TO THE MEMBERS

circular 2/99 of February this year that the Managers have been holding discussions with providers of spill management and spill response services, in the light of concerns about the cost of dealing with US pollution incidents involving dry cargo ships.

Dear Sirs,

OIL POLLUTION IN THE UNITED STATES: DRY CARGO SHIPS

Spill management and spill response

Members were advised by the Association's

There is no legal requirement for ships other than tankers to have Vessel Response Plans (VRPs) under the Oil Pollution Act 1990 (OPA 90) or under the laws of most individual states. Many operators thus have no pre-contracted arrangements with spill managers or response organisations. This can cause delay in reacting to a pollution incident, with adverse effects for cost control, and may result in a response organised by state or federal authorities at greater expense than would be incurred with pre-contracted facilities.

We are therefore pleased to advise that the Association has appointed the US spill management firm Corbett & Holt (C&H) to assist any entered dry cargo ship involved in a spill in the United States. C&H will provide the spill management team required by the US Coast Guard, and will provide services equivalent to those of the Qualified Individual (QI) under OPA 90, including a 24 hour watch to be able to activate spill responders and to liaise with federal and state authorities in the crucial early stages of an incident.

We are also pleased to advise that the Association has reached agreements with the two largest oil spill response organisations - Marine Spill Response Corporation (MSRC) and National Response Corporation (NRC) - for the provision of contracted spill response services in the US to any dry cargo vessel entered in the Association.

These arrangements, which have immediate effect, are of potential benefit to any Member of the Association covered for pollution risks whose dry cargo vessels trade to the United States. However, they are not mandatory. Members who have an alternative preferred spill manager for all or part of their dry cargo fleet, or who wish to be excluded from the arrangements for access to the spill response organisations described above, are requested to advise the Managers in writing, identifying the ships concerned.

All other dry cargo ships insured for pollution risks will be automatically included in the new arrangements and, for these ships, in the event of a spill in US waters Members should ensure that immediate notice is given by telephoning one of the following contact numbers, which are manned on a 24 hour basis:

Corbett & Holt
Primary: +1 202 337 2500
Secondary: +1 202 337 2525

Fees payable to secure access to these facilities will be met by the Association from general funds. In the event of a spill, the costs charged for managing and responding to the spill will form a part of the member's claim recoverable from the Association under the Rules and terms of entry.

California Legislation

The Association's circular of February this year also provided notice of new regulations which will require Members who trade dry cargo ships to California to have in place from 1 September 1999 an oil spill contingency plan approved by the California Office of Oil Spill Prevention and Response (OSPR) and a Certificate of Financial Responsibility (COFR) for US$300 million issued by that office. The Managers have continued to monitor closely the development of these requirements.

Oil Spill Contingency Plans

OSPR have now published draft regulations, in relation to which public hearings will be held on 12 and 14 May. The Managers have reviewed the draft and will encourage OSPR to make the requirements more manageable for compliance purposes. It is hoped that this will make it possible for the general US arrangements referred to in the earlier part of this circular to be used in the context of an approved statewide oil spill contingency plan. The final form of the regulations will only be determined after the period for public comment comes to an end.

Some Members may have seen details of a statewide response plan announced by the Pacific Merchant Shipping Association (PMSA), which could facilitate certain aspects of compliance. PMSA is a maritime trade association (not a response organisation) which has announced that it will contract with spill response companies and co-operatives, and with a firm of spill managers, giving access to those services under its statewide plan at a cost of US$175 per vessel arrival, at any Californian port. However, Members should be aware that, as presently drafted, the regulations contain many requirements which remain specific to the owner or operator of the vessel and are not included in the elements which can be addressed in a statewide plan.

Members are therefore recommended to await the publication of final regulations and further advice from the Managers (who are in discussion with PMSA) before making any firm decision on how to achieve compliance.

Certificates of Financial Responsibility

The draft regulations indicate that Members will be able to meet the financial responsibility requirements by submitting to OSPR a copy of their P&I Club Certificate of Entry.

The Managers will continue to monitor developments in relation to both aspects of the regulations - the oil spill contingency plans and the COFR requirement - and will provide further guidance in due course.

Yours faithfully

THOMAS MILLER (BERMUDA) LTD.

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