Double-Hull Tanker Legislation An Assessment of the Oil Pollution Act of 1990 (1998) / Chapter Skim
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5 Domestic (Jones Act) Tanker Trade
5 Domestic (Jones Act) Tanker Trade
Pages 97-114
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From page 97... ...
Domestic trade consists of the Alaskan crude oil trade and the coastal products trade. The Alaskan crude oil trade utilizes large tankers (50,000 to 265,000 DWT)
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From page 98... ...
Jones Act tank vessel trade is highly competitive.5 The market is characterized by a competitive structure and behavior with low barriers to entry. In addition to competition with other vessels, tank vessels in the domestic trade compete with the highly developed land-based pipeline transportation system in the United States and with foreign tankers carrying refined petroleum products to U.S.
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From page 99... ...
The peak years of construction reflect the opening of TAPS. Alaskan Crude Oil Trade The fleet of Jones Act crude oil tankers exceeding 50,000 DWT consists of 44 tankers with a total capacity of approximately 4.8 million DWT.
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From page 100... ...
' \\~ Supply without '_ Readmeasurement or Conversions 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1995 2000 2005 Year 2010 2015 FIGURE S-2 Jones Act tank vessel supply (vessels of more than SO,OOO DWT)
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From page 101... ...
Coastal Products Trade Supply of Jones Act Tankers of Less Than 50,000 DWT According to MARAD, there are 72 tankers totaling 2.7 million DWT in the coastal products trade,~° of which 20 tankers (with a total capacity of 700,000 DWT) have double hulls.
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From page 102... ...
2.5 In .= 1.5 1 - 1 \: . ~ 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 995 1 1 1 1 1 1 T r T 1 r T 2000 2005 Year FIGURE 5-4 Jones Act tank vessel supply (tank barges and ITBs)
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From page 103... ...
Both the EIA Reference case and the EIA High Oil Price case show increasing production after the 2010-2012 time penod, but ADR shows a continuing decline (State of Alaska, 1995~. This latter ANS production forecast assumes that no new fields are brought on-line, that the Alaskan National Wildlife Refuge is not successfully developed, and that existing high marginal cost fields, not on-line, rema~n off-line.
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From page 104... ...
exports. We will supplement or replace ships required to transport Alaskan crude oil with U.S.-built ships as existing ships are phased out under the provisions of the Oil Pollution Act of 1990." Exports of ANS crude are just starting, and there are widely divergent projections of their volume.
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From page 105... ...
_ . _ 105 \ | Expected Supply | \ ~ Demand with Exports 0.5 O 1996 2000 2004 2008 2012 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I 1 1 T r r 1 1 1 T r r 1 1 T T r r Year FIGURE 5-6 ANS crude oil trade supply and demand.
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From page 106... ...
Sources: Navigistics, 1996; PIRA, 1996; State of Alaska, 1995. 0.9 0.8 o 0.7 0.6 0.5 0.4 0.3 0.2 0.1 o 2004 2006 2008 2010 Year 2012 2014 Cumulative Newbuilding ~ Excess Supply FIGURE 5-8 ANS newbuilding conundrum.
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From page 107... ...
shipbuilding capacity is adequate to meet the need, as shown later in this chapter. Coastal Products Trade Domestic tank vessels used in the east coast products trade face different and more complex competitive problems than those affecting international transportation.~3 These vessels compete not only among themselves, but also against oil pipelines and (indirectly)
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From page 108... ...
The future course of Jones Act tanker demand, however, is in question. Because the Gulf and East Coast tanker and coastal barge market is limited i4MARAD (1996)
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From page 109... ...
If these rates significantly exceed prevailing and anticipated future market rates, however, the pipelines and imported oil are likely to gain market share at the expense of domestic tank vessels. Under such conditions, rates are likely to be perceived as too low to support the higher cost of new or converted double-hull tankers or barges.
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From page 110... ...
stated in presentations to the committee that there are no restrictions on the availability of capital for economically viable construction or reconstruction of double-hull tank vessels for the Jones Act trade. In addition, MARAD is currently authorized to provide financing guarantees (through the Title XI program)
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From page 111... ...
Another key difference in domestic trade is a high degree of market uncertainty caused by factors such as competition from pipelines and imports, the 1996 i6Figures 5-10 and 5-11 reflect retirement patterns of the total U.S.-flag tanker ship fleet, of which Jones Act vessels are the majority. i7Under OPA 90, Jones Act owners cannot adopt hydrostatically balanced loading (HBL)
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From page 112... ...
Higher construction price differentials would result in special survey break-even costs for Jones Act tank vessels increasing accordingly.
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From page 113... ...
TABLE 5-6 Cost Impact of Early Retirement Due to Section 4115 on Jones Act Tank Vessel Fleet Estimated Special Break-Even Cost Survey CostNumber of Total Cost Impact Tank Vessel Type (in $ million) (in $ million)
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From page 114... ...
Although private capital is available and federal financing will facilitate economically viable double-hull projects, replacement of the Jones Act fleet will be discouraged if Alaskan oil production continues to decline and the higher freight rates needed to pay for double hulls cause domestic operators in the coastal products trade to lose business to pipelines and foreign tankers. Finding 5.
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