOT are boarded f o r i n s p e c t i o n o f the s l o p tank and o i l record book. According to one source, the cost o f such i n s p e c t i o n i s estimated to be $250 per boarding. -124-- The area i s p a t r o l l e d by a i r c r a f t s . The cost of a e r i a l s u r v e i l l a n c e i s $500 'per a i r c r a f t hour. 7 (The Alaska trade o zone i s p a t r o l l e d by two a i r c r a f t , each f l y i n g 20 hours per week, at a cost o f $1 M i l l i o n per y e a r ) . The above f i g u r e s and assumptions are very crude. They are expected, however, to provide the order o f magnitude of p o l i c i n g c o s t s . I f these costs turn out to be p o t e n t i a l l y s i g n i f i c a n t f u r t h e r work w i l l be needed i n t h i s area as p o l i c i n g c osts could vary depending on the p o l l u t i o n control a l t e r n a t i v e . 5.3.4 C h a r a c t e r i s t i c s o f Operational Discharges and the value of  the O i l saved. Given the composition and a l l o c a t i o n o f the tanker f l e e t , the number o f t r i p s per year f o r each port and each type of tanker can be estimated. Using the information contained i n Chapter 3 (average discharges per t r i p , c o n c e n t r a t i o n , etc.) the c h a r a c t e r i s t i c s o f ope r a t i o n a l discharges on the route can be estimated. The amount of o i l saved may then be estimated r e l a t i v e to the reference a l t e r n a t i v e . The value to s o c i e t y of t h i s o i l i s assumed to be adequately r e f l e c t e d by the market p r i c e of crude o i l (approximately $90 per tons).' 4.3.5 Summary The s e c t i o n has described a procedure to assess the economic cost and e f f e c t i v e n e s s of a l t e r n a t e c o n t r o l p o l i c i e s . A number of t h e o r e t i c a l cases are considered (e.g. long-run e q u i l i b r i u m o f tanker supply and demand + Same P o l l u t i o n Control equipment req u i r e d worldwide). The procedure can be used to estimate the annual c o s t of p o l l u t i o n c o n t r o l and the c h a r a c t e r i s t i c s o f operational discharges under each case, i n each basic p e r i o d . When a l l cases -125-POLLUTION CONTROL ALTERNATIVE (Trade T, Case C, Period P) Shipyard costs Demand _ f o r o i l Pol i c i n g A c t i v i t i e s -Vessel costs and throughputs COMPOSITION AND <c ALLOCATION OF FLEET ANNUAL .TRANSPORTATION COST Ad d i t i o n a l T r a n s p o r t a t i o n cost r e l a t i v e to reference a l t e r n a t i v e Port c o s t s Route C h a r a c t e r i s t i c s CHARACTERISTICS OF OPERATIONAL DISCHARGES Amount of o i l saved r e l a t i v e to reference a l t e r n a t i v e TOTAL ANNUAL COST OF 6P0LLUTI0N CONTROL EXHIBIT 6 THE ESTIMATION PROCEDURE -126-have been considered, probable ranges f o r the cost and e f f e c t i v e n e s s ( i n each basic period) of a l t e r n a t e c o n t r o l p o l i c i e s can be proposed. E x h i b i t i i s a concise and convenient way to summarize the estimation procedure. -127-FOOTNOTES CHAPTER 4 'According to C A . Walder, OCIMF, Personal Interview, London A p r i l 1976. 2 In t h i s regard, see U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker B a l l a s t i n g : How l i g h t can you go, Washington D.C. "That i s , a vessel with same commercial p r o f i t a b i l i t y . 4 According to Mr. Cawley (Economic Manager, B r i t i s h Petroleum) Personal Interview, London, A p r i l 1976. Mueller, W.H., The Worldwide Need f o r Tankers, From Sea Trade Conference: Money and sh i p s , London, March 18, 1975. ^According to A. McKenzie, Tanker Advisory Center, an i n s p e c t o r was paid $150 per ship to inspect the slop tank and o i l record book a t the ARAMCO terminal i n the Arabic Gulf. This was i n 1971. The f i g u r e adopted in the study allows f o r an i n f l a t i o n (Personal interview, New York, 1975). ^U.S. Coast Guard, An A n a l y s i s o f Mission Performance, Report, Washington, D.C, 1975, p. 111. 8 According to the Canadian Federal F i s h e r i e s M i n i s t e r Romeo LeBlanc, the new Canadian 200-mile coastal f i s h i n g zone can be p a t r o l l e d by one a i r c r a f t . The Alaska trade zone w i l l be roughly twice as l a r g e , Vancouver Sun, "Canada able to p o l i c e 200-mile zone", June 14, 1976. CHAPTER 5 THE ALASKA TRADE The e v a l u a t i o n method described i n Chapter 4 w i l l be. used i n the next chapters to evaluate the c o s t - e f f e c t i v e n e s s of the IMCO p o l l u t i o n control a l t e r n a t i v e (See chapter 2) on the Alaska trade route. This chapter w i l l d e s c r i b e the c o n d i t i o n s p r e v a i l i n g on the Alaska trade. I t provides the s p e c i f i c data that are needed, i n a d d i t i o n to the background data provided i n Chapter 3, to evaluate a l t e r n a t e c o n t r o l p o l i c i e s on the Alaska trade. The f i r s t s e c t i o n describes the supply and demand f o r o i l on the Alaska trade. The second s e c t i o n d e s c r i b e s the c h a r a c t e r i s t i c s o f the Alaska trade route. The l a s t s e c t i o n provides the b a s i c vessel costs on the Alaska trade. 5.1 SUPPLY AND DEMAND FOR THE ALASKAN CRUDE OIL The trans-Alaska p i p e l i n e i s scheduled to begin operations i n the t h i r d quarter of 1977. From Valdez, Alaska the p i p e l i n e ' s throughput w i l l be shipped by tanker to o i l importing regions. According to a recent report f o r the U.S. Maritime Administration,^ the p i p e l i n e w i l l i n i t i a l l y t r a n s p o r t 600,000 b a r r e l s per day. By the beginning o f 1978, t h i s throughput i s expected to r i s e to about 1.2 m i l l i o n s b a r r e l s per day and by the beginning of 1980, the p i e p l i n e i s expected to c a r r y i t s f u l l c a p a c i t y of two m i l l i o n s b a r r e l s per day. A f t e r exhaustion of the Prudhoe Bay F i e l d producible r e s e r v e s , the p i p e l i n e w i l l continue to be used f o r t r a n s p o r t a t i o n o i l from ? other f i e l d s on the Alaska North Slope and A r c t i c Ocean s h e l f . -128--129-The d e s t i n a t i o n o f the p i p e l i n e ' s throughput i s s t i l l s ubject to c o n s i d e r a b l e u n c e r t a i n t y . I t i s g e n e r a l l y considered that the o i l w i l l be shipped to Puget Sound, San F r a n c i s c o and Lons Angeles-Long Beach on the U.S. West Coast. I t i s b e l i e v e d that up to 1980 the throughput w i l l be d i v i d e d between Puget Sound, San Francisco and Long Beach on a 15-40-45 b a s i s . When the p i p e l i n e reaches i t s maximum throughput o f two m i l l i o n b a r r e l s a day i n 1980, i t i s probable that a surplus w i l l develop on the 2 West Coast. It i s a l s o probable that t h i s surplus w i l l be moved from the West Coast to the U.S. Midwest by p i p e l i n e . In May 1975, Standard O i l o f Ohio (S0HI0) announced i t s plans to move t h i s a n t i c i p a t e d surplus v i a a p i p e l i n e 3 o r i g i n a t i n g i n Long Beach. In the l a t e f a l l o f 1975, however, as a r e s u l t 4 of the phasing out of Canadian o i l exports, a consortium of companies, the Northern T i e r P i p e l i n e Company announced i t s p r o j e c t to b u i l d a p i p e l i n e from Puget Sound to Clearbrook, Minnesota, Montana, North Dakota, and Wisconsin which c u r r e n t l y depend upon Canadian crude (SOHIO's l i n e would 5 serve r e f i n e r i e s f u r t h e r south and e a s t ) . A t h i r d proposal under study would be to ship Alaskan o i l by tankers to K i t i m a t , B r i t i s h Columbia. The o i l would then be transshipped to Edmonton through a new p i p e l i n e ; and from Edmonton to the U.S. Midwest through e x i s t i n g p i p e l i n e s . The plan i s proposed by the Trans Mountain O i l P i p e l i n e Corporation whdch p r e s e n t l y s u p p l i e s U.S. r e f i n e r i e s with Canadian crude from A l b e r t a . This plan i s considered to be environmentally p r e f e r a b l e to the Puget Sound scheme as a l a r g e tanker s p i l l i n the Puget Sound area 6 would be a major d i s a s t e r f o r both the United States and Canada. It i s d i f f i c u l t to p r e d i c t which o f the above schemes w i l l be implemented, as no c o n s t r u c t i o n permit has been d e l i v e r e d yet by the -130-r e s p o n s i b l e governments. Decisions i n t h i s regard w i l l c l e a r l y a f f e c t the a l l o c a t i o n o f Alaskan o i l among the ports of the U.S. and'Canadian West Coast. Another source of u n c e r t a i n t y i s the magnitude of the surplus to be transported to the U.S. Midwest. The most probable case ( i n June 1975) was that a 500,000 b a r r e l s per day surplus would develop on the U.S. West Coast. This surplus would be transported to the Midwest t o t a l l y out of Long Beach. The r e s t of the o i l would s t i l l be d i v i d e d between Puget Sound, San Francisco and Long Beach on a 15-40-45 b a s i s . 7 This might not be the most probable case anymore given the developments that have taken place since June 1975. But a v a i l a b l e inform-a t i o n does not y i e l d more probable f i g u r e s . Based on these f i g u r e s , TABLE 26 shows the d e s t i n a t i o n of the Alaska p i p e l i n e ' s throughput. I t takes i n t o account the o i l production of Cook I n l e t , Alaska, which w i l l a l s o be shipped by tankers from Valdez. This production i s expected to y i e l d 220,000 b a r r e l s a day by the beginning of g 1978 and 241,000 by the beginning o f 1980. 5.2 THE CHARACTERISTICSSOF THE ALASKA TRADE ROUTE 5.2.1 S i z e c o n s t r a i n t s The f o l l o w i n g s i z e c o n s t r a i n t s w i l l apply on the Alaska trade: a) The port o f Long Beach cannot accommodate tankers l a r g e r than 138,000 DWT unless part of the cargo has been o f f l o a d e d at a previous c a l l . With only minor dredging and expansion of onshore p i p e l i n e and storage tank f a c i l i t i e s , t h i s l i m i t would be increased to 200,000 DWT f o r new tankers "of the g wide beam c o n f i g u r a t i o n now being proposed". -131-TABLE 26 DESTINATION OF THROUGHPUT OF ALASKAN OIL PIPELINE (thousands of b a r r e l s per day) 1978. 1980 Puget Sound 213 261 San Francisco 568 696 Long Beach 639 1,284 Total = North Slope + Cook I n l e t 1,420 2,241 SOURCE: U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker Suppl,y and Demand  f o r the Alaskan O i l Trade, Washington. D.C. June 1976. -132-b) Puget Sound i s c u r r e n t l y able to accommodate tankers up to 210,000 DWT.10 However, i n May 1975, the Governor o f the State o f Washington signed i n t o law a b i l l which places severe l i m i t s and c o n t r o l s on tanker t r a f f i c i n Puget Sound. Among other t h i n g s tankers g r e a t e r than 125,000 DWT are not allowed i n Puget Sound waters. This law faces a s u i t i n court by A t l a n t i c R i c h f i e l d Company. ARC0 contends that the law i s pre-empted by U.S. fed e r a l laws, i n p a r t i c u l a r those r e g u l a t i n g i n t e r s t a t e and f o r e i g n commerce. 1 1 c) The port o f San Francisco i s not able to accommodate f u l l y loaded tankers above 35,000 DWT. However, the p r a c t i c e o f l i g h t e n i n g i n t o small tankers w i l l permit to accommodate tankers up to 100,000 DWT.12 Due to these s i z e c o n s t r a i n t s , tankers greater than 200,000 DWT tons are not s u i t a b l e on the Alaska trade. This l i m i t may be con s i d e r a b l y increased i f a deepwater port (or o f f s h o r e terminal) i s b u i l t on the Canadian or U.S. West Coast. The question has been much debated i n recent years, but tanker operators do not seem to expect such developments. None o f the v e s s e l s 13 p r e s e n t l y scheduled f o r use on the Alaska trade exceeds 190,000 DWT. The s i z e c o n s t r a i n t s that are most l i k e l y to apply are summarized i n TABLE 27. 5.2.2 Vessel operating c o n d i t i o n s TABLE 28 describes the operating c o n d i t i o n s f o r conventional tankers using conventional LOT on the Alaska trade route. A sustained sea speed o f 15.5 knots i s assumed f o r a l l v e s s e l s . No allowance i s made f o r p o s s i b l e slow steaming p r a c t i c e s during weak market c o n d i t i o n s , due to the -133-TABLE 27 SIZE CONSTRAINTS FOR TANKERS IN DISCHARGING PORTS FOR THE ALASKAN OIL TRADE PORT SIZE LIMIT Puget Sound - physical l i m i t 200,000 DWT - l e g a l l i m i t 125,000 DWT San Francisco - with l i g h t e n i n g 100,000 DWT Long Beach 3 - new ve s s e l s 200,000 DWT - e x i s t i n g v e s s e l s 150,000 DWT a Plans are underway i n Long Beach to increase the present ship s i z e c a p a c i t y (150,000 DWT). -134-TABLE 28 OPERATING CONDITIONS ON THE ALASKA ROUTE FOR CONVENTIONAL TANKERS USING CONVENTIONAL LOT UNLOADING PORT Puget Sound San Francisco Long Beach Round t r i p (miles 2,500 3,400 4,100 Sea Speed (knots) 15.5 15.5 15.5 Sea days 6.72 9.14 11.02 Port days 3 3 3 Voyage delay per t r i p .5 .5 .5 Days/trip 10.22 12.64 14.52 Operational days per year 350 350 350 T r i p s per year 34.25 27.69 24.10 SOURCE: U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker Supply and Demand f o r the Alaskan O i l t r a d e , Washington, D.C., 1975 -135-l a c k of data. A l l v e s s e l s are assumed to spend three days per t r i p i n port. Twelve hours per t r i p are allowed f o r voyage delays and 15 days per year f o r voyage r e p a i r . No allowance i s made f o r the p o s s i b l e impact of vessel s i z e on the above operating bases, due to the l a c k of information i n t h i s regard. 5.3 BASIC VESSEL COSTS ON THE ALASKA TRADE By U.S. law the v e s s e l s operating on the Alaska trade must be U.S. f l a g v e s s e l s . The c a p i t a l and operating c o s t s o f U.S. f l a g tankers are g e n e r a l l y higher than the costs of other tankers. Estimates of basic cost f o r conventional tankers on the Alaska trade are provided i n TABLE 29, using the f o l l o w i n g assumptions: - ship economic l i f e = 20 years - cost of c a p i t a l = 10% - Scrap value = 10% - Tax r a t e = 0 5.4 SUMMARY This chapter has described the basic c o n d i t i o n s p r e v a i l i n g on the Alaska trade. The supply and demand f o r o i l are unaffected by p o l l u t i o n c o n t r o l . Nor are the port depth l i m i t a t i o n s . P o l l u t i o n c o n t r o l , however, has an impact on the basic vessel c o s t s and operating c o n d i t i o n described i n t h i s chapter. This impact must be estimated when assessing the economic cost and e f f e c t i v e n e s s o f a l t e r n a t e p o l l u t i o n c o n t r o l p o l i c i e s . T h is i s i l l u s t r a t e d i n the f o l l o w i n g chapter. -136-TABLE 29 BASIC VESSEL COSTS FOR CONVENTIONAL TANKERS ON THE ALASKA TRADE I n i t i a l c o n s t r u c t i o n costs (MM$) 29 (SHIP SIZE (MDWT) 85 115 140 175 36 41 47 55 Amortization FIXED ANNUAL COSTS (M$/ship/year 3000 3700 4250 4875 5700 Insurance + uninsured l o s s 925 1050 1240 1390 1610 Crew Cost Prov/stores 1000 1000 1000 1000 1000 115 125 125 135 135 Maintenance and r e p a i r s 370 450 480 500 530 Overhead 90 90 100 110 110 Mi seellaneous Fuel (M$/ship/year Port charges (M$/ship/year 60 60 70 80 80 VARIABLE ANNUAL COSTS 2000 2420 2570 2695 2870 15 18 25 30 38 SOURCES: Interpreted from: American Petroleum I n s t i t u t e (API: estimates f o r 1976). and U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n . Tanker B a l l a s t i n g : How l i g h t can you go, Appendix C. Washington D.C. May 1975 (Using l i n e a r i n t e r p o l a t i o n s between s i z e s ) -137-FOOTNOTES CHAPTER 5 U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker  Supply and demand f o r the Alaskan O i l Trade, Washington D.C. June 1975 2 I b i d . , p. 2. 3 I b i d . , p. 2. 4 The Canadian Government announced i n November 1975 that the d e l i v e r y o f Canadian Crude o i l to the U.S. would stop i n 1981. 5 " 0 i l update 76", P a c i f i c Northwest Sea, (V o l . 8, No. 4, 1975 and Vol. 9, No. 1, 1976), pp. 16-21 6 Vancouver Sun, June 1976 ^U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Tanker  Supply and Demand f o r the Alaskan O i l Trade, p. 2. 8 I b i d . , p. 2 9 I b i d . , p. 9. 1 0U.S. Corps of Engineers, U.S. West Coast Deep Water Port F a c i l i t i e s  Study, Appendix C, 1973. ^U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Tanker  Supply and demand f o r the Alaskan O i l Trade, p. 9 P a c i f i c Northwest Sea, p. 18 U.S. Congress, O i l Tra n s p o r t a t i o n by Tankers: An A n a l y s i s of  Marine P o l l u t i o n and s a f e t y Measures, pp. 81-82. l^u.S. Congress p. 24 and U.S. Corps of Engineers, Appendix D. 13U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker  Supply and demand f o r the Alaskan O i l Trade, Table 3. 14 These assumptions are based on the sources shown under TABLE 28. CHAPTER 6 ILLUSTRATION OF THE EVALUATION METHOD: THE COST-EFFECTIVENESS OF THE IMCO ALTERNATIVE ON THE ALASKA TRADE 6.1 INTRODUCTION The o b j e c t i v e o f t h i s chapter i s to estimate the economic cost and e f f e c t i v e n e s s o f implementing the IMCO a l t e r n a t i v e on the Alaska trade. The IMCO a l t e r n a t i v e has been described as fo l l o w s i n Chapter 2. - A d d i t i o n a l segregated b a l l a s t c a p a c i t y on tankers over 70,000 deadweight tons ordered a f t e r December 31, 1975 or d e l i v e r e d a f t e r December 31, 1979. - Improved LOT i s used by a l l tankers on medium to long-haul trades. - Shore reception f a c i l i t i e s are used on short-haul t r a d e s , i n s p e c i a l areas and i n drydocking p o r t s . Short-haul trades means a trade i n v o l v i n g b a l l a s t voyages of l e s s than 1000 miles or three days. According to Chapter 5 (TABLE 28), there i s no b a l l a s t voyage l e s s than 1000 miles or three days on the Alaska trade (unless some o i l i s shipped from Valdez to Canada). The Alaska trade area i s not defined as a s p e c i a l area by IMCO. Acco r d i n g l y , no shore f a c i l i t y i s required on the Alaska trade under the IMCO a l t e r n a t i v e . -138--139-The p o l l u t i o n c o n t r o l standards under the IMCO a l t e r n a t i v e are those contained i n the 1973 Convention. I t i s assumed that the U.S. Coast Guard inspects a l l v e s s e l s loading at Valdez and p a t r o l s the Alaska trade zone with a i r c r a f t to enforce these standards. I t i s f u r t h e r assumed that the p e n a l t i e s are s u f f i c i e n t l y high to prevent f a i l u r e s i n the use o f improved LOT. The s i g n i f i c a n c e o f t h i s assumption w i l l be t e s t e d at the end of the chapter. The c o s t - e f f e c t i v e n e s s o f p o l l u t i o n c o n t r o l under the IMCO a l t e r n a t i v e i s obtained by comparison with the reference a l t e r n a t i v e using the procedure described i n Chapter 4 and the data provided i n Chapter 3 and 5/ The reference a l t e r n a t i v e , which has been r e f e r r e d to as current p r a c t i c e i n Chapter 2, simply i n v o l v e s the voluntary use of conventional LOT by-shipmasters. According to Chapter 5 (Table 28), b a l l a s t voyages r e q u i r e 80 to 140 hours on the Alaska trade route. This leaves enough time f o r the LOT operations to be c a r r i e d out. The task may be d i f f i c u l t , however, when severe weather i s encountered. The p o l l u t i o n c o n t r o l standards under the reference a l t e r n a t i v e are those contained i n the 1954 Convention, as amended i n 1962. These standards are not c o n s i s t e n t with the proper use of LOT and they are extremely d i f f i c u l t to enforce. As a r e s u l t , governmental enforcement has no s i g n i f i c a n t impact on oper a t i o n a l p o l l u t i o n . I t i s assumed that there i s no governmental enforcement on the Alaska trade under the enforcement a l t e r n a t i v e . I t i s f u r t h e r assumed t h a t the o i l companies have set up a voluntary i n s p e c t i o n scheme at Valdez (because i t i s c o n s i s t e n t with o i l companies' current p o l i c y and p r a c t i c e ) . As a r e s u l t , conventional LOT i s assumed to be, on the average, 90 per cent e f f e c t i v e i n good weather, and 80 per cent e f f e c t i v e i n bad weather. -140-Due to v a r i a t i o n s i n supply and demand f o r Alaskan o i l two basic periods (as defined i n s e c t i o n 4.3) are defi n e d : (1) the peri o d 1978-1980 during which the trans-Alaska p i p e l i n e operates a t about h a l f c a p a c i t y and (2) the period 1980-and-after during which the p i p e l i n e operates at f u l l c a p a c i t y . The c a l c u l a t i o n s are the same f o r both periods. They are made i n t h i s study f o r the second period only. According to the previous chapter, i t i s assumed t h a t the tankers used on the Alaska trade have t h e i r s i z e comprised between 60,000 dwt and 200,000 dwt.1 Given the p o l l u t i o n c o n t r o l standards to be i n v e s t i g a t e d and the port depth l i m i t a t i o n s described i n Chapter 5, the f o l l o w i n g s i z e c l a s s e s are used. CLASS SIZE REPRESENTATION SIZE MDWT MDWT 60-69 65 70-99 85 100-125 115 126-150 140 151-200 175 The next two sect i o n s estimate the annual economic cost o f ocean t r n a s p o r t a t i o n and the c h a r a c t e r i s t i c s o f operational discharges o f o i l under the reference a l t e r n a t i v e and under the IMCO a l t e r n a t i v e . The l a s t s e c t i o n of t h i s chapter estimates the economic cost o f p o l l u t i o n control under the IMCO a l t e r n a t i v e . 6.2 THE REFERENCE ALTERNATIVE The f o l l o w i n g steps are c a r r i e d out in t h i s s e c t i o n : -141-Estimate 1 Annual vessel throughputs 2 Annual vessel f i x e d and v a r i a b l e c osts 3 Composition and a l l o c a t i o n o f the tanker f l e e t 4 C h a r a c t e r i s t i c s o f tanker operational discharge 5 Annual cost of ocean T r a n s p o r t a t i o n 6.2.1 Annual Vessel throughputs under the reference a l t e r n a t i ve According to Chapter 3, the throughput per t r i p of a 100,000 dwt crude o i l tanker i s 95,000" tons i n the absence o f p o l l u t i o n c o n t r o l . Assuming that conventional LOT i s 80 to 90 per cent e f f e c t i v e , depending on weather, the amount o f o i l r e t a i n e d i n the slop tank i s 192 to 226 tons (using Table 5) and the amount of dead weight water ( o n e - t h i r d of the slops) i s 96 to 1T3 tons. The l o s s o f throughput r e l a t i v e to the case o f no p o l l u t i o n control i s 96 to 113 tons per t r i p depending on the weather. Heavy weather i s frequent i n the g u l f o f Alaska. In the absence of any s p e c i f i c data, i t i s assumed t h a t heavy weather i s encountered on 50 per cent o f the b a l l a s t voyages. Therefore, the average l o s s o f through-put f o r a 100,000-dwt crude o i l tanker on the Alaska trade i s 104 tons per t r i p under the reference a l t e r n a t i v e . The r e s u l t i n g throughput per t r i p i s 94,496 tons on the average allowing f o r 400 tons of cl i n g a g e . Using t h i s f i g u r e and the operating bases shown i n TABLE 28, i t i s now p o s s i b l e to c a l c u l a t e annual throughputs f o r each vessel s i z e . These annual throughputs are shown i n TABLE 30. 6.2.2 Annual vessel c o s t s under the Reference A l t e r n a t i v e According to Chapter"4, the f o l l o w i n g cases are considered to estimate vessel f i x e d c o s t s . -142-TABLE 30 VESSEL THROUGHPUTS UNDER THE REFERENCE ALTERNATIVE 3 Vessel S i z e (MDWT) 65 85 115 140 175 Throughput/trip (M Tons) T r i p s / y e a r 61.41 80.30 108.80 132.27 165.34 VALDEZ TO PUGET SOUND 34.25 Annual throughput (M Tons/year) T r i p s / y e a r 2103 2750 3726 4530 VALDEZ TO SAN FRANCISCO 27.69 5663 Annual throughput (M tons/year) T r i p s / y e a r 1700 2223 3013 3663 VALDEZ TO LONG BEACH 24.10 4578 Annual throughput (M tons/year) 1480 1935 2622 3188 3985 Assuming v e s s e l s are used at f u l l c a p a c i t y D I t i s proportional to s i z e (94.496 tons f o r a 100,000 dwt tanker according to the t e x t ) . c U s i n g TABLE 28 -143-Case 1: Large permanent surplus. The opportunity c o s t o f e x i s t i n g v e s s e l s i s zero. Case 2: Long-run E q u i l i b r i u m o f Tanker supply and Demand. The annual opportunity c o s t o f an e x i s t i n g vessel i s equal to the v e s s e l ' s a m o r t i z a t i o n c o s t . The annual f i x e d and v a r i a b l e costs are c a l c u l a t e d i n TABLE 31. The r e s u l t i n g costs per ton transported are shown i n TABLE 32. Only the re l e v a n t s i z e s are included (See Section 5.2.1) TABLE 32 shows t h a t i t i s always uneconomic to order new v e s s e l s where there i s a l a r g e surplus (even though there are l e s s s i z e c o n s t r a i n t s applying on new v e s s e l s ) . The costs per ton transported are the same f o r new and e x i s t i n g ships at the long run e q u i l i b r i u m . 6.2.3 Composition and Al1bcatibn o f the Tanker FIeet under the  Reference A l t e r n a t i v e . Based on the p r e v i o u s l y c a l c u l a t e d vessel c o s t s , the composition and a l l o c a t i o n o o f the tanker f l e e t under the reference a l t e r n a t i v e i s estimated f o r each p e r i o d , using the o p t i m i z a t i o n model described i n Chapter 4 (and Annex B). The number o f v e s s e l s used on the trade and the a l l o c a t i o n o f the f l e e t i s shown i n Table 33. According to Chapter 4, v e s s e l s are attached to the trade over the year, since they cannot be t r a n s f e r r e d to other trades f o r small periods o f time. However, they are not attached to a given port. TABLE 33 shows, f o r instance, t h a t four v e s s e l s i n the 100,000 to 125,000 dwt range are used on the trade when there i s a l a r g e s u r p l u s . 3.373 o f these f o u r v e s s e l s are used on the Valdez t o Puget Sound route (that i s , each vessel i s used 52 x 3.373/4 = 43.8 weeks per year on the average, on the Puget Sound route) -144-TABLE 31 ANNUAL VESSEL FIXED AND VARIABLE COSTS UNDER XtHE REFERENCE ALTERNATIVE 3 Vessel S i z e (MDWT) 65 85 115 140 175 ANNUAL FIXED COSTS—LARGE SURPLUS New S h i p s 0 5560 6475 7265 8090 9165 E x i s t i n g s h i p s 0 2560 2775 3015 3215 3465 ANNUAL VARIABLE COSTS—LARGE SURPLUS Puget Souncjd San F r a n c i s c o ^ Long Beach d 2513 3036 3426 3722 4171 2415 2918 3262 3522 3922 2360 2854 3172 3418 3786 aThe annual costs o f e x i s t i n g v e s s e l s are estimated i n the case of a la r g e surplus only s i n c e the costs o f new and e x i s t i n g v e s s e l s are about the same at the long-run e q u i l i b r i u m b T h i s i s the sum of the f i x e d costs shown i n TABLE 29. cNo opportunity c o s t d U s i n g the basic v a r i a b l e costs shown i n TABLE 29 and the number of t r i p s per year shown i n TABLE 28. -145-TABLE 32 . UNIT TRANSPORTATION COST OF ALASKAN OIL UNDER THE REFERENCE ALTERNATIVE ($ per ton of crude transported) Vessel S i z e 65 85 115 140 175 Surplus Puget Sound - E x i s t i n g Ships 2/41 2 611 1/73 - New Ships 3.84 3.46 2.87 San Francisco - E x i s t i n g Ships 2.93 2.56 - New Ships 4.69 4.22 Long Beach - E x i s t i n g ships 3.32 2.90 2.36 2.08 - New Ships 5.35 4.82 3.98 3.61 3.25 Long-Run E q u i l i b r i u m Puget Sound - New and E x i s t i n g ships 3.84 3.46 2.87 San Francisco - New and E x i s t i n g ships 4.69 4.22 Long Beach - New and E x i s t i n g ships 5.35 4.82 3.98 3.61 3.25 (only new) -146-TABLE 33 NUMBER AND ALLOCATION OF THE'ALASKA TANKER FLEET UNDER THE REFERENCE ALTERNATIVE ( a f t e r 1980) Vessel Size 65 85 115 140 175 Large Surplus (No new v e s s e l ) Puget Sound 0 0 3.373 0 0 San Francisco 0 15 a 0 0 0 Long Beach 0 0 .479 19 0 Total 0 15 4 19 0 Long-run e q u i l i b r i u m (new and e x i s t i n g v e s s e l s ) Puget Sound 0 .924 2.69 0 0 San Francisco 0 15 0 0 0 Long Beach .84 0 .31 0 15 Total 1 16 3 0 15 -147-each .479 of these v e s s e l s are used on the Long Beach route (each vessel i s used 6.2 weeks per year, on the average, on the Long Beach r o u t e ) . Each of these four v e s s e l s i s i d l e f o r two weeks per year, on the average. 6.2.4 C h a r a c t e r i s t i c s of Tanker Operational Discharges under the  Reference A l t e r h a t i v e The number o f t r i p s per year i s now estimated f o r each p o r t , using TABLE 33 ( a l l o c a t i o n o f the f l e e t ) and TABLE 28 (number of t r i p s per year f o r an i n d i v i d u a l vessel used at f u l l c a p a c i t y ) . TABLE 33, f o r in s t a n c e , shows that .479 v e s s e l s i n the 100,000 to 125,000 dwt range are used on the Valdez to Long Beach route where there i s a l a r g e surplus. According to TABLE 28, a vessel used at f u l l c a p a c i t y on the Valdez to Long Beach route completes 24.10 t r i p s per year. A c c o r d i n g l y , v e s s e l s i n the 100,000 to 125,000 dwt range complete .479 x 24.10 = 11.54 t r i p s per year on the Valdez to Long Beach route. S i m i l a r c a l c u l a t i o n s are made f o r each vessel type and each port. The r e s u l t s are shown i n TABLE 34. TABLE 34 a l s o shows the average discharge of o i l per t r i p f o r each vessel type. The average discharge of o i l i s c a l c u l a t e d f o r a 100,000 dwt tanker using Chapter 2 (TABLE 5) and assuming that LOT i s 80 to 90 per cent e f f e c t i v e , depending on weather. Then the average discharge o f o i l i s c a l c u l a t e d f o r the r e l e v a n t vessel s i z e s , assuming i t i s proportional to s i z e . The c h a r a c t e r i s t i c s o f o i l discharges under the reference a l t e r n a t i v e are given f i n a l l y i n TABLE 35. I t i s shown t h a t the t o t a l discharge of o i l on the Alaska trade i s 36,360 tons per year under the reference a l t e r n a t i v e ( t h i s amount does not depend upon the f l e e t s i nce a l l v e s s e l s use the same p o l l u t i o n co n t r o l technique so that o i l discharges are pro p o r t i o n a l to the amount of o i l c a r r i e d o n l y ) . The average discharge i s 36 to 39 tons, depending on the f l e e t . -148-TABLE 34 NUMBER OF TRIPS AND AMOUNTS OF OIL DISCHARGED UNDER THE REFERENCE ALTERNATIVE Vessel s i z e (MDWT) 65 85 115 140 175* Average discharge of o i l per t r i p (tons) 20.7 27.1 36.7 .. 44.7 55.8 T r i p s per y e a r — L a r g e surplus Puget Sound 0 0 115 0 0 . San Francisco 0 415 0 0 0 Long Beach 0 0 11.5 458 0 T r i p s per y e a r — L o n g run E q u i l i b r i u m Puget Sound 0 31.64 92 0 0 San Francisco 0 415 0 0 0 Long Beach 20 0 7.5 0 361 -149-TABLE 35. CHARACTERISTICS OF OIL DISCHARGES UNDER THE REFERENCE ALTERNATIVE Unloading;port- Puget:Sound San Francisco LARGE SURPLUS Annual amount o f o i l discharged (tons/year)" 4,220 11,246 Long Beach Total 20,894 36,360 Frequency of discharge (# t r i p s / y e a r 115 415 469 999 Average amount of o i l discharged (tons per t r i p ) 37 27 45 36 C o n c e n t r a t i o n 3 and l o c a t i o n 50 to 700,000 ppm anywhere at sea Annual amount of o i l discharged (tons/year) 4,220 LONG-RUN EQUILIBRIUM 11,246 20,894 36,360 Frequency of discharge (# t r i p s / y e a r ) 124 415 388.5 927.5 Average amount of o i l discharged ( t o n s / t r i p ) 34 Concentration and l o c a t i o n : 27 54 39 50 to 700,000 ppm anywhere at sea. a 700,000 ppm when dumping pure slops -150-6.2.5 Annual Cost o f Ocean Tr a n s p o r t a t i o n under the•Reference  A l t e r h a t i v e The annual cost i n c u r r e d by tanker owners i s $ M i l l i o n 236,557 when there i s a la r g e surplus and $ M i l l i o n 384.198 at the long-run e q u i l i b r i u m (these f i g u r e s are produced by the o p t i m i z a t i o n model). There i s no tax (see Section 5.3) and no increase i n the opportunity cost o f e x i s t i n g tankers due to p o l l u t i o n control on new v e s s e l s (See Section 4.3.3.3). The cost i n c u r r e d by tanker owners th e r e f o r e r e f l e c t s e x a c t l y v e s s e l , port and shipyard c o s t s . There i s no governmental enforcement a c t i v i t y under the reference a l t e r n a t i v e , but the o i l company i n s p e c t i o n scheme at Valdez costs $250,000 per year (since the cost o f i n s p e c t i o n i s $250 per boarding. There are approximately 1000 t r i p s per y e a r ) . The annual cost o f ocean t r a n s p o r t a t i o n under the reference a l t e r n a t i v e i s t h e r e f o r e : 236.557 + .250 + $ m i l l i o n 236.807 when there i s a la r g e surplus and 384.198 + .250 = $ m i l l i o n 384.448 at the long run e q u i l i b r i u m . 6.2.6 Summary The f o l l o w i n g estimates have been obtained i n t h i s s e c t i o n : - 36,360 tons o f o i l are discharged annually by tankers engaged i n the Alaskan o i l trade when conventional LOT i s the p o l l u t i o n control technique f o r a l l tankers. - The annual cost o f ocean t r a n s p o r t a t i o n f o r the Alaska trade i s $ M i l l i o n 236.807 when there i s a l a r g e surplus and $ m i l l i o n 384,448 at the Long-run e q u i l i b r i u m when conventional LOT i s the p o l l u t i o n c o n t r o l technique f o r a l l tankers. -151-6.3 THE ANNUAL COST OF OCEAN TRANSPORTATION AND THE CHARACTERISTICS OF OPERATIONAL DISCHARGES UNDER THE IMCO ALTERNATIVE. The c a l c u l a t i o n s i n the previous s e c t i o n have been d e t a i l e d e x t e n s i v e l y . The c a l c u l a t i o n s i n t h i s s e c t i o n are q u i t e s i m i l a r and the explanations alre a d y given are not repeated. 6.3.1 Annual Throughputs under the IMCO A l t e r h a t i v e Vessel operating c o n d i t i o n s under the IMCO a l t e r n a t i v e d i f f e r from those p r e v a i l i n g under the reference a l t e r n a t i v e i n the f o l l o w i n g r e s p e c t s . - segregated b a l l a s t tankers save 5 hours i n port per t r i p (See 3.2.2.1 ( c ) ) . -Improved LOT and the a d d i t i o n a l segregated b a l l a s t c a p a c i t y s ^ a f f e c t i t h e f t t h r p u g h p u t ' l p e r r t r i p . TiiThe J o s s 'of ?throughput•>includi,ng 4M00stons o f c l i n g a g e f o r a conventional 100,000 dwt tanker i s 504 tons per t r i p under the reference a l t e r n a t i v e (See 6.2.1). Based on TABLE 14, the l o s s o f throughput f o r a 100,000 DWT segregated b a l l a s t tanker using improved LOT properl y (and l i g h t e r b a l l a s t i n g p r a c t i c e s ) i s 470 tons per t r i p . The l o s s of throughput f o r a conventional tanker using improved LOT i s properly i s 522 tons. Based on these f i g u r e s , the annual throughputs are c a l c u l a t e d i n TABLE 36. 6.3.2 Annual Vessel Costs under the IMCO A l t e r h a t i ve Vessel costs d i f f e r from those p r e v a i l i n g under the reference a l t e r n a t i v e i n the f o l l o w i n g r e s p e c t s : -152-TABLE 36 VESSEL THROUGHPUTS UNDER THE IMCO-ALTERNATIVE SIZE 65 85 115 140 175 Cargo throughput per t r i p (M tons) - e x i s t i n g ships 61.40 80.28 108.78 132.24 165.'30 - new ships 61.40 80.37 108.89 132.37 165.46 PUGET SOUND Number o f t r i p s 3 per year - e x i s t i n g ships 34.25 34.25 34.25 34.25 34.25 - new ships 34.25 34.96 34.96 34.96 34.96 Annual throughput (M tons) - e x i s t i n g ships 2103 2750 3726 4530 5663 - new ships 2103 2810 3807 4628 5784 SAN FRANCISCO Number of t r i p s / y e a r 3 - e x i s t i n g ships 27.69 27.69 27.69 27.69 27.69 - new ships 27.69 28.16 28.16 28.16 28.16 Annual throughput (M tons) - e x i s t i n g ships 1700 2223 3013 3663 4578 - new ships 1700 2263 3066 3728 4659 LONG BEACH Number of t r i p s a per year - e x i s t i n g ships 24.10 24.10 24.10 24.10 24.10 - new ships 24.46 24.46 24.46 24.46 24.46 Annual throughputs (M tons) - e x i s t i n g ships 1480 1935 2622 3188 3985 - new ships 1480 1966 2663 3238 4047 3 T a k i n g i n t o account the 5 hours saved i n port by segregated b a l l a s t tankers. -153-- Segregated b a l l a s t tankers save time i n port and, t h e r e f o r e , complete more voyagespper year. The v a r i a b l e cost i s a f f e c t e d . - Segregated b a l l a s t increases c o n s t r u c t i o n cost by 5 per cent and r e p a i r and maintenance costs by 6 per cent (See s e c t i o n 3.2.2). - Improved LOT req u i r e s a $200,000 investment f o r a l l s h i p s . This i s amortized over 20 years f o r new sh i p s , and over 10 years f o r e x i s t i n g s h i p s , using a 10 per cent c o s t of c a p i t a l (See Section 5.3). The r e s u l t i n g f i x e d and v a r i a b l e costs are shown i n TABLE 37. The f i x e d cost of e x i s t i n g tankers i s c a l c u l a t e d i n the case of a l a r g e surplus only s i n c e the costs of new and e x i s t i n g v e s s e l s are about the same at the long-run e q u i l i b r i u m . The costs per ton o f o i l transported are f i n a l l y shown i n TABLE 38. I t i s uneconomic to use new v e s s e l s when there i s a lar g e surplus. 6.3.3 Composition and A l l o c a t i o n of the Tanker F l e e t under the  IMCO A l t e r n a t i v e . The composition and a l l o c a t i o n of the tanker f l e e t i s given i n TABLE 39. Only e x i s t i n g v e s s e l s are used when there i s a l a r g e s u r p l u s . Both new and e x i s t i n g v e s s e l s can be used at the long-run e q u i l i b r i u m . TABLE 39 assumes th a t no e x i s t i n g vessel i s used at the long-run e q u i l i b r i u m . When as many e x i s t i n g v e s s e l s as is.economic are kept on the trade, the f l e e t i s as shown in TABLE 33, at the long-run e q u i l i b r i u m . -154-W New v e s s e l s TABLE 37 ANNUAL VESSEL COSTS UNDER THE REFERENCE ALTERNATIVE (M $ / year) Vessel S i z e (MDWT) 65 85 115 140 175 FIXED COSTS Basic f i x e d c o s t 9 5560 6470 7265 8090 9165 + C a p i t a l c o s t o f segregated b a l l a s t 0 185 212 244 285 + C a p i t a l c o s t o f Improved LOT 21 21 21 21 21 + Increase i n mainten-ancersandarepad raeost . ,22 27 29 30 32 TOTAL FIXED COST 5603 6708 7527 8485 9503 E x i s t i n g v e s s e l s — L o n q - r u n Eaui 1ibrium Basic f i x e d c o s t 2560 2775 3015 3215 3465 C a p i t a l cost o f im. LOT 28 28 28 28 28 Total f i x e d cost 3682 2817 3057 3257 3507 VARIABLE COSTS Puget Sound - Newb 2513 3048 3440 3742 4195 - E x i s t i n g c 2513 3036 3426 3722 4171 San Francisco - Newb 2415 2928 3275 3537 3942 - E x i s t i n g 0 2415 2918 3262 3522 3922 Long Beach - Newb 2360 2860 3102 3428 3798 - E x i s t i n g 0 2360 2854 3172 3418 3786 a Fixed cost under the reference a l t e r n a t i v e (TABLE 31) ^Allowing f o r the increased number o f t r i p s completed by new ships (due t o the time savings i n p o r t ) . cSame as i n TABLE 31. -155-TABLE 38 UNIT TRANSPORTATION COST OF ALASKAN OIL UNDER THE IMCO ALTERNATIVE ($ per ton) S h i p s i z e MDWT Puget Sound - E x i s t i n g - New San Francisco - E x i s t i n g - New Long Beach - E x i s t i n g - New Puget Sound New and E x i s t i n g San - Francisco New and E x i s t i n g Long Beach New and E x i s t i n g 65 85 115 140 175 LARGE SURPLUS 2.43 2.13 1.74 3S85 3.47 2.88 2.95 2.58 4.70 4.26 3.35 2.93 2.38 2.09 1.83 5.36 4.86 4.02 3.65 3.29 LONG-RUN EQUILIBRIUM 3.85 3.47 2.88 4.70 4.26 5.36 4.86 4.02 3.65 3.29 -156-TABLE 39 NUMBER AND ALLOCATION OF THE ALASKA TANKER FLEET UNDER THE IMCO ALTERNATIVE Vessel s i z e (MDWT) 65 85 115 140 175 LARGE SURPLUS Puget Sound 0 0 3,372 0 0 San Francisco 0 15 0 0 0 Long Beach 0 0 .479 19 0 TOTAL 0 15 4 19 0 LONG-RUN EQUILIBRIUM 9 Puget Sound 0 0.36 3,275 0 0 San Francisco 0 14,810 0 0 0 Long Beach 0 0 .725 1 14 TOTAL 0 15 4 1 14 -157-6.3.4 C h a r a c t e r i s t i c s of tanker Operational Discharges under  the IMCO A l t e r n a t i v e The number of t r i p s per year and the average amount of o i l discharged per t r i p i s estimated f o r each vessel type and each po r t , as explained i n the previous s e c t i o n (using chapter 3 to estimate the average amount discharged by conventional or segregated b a l l a s t tankers using improved LOT.) The c h a r a c t e r i s t i c s o f operational discharges o f o i l on the Alaska trade under the IMCO a l t e r n a t i v e are shown i n TABLE 40. The t o t a l discharge o f o i l i s about 4000 tons i n the l a r g e surplus case (only e x i s t i n g v e s s e l s are used). It i s 2900 to 3500 tons a t the long-run e q u i l i b r i u m depending on the number of e x i s t i n g v e s s e l s used. The average amount i s 3 to 5 tons under both cases. A l l discharges take place outside o f the 50 miles zone. 6.3.5 Annual c o s t o f Ocean Tr a n s p o r t a t i o n under the IMCO A l t e r n a t i v e The annual t r a n s p o r t a t i o n cost under the IMCO a l t e r n a t i v e i s computed i n TABLE 41. P o l i c i n g c o s t s are estimated using the f o l l o w i n g f i g u r e s : - each vessel i s boarded each t r i p f o r i n s p e c t i o n o f the slop tank and o i l record book. The cost i s $250 per boarding (See Chapter 4). - The Alaska trade zone i s p a t r o l l e d by two a i r c r a f t s (20 hours per week each). The co s t o f a e r i a l s u r v e i l l a n c e i s $500 per tour (See Chapter 4). According to TABLE 41, the annual cost o f ocean t r a n s p o r t a t i o n under the IMCO a l t e r n a t i v e i s $ M i l l i o n 240.97 under the l a r g e surplus case and $Mil1 ion 386.81 a t the long-run e q u i l i b r i u m (when only new ve s s e l s are used. I t i s l e s s when e x i s t i n g v e s s e l s are used too since the opportunity c o s t to -158-TABLE 40 CHARACTERISTICS OF OPERATIONAL DISCHARGES UNDER THE IMCO ALTERNATIVE Route Puget Sound San Francisco Long Beach M l 1 routes Annual amount o f o i l discharged (tons/year) 502 LARGE SURPLUS 1340 2166 4008 Frequency o f discharges ( t r i p s / y e a r ) 115 415 470 1000 Average amount o f o i l discharged ( t o n s / t r i p ) 4.37 3.23 4.61 4.00 Concentration and l o c a t i o n Annual amount o f o i l discharged (tons/year) 30=10,000 ppm outside o f the 50 miles zone LONG-RUN EQUILIBRIUM 336-504 896-1340 1662-1692 2894-3536 Average.iamount of o i l discharged ( t o n s / t r i p ) 2,93-4.07 2.1.6-3.23 4,34-4.36 3.17-3.61 Concentration and l o c a t i o n 30-10,000 ppm o u t s i d e of the 50 miles zone -159-TABLE 41 ANNUAL COST OF OCEAN TRANSPORTATION UNDER THE IMCO ALTERNATIVE ($ m i l l i o n / y e a r ) Long-run e q u i l i b r i u m Large Surplus (new vessel only) Vessel shipyard and  port costs - Cost i n c u r r e d by shipowners 9 237.62 385.52 - l e s s tax 0 0 - Total 237.62 385.52 Pol i c i n g costs - Boarding .25 .25 - a e r i a l s u r v e i l l a n c e 1.04 1.04 - Total 1.29 1.29 Annual cost o f ocean Tran s p o r t a t i o n 238.91 386.81 a Given by the o p t i m i z a t i o n model -160-the shipowner overestimates the economic opportunity cost o f e x i s t i n g v e s s e l s . See Chapter 4, Section 4.3.3.3). 6.3.6 Summary The f o l l o w i n g estimates have been obtained i n t h i s s e c t i o n : - 2,900 tons o f o i l are discharged annually by tankers engaged on the Alaska trade under the IMCO a l t e r n a t i v e when a l l tankers above 70,000 dwt are segregated b a l l a s t tankers using improved LOT, and 4000 tons o f o i l are discharged annually when a l l tankers are conventional tankers using improved LOT only. - The annual c o s t o f ocean t r a n s p o r t a t i o n i s $ m i l l i o n 238.91 under the l a r g e surplus case and at most $ M i l l i o n 386.81 at the long-run e q u i l i b r i u m . 6.4 THE COST EFFECTIVENESS OF THE IMCO ALTERNATIVE ON THE ALASKA TRADE The economic c o s t of implementing the IMCO a l t e r n a t i v e on the Alaska trade i s c a l c u l a t e d i n TABLE 42. TABLE 42 shows t h a t p o l l u t i o n c o n t r o l under the IMCO a l t e r n a t i v e generates a net b e n e f i t per ton of o i l saved, assuming that enforcement i s e f f e c t i v e and the value o f the o i l saved ( g e n e r a l l y found i n the s l o p s ) i s c l o s e from the market p r i c e of crude o i l . The net b e n e f i t per ton o f o i l p o l l u t i o n saved i s $20 to $25 depending on the tanker supply and demand c o n d i t i o n s . TABLE 42 a l s o shows t h a t the a d d i t i o n a l ocean t r a n s p o r t a t i o n c o s t , i n c l u d i n g p o l i c i n g c o s t , under the IMCO a l t e r n a t i v e i s about $2 m i l l i o n , that i s l e s s than one per cent of the t o t a l ocean t r a n s p o r t a t i o n c o s t . By comparing the r e s u l t s obtained at the long-run e q u i l i b r i u m under the reference a l t e r n a t i v e and under the IMCO a l t e r n a t i v e , i t i s p o s s i b l e -161-TABLE 42 THE ECONOMIC COST OF THE IMCO ALTERNATIVE ON THE ALASKA TRADE Large Surplus Long-Run E q u i l i b r i u m (new v e s s e l s only) A d d i t i o n a l t r a n s p o r t a t i o n c o s t ($ m i l l i o n / y e a r 2.103 2.330 Amount of o i l saved (tons) 32,360 33,460 Value of the o i l saved ($ M i l l i o n ) 2.912 3.011 Annual c o s t o f p o l l u t i o n c o n t r o l .808 .670 Net b e n e f i t per ton of o i l saved $25 $20 -162-to estimate the incremental c o s t - e f f e c t i v e n e s s o f r e q u i r i n g segregated b a l l a s t on new tankers i n a d d i t i o n to improved LOT. When a l l tankers are new and a l l use only improved LOT, the f l e e t i s as shown i n TABLE 33 (long-run e q u i l i b r i u m c a s e ) . The a d d i t i o n a l ocean t r a n s p o r t a t i o n c o s t i s simply the co s t o f pr o v i d i n g the ships shown i n TABLE 33 with the improved LOT equipment ($21,000 per year and per ship) and the cost o f e n f o r c i n g the proper use o f improved LOT. The incremental p o l l u t i o n c o n t r o l cost o f r e q u i r i n g segregated b a l l a s t on new ships i s c a l c u l a t e d i n TABLE 43. Two cases are considered. , The case o f e f f e c t i v e enforcement where improved LOT i s 98.5 per cent e f f e c t i v e , and the case of no e f f e c t i v e enforcement where improved LOT i s only 90 per cent e f f e c t i v e on the average. No p o l i c i n g cost i s assumed in the case o f no e f f e c t i v e enforcement. TABLE 43 shows t h a t the incremental cost o f segregated b a l l a s t i s $182 per ton when improved LOT i s pr o p e r l y enforced. But the segregated b a l l a s t requirement generates a net b e n e f i t o f $37 per a d d i t i o n a l ton saved when improved LOT i s not properl y enforced. These r e s u l t s show the importance o f enforcement when eva l u a t i n g the c o s t -e f f e c t i v e n e s s o f a p o l l u t i o n c o n t r o l p o l i c y . 6.4 SUMMARY This chapter has described the c a l c u l a t i o n s r e q u i r e d to estimate the cost o f tanker p o l l u t i o n c o n t r o l . The c a l c u l a t i o n s showed t h a t p o l l u t i o n c o n t r o l under the IMCO a l t e r n a t i v e generates a net b e n e f i t . This b e n e f i t i s estimated to be $20 to $25 per ton of o i l p o l l u t i o n prevented. The use of a d d i t i o n a l segregated b a l l a s t c a p a c i t y on new ships ( i n a d d i t i o n to improved LOT) invo l v e s a net cost (about $180 per a d d i t i o n a l ton of o i l saved) when LOT i s used properly. I t generates a b e n e f i t and prevents l a r g e p o l l u t i o n when LOT i s poorly operated. -163-TABLE 43 THE INCREMENTAL COST OF REQUIRING SEGREGATED BALLAST ON NEW TANKERS ON THE AtiASKA TRADE E f f e c t i v e No E f f e c t i v e Enforcement Enforcement Amount of o i l discharged Amount of o i l saved r e l a t i v e l y to reference a l t e r n a t i v e Value o f the o i l saved Cost of improved LOT - equipment c o s t - p o l i c i n g c o s t - Total IMPROVED LOT ONLY 4000 tons 32360 tons $2,912,000 $ 735,000 $1,290,000 $2,025,000 26,600 tons 9,760 $874,000 $735,000 0 $735,000 — c o n t i n u e d - --164-TABLE 43 (Continued) E f f e c t i v e No E f f e c t i v e Enforcement Enforcement IMPROVED LOT + SEGREGATED BALLAST Amount of o i l discharged 2900 tons 19,314 tons Amount o f o i l saved r e l a t i v e l y to reference a l t e r n a t i v e 33,460 tons 17,046 tons Cost o f Improved LOT + segregated b a l l a s t - v e s s e l , port and shipyard cost $1,040,000 $1,040,000 - p o l i c i n g c o s t $1,290,000 0 - t o t a l $2,330,000 $1,040,000 Value o f the o i l saved $3,011,000 $1,534,000 INCREMENTAL COST-EFFECTIVENESS OF SEGREGATED BALLAST Incremental ocean t r a n s p o r t a t i o n cost $ 300,000 $ 305,000 Incremental value o f the o i l saved $ 99,000 $ 660,000 Net incremental c o s t $ 201,000 $ 355,000 Incremental amount of o i l saved 1100 tons 9,554 tons Incremental cost per ton of o i l saved $183 - $37. -165-FOOTNOTES CHAPTER 6 1 Crude o i l tankers are g e n e r a l l y above 60,000 dwt. CHAPTER 7 SUMMARY AND CONCLUSIONS Operational discharges o f o i l by tankers are a major source o f marine p o l l u t i o n . There are a number o f p o l i c i e s a v a i l a b l e to c o n t r o l these discharges. This study has provided a method and a data base to evaluate the c o s t - e f f e c t i v e n e s s o f these p o l i c i e s . This method and data base have been used to evaluate the c o s t - e f f e c t i v e n e s s o f implementing the pr o v i s i o n s o f the 1973 IMCO Convention on the f u t u r e Alaskan o i l trade. Most tankers c u r r e n t l y use retention-on-board (ROB) or load-on-top (LOT) procedures to prevent the discharge o f o i l during d e b a l l a s t i n g and c l e a n i n g operations. The e f f e c t i v e n e s s o f these procedures may vary c o n s i d e r a b l y depending on such f a c t o r s as length o f haul, weather and clingage c o n d i t i o n s , and crew a b i l i t y . There i s a f i n a n c i a l i n c e n t i v e , however, f o r i n t e g r a t e d o i l companies to use retention-on-board or load-on-top e f f e c t i v e l y s i n c e the value o f the o i l saved i s l i k e l y to exceed the cost o f c a r r y i n g deadfreight water i n the slops and processing s a l t contaminated o i l a t the r e f i n e r y . But good LOT or ROB performance are f i n a n c i a l l y undesirable to the independent shipowner, unless he receives the f r e i g h t on the slops (and a compensation f o r any in c u r r e d d e l a y s ) . The 1954 Convention, as amended i n 1962, i s the e x i s t i n g law on the subject o f tanker o p e r a t i o n a l p o l l u t i o n . But t h i s convention i s v i r t u a l l y impossible to enforce and has p r a c t i c a l l y no impact on tanker operational discharges o f o i l . -166--167-A number o f p o l i c i e s have been proposed i n recent years to reduce tanker operational discharges of o i l from t h e i r current l e v e l . Three basic p o l i c i e s are i d e n t i f i e d i n Chapter 2. F i r s t , the i n d u s t r y a l t e r n a t i v e , which r e f l e c t s c u r r e n t i n d u s t r y trends, r e l i e s on improved LOT or ROB, crude washing techniques, and segregated b a l l a s t f o r new v e s s e l s . Second, the environ-m e n t a l i s t s ' a l t e r n a t i v e (which r e f l e c t s the views of the environmental groups) r e l i e s p r i m a r i l y on segregated b a l l a s t f o r both new and e x i s t i n g v e s s e l s . The use o f LOT or ROB procedures i s kept to a minimum. T h i r d , the IMCO a l t e r n a t i v e , which reproduces the 1973 Convention, i s s i m i l a r to the i n d u s t r y a l t e r n a t i v e except t h a t i t r e q u i r e s the use of shore f a c i l i t i e s to handle c l e a n i n g and b a l l a s t water i n s p e c i a l areas and on short-haul trades. Chapter 3 provides a data base to be used when e v a l u a t i n g the c o s t - e f f e c t i v e n e s s o f a l t e r n a t e p o l i c i e s . Chapter 3 gives estimates of the impact of p o l l u t i o n c o n t r o l techniques on (1) the c a p i t a l and operating c o s t s of tanker t r a n s p o r t a t i o n and (2) the amounts and concentrations of operational o i l discharges. The method described i n Chapter 4 permits the assessment of a l t e r n a t e p o l i c i e s i n c o s t - e f f e c t i v e n e s s terms. The e f f e c t i v e n e s s of a given c o n t r o l p o l i c y i s evaluated by studying the c h a r a c t e r i s t i c s of o p e r a t i o n a l discharges under t h i s p o l i c y . These c h a r a c t e r i s t i c s are (1) amounts of o i l (2) concentration o f o i l discharges (3) l o c a t i o n and depth o f o i l discharges and (4) frequency of o i l discharges. The economic cost o f a given c o n t r o l p o l i c y r e l a t i v e to the reference a l t e r n a t i v e i s the a d d i t i o n a l tanker t r a n s p o r t a t i o n c o s t , i n c l u d i n g p o l i c i n g c o s t s , l e s s the value o f the a d d i t i o n a l o i l saved. A d i s t i n c t i o n i s made between the costs i n c u r r e d by tanker owners and the economic c o s t o f tanker t r a n s p o r t a t i o n . -168-I t i s assumed t h a t the a l l o c a t i o n of the tanker f l e e t i s such t h a t the t o t a l cost incurred by tanker owners i s minimi zed.taTaxes and t r a n s f e r s are excluded to estimate the economic cost o f tanker t r a n s p o r t a t i o n . Various cases are considered to estimate the opportunity c o s t of e x i s t i n g v e s s e l s . The proposed method i s used to estimate the c o s t - e f f e c t i v e n e s s of implementing the IMCO a l t e r n a t i v e on the Alaskan o i l trade routes. Chapter 5 describes the r e l e v a n t c h a r a c t e r i s t i c s of the Alaskan o i l t r a d e . In Chapter 6 i t i s estimated t h a t the value o f the o i l saved under the IMCO a l t e r n a t i v e ( r e l a t i v e to current p r a c t i c e ) exceeds the a d d i t i o n a l t r a n s -p o r t a t i o n and p o l i c i n g c o s t s . Thus, the c o s t o f tanker operational p o l l u t i o n c o n t r o l has become small (or negative) as a r e s u l t of the recent increase i n the p r i c e o f o i l . In t h i s regard the estimates obtained p r i o r to the 1973 IMCO Convention are no longer v a l i d . Chapter 6 a l s o shows t h a t the cost of p o l l u t i o n c o n t r o l depends upon the enforcement p o l i c y . In the case o f e f f e c t i v e enforcement, the c o s t of r e q u i r i n g segregated b a l l a s t f o r new tankers engaged i n the Alaskan o i l trade i s approximately $200 per a d d i t i o n a l ton of o i l p o l l u t i o n prevented. But t h i s c o s t i s negative i n the absence of e f f e c t i v e enforcement (that i s , the a d d i t i o n a l cost due to segregated b a l l a s t on new tankers i s more than o f f s e t by the value o f the o i l saved, r e l a t i v e to c u r r e n t p r a c t i c e ) . The l e s s e f f e c t i v e the enforcement p o l i c y , the more d e s i r a b l e i t i s to r e q u i r e segregated b a l l a s t . T h i s study has only provided c o s t - e f f e c t i v e n e s s estimates f o r one p o l l u t i o n c o n t r o l p o l i c y on a s i n g l e trade. The method and data provided i n t h i s study should permit f u r t h e r i n v e s t i g a t i o n s . In p a r t i c u l a r , i t would be i n t e r e s t i n g to compare a l t e r n a t e p o l l u t i o n c o n t r o l p o l i c i e s on various trades and to i d e n t i f y the most important f a c t o r s by means of a s e n s i t i v i t y a n a l y s i s -169-BIBLIOGRAPHY BOOKS AND REPORTS IMCO, Report on Study 1: Segregated B a l l a s t Tankers, Report by the United S t a t e s , 1972. IMCO, Report on Part 2 o f Study 1: Segregated B a l l a s t aboard Product Tankers  and smal1er crude c a r r i e r s , r e p o r t by the United S t a t e s , 1973. IMCO, Report on Study I I I : Retention on board, Report by the United Kingdom, 1973. IMCO, Report on Study IV: Clean B a l l a s t i n g before s a i l i n g from d i s c h a r g i n g p o r t , Report by France (P. Theobald), 1973. IMCO, Report on Study V: Retaining d i r t y b a l l a s t on Board f o r Port D i s p o s a l , Report by I s r a e l , 1973. IMOO, Introduc t i o n of Segregated B a l l a s t i n e x i s t i n g Tankers, Report by Greece, I t a l y and Norway, 1976. U.S. Coastt F i n a l Environmental Impact Statement: Regulations f o r Tank Vessels engaged i n the C a r r i a g e o f o i l i n Domestic Trade, Washington, D.C. August, 1975. U.S. Coast Guard, D r a f t Environmental Impact Statement Regulations f o r U.S. Tank Vessels C a r r y i n g o i l i n (foreign Trade and f o r e i g n Tank vess e l s that enter the Navigable Waters o f the United S t a t e s , Washington, D.C., A p r i l , 1976. U.S. Congress, O f f i c e of Technology Assessment, O i l T r a n s p o r t a t i o n by tankers:  An a n a l y s i s o f marine p o l l u t i o n and s a f e t y measures, Washington D.C, J u l y 1975. U.S. Corps of Engineers, U.S. West Coast Deep Water Port F a c i l i t i e s Study, June 1973. U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Port C o l l e c t i o n and Separation F a c i l i t i e s f o r O i l y Wastes, Report by F r e d e r i c R. H a r r i s , Inc. Washington, D.C, 1973. U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Tanker Tank Cleaning  Research Program, Report by MSA Research C o r p o r a t i o n , March 1974. U.S. Department of Commerce, Maritime A d m i n i s t r a t i o n , Survey of Ship Discharges, Report by EXXON Research and Engineering Company, J u l y 1974. -170-U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Crude Washing  Guide!ines, Report by EXXON In t e r n a t i o n a l Company Tanker Department, A p r i l 1975. U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Tanker B a l l a s t i n g : How  l i g h t can you go? Report by A.C. Landsburg and J.M. Cruikshank, Washington, D.C, May 1975. U.S. Department o f Commerce, Maritime A d m i n i s t r a t i o n , Tanker Supply and Demand  f o r the Alaskan O i l Trade, Report by J.A. G r i b b i n , Washington, D.C June 1975. U.S. National Academy o f Sciences, Petroleum i n the Marine Envi ronment, Washington, D.C. 1975 Zacher, M. et a l . , The P o l i t i c s o f I n t e r n a t i o n a l Environmental Regulation: The case o f O i l P o l l u t i o n C o n t r o l , U n i v e r s i t y of B r i t i s h Columbia, to be published. PAPERS AND ARTICLES Burrows, e t . a l . , "Operational Dumping and the P o l l u t i o n o f the Sea by O i l : An E v a l u a t i o n o f Preventive Measures", Journal of Environmental Economics and Management, 1:202-218, 1974. Crighton, L.J. and T e l f e r , I.E., Segregated Bal1ast Tankers, Proceedings of the symposium on Marine P o l l u t i o n , Royal I n s t i t u t i o n of Naval A r c h i t e c t s , London, 1973. Gray, W.O., The 1973 Convention: A Tanker Operator's Viewpoint, Proceedings o f the 1975 Conference on Prevention and Control of O i l P o l l u t i o n , San F r a n c i s c o , March 1975. Gray, W.O., Segregated B a l l a s t and Related Aspects o f Tanker Design Proceedings o f the IMCO Symposium on Prevention o f P o l l u t i o n from Ships, Acapulco, March 1976. Heaver, T.D. and Waters, W.G., An Economic A n a l y s i s o f C o n t r o l s on the  Discharges o f o i l at sea, Proceedings of the Canadian Trans-p o r t a t i o n Research Forum, Quebec C i t y , 1974. Holdsworth, M.P., Loading Port Inspection o f Cargo Residue Retention by Tankers i n B a l l a s t , Proceedings of the IMCO Symposium on Prevention of P o l l u t i o n from s h i p s , Acapulco, March 1976. Maybourn, R., Crude O i l Washing, Proceedings o f the IMCO Symposium on Prevention o f P o l l u t i o n from Ships, Acapulco, March 1976. -171-M u e l l e r , W.H. The worldwide Need f o r Tankers, Proceedings o f the Sea-Trade Conference—Money and Ships, London, March 1975. " O i l Update 76", P a c i f i c Northwest Sea, V o l . 8, n°4, 1975 and V o l . 9,°1, 1976 Van Cleave, H.D., e t . a l . , Techniques f o r C o n t r o l l i n g O i l Discharges from Product O i l Tankers j, Proceedings o f the IMCO Symposium on Prevention o f P o l l u t i o n from Ships, Acapulco, March 1976. V i c t o r y , 6., The Load-on-Top System, Present and Future, Proceedings o f the Symposium on Marine P o l l u t i o n , Royal I n s t i t u t i o n of Naval A r c h i t e c t s , London, 1973. World Tanker F l e e t Review, London, December 1975. INTERVIEWS LONDON: 1) Department of Trade and Industry Gordon V i c t o r y (now r e t i r e d ) Marine D i v i s i o n — D e p a r t m e n t o f Trade and Industry Sunley House 90 High Hoi born London WclV 61P 2) O i l Companies In t e r n a t i o n a l Marine Forum C A . Walder, Executive S e c r e t a r y OCIMF Portland House - Stag Place London SW1E 5BH 3) I n t e r n a t i o n a l Chamber of Shi pping J.C.S. Horrocks ICS 30-32 St. Mary Ave. London EC3A 8ET 4) B r i t i s h Petroleum Tanker Company G.A.B. King, D i r e c t o r ; J.R. Keates, Legal and Claim D i v i s i o n , and Ian E. T e l f e r , C h i e f Naval A r c h i t e c t BP Tanker Company Limited B r i t a n n i c House Moore Lane London EC2Y 9BR -172-5) S h e l l M.P. Holdworth Captain B. Dav i e s - P a t r i c k She!1 I n t e r n a t i o n a l Marine Sh e l l Centre London SEI 7NA PARIS: 1) S e c r e t a r i a t a l a Marine Marchahde Yves Chaumont Equipment Naval—Bureau Technique S e c r e t a r i a t a l a Marine Marchande 3 P l a c e e d e Fontenoy P a r i s 7 , France UNITED STATES: 1) U.S. Coast Guard Lieutenant Commander Warren D. Snider O f f i c e o f Merchant Marine Safety U.S. Coast Guard Headquarters 400 Seventh S t r e e t , S.W. Washington D.C. 20490, U.S.A. 2) Maritime A d m i n i s t r a t i o n George C. Steinman, C h i e f (Environmental A c t i v i t i e s Group) Walter Chappel ( O f f i c e o f S h i p b u i l d i n g Costs) Maritime A d m i n i s t r a t i o n Washington D.C. 20234, U.S.A 3) EXXON C.L. Crane ( L o g i s t i c s Department) EXXON Corporation 1251 Avenue o f the Americas New York, New York 10020, U.S.A. -173-Center f o r Law and S o c i a l P o l i c y (Environmental Groups) El don Greenberg Center f o r Law and S o c i a l P o l i c y 1751 N S t r e e t , N.W.. Washington, D.C. 20036, U.S.A. Tanker Advisory Center Arthur McKenzie, D i r e c t o r Tanker Advisory Center 315 West 70th S t r e e t New York, New York 10023, U.S.A. Engineering Computer Opteconomics, Inc. Joseph D. P o r r i c e l l i and V i r g i l Keiths (Advisers to Environmental groups) 505 Burning Tree Drive Arnold, Maryland 21012, U.S.A -174-ANNEX A AVERAGE DISCHARGES FOR A CONVENTIONAL 100,000 DWT CRUDE OIL TANKER USING IMPROVED ROB Good Weather Bad Weather 1. Capacity o f d i r t y b a l l a s t tanks 20-25% o f DWT 35-40% o f DWT 2. Amount o f d i r t y b a l l a s t 22,500 tons 37,500 tons 3. S e t t l e d p a r t o f d i r t y b a l l a s t (90% of (2)) 20,000 tons 33,750 tons 4. O i l discharge from d i r t y b a l l a s t tanks ((3) x 30 ppm) .60 ton 1.00 ton 5. Washwater f o r a complete washing c y c l e ( s t r i p p i n g pumps only) 14,400 tons 14,400 tons 6. Tank c a p a c i t y cleaned 25-35% of dwt 35-40% of dwt 7. Washwater on a rou t i n e voyage ( s t r i p p i n g pumps only) 4,300 tons 5,400 tons 8. D i r t y p a r t o f d i r t y b a l l a s t (10% of (2)) 2,000 tons 3,750 tons 9. Total amount of slops ( s t r i p p i n g pumps only) = (8) + (7) 6,300 tons 9,150 tons 10. O i l discharge from slop tank ( s t r i p p i n g pumps only) = (9) X 150 ppm .94 ton 1.37 tons 11. Total o i l discharge ( s t r i p p i n g pumps only) = (10 + (4)) 1.54 tons 2.38 tons 12. Washwater on a r o u t i n e voyage (with eductors) = 3.5 x (7) 15,000 tons 18,900 tons 13. Total amount of slops (with eductors) to be handled. (12) + (8) 17,000 tons 22,650 tons 14. O i l discharge from sloptank (with eductors) = (1.3) x 150 ppm 2.55 tons 3.40 tons 15. Total o i l discharge (with eductors) (14) = (4) 3.15 tons 4.40 tons -175-ANNEX B AN OPTIMIZATION MODEL TO ESTIMATE THE COMPOSITION AND ALLOCATION OF THE TANKER FLEET ON THE ALASKA TRADE 1) GENERAL The model minimizes the annual c o s t i n c u r r e d by shipowners on the Alaska t r a d e , subject to supply and demand ( f o r o i l ) c o n s t r a i n t s , and to in t e g e r c o n s t r a i n t s . Integer c o n s t r a i n t s a r i s e from the f a c t that the e n t i r e f i x e d cost must be paid, even i f the vessel i s not used at f u l l c a p a c i t y . Such c o n s t r a i n t s are necessary unless i t i s assumed that tankers can be t r a n s f e r r e d to another trade a t a small cost and f o r a small period o f time. This assumption i s not made i n the study. 2) MODEL DESCRIPTION1" A l l the costs mentioned here are annual costs The cost to be minimized can be expressed as f o l l o w s : Minimize i=l j=l where A i j n = V i j e i j n + f j E j n + V i j m i j n + FjMjn V i j = V a r i a b l e cost o f e x i s t i n g v e s s e l s (Port i , s i z e j ) V i j = V a r i a b l e cost o f new v e s s e l s (port i , s i z e j ) Fj = f i x e d cost o f e x i s t i n g v e s s e l s (Size j ) Fj = f i x e d cost o f new v e s s l e s (Size j ) Ejn = # e x i s t i n g v e s s e l s ( s i z e j ) i n year n Mjn = # New ve s s e l s ( s i z e j ^ . i n year n e i j n = # e x i s t i n g v e s s e l s ( s i z e j , port i ) i n year n mijn = # N 6 W v e s s e l s ( s i z e j , port i ) i n year n -176-3) C o n s t r a i n t s The f o l l o w i n g c o n s t r a i n t s have to be met a) Crude O i l Requirement 5 ( e i j n + mijn) T i j ^ Rin j=l ~ where Rin = Annual Crude Requirement X\i ° ((Portl it^^Yearln'). T i j = Annual Throughput (Port i - s i z e j ) b) Capacity C o n s t r a i n t s 3 Ejn 2Z e i j n i = 1 Mjn — 3 ^ • ^ ^ mijn i = 1 Theseetftro c o n s t r a i n t s express the f a c t t hat v e s s e l s cannot be used beyond f u l l c a p a c i t y c) Fixed cost c o n s t r a i n t s Ejn = Integer Mjn = Integer These c o n s t r a i n t s express the f a c t t hat v e s s e l s cannot be t r a n s f e r r e d to another trade during the year. -177-3) Implementation The e x p r e s s i o n 3 5_ i s minimized u s i n g a > >> * ~ A i j n i = l j = l co n v e n t i o n a l l i n e a r program package, and the "branch and bound" a l g o r i t h m t o account f o r the i n t e g e r c o n s t r a i n t s . To a v o i d having l a r g e c o s t i n c r e a s e s caused by small changes i n v e s s e l throughputs, f i g u r e s w i t h i n 1 per cent o f an i n t e g e r a r e accepted as i n t e g e r s . T h i s r e c o g n i z e s t h a t i n r e a l i t y v e s s e l s i z e a r e not l i m i t e d t o t h e f i v e r e p r e s e n t a t i v e s i z e s used i n the study. F o r i n s t a n c e Mjn =15.15 and s i z e j = 100,000 dwt means t h a t 15 v e s s e l s i n the 100,000 dwt c l a s s a r e used on the t r a d e , w i t h the average s i z e being equal t o 101,000 dwt„ -178-ANNEX C FIXED AND VARIABLE COSTS FIXED COSTS 1) C a p i t a l Costs are obtained, using the assumptions and procedures described i n Chapter 4 and the amortization costs provided i n TABLE 29, f o r each v e s s e l . They are then summed up over the whole f l e e t . 2) Fixed Operating Costs: Vessel f i x e d operating costs are obtained, using the costs described i n TABLE 28, and making proper allowance f o r any impact o f p o l l u t i o n c o n t r o l on these c o s t s . VARIABLE COSTS 1) The number of t r i p s f o r each po r t , and ship s i z e i s c a l c u l a t e d . 2) Fuel c o s t s and port charges are c a l c u l a t e d assuming that these costs are pro p o r t i o n a l to the number o f t r i p s completed. 

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