Some Deem Double-Hull Tankers Worth the Cost

Refiner Tesoro is far smaller than Exxon, but investing in an extra measure of safety is an economic decision.

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Let's look at the backward economics of environmental protection in the oil industry.

Here's how a company with fewer resources is more likely to invest in an extra safeguard than a company with more resources than any other in the world.

Tesoro, the second-largest refining company in the western United States, made $566 million in profit last year. Point of comparison: That's 1.4 percent of the profit pulled in last year by Exxon Mobil, $40.6 billion.

As we reported here, Exxon still uses a less expensive, single-hulled tanker in Alaska's Prince William Sound despite its experience with the Valdez disaster. But Tesoro uses double-hulled vessels for all three of its full-time U.S. tanker charters.

"When you operate in some of the most environmentally sensitive areas like we do—Hawaii, Alaska, San Francisco, Los Angeles—if you don't make that one of your absolute top priorities, you are risking the company," says Lynn Westfall, Tesoro's senior vice president and chief economist. "One Valdez incident would bring our entire company down. We couldn't stand that kind of a loss."

Obviously, Exxon was big enough to withstand the $3.5 billion it has paid in cleanup costs and fines for the worst oil spill ever in U.S. waters.

It turns out that Tesoro has some real-life experience with the value of a double hull. In February 2006, the Tesoro-chartered double-hulled tanker Seabulk Pride, carrying 5 million gallons of petroleum products, ran aground in Cook Inlet, Alaska, after it was hit by an ice floe. Although the company reported 80 gallons of oil did spill when it pulled away from the port, no oil escaped from the crack in its outer hull. Accounts of the incident are here and here.