U.S. Forced to Pay Recyclers to Take Its Aging Ships

Some ships in the National Defense Reserve Fleet are kept at the James River Reserve Fleet site.
Some ships in the National Defense Reserve Fleet are kept at the James River Reserve Fleet site. (Courtesy Of Maritime Administration)
By Steve Vogel
Washington Post Staff Writer
Monday, September 7, 2009

Built in 1942 as a Navy rescue ship, the USS Escape aided American vessels in distress in the Atlantic during World War II. The ship was called back into service during the Korean War, and in the 1960s it supported the Mercury manned spaceflight program.

Escape was decommissioned in 1995, after nearly two decades of Coast Guard service, and has since been part of a "ghost fleet" of aging, rusting vessels laid up in the James River off Newport News, Va.

Soon there will be no Escape. On Tuesday, Bay Bridge Enterprises will tow the 1,630-ton vessel to Chesapeake, Va. The company will scrap the ship and sell the steel and anything else that can be salvaged. For this, the federal government will pay Bay Bridge $115,200.

In the recent past, the Maritime Administration, which is responsible for disposing of aging merchant-class ships in the government inventory, often got one or more bids from U.S. salvage recyclers interested in buying such ships. But these days, the government usually ends up paying to unload the vessels, a change attributable to the poor economy, tight credit, fluctuating steel prices and strict environmental restrictions.

"We put them out for sale and see if anybody bites," said David Matsuda, deputy maritime administrator.

A package of four ships the Maritime Administration offered for sale received a bid of $3.5 million in August 2008 from two buyers. But by late September, after the economic collapse and a plunge in world steel prices, both had rescinded their offers.

In November, the agency asked for new bids. By the time it went to contract, the government had to pay $1.8 million to get rid of the ships.

How much money companies like Bay Bridge make on a ship such as Escape depends on many variables, chief among them the price of steel. "It's a calculated risk you have to take," said Shailesh "Sam" Vyas, president of Bay Bridge.

Steel prices have fluctuated wildly in recent years. The price of scrap steel plunged to as low as $140 a ton from $580 a ton in July 2008; in recent weeks it has been closer to $220, Vyas said.

Prices can change dramatically in the eight or nine months it takes to strip a ship. And even before bidding on a ship, companies must assess how much it will cost to remove and dispose of environmental hazards.

"We check how much asbestos abatement is needed, we have to look at PCBs [polychlorinated biphenyls], fuel, ballast waste -- all these things are costs to us," said Rebecca Robinson, Bay Bridge's vice president. "You have to look at the ship, because you never know."

The Maritime Administration, which is part of the Department of Transportation, owns and operates the National Defense Reserve Fleet, which is made up of former commercial cargo ships and inactive Navy vessels that can be activated for a national emergency. In recent years, its ships have supported operations in Iraq and Afghanistan and assisted relief operations after hurricanes Katrina and Rita.

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