WATCHING WASHINGTON INSURING TANKERS

A year ago, over the objections of the tanker industry, Congress passed the tough Oil Pollution Act (OPA).

A reaction to the Exxon Valdez oil spill, the law sharply increased shipowners' liability for spills and ordered a transition to double hull tankers in U.S. waters. The tanker and inland barge industries have loudly complained that the requirements are too strict. The decibel level rose after the Coast Guard issued proposed rules designed to implement the law (OGJ, Oct. 7, p. 36).

INTERTANKO WARNING

The International Association of Independent Tanker Owners (Intertanko), Oslo, said, "The flow of crude oil and petroleum products to the U.S. is very much at risk in the near term. Traditional sources of marine insurance coverage are simply inadequate to meet the requirements of federal and state law."

Now, guess who's suddenly concerned about the severity of the law? The same congressional committees that drafted it.

In a House of Representatives hearing last week, congressmen on the Coast Guard and navigation subcommittee pressured the Coast Guard to somehow make the new law work.

Rep. Billy Tauzin (D-La.), subcommittee chairman, said, "It concerns me to hear the dire warnings of vessels unable to enter U.S. waters because they cannot get their certificates of financial responsibility. None of us wants to see anyone in this country unable to heat their home because of the lack of home heating oil. None of us wants to see refineries idle and unable to provide fuel for our transportation systems. "

Tauzin pledged the subcommittee will help the Coast Guard and industry "arrive at mutually acceptable solutions to these problems."

But Rear Adm. Richard Appelbaum took an uncompromising stance, maintaining that the Coast Guard is only following the letter of the OPA.

Congressmen were able to pry from him the fact the Coast Guard may delay the final rule to obtain better data.

Tanker owners said a key problem is that OPA does not allow their participation in international protection and indemnity (P&I) groups to be used as proof of insurance coverage.

Oil firms said another option under OPA, self-insurance, won't work because the proposed rules would permit only U.S. assets to be counted in their net worth but require the balance sheet to include worldwide liabilities.

The American Petroleum Institute warned, "With such strict standards, it is doubtful even the major companies can self-insure. A survey of API member companies indicated that not one company could meet these proposed working capital and net worth tests. This is a clear indication the standards are too stringent."

NO QUICK FIX

The tanker industry has proposed a quick fix: that companies be allowed to count P&I coverage as an asset for self-insurance purposes.

Congressmen tried to get the Coast Guard to endorse that, but Appelbaum again responded OPA didn't permit the agency that flexibility.

Intertanko agreed: "The elements of the proposed regulations that create most urgent concern for the international maritime community are, to a very large extent, quite beyond the control of the Coast Guard to address through the drafting of implementing regulations."

The hearing did little to resolve uncertainties. But it was readily apparent that lawmakers, rulemakers, and tanker and barge owners will be working hard to find a way to wire around OPA's tough language in the next few months.