Secretary of Transportation Elizabeth Hanford Dole yesterday issued a rule that will allow a group of U.S. tanker operators to enter the lucrative Alaskan oil trade by repaying federal construction subsidies over a one-year period.
The rule, which has sharply divided the U.S. maritime industry, will shave $800 million to $3 billion off the cost of shipping Alaskan oil to the West Coast over the next 10 years, according to Transportation Department officials.
It is also likely to have repercussions throughout the industry, department officials said. By allowing seven very large "supertankers" to ship the oil, the rule will displace older and smaller tankers that currently dominate the Alaskan trade.
They, in turn, will displace other ships carrying cargo from the East Coast and Gulf states, according to Richard Walsh, director of the department's office of economics. As many as 800 American seamen could lose their jobs, he said.
"This will increase competition and further minimize government obstacles to marketplace decisions," Dole said in a statement.
The rule represents a shift in longstanding federal policy designed to aid the country's ailing maritime industry. Because the costs of building ships are significantly lower in foreign shipyards, the Maritime Administration had provided construction differential subsidies to spur U.S. shipbuilding.
But ships built with such subsidies were barred from competing in the domestic shipping trade, although some exceptions have been granted on a case-by-case basis in recent years. Some U.S. operators with ships built with subsidies had offered to repay their subsidies to the federal government in exchange for being allowed to enter the Alaska trade.
But one congressional aide said that the rule has been strongly opposed by unsubsidized domestic carriers who view it as a "breach of trust." These operators "entered the market without subsidy on the assurance they would be protected," the aide said.
The Transportation Department has estimated that the operators of seven very large crude carriers are likely to offer to pay back their subsidies with interest over the next year, netting the Treasury about $277 million. Two of these ships are owned by Atlantic Richfield, three are owned by Seatrain and two by American Petrofina, according to Walsh.
In addition, New York ship operator Leo Berger, a major proponent of the rule, owns four slightly smaller "Panamax" tankers that would also be eligible for the payback.