U.S. Forced to Pay Recyclers
To Take Old Merchant ShipsBy Steve Vogel
Washington Post Staff Writer
Monday, September 7, 2009
NEWPORT NEWS, VA. — Built in 1942 as a Navy rescue ship, the USS Escape aided American vessels in distress in the Atlantic during World War II. The ship was called back into service during the Korean War, and in the 1960s it supported the Mercury manned spaceflight program.
Escape was decommissioned in 1995, after nearly two decades of Coast Guard service, and has since been part of a "ghost fleet" of aging, rusting vessels laid up in the James River off Newport News, Va.
Soon there will be no Escape. On Tuesday, Bay Bridge Enterprises will tow the 1,630-ton vessel to Chesapeake, Va. The company will scrap the ship and sell the steel and anything else that can be salvaged. For this, the federal government will pay Bay Bridge $115,200.
In the recent past, the Maritime Administration, which is responsible for disposing of aging merchant-class ships in the government inventory, often got one or more bids from U.S. salvage recyclers interested in buying such ships. But these days, the government usually ends up paying to unload the vessels, a change attributable to the poor economy, tight credit, fluctuating steel prices and strict environmental restrictions.
"We put them out for sale and see if anybody bites," said David Matsuda, deputy maritime administrator.
A package of four ships the Maritime Administration offered for sale received a bid of $3.5 million in August 2008 from two buyers. But by late September, after the economic collapse and a plunge in world steel prices, both had rescinded their offers.
In November, the agency asked for new bids. By the time it went to contract, the government had to pay $1.8 million to get rid of the ships.
How much money companies like Bay Bridge make on a ship such as Escape depends on many variables, chief among them the price of steel. "It's a calculated risk you have to take," said Shailesh "Sam" Vyas, president of Bay Bridge.
Steel prices have fluctuated wildly in recent years. The price of scrap steel plunged to as low as $140 a ton from $580 a ton in July 2008; in recent weeks it has been closer to $220, Vyas said.
Prices can change dramatically in the eight or nine months it takes to strip a ship. And even before bidding on a ship, companies must assess how much it will cost to remove and dispose of environmental hazards.
"We check how much asbestos abatement is needed, we have to look at PCBs [polychlorinated biphenyls], fuel, ballast waste -- all these things are costs to us," said Rebecca Robinson, Bay Bridge's vice president. "You have to look at the ship, because you never know."
The Maritime Administration, which is part of the Department of Transportation, owns and operates the National Defense Reserve Fleet, which is made up of former commercial cargo ships and inactive Navy vessels that can be activated for a national emergency. In recent years, its ships have supported operations in Iraq and Afghanistan and assisted relief operations after hurricanes Katrina and Rita.
Ships in the fleet once totaled 2,277 but now number 177. They are kept at three sites: the James River Reserve Fleet, the Beaumont Reserve Fleet in Texas and the Suisun Bay Reserve Fleet in California.
When ships are no longer useful, the Maritime Administration adds them to a list of obsolete vessels designated for disposal.
From 1991 through 1994, the Maritime Administration sold 81 such ships for $35 million, most to overseas scrapping operations in countries such as India, Pakistan and Bangladesh.
But rising environmental concerns, including public awareness of the hazards presented by PCBs in shipboard components, placed new scrutiny on the practice. In the mid-1990s, a prohibition on exporting PCBs effectively meant no more ships could be sent overseas.
Sales dried up, as there were few domestic recyclers.
But since the agency began receiving appropriations for ship disposal in 2001, and more U.S. companies have been certified for business, the agency has gotten rid of 130 ships, and the number of vessels still awaiting disposal has been cut to 86. For a while, as steel prices climbed, the government was making money on the sales.
The Obama administration has requested $12 million for ship disposal in the 2010 budget, the same amount appropriated the previous year but $300,000 less than in 2008.
A few ships on the obsolete list have met happier ends. Since 2001, three have been sunk to form artificial reefs. But the work required before a boat can be sunk makes the process three to five times as costly as recycling, according to Matsuda. Hence, most of the ships in the ghost fleets will likely meet the same fate as Escape.
Original Article 
