Comments of International Shipbreaking Limited, LLC
Green Paper on Better Ship Dismantling
European Commission Document 2007-269
Background
Thank you for this opportunity to submit comments to the European Commission Green Paper on Better Ship Dismantling (Green Paper), issued 22 May 2007. The Commission is to be commended for its diligent work, which is reflected in this document, and for moving this critical issue forward.
International Shipbreaking Limited, LLC (ISL) www.shiprecycling.com, is a U.S. corporation located in Brownsville, Texas. ISL is one of the largest U.S. ship dismantling companies, and has been in operation since 1995. Since its founding, ISL has dismantled and processed over 270,000 ldt of steel and other materials from vessels of all types and sizes. A copy of our dismantling record is attached.
ISL consistently meets all existing law and regulation pertaining to ship dismantling operations. We would submit that ship dismantling law and regulation is more fully developed in the United States than elsewhere, due solely to the fact that the United States is the only location where large scale ship dismantling operations are underway in a regulatory climate that is transparent, verifiable and which contains strict controls on all aspects of environmental, health and safety operations. Moreover, as a matter of corporate policy, ISL strives to maintain the highest environmental, health and safety standards among its workforce. This has been the corporate philosophy from ISL’s inception.
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For the last year, ISL has been seeking to expand its operations to locations in the European Union (EU) and elsewhere. ISL has undertaken an exhaustive due diligence effort to identify potential locations and partners to establish a fully compliant ship dismantling operation which replicates the processes, methodologies and technologies that ISL employs in the United States. Thus the comments that follow reflect our experience as currently operating “green” ship recyclers and observations gained from our investigations into opportunities that may exist outside the United States.
The U.S. experience as guidance
In our view, the EU is at a point in the development of these programs similar to that of the United States in the early 1990’s. At that time, there was significant negative public attention focused on the disposition of government ships in Asia, which resulted in a complete prohibition on the export of U.S. government vessels in 1994. The prohibition was imposed, however, with little consideration of the capabilities of the existing industry and the U.S. Maritime Administration (Marad) and the Environmental Protection Agency (EPA) were completely unprepared to implement a domestic ship recycling program. This led to delays in the implementation of the program, higher costs than had been anticipated, and a confusion and uncertainty among the domestic recycling companies. These difficulties have been overcome and the program that exists today in the United States does achieve best value for the government, while balancing the need for stringent environmental, health and safety regulation with the practical realities of business operations.
Over the last ten years the cost to the U.S. government for ship dismantling has steadily declined from an average actual cost of $253 per ton in 2001to $83 per ton in 2006. In fact, Marad recently received bids for payment by U.S. dismantling companies.
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Additional evidence of the success in creating sufficient capacity in the United States is found in the number of fully operational ship recycling operations; all vigorously competing for the U.S. government vessels and all fully compliant with U.S. law and regulation.
While ISL certainly recognizes the differences between the EU and the United States, we believe there are parallels that can be drawn. ISL strongly urges the EU to examine the development and implementation of the U.S. program, which shares the goal of “green” ship recycling and consider replicating those aspects of the program that have worked, and modifying those areas where you feel improvements can be made. The fact remains, however, the U.S. is the only nation where large scale ship recycling is being conducted in a fully transparent manner and in compliance with internationally recognized environmental, health and safety standards.
There must be an effective public-private partnership
ISL has shown that successful ship recycling operations can exist and flourish in a strict regulatory climate. ISL must comply with federal statutes, such as the Clean Water Act; the Toxic Substances Control Act and the Resource Recovery and Reclamation Act; the federal Occupational Safety and Health Act. In many instances these laws have served as models for other nations to adopt, as much of the world has moved to increase environmental protection and worker safety. ISL must also, however, comply with state and local regulations, which add another layer of inspection and oversight to its operations. The result has been an effective working relationship between regulators and ISL, which achieves the maximum in environmental protection and worker safety, while permitting ISL to achieve these standards in a way that also enables ISL to maximize the efficiency of its operations.
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All regulators share a common goal of ensuring that law and regulations are met by the industries being regulated. Clearly ISL understands the need for effective regulation, and one goal of this effort in the EU, is to create a regulatory structure which ensures that dismantling of EU-controlled vessels will be conducted in a responsible fashion. ISL, however, believes that an equally important goal of this effort must be to establish a viable and self-sustaining ship dismantling industry, similar to that which exists in the United States.
To accomplish this, ISL would suggest adopting a regulatory implementation approach which requires full adherence with the standards regarding waste handling and disposal, worker safety and other issues, but which allows each facility to develop specialized operating plans that achieve compliance in a way that best suits that individual business. The alternative, in our view, would be to prescribe a uniform method of operations for all facilities, which presents a danger of stifling innovation, undermining the viability of the operation and would ignore the variables raised by geography, workforce and other factors unique to each facility. Using the United States as an example, ISL and its competitors in Texas must meet the same federal, state and local laws; but they all do it in ways that fit their business needs and structure. This type of regulatory approach would, we believe, attract a wide range of prospective operators in several different locations which is certainly the overall goal of this effort.
A Self-sustaining industry must be created
Commercial shipowners have different priorities than governmental agencies and have traditionally received value for their scrapped vessels. Thus, the common challenge will be in providing those owners with the incentives necessary to change their historic practices. Complicating this challenge, is the fact that there is no operating green recycling capacity in the EU today capable of dismantling on a scale necessary to
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service the anticipated demand of the forthcoming retirements. We believe, therefore, that an additional barrier may be created because until there are a number of operating green facilities with a track record of successful operation, shipowners may perceive a greater risk in sending a vessel to an untried green yard than sending it to China, for example, where there may be less transparency and unproven green capacity (as identified in the Commission Staff Working Document) but more experience. Finally, since the construction of new green recycling facilities will involve investment in infrastructure and worker training which must be recovered from the revenues of the operation, we feel it impractical to impose the entire burden on commercial vessel owners for the development of such facilities.
In our investigations in various EU nations, we were unable to identify a candidate location that possessed all of the basic elements we feel are necessary to operate a facility with a capacity similar to our facility in Brownsville, Texas without a significant investment in plant and equipment and workforce training, or, in some cases, construction of modern hazardous waste handling facilities. Absent such facilities, the hazardous products from the vessels would have to be shipped to existing disposal facilities in Europe, which greatly increases the operating cost. It is our understanding, that the siting of new waste disposal facilities in some of the newly acceded members of the EU is severely restricted by law, creating yet another potential obstacle that must be overcome.
Thus, as this program moves forward, we urge the Commission to remain focused on the need to balance regulatory requirements with the need for the proposed dismantling facility to raise the necessary capital to build the infrastructure, train the workforce and begin operations.
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ISL believes that an “all EU” solution may be not be achievable given the number of vessels that must be disposed of in the next 10 years; increasing labor costs and the likely resistance of local communities to the placement of ship dismantling operations near houses, parks or other inhabited areas. Rather, ISL believes that efforts should be considered to create a defined set of principles and incentives for the operation of ship dismantling facilities; offer technical and operational assistance; continued monitoring and oversight and, where necessary, assistance in obtaining the financing to support the fixed investments and start up costs.
ISL, and its three competitors, are located in a community that welcomes ship dismantling as an essential element in the local economy. Collectively, our industry employs up to 1,000 people, and makes a significant contribution to the community in the form of taxes and ancillary economic activity. We do believe it possible to find locations in the world economy, which would see this as part of their own economic development activities. If this effort resulted in the creation of a number of fully compliant “model” facilities, employing thousands of workers in conditions that protect their health and the environment, then we would suggest this would be a much larger achievement than simply restricting the new and compliant capacity to the developed world. If such a program can be designed and implemented, coupled with an initial supply of vessels from the EU government fleets, for example, it would not only provide these nations with the technology and assistance to bring their industries into compliance, it would provide a foundation for efforts to persuade the world shipowning community to support these new facilities. We sincerely believe there are willing parties in India, China and elsewhere that would welcome this because of its potential to generate jobs and further economic development.
In the end, this effort will succeed only if a majority of the world’s shipowners are willing to support it. Properly structured, a facility that replicates ISL’s business processes and
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methodologies located in India, China or elsewhere would, we believe, attract the world’s most progressive shipowning companies; those companies which have already made great progress in creating a corporate culture of safety and environmental responsibility. Our confidence is based in large part on our perception of the value these companies would place on attaining certainty that their vessels are being disposed of in an environmentally responsible fashion and with acceptable conditions provided to the workers.
In today’s environment, where publicity of any kind, positive or negative, flashes around the world in seconds, many companies – especially large publicly traded corporations -- cannot afford to risk their good name and reputation for the sake of receiving an incrementally larger return for their scrapped vessel. Thus, a significant part of this effort must include the world’s major shipowners, both in crafting the regulations, but also in pressing them to act as responsibly with the disposal of their vessels as they do when the vessels are operating. If environment, health and safety are guiding principles for these companies, which they are for many companies, then it should not be a tremendous leap to apply those principles to the end of life decisions for their vessels.
A Possible Way Forward
ISL would suggest consideration of the following as an outline of steps that we feel would have a strong likelihood of increasing green ship recycling throughout the world:
(1) Identify several candidate facilities that exhibit a willingness, capacity and commitment to green recycling principles. Once identified, these facilities
would enter into a binding contractual commitment to receive technical assistance in the design of such facilities; the training of the workforce,
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operation of the facility and acceptance of monitoring and oversight by EC authorities.
(2) Identify, inspect and confirm availability or non-availability of proper hazardous waste disposal facilities proximate to the ship dismantling site. Enter into agreements with local or national governmental authorities to permit oversight and monitoring of the construction and operations of such facilities by EU governmental authorities.
(3) Assess the total investment required and determine an allocation of infrastructure funding among private and government sources.
(4) In return for the cooperation and binding commitments of the operators of the dismantling and hazardous waste facilities, the EU would commit to dismantle its government-owned vessels at the facility, once it has been certified to be ready to accept vessels.
(5) Once the facility begins dismantling of the government vessels, a concerted marketing effort would be undertaken among the leading commercial shipowners; especially those facing the most immediate impact of the mandatory vessel retirements. We believe that if the commercial shipowners can see these facilities have the full backing and support of the EC, some will be inclined to support the new facility by allocating vessels to follow the government vessels.
In this way, we believe a self sustaining industry can be created in the and move the entire world toward the goals we all share to protect the environment; respect workers and instill responsibility in all aspects of ship ownership and ship dismantling.