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Federal Ships: Policy Changes in the Disposal of Surplus Ships

Published by the Government Accountability Office on 1997-10-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                           United States
         GAO               Ge!nil Aicounting Office
                           Was]$'1gton, D.C. 20548

                           National Security and
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                                                                                       159543
                           International Affairs Division


                           B-278289

                           October 17, 1997

                           The Honorable John Glenn
                           Ranking Minority Member
                           Committee on Governmental Affairs
                           United States Senate

                           Subject: Federal Ships: Policy Changes in the Disposal of Surplus Ships

                           Dear Senator Glenn:

                           The Navy and the Maritime Administration currently have about 170 surplus
                           ships awaiting disposal for scrapping. At your request, we are currently
                           reviewing a number of federal ship disposal issues. In briefing your staff on the
                           progress of this work, it was agreed that we would provide you with an interim
                           report on a major shift in policy by the Environmental Protection Agency (EPA)
                           and the Navy as it relates to the disposal of surplus ships for scrapping.

                           BACKGROUND

                         The Navy became aware of the presence of polychlorinated biphenyls (PCBs)l
                         in various solid materials on board its ships in April 1989 and initiated
                  un     discussions with EPA on how to properly handle the hazardous materials in
                         September 1989. In July 1994, EPA advised the Maritime Administration that
                Z
                V      < surplus ships could not be exported for scrapping under EPA's regulations if the
       ~                 ships contained materials with concentrations of PCBs at 50 parts per million or
    °8 s° a.S           greater. On December 6, 1994, EPA issued a notice of proposed rulemaking
~ X W 'Sg~              related to PCB management and disposal. As a result, the Maritime
    ; ',                Administration stopped its sales of surplus ships for overseas scrapping in 1994.


                           'PCBs are a class of organic chemical compounds that are nonflammable and
                           can conduct heat without conducting electricity. On ships, liquid PCBs are
                           found in transformers and large capacitors. Solid PCBs are found in a wide
      uQ·n o               range of ship components including electrical cables, felt gaskets, rubber
      X,   W               mounts, adhesives, and paints. Under the 1976 Toxic Substances Control Act,
       o o v 'i            PCBs were singled out for handling as a threat to the environment and human
                           health by restricting the manufacture and use of equipment containing this
 X4       = g>             substance.
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                                              ~~~~~~51      9   50       GAO/NSIAD-98-17R Surplus Ship Disposal
                  E--4~S                                    9 F50
B-278289

The Navy's policy for sometime was that its surplus combaitant-ps should be
scrapped domestically whenever practicable. In July 1.995, the policy was
changed to restrict all ship scrapping to the United States because of the PCB
regulatory issues. Since then, the Defense Reutilization and Marketing Service,
the sales agent for the Navy, has only sold ships for domestic scrapping.

MAJOR POLICY CHANGE

Recognizing a need to reduce its backlog of about 100 surplus ships and the
potential for increased revenues from sales of ships for overseas scrapping, the
Navy negotiated an agreement with EPA, effective on August 8, 1997, to allow
its surplus ships to be exported for scrapping. Except for certain aircraft
carriers and nuclear powered ships that will not be scrapped overseas for
national security reasons, all other obsolete combatant ships may be scrapped
overseas as long as they have been properly demilitarized during the
inactivation process.

The agreement allows Navy ships to be exported for scrap if liquid PCBs are
removed. Items containing solid PCBs must also be removed if they are readily
removable and if their removal does not jeopardize the ship's structural
integrity. The agreement also requires the Navy to notify EPA prior to export of
a ship and specifies that EPA notify the countries where ships will be scrapped.
This agreement will remain in effect until EPA's final rule on PCBs is issued,
and it is expected that the governing language in the final rule will be consistent
with the approaches taken in the agreement. The Navy and the Defense
Reutilization and Marketing Service are now developing procedures to be used
for sale of ships for overseas scrapping. Further, Maritime Administration ship
disposal program managers advised us that they are seeking a similar agreement
with EPA to allow them to resume exporting its 70 surplus ships for overseas
scrapping.

We discussed the matters contained in this report with officials of the
Department of the Navy, Maritime Administration, and EPA, and incorporated
their comments where appropriate.



As requested, our final report on federal ship disposal issues will address the
agencies' disposal programs and recent actions taken to improve their efficiency
and effectiveness, the potential benefits and drawbacks of foreign sales, and the
potential for streamlining and consolidating the marketing and sales of surplus
ships.

As agreed with your staff, we plan no further distribution of this interim report
for 1 week, unless you publicly announce its contents earlier. At that time, we
will provide copies to the Chairman of the Senate Governmental Affairs


2                                              GAO/NSLAD-98-17R Surplus Ship Disposal
B-278289
Corvnitee, other interested committees, the Secretaries of Defense and the
Navy, and the Administrators of the Environmental Protection Agency and the
Maritime Administration.

If you should have any questions, you may contact me on (202) 512-8412 or my
Assistant Director, George Jahnigen, on (202) 512-8434. Major contributors to
this interim report were Larry Peacock, Willie Cheely, Margaret Armen, and
Nancy Lively.

Sincerely yours,




David R. Warren, Director
Defense Management Issues




(709270)

3                                           GAO/NSIAD-98-17R Surplus Ship Disposal