Alaska's Oil Spill Response Rhetoric Questioned

Steven Candito, Board Member and former Chief Executive Officer of the National Response Corporation, set out to clarify some of the inaccurate rhetoric surrounding Alaska’s oil spill response capabilities in his testimony before the Committee on Transport and Infrastructure Subcommittee on Coast Guard and Maritime Transportation this week.

Candito is one of the founders of 1 Call Alaska along with Resolve Marine Group, and his testimony concerns changes that would limit the use of alternative planning criteria (APC) for oil spill response. The Oil Pollution Act (OPA) was enacted in 1990 after the 1989 Exxon Valdez oil spill in Alaska. OPA, in conjunction with the Clean Water Act, requires an owner or operator of a tank vessel, or non-tank vessel over 400 gross tons to prepare a vessel response plan for spills of oil or hazardous substances. While many areas of the U.S. comply with the national planning criteria for oil spill response, there are still areas with low population and vessel traffic that cannot, and instead use APC.

A proposed requirement to complete an economic impact study and provide coverage in all of Western Alaska would have an adverse effect on the expansion and improvement of spill response coverage, says Candito. It would require a much more substantial investment to enter the market and would stifle competition, he says.

“Achieving the ambitious targets set by OPA 90 in Western Alaska has been challenging due to its vast, remote coastline, and challenging operating environment. Under the Coast Guard’s implementation of APC, the response industry is making substantial strides in improving coverage - investing in vessels and aircraft, building staging facilities, and hiring experienced manpower, most of which is based in Alaska.”

He says it would discourage further commitment of the resources needed to move Alaska closer to the higher OPA standards of protection. “Section 107 type legislation will impede the expansion of response resources by excluding additional companies with the most experience and the largest inventory of open water assets already in Alaska.

“The Exxon Valdez spill exposed how ill-prepared the U.S. government and the maritime industry was to respond to a major oil spill, particularly one in Alaska. When Congress enacted the OPA 90, it established the foundation for creating the world’s most extensive spill response industry. Before OPA 90 the spill response industry consisted of primarily local cooperatives with limited equipment. There was very limited ability to respond to large, open-water oil spills.”

It appears the push for changes to the current arrangements are premised on the following false assertions, says Candito: Competition will drive fuel prices up in Alaska; there will be a price war between providers, ultimately ending at an unsustainable price of $0.00; and thirdly, competitors will provide duplicative resources driving up costs.

“Competition ultimately drives down prices while increasing resources. The fallacy that a not for profit monopoly provides the most resources at the lowest cost is simply not true. Rather, these entities become inefficient bureaucracies that stifle innovation and ultimately only benefit the few high-priced employees.

Candito cites a fuel price report published by Alaska’s department of Commerce, Community, and Economy published in January 2017 reviewing the previous year, saying this report concluded: “heating fuel and gasoline prices in most regions of the state are at their lowest since early in 2009, and most surveyed communities have seen significant declines.” 

The report states that remote communities have higher shipping costs, resulting in fuel prices that are significantly higher than the statewide average. However, since most communities receive at least one fuel delivery a year, they are continuing to benefit from the lowering costs of fuel that affected the rest of the country in late 2014. 

“Thus, the primary drivers of fuel cost in Alaska are the price per barrel, the fixed cost per shipment and infrequency of delivery rather than any minimal APC market pressure,” says Candito.

Regarding the assertion multiple providers create onerous duplicity in response resources, he cites the company, 1 Call Alaska, part of National Response Corporation. “The main reason an APC is needed is that currently the resources are insufficient to meet OPA 90’s high standards. Thus, competition has caused us to add the personnel, equipment and resources. Further, the resources we added are not necessarily the same type that existed. Since inception, 1 Call Alaska represents a $44,000,000 investment in aircraft, equipment, vessels and fixed facilities. 

“Between the parent companies’ footprint in Alaska, we employ full time more than 130 Alaskans. On top of that, over the last year alone, we have cooperated with the Coast Guard to save 100+ lives, prevent the discharge of millions of gallons of oil and preserve the pristine Alaska environment through intervening in numerous Ship Casualty events. 

“Key to note, the majority of the casualties we respond to were not subscribers to our APC service. In fact, our services were called upon out of necessity, as the entities advocating for this legislative language to force us and other potential competitors out of the market could not effectively respond to their customer’s needs in time of emergency.”

A number of other testimonies were given at the hearing. Buddy Custard, President and CEO of the Alaska Maritime Prevention & Response Network has criticized the U.S. Coast Guard’s APC in his testimony. More information is available here.