In this corner, Capt. Leo V. Berger of Lake Success, N.Y., a basic American rags-to-riches story, an immigrant boy who rose to shipping magnate by way of a Bronx orphanage, the Merchant Marine Academy and Cornell Law School.
And in the other corner, a team of heavy hitters from the Washington establishment, including Sen. Russell Long (D-La.), Tom Boggs' law firm, Bob Gray's public relations shop, the Seafarers International Union, and Rep. Walter B. Jones, (D-N.C.), chairman of the House Merchant Marine Committee.
The U.S. Department of Transportation, which started this fight, is caught in the middle now. DOT ignited a classic Washington lobbying war by proposing to allow owners of tankers built and operated with federal subsidies to pay back the subsidies and thus gain access to domestic routes from which they currently are banned.
The proposal reflects the administration's long-term policy of getting rid of subsidy programs that have been part of the merchant marine economy since 1936. But the imposing lineup of opponents say it is illegal, unwise, and unfair to shipowners who waived subsidies to sail on domestic routes.
DOT's proposal has engaged the attention of two federal courts, Congress, the entire maritime establishment, and the White House, where presidential counselor Edwin Meese heard from both sides at a recent meeting. The response has been so heavy that DOT extended by a month to May 2 the period for public comment on the proposal.
The issue is simple to Berger, a maverick independent whose Apex Marine Corp. owns nine tankers on which subsidies could be repaid: Uncle Sam would get back some $150 million in subsidies that Apex already has received, would save another $300 million that Apex is entitled to get, and would benefit from overall lower shipping costs because relatively new ships would replace "old clunkers" now plying the Alaskan oil route.
Berger, 62, came to the United States from his native Hungary at the age of 8. He described himself in an interview as "the best example of success in America. I was a pauper, and I became a millionaire. I'm disgusted with the other side painting me as an ogre." Berger said that he didn't ask DOT for the rule change and can survive without it. "I only want to do what's good for the country," he said.
But his opponents--major operators of tankers currently in the domestic trade, the maritime unions, domestic shipbuilders and several influential members of Congress--contend that the change would unfairly allow Berger to recover from what they call a "bad investment decision" at their expense.
In the words of Michael Klebanoff, president of Ogden Marine Inc. and of the American Maritime Association, the DOT plan would allow owners of subsidized tankers to escape a "very depressed world market to scavenge on the new Alaskan trade . . . an investment that has gone bad would be bailed out at the expense of the coastwise carriers who made, with their own money, what turned out to be a sounder investment."
The government pays subsidies for the construction of ships in American yards, and for the operation of U.S.-registered ships on international routes. The purpose is to enable American vessels to compete for cargo with foreign vessels built and operated at much lower costs.
But subsidized ships are not permitted to carry cargo on domestic routes, because there is no foreign competition on those routes. A law known as the Jones Act bars foreign-registered vessels from domestic traffic.
The Reagan administration has been trying to curtail the subsidy program, which at the time of Reagan's election was costing $606.4 million a year. No money has been budgeted for construction subsidies for the past two years, no new contracts for operating subsidies have been let, and ship owners have been encouraged to trade their subsidy contracts for waivers of other restrictions. The proposed new rule is part of this campaign.
Its publication coincides with a worldwide surplus of tanker capacity caused by overbuilding of ships and declining demand for oil. As a result, ships transferred from international to domestic routes would bump into the mothball fleet some smaller, higher-cost vessels that are profitable only in a protected market.
DOT estimated that owners of 15 subsidized tankers with a total capacity of about 2.5 million deadweight tons--including Berger's--would take up the payback offer and become eligible to carry Alaskan oil to West Coast ports. DOT said some small, old tankers currently in the Alaskan fleet probably will have to be scrapped and some jobs will be lost, but it said the national economy will benefit because overall oil transportation costs would be brought down by the greater efficiency of the relatively new subsidized tankers.
A leading opponent of the change is Ran Hattena, president of Overseas Bulkships Inc., which he said owns 18 ships. Hattena said that, if only 10 subsidized tankers enter the Alaskan trade, they will "run the ratio of supply to demand well over 4 to 1. And this takes no account of 1 million tons of older tonnage already laid up for want of business."
The domestic tanker owners' war against the proposed change is being waged on several fronts:
Fifteen members of the House Merchant Marine Committee, including Chairman Jones, and seven members of the Senate, including Long and Virginia Republicans John Warner and Paul Trible, wrote to Transportation Secretary Elizabeth H. Dole urging that the proposed rule be withdrawn.
The domestic tanker owners engaged Gray and Co., the well-connected public relations firm headed by Robert Gray, to stimulate opposition to DOT's proposal. One typical notice from Gray's staff said that the proposal would "contribute to the demise of the merchant marine, a crucial element in national defense."
A group of domestic tanker owners engaged Allan A. Tuttle, of Patton, Boggs & Blow, the lobbying law firm headed by Thomas Hale Boggs, to attack the proposed rule in court.
The U.S. Supreme Court ruled in an earlier case that the government has the right to permit subsidy repayment, so Tuttle took another tack. In a lawsuit in U.S. District Court, he charged that the rulemaking procedure was invalid because it should be conducted by the Maritime Administration, not by the Department of Transportation.
Government attorneys responded that this was an irrelevant argument because the Maritime Administration is part of DOT and the maritime administrator reports to Dole. The court ruled in favor of the government, but Tuttle has appealed the ruling to the U.S. Court of Appeals.
The domestic tanker owners argue that they made good-faith investments in new ships for the Alaska trade with the understanding that the rules would shelter them from their subsidized competitors.
Berger, however, said that the only ships endangered by the prospective entry of his 90,000-ton tankers are "old clunkers, the small ships. I wouldn't hurt anybody over 50,000 tons."