SINGLE HULL OIL TANKERS (5111/03)
Letter from the Chairman to David Jamieson
MP, Parliamentary Under-Secretary of State, Department for Transport
Thank you for your Explanatory Memorandum dated
3 February 2003 which Sub-Committee B considered at its meeting
on 17 February.
While we understand the desire of the Commission
to accelerate changes in order to try to avoid a repetition of
the Prestige and Erika disasters, we share the Government's
concerns about these proposals. We would like to see the Commission's
regulatory impact assessment (RIA) as soon as this is produced.
We find it difficult to understand the rationale
behind the proposal to impose a double hull regime on tankers
down to 600 tons deadweight. There is, of course, a strong case
for the larger ocean-going tankers to be double hulled, but no
case at all, so far as we can see, for smaller tankers. The smaller
the vessel, the more complex it is to build a double hull that
is capable of being properly maintained against corrosion. It
is also very rare that coastal craft are involved in disasters
such as those that affected the Prestige and Erika.
The cost, too, of trying to build small craft with double hulls
is likely to be disproportionate.
We understand from paragraph 12 of your Explanatory
Memorandum that your Department has commissioned a RIA for the
United Kingdom. We should like to see this assessment as soon
as possible, especially given the expectation mentioned in the
final paragraph of your Explanatory Memorandum that the text of
the Regulation will be put to the Transport Council in June for
agreement. We do not see how the Government can give its agreement
to the present proposal. We should be grateful to be kept fully
informed of the changes made to the text in negotiation.
Under the circumstances, the Scrutiny reserve
on this document is maintained.
20 February 2003
Letter from David Jamieson to the Chairman
Thank you for your letter of 20 February following
the consideration of this Explanatory Memorandum in Sub-Committee
B on 17 February.
I note that the Committee has expressed a wish
to see the Commission's regulatory impact assessment as soon as
it is produced. I share your desire to see this document but I
am afraid that, despite much prompting from Member States, the
Commission has not yet produced its impact assessment.
The Committee also asked to see an assessment
of the impact which the proposal could be expected to have in
the UK. A partial assessment has been produced and is annexed
to this letter. It addresses the main areas of concern for the
UK and also sets out an estimate of the benefits which the proposal
is intended to bring. You will see from paragraph 63 of the assessment
that the negative impact of the proposal could be significantly
a reduction from 30 in the index
number below which heavy oil could not be carried in single hull
phasing out smaller single hull tankers
over a number of years instead of banning them immediately.
In negotiation we have had some success in achieving
these objectives. The Presidency has put forward a compromise
proposal which, if accepted, would reduce the index number from
30 to 25.7 and provide a phasing out period for small single hull
tankers. This will be discussed at Transport Council on 27 March.
I shall, of course, keep the Committee informed
of changes to the proposal in the course of negotiations.
19 March 2003
PARTIAL REGULATORY IMPACT ASSESSMENT
The Commission's proposal for a Regulation
to accelerate further the phase-in of Double Hull Tankers and
to ban the carriage of heavy oils in Single Hull Tankers
1. The Commission's response to the oil
spill caused by the tanker PRESTIGE in November 2002 off the coast
of Falicia in Spain, should be seen in the light of the measures
taken after the severe oil spill off the French coast resulting
from the accident to the ERIKA in December 1999. Shortly after
the ERIKA accident, the Commission presented a number of proposals
designed to prevent such accidents occurring again. One of the
"ERIKA" measures was a proposed Regulation on the phasing
out of single-hull oil tankers. This Regulation was adopted on
18 February 2002, and applied from 1 September 2002.
This measure was also agreed at the international level when the
International Maritime Organisation (IMO) adopted a revision of
Regulation 13G of Annex I to the International Convention on the
Prevention of Pollution from Ships (MARPOL) 73/78 at the forty-sixth
meeting of the Marine Environment Protection Committee in April
2001. The timetable for the phase in of the double hull design
or equivalent requirements that were eventually adopted at EU
and the international level were less ambitious than those initially
proposed by the European Commission.
1. In its Communication on improving safety
at sea in response to the PRESTIGE accident (COM(2002)681 final)
the Commission announced a number of further measures. On 6 December
2002 the Transport Council called for an acceleration of the phasing-out
of single-hull tankers, for the application of the Condition Assessment
Scheme (CAS) to tankers from 15 years of age and for Member States
to conclude administrative agreements to ban single hull tankers
from carrying the heaviest grades of oil into their ports, terminals
and anchorage areas.
3. The Commission proposes to meet these
objectives by an amendment of the Regulation (EC) No 417/2002.
4. Parts of the proposal, as currently drafted,
could cause considerable disruption to energy supplies within
the EU. As a major processor of crude oil from the North Sea and
an exported of heavy fuel the UK is likely to be particularly
affected by the proposal.
5. The Commission proposes that Regulation
(EC) 417/2002 should be amended so that:
the current phasing out scheme for
single hull oil tankers of 5000 dwt and above should be accelerated;
the transport of heavy grades of
oil in single hull tankers of 600 deadweight tons (dwt) and above,
bound for or leaving EU ports, should be prohibited (this goes
further than the Council Conclusions which call on Member States
to secure administrative agreements to prevent the carriage of
heavy oil in single hull tankers);
the Condition Assessment Scheme,
an enhanced inspection regime which tankers of 20,000 tons deadweight
and above must satisfy to be able to operate after certain dates,
should apply to all single hull tankers down to 5,000 dwt from
the age of 15 years.
Phasing out single hull tankers
6. In terms of double hull capacity, the
and some trade associations (such as the Oil Companies International
Marine Forum (OCIMF) and
the International Association of Independent Tanker Owners (Intertanko))
believe that there is enough spare capacity across the world to
phase out and replace single hull tankers in the timetable proposed
in the Regulation. There is though the issue of where that capacity
is locatedalmost certainly it is not in the EU. The existence
of capacity does not automatically mean that it is available as
and when it is needed in the EU.
7. The Commission's analysis shows that
the proposal would move forward the replacement of the majority
of single hull tankers by three or four years.
There will be some years where the rate of replacement
would peak and the number of ships required is superior to the
number of ships currently built in one single year, but the Commission
believes that normal market operations would be able to deal with
this problem as the industry would anticipate and plan in advance
a timetable for replacement. (However, the Commission has not
made it clear how normal market operations could have anticipated
and so prevented a peak in 2003 when its proposal was produced
only in 20 December 2002).
8. OCIMF says that there are a large number
of double hull tankers currently trading outside Europe that could
in theory trade in heavy grades of oil. A transfer of these vessels
to EU trades could meet demand in the larger size bands, but with
less coverage in the size bands below 40,000 dwt. However there
are a number of issues to be resolved. These include:
the practical availability of vessels
to trade in the EU;
the way in which tankers would be
secured through time charter or spot trading;
the effect on rate levels and differentials
in the EU tanker trades;
the degree of excess capacity in
the current tanker market;
the particular routes and cargoes
that would have to carried; and
the effect on rates and availability
of capacity in the rest of the world.
These issues require further consideration before
a final judgement can be made on the degree to which substitution
of tankers from outside the EU could meet EU demand for movement
of heavy grades of oil.
9. The main issue for both smoothing off
the accelerated phase-out and the immediate fuel ban is the ability
actually to substitute tonnage in different regional trades and
Ban on single hull tankers carrying heavy grades
10. The UK is particularly concerned at
the proposal to set the boundary on the size of single hull vessel
that may not transport heavy grades of oil at 600 dwt. Smaller
tankers, between 600 and 5,000 dwt, are particularly significant
in coastal traffic (for example, supply of fuel oil to Scottish
islands) and bunkering (ship refuelling). Therefore the proposal
could have serious repercussions on the energy supply to small
islands and on the ship refuelling trade.
11. The UK also fears that the ban on the
use of single hull vessels might negatively affect exports of
fuel oil, as this product is generally transported via specialist
ships, most of which are single hulled. The consequence of a restriction
of fuel oil exports could have serious implication for the UK
12. In addition, the proposal may result
in more competition for double hull tonnage if other countries
adopt a similar line to prevent vessels being "dumped".
Even if they do not, the EU risks criticism for "exporting"
its problems with single hulls to other parts of the world.
13. The Commission's proposal could, perversely,
run counter to Community (and UK) policy on modal shift and especially
the encouragement of short sea shipping as a more environmentally
friendly alternative to road transport.
14. Another area of concern is the disruption
to international arrangements, which is likely to result from
an EU decision to depart from the phase out agreement only recently
secured in IMO. An EU decision to accelerate further the phasing
out of single hull tankers may not cause great economic dislocation
within the EU but the effect could be greater if other regions
decided to adopt a similar line, thus increasing the competition
for double hull tonnage. Moreover, "dumping" single
hull tonnage from the EU to other parts of the world which may
be as environmentally sensitive but have less ability to police
the use of poorly maintained ships and to deal with pollution
incidents, is unlikely to enhance the EU's reputation for environmental
CAS inspection regime
15. CAS is an additional, discriminatory
survey technique intended to detect poor, and reward good, ship
maintenance, and it is poor maintenance that is the root of many
casualties. Our main concern is whether the surveying industry
can muster enough resources quickly enough to meet the extension
to all tankers and the earlier decision dates now proposed, by
comparison with those required in the post-Erika Regulation. We
need reassurance on that to be able to endorse an approach, which
in principle we approve and consider positively.
16. The UK position is that the proposal
should be amended to avoid potentially serious economic implications
both at EU and UK level.
17. The proposal will apply to all 15 EU
countries plus those such as Norway as part of the EEA. All countries
are likely to be similarly affected by the accelerated phasing
out of single hull tankers, as the costs would be reflected in
higher freight rates and shipping costs. These are then passed
on as higher prices for crude oil and/or oil products and since
these are internationally traded commodities and goods, the impact
will be felt similarly in all countries. However, countries with
a larger trade in heavy fuel oil, such as the UK, are likely to
be more affected.
18. At a UK domestic level the proposal
is likely to have a greater impact on small islands communitiessuch
as the Shetlands, Orkneys and Channel Islandsthen the rest
of the country, as these depend on supplies of fuel oil for their
power generation. The ban on single hull tankers shipping fuel
oil could interrupt their supply and force power stations to close,
leaving the islands without power generation.
19. At the industry level, the proposals
will affect both the UK shipping and "upstream" and
"downstream" oil industries. An initial assessment of
the proposal to ban the carriage of the heaviest grades of oil
in single hull tankers suggests that the greatest impact would
be felt in the small (600-5,000 dwt) vessel sector, engaged mainly
in the coastal and short-haul operations, and in the form of "bunker
barges", in ship-refuelling. Since few of these vessels are
fitted with a double hull, an outright, almost immediate, ban
in respect of some products would cause problems of availability
in shipping capacity which would have significant effects on supply.
20. The benefits of the proposals are difficult
to assess since they are quantifiable mainly in terms of avoiding
the potential costs of cleaning up after an oil spill and the
externality costs in terms of lost revenues from tourism and/or
fishing. The situation is complicated by the fact that the proposals
will apply only to EU-registered vessels or those operating to
or from EU ports. Neither the ERIKA nor the PRESTIGE was registered
in an EU State or operating to or from an EU port when they were
21. Compared to single hull tankers, double
hulls do have incremental environmental advantages, particularly
in low impact collisions and groundings, and have the current
advantage of being relatively new. They are not however a substitute
for proper standards of management, operation, maintenance and
corrosion control. Double hull ships will still cause problems
in the future if the quality of maintenance and operation is allowed
to deteriorate as they pass into the hands of second, third and
subsequent owners and change Class or Flag.
22. It follows that the requirement for
an enhanced inspection regime is likely to be of greatest value
in protecting the environment.
23. The quantifiable benefit of the proposals
are dependent on two factors: the avoided costs (in terms of cleaning
up and lost revenues) and the higher probability of incident leading
to loss for single hull tankers compared to double hull tankers.
24. Clean-up costs vary depending on the
type of oil spilled, the amount spilled, the physical and biological
characteristics of the spill location, weather conditions, the
time of the year and the effectiveness of clean-up. In the past
costs for large spills involving crude oil and in some instances
fuel oil have ranged from the $83 million for the Braer (UK) incident
in 1993, to the $219 million for the Nakhodka (Japan) in 1997
or the $2.5 billion for the Exxon Valdez (USA-Alaska) in 1989.
The Erika compensations are still to be finally defined, but they
are likely to exceed $180 million.
25. The draft Regulation forms part of a
package of proposals initiated by the Transport Council which
collectively are intended to reduce the incidence of severe spills
of persisting oil and oil products. It represents the precautionary
elements of that package, but it is questionable how many of the
past spills would have been prevented by these measures alone.
26. If the Regulation is amended to address
some of the issues raised by the UK, we could add to the potential
benefits of option one, the security of ensuring sufficient capacity
to avoid disruption to oil supplies.
27. The business sectors potentially affected
Oil production industry.
Petroleum products traders.
Energy and electricity providers.
28. The shipping industry and charterers
are directly affected as they will have to replace their vessel
fleet as the phasing out timetable kicks in. Oil industry and
products traders will be affected as the ban on single hull tankers
might impede the normal practice of their businessimport
and export of crude oil and heavy fuel oil. Refiners will be affected
as the difficulties in exporting fuel oil could cause refineries
to stop their operationsproduction of other lighter products
is not possible unless the fuel oil is disposed in some way. (Although
there are other ways to dispose of heavy fuel oil besides exporting
it they would not help those who rely on the fuel oils being imported).
Energy and electricity providers in small islands could be affected
as their power generators function on fuel oil, generally supplied
by small single hull tankers.
29. It does not appear that this proposal
or the amendments being suggested by the UK and like-minded Member
States will have a significant impact in the Small Business sector.
30. This is a partial impact assessment
and, in the time available, it has not been possible to quantify
fully the costs or benefits of the proposals. However it is hoped
to develop and refine these aspects of the assessment in subsequent
Option 1: Commission proposal
31. The costs of the Commission proposals
are difficult to assess due to the lack of available data and
the relative short time notice with which the proposal has been
put forward. The Commission itself has not yet carried out a proper
analysis of the regulatory and economic impact assessment of the
32. The economic implications of the proposals
can be divided into three broad areas:
implications of the accelerated phasing
out of single hull tankers;
implications of the ban of transport
of heavy grades of oil in single hull tankers leaving or entering
EU ports; and
the enhanced inspection regime (CAS).
Accelerated phasing out of single hull tankers
33. Regulation 417/2002,
agreed as part of the Erika package following the sinking of the
tanker Erika in 1999, set out a timetable for the phasing out
of single hull tankers. This regulation implemented measures that
had been agreed in the IMO
and were therefore globally applicable.
34. The new Commission proposal will amend
the current Regulation to accelerate the phasing out of single
hull tankers. The costs of the proposal would be in terms of the
additional costs, incurred by companies/industry, of replacing
single hull tankers in advance of the original timetable.
35. Additional costs from replacing single
hull tankers with double hull tankers are identifiable as capital
costs and operating costs. Capital costs are the costs of building
new double hull tankers under the timetable set out in the proposed
regulation compared to the costs of building new tankers under
the timetable set out in the previous Regulation.
36. Operating costs include manning, supplies,
routine maintenance and repairs, administrative costs, fuel and
port costs. The additional costs of the proposed Regulation are
the difference between operating costs of single hull tankers
and costs of double hull tankers, that shipping companies will
incur under the timetable set out in the proposed Regulation.
In addition to that there is also the question of increased financing
and leasing costs that would be incurred by the manufacture and
operation of new modern tankers (although new tonnage is likely
to be more fuel efficient and capable of being operated safely
with fewer crew).
37. These additional costs of replacing
single hull tankers are likely to be reflected in higher freight
rates, which are then likely to be passed on as higher final products
prices. Freight rates have already increased since the Prestige
accident partly because of high insurance premiums but also because
of the move by the EU to ban single hull tankers. Freight rates
increased by more than $1/bbl for UK continent to US Atlantic
coast rates since October.
38. A detailed study would be needed to
assess the potential increase in freight rates but since these
only represent a small proportion of the cost of oil products
the overall impact on product prices is likely to be small. Moreover,
the costs and rates are likely to be spread equally across all
EU members as oil and oil products are internationally traded
39. The OCIMF paper makes a preliminary
assessment of the effects of the ban on carrying heavy grades
of oil on single hull tankers above the 5,000 dwt limit. A critical
assumption behind this analysis is the degree to which double
hull tankers currently trading outside the EU area could substitute
for single hull tankers trading to or from EU ports. The degree
of substitution is partly a technical matter to do with ability
of individual tankers to carry particular types of cargo.
40. Intertanko figures imply a peak for
withdrawal in 2003-04, which could congest mainly non-EU scrap-yards
unless these single hulls could be efficiently "switched"
with double hulls now in non-EU trades.
41. However, both the Commission and the
OCIMF study looked at the worldwide situation and did not examine
the consequences from a European perspective. It is likely that
when considering only the vessels operating in EU waters as opposed
to the all vessels operating worldwide, the assessment may be
Ban on single hull tankers carrying heavy grades
42. The Commission proposes "to prohibit
the transport of heavy grades of oil in single hulled tankers
bound for or leaving EU ports of a member state of the EU".
Heavy grades of oil are defined in the original Commission proposal
as heavy fuel oil, heavy crude oil, waste oils, bitumen and tar.
Heavy fuel oil includes virtually all types of fuel oil; heavy
crude oil includes crude oils whose API (American Petroleum Index)
grade is lower than 30. 
43. The ban and the potential effects on
the UK downstream and upstream oil sectors, and the impact on
UK trade in oil products are of particular concern for the UK.
44. With regard to the upstream oil sector,
there are seven UK oil fields that use offshore loading systems
and produce crude oil with a density that would be covered by
the regulation (ie within the 30 API limit). All of these use
shuttle tankers for offloading and six of the fields use floating
production and storage facilities (FPSOs and FSUs) to process
45. The shuttle tankers used are in the
range of 30,000 to 110,000 dwt (200,000-850,000 barrels). Most
are Norwegian owned and are provided under contracts that allow
field operators to call on them as required. Many but not all
of these are double bottomed with wing tanks, ie not full double
hulls and therefore to be banned under the draft's present text.
However, this would offer some scope to argue for a distinction
between single hulls and other hulls that give an enhanced level
of protection. The field operators are covered contractually but
cargo sizes and flexibility may be affected by the regulations,
particularly in winter months. The field operators consider the
risk of production interruptions to be relatively low (one to
three days outage in average winter). However, this risk would
increase if field operators, otherwise exempted from the regulations
because their crude was lighter than the limiting density, decided
on reputational grounds to contract for the limited fleet of double
hulled shuttle tankers.
46. The seven fields produce crude oil in
the range 19 to 30 API. Moving the limit of density covered by
the Regulation from 30 API to 17.5 API would remove all of these
fields and their associated shuttle tankers from consideration.
47. There is no indication that the floating
production units (FPSOs and FSUs) used on these six fields would
be captured by the regulation, as these are not tankers. Their
primary purpose is not carrying oil, as they are not used for
navigation and do not enter port other than for maintenance. Also,
in most cases they have double bottoms and double sides. However,
if the regulations were interpreted such as to include these facilities
we estimate that about 1.3 to 1.4 billion barrels of recoverable
reserves could be put at risk.
48. On the downstream side there are two
main issues both regarding the ban on heavy fuel oil: one relates
to the energy supply to small islands and bunkering sites (for
large ship refuelling); the second relates to refinery production.
49. The Commission proposal will disrupt
bunkering operations and oil supplies to various on shore locations.
Particularly at risk would be power stations in island and other
isolated communities, typically with restricted harbours, which
could not easily be supplied by alternative means.
50. Electrical power on small island communities
is often generated using large diesel engines fuelled by heavy
fuel oil. The fuel oil is delivered in small coasters of around
2,000 dwt capacity using single hulled ships. Since the proposed
limit is set at 600 dwt there are no ships below this capacity
available to supply these island communities. A study carried
out by OCIMF identified that only 4 per cent of the worldwide
fleet in the range 600-5,000 dwt is double hulled and that within
Europe, there are only five double hull vessels trading in fuel
oil of which two are new builds. Therefore, electrical generation
could be put in jeopardy within a few weeks of the Regulation
coming into force.
51. All medium and large cargo ships including
crude carriers use heavy fuel oil as their power source. The fuel
is delivered to the ships via barges or small coasters which range
from 200 to 2,500 dwt in size. All these barges and ships are
single hulled. Since the proposed limit is set at 600 dwt the
vast majority of ships bunkers would not be permitted. The larger
cargo ships would be forced to bunker outside the EU or extend
their refuelling time by many days. This would result in further
exports of heavy fuel oil from EU states including the UK. Trade
between the UK and the rest of the world would be severely restricted
and in some cases may be discontinued completely.
52. OCIMF estimated that "these measures
cannot be implemented within the time frame proposed by the Commission
since it requires the replacement of existing single hull vessels
with double hull vessels that do not exist today".
53. Increasing the minimum tonnage prohibited
to 5,000 dwt and above would resolve this.
54. With regard to refinery production,
all UK refineries manufacture heavy fuel oil since it is the residue
left after distilling out the lighter products such as petrol
and jet fuel. Heavy fuel oil is a useful product and used to generate
heat by industry for processes and in power stations for generating
electricity. The shipping industry also uses it to fuel the marine
55. Demand for heavy fuel oil in the UK
has declined substantially over the last decade and it has been
replaced with natural gas. Consequently the UK exports around
5.5 million tonnes annually of heavy fuel oil. Much of this is
exported to Rotterdam for the marine trade, Italy for power generation
and further afield to the US and Singapore.
56. The fuel oil is currently exported largely
in specialised single hulled ships. In general the greater the
distance the larger the ship used. The ships must have sophisticated
heating systems on board since fuel oil is solid at ambient temperatures
and the oil must be kept fluid for pumping. There are many double-hulled
ships in the EU but few have heating systems installed.
57. The worse-case consequence of not being
able to export the heavy fuel is that most UK refineries will
shutdown and the remainder operate at low throughput. There will
be the inevitable lack of transport fuels and the economy will
come to a grinding halt within two months. At a minimum there
could be disruptions to the supply of refined products.
58. OCIMF estimated that, considering the
number of non double hull ships trading heavy oils in Europe compared
with available double hull ships with heating coils (ie equipped
for heavy oils transport) not trading in Europe, there would appear
to be sufficient capacity. However, since some of the ships trading
outside Europe may already be committed to other business and
they are unlikely to re-locate into the European area, it is likely
that disruptions to supply will result, as suitable ships might
not be available in the right place at the right time. Any disruptions
would be worsened if governments in other parts of the world introduced
a similar ban.
59. The UK is the main exporter of fuel
oil within the EU, in terms of volume5.6 million tonnesand
valueexports are worth £540 million. More than half
of this trade is directed to EU states plus Norway (2.9 million
tonnes or 53 per cent). The UK is also an importer (1.1 million
tonnes), although Italy is by far the largestwith more
than 14 million tonnes imported. We do not know the share of this
trade that is carried by single hull tankers compared to double
hull tankers but it is likely that if both exports and imports
are affected by this Regulation the UK will be one of the countries
most affected within the EU.
60. Fuel oil accounts for around 5 to 6
per cent of total petroleum (crude and products) exports by weight,
but between 20 and 25 per cent of total petroleum product exportsin
2001 fuel oil was the largest UK exported oil product by weight.
61. The implications for trade into the
UK and the rest of the EU depend on the validity of the Commission's
contention that there is enough double hull capacity overall to
be switched into the range of EU general crude and specialised
oil products trades. In some cases, notably the fuel oil trade,
we need further assurance that sufficient double hulls already
fitted with specialised equipment can be enticed by higher charter
rates into the EU trades, and at what cost.
CAS inspection regime
62. Our concern here is that the surveying
industry can muster sufficient resources quickly enough to meet
the extension to all tankers and the earlier decision dates now
proposed, by comparison with those required in the Erika Regulation.
63. In negotiations we have concentrated
on seeking changes to the proposal which would mitigate the cost/impact
set out above. The negative effects of the proposal could be significantly
a reduction from 30 in the index
number below which heavy oil could not be carried in single hull
phasing out smaller single hull tankers
over a number of years instead of banning them immediately.
64. Since the Regulation will apply to all
the industries involved in an internationally traded commodity
in all Member States it is not expected to cause significant distortion
to the competitive position of any particular party.
65. The ban on single hull tankers carrying
heavy fuel oil into a UK port will be part of the port State control
mechanism and will be enforced by the Maritime and Coastguard
66. The main practical problem is not the
further acceleration of the phasing out of larger tankers for
which the major penalty would be premium charter rates to secure
double hulls. Even this problem would diminish as more post-ERIKA
double hulls come into service.
67. However, the present draft text on banning
the carriage of heavy fuels in single hull tankers from July 2003,
would cause dislocation to the fuel trade with the risk that:
fuel oil supplies to power stations
on islands round the UK coast could not be guaranteed;
the trade in ships' bunkers would
be severely threatened with vessels having to bunker outside the
refinery throughput would be disrupted
with supplies of petrol and aviation spirit being threatened;
the export trade in fuel oil would
become dependent on being able to obtain sufficient double hull
capacity of the correct type.
We are working with like-minded Member States
to press for changes which would avoid these negative effects.
Letter to the Chairman for John Spellar,
Minister of State
You wrote to David Jamieson on 20 February asking
to see an impact assessment for the above proposal. This was enclosed
in David Jamieson's letter to you of 19 March, in which he indicated
that the proposal would be discussed at the Transport Council
on 27 March. The expectation was that the proposal would be the
subject of a policy debate and might reach a general approach.
Indeed, this is what is stated in the latest version of the Transport
Council agenda, dated 21 March.
However, the indications are now that there
is a strong possibility that the Presidency will push for agreement
on this dossier. They are encouraged in this by the conclusions
of the European Council last week, which called on the Council
to reach agreement.
Although I would be very reluctant to agree
the proposal before Members had had the opportunity to consider
the impact assessment, the proposal as it stands contains acceptable
transitional provisions in respect of the phasing out smaller
single hull tankers over a number of years and an acceptable definition
of the characterisation of heavy fuel oil. This will be particularly
beneficial to services delivering fuel oil, to peripheral island
communities. I believe that this is the best deal that can be
achieved for the UK given the circumstances and I would not wish
to jeopardise this position by with-holding my agreement. Mindful
of the Committee's interest in the proposal, I therefore wanted
to write in advance of the Council to advise you of this possibility.
26 March 2003
Letter from the Chairman to John Spellar
Thank you for your letter dated 26 March, and
also for David Jamieson's letter of 19 March and the partial regulatory
impact assessment (RIA) that accompanied it.
These letters and the RIA were considered by
Sub-Committee B at its meeting on 31 March.
We understand why you feel that you had to accept
the compromise offered by the Presidency. Thank you for warning
us in advance that would do this, and that you would accordingly
need to override the Scrutiny reserve on this document.
We understand that you and Brian Wilson are
content with the compromise that will see the phasing-out of the
smaller single-hulled tankers over a number of years up to 2007.
We should like to know the details of the compromise agreed on
27 March. Does the phase-out extend down to vessels of 600 tonnes
and above? Or have the smaller vessels between 600 and 2,500 tonnes,
been excluded from the Regulation? Have you also managed to secure
a period of delay of up to six months after the Regulation comes
to force to allow the international tanker fleet to make the appropriate
arrangements to meet the requirements of the Regulation for the
We understood that the Commission could no longer
submit proposals without a cost benefit analysis in the form of
a RIA. What were the circumstances that enabled them, apparently,
to dispense with this mandatory requirement on this occasion?
Finally, why did the UK not press for a reduction
in the American Petroleum Index (API) down to a level that would
have benefited the entire North Sea industry ie around 18-19or,
at least, join the German and the Dutch in securing an even lower
API that the compromise figure of 25.7?
2 April 2003
12 OJ L 64, 7.3.2002, p.1 Regulation (EC) No 417/2002
of the European Parliament and of the Council of 18 February 2002
on the accelerated phasing in of double hull or equivalent design
requirements for single hull oil tankers and repealing Council
Regulation (EC) No 2978/94, as amended by Regulation (EC) No 2099/2002
(OJ L324, 29.11.2002, p.1). Back
Commission paper: "Statistical data on available tanker
capacity", for Accelerated phasing out scheme for single
hull oil tanker (amendment of Regulation (EC) No 417/2002), 28
January 2003. Back
OCIMF paper on EC Commission proposal: Capacity study and comments
on EU plans for single hull tankers, January 2003. Back
Intertanko: Tanker fleet phase out analysis, January 2003, from
website www.intertanko.com Back
Regulation (EC) No 417/2002 of the European Parliament and of
the Council of 18 February 2002 on the accelerated phasing in
of double hull or equivalent design requirements for single hull
oil tankers and repealing Council Regulation (EC) No 2978/94. Back
Resolution MEPC 95(46) amending Regulation 13G of Annex I of
MARPOL 73/78 adopted on 27 April 2001, entering into force on
1 September 2002. Back
From Explanatory Memorandum of Commission proposal, paragraph
Heavy fuel oil include precisely oil products falling under CN
codes 2710 19 51, 2710 19 55, 2710 19 61, 2710 19 63, 2710 19
65 and 2710 19 69. Back