While the 682-foot SS Oceanic might still survive as a floating hotel or casino, her voyage is controversial. That's because the ship left San Francisco last month laden with an estimated 460 tons of asbestos and toxic PCBs embedded in its electrical and engine-room systems.

Just how dangerous that 58-year-old vessel would be if it is scrapped on a beach in the developing world, and how it managed to leave US waters despite laws prohibiting PCB waste exports are questions the US Environmental Protection Agency (EPA) is investigating.

But the Oceanic case also highlights a serious regulatory failure, observers say. While overseas scrapping of US-government-owned vessels is prohibited, scores of privately owned commercial ships flying the US flag have in recent years been granted permission to be reregistered and sold for scrap overseas with scant attention paid by federal authorities to the tons of PCBs they likely carry with them and in conflict with a US law banning PCB waste exports, the Monitor has learned.

In the US, such reregistering or "reflagging" of a ship under a new foreign owner for the explicit purpose of scrapping it overseas is a longstanding regulatory pro­cess overseen by the US Maritime Admin­istration (MARAD). Yet neither MARAD, the EPA, or the US Coast Guard routinely monitor whether ship owners are complying with warnings on the reflagging application that they must obey US environmental laws.

The result: A commercial US ship owner can easily reflag a vessel to get the top price for its steel hull from overseas scrap yards – while skirting US environmental laws that might otherwise restrict a US-flag vessel from being disposed of there, experts say. With steel scrap prices at record levels, some ships today may bring $700 a ton in Bangladesh. That's around $20 million for a typical retired tanker.

"This is something people have been exploiting for years, and MARAD has codified this practice into a regulation that makes it legal," says John Graykowski, a former acting administrator of MARAD under President Clinton who now works with US-based ship-recycling companies. "It's high time the agency took a hard look at this issue in light of the global reforms going on in the ship-scrapping industry."

Thousands of tons of toxins

The Oceanic is not thought to have been reflagged to be scrapped just yet, environmentalists say. But the fact that it soon could be underscores an emerging global threat in the next few years: A tidal wave of hundreds of old ships carrying PCBs and asbestos expected to be cut up and their contents spilled onto beaches in developing nations.

Polychlorinated biphenyls are a mixture of chlorinated compounds, often an oily liquid or solid. Because they don't burn easily and are good insulators, PCBs are often used in electrical equipment in wiring and transformers.

But while PCBs and asbestos were phased out of US shipbuilding in the 1980s, many ships like the Oceanic that are more than 25 years old often contain hundreds of tons of asbestos and PCBs. Now these ships are coming up for scrapping, experts say.

With prospects cooling for the global economy, legions of older commercial ships now plying the world's oceans are expected to be scrapped when shipping volumes fall from current high levels and they become uneconomical to operate.

The London-based International Mari­time Organization is developing tougher global ship-recycling standards to protect workers and the environment. But these won't take effect until 2013 at the earliest – too late to offer meaningful protection from the coming surge of old ships.

Before they take effect, hundreds of ships weighing a total of 55 million tons – more than double the volume of the past five years – may be scrapped, a European Commission study on the global ship-scrapping industry estimated last year. A peak of 18 million tons of ships is expected in 2010.

"We all know about this looming problem," says Frank Stuer-Lauridsen, a Copenhagen-based maritime expert who co-wrote the study. "But nobody seems to have the energy to address this interim period, and the signs are not good."

While "green" ship recycling using sustainable environmental and safe labor practices is maturing in the US and elsewhere, the lure of higher prices paid by unsafe, polluting ship-scrapping operations overseas is strong, experts say. As a result, "the vast majority" of European Union-flagged vessels "along with the rest of the world's obsolete vessels" still make their last voyages to beaches and ship yards in India, Bangladesh, or Pakistan where safety practices are far less stringent, the EC report found.

In Alang, India, for instance, ships are often driven onto the beach, where workers with minimal personal protection cut them up with torches, spilling toxins into sea and air, maritime experts say. With fewer environmental and labor requirements, ship recycling in places like Alang can be highly profitable, but highly dangerous for workers, the EC report on ship recycling found.

The official tally of people killed at Alang from scrap-yard accidents in 2003-04 was 26; the unofficial total was 103, the EC report said. (There have apparently been improvements among some of India's ship-­breaking companies, including moves toward safety certification, the EC report acknowledges.)

"The impact these ships will have on the environment and workers is horrible to contemplate," says Jim Puckett, coordinator of the Basel Action Network, an environmental group that spotlighted the SS Oceanic for possibly carrying PCBs.

By contrast, ship-recycling practices in the US have improved and are now among the best in the world, the EU study found. After the Baltimore Sun won a Pulitzer Prize for its 1997 reporting that the US was sending its old warships to India for scrapping under horrendous working conditions, Congress halted that practice and mandated US-only recycling. Now government-owned vessels overseen by MARAD are scrapped at seven certified US ship-recycling yards.

But that's not the case for privately owned commercial vessels. For them, American laws to deal with the toxic materials aboard ships bound for the scrap yard are a slender reed. The US, for instance, did not sign the Basel Convention of 1989, an international law barring toxic waste exports from one country to another without formal notification.

Limits to EPA's policing

Yet the US does have one powerful legal cudgel: the Toxic Substances Control Act of 1976 or TSCA. Under it, PCB waste – including entire ships if they carry high-enough concentrations of PCBs – may not be exported overseas. That law applies to all federal agencies and the private sector, with the EPA as a key enforcer, legal experts say.

If the EPA believes an owner "intends to export a ship for scrapping in violation of [TSCA], it can take appropriate enforcement action including an inspection, to determine the presence of PCBs on the vessel," an EPA enforcement expert writes in an e-mail response to Monitor questions.

The EPA has indeed taken action to keep a handful of former government ships containing PCBs from leaving the US. But it has a critical problem: It rarely knows in advance which ships may soon be bound for scrapping overseas – unless environmental groups or ship aficionados blow the whistle. That's what happened – too late – with the Oceanic. Historic ship watchers found out the ship was leaving and told environmentalists, who informed the US Coast Guard and the EPA – but by that time the ship had left port.

The reason that US-flag ships like the Oceanic exist at all is so the government can use them during wartime. In order to retain sufficient vessels for national-security reasons, MARAD has long been required to approve any sale to a foreign owner or the reregistering of a vessel to another nation.

Still, there is no interagency agreement for MARAD to routinely notify the EPA when ships are to be reflagged for scrapping abroad, the two agencies concur. As a result, MARAD does not tell the EPA of any ships that may receive a "transfer order." Nor does the EPA routinely request such information.

"These are agencies working at cross purposes that should know a ship is departing in possible violation of US environmental law – and they don't do anything," says Basel Action Network's Mr. Puckett.

Onus on ship owners

Spokesmen for the EPA and MARAD requested and answered e-mailed questions as well as by phone about PCB and reflagging issues. But requests to interview senior officials were refused.

"Ship owners are responsible for complying with the PCB export ban," Roxanne Smith, an EPA spokeswoman, wrote in a statement. Since clamping down recently on some vessels, the EPA "is continuing to work with MARAD and other federal agencies to examine ways to improve our interagency coordination so that all federal enforcement capabilities and resources can be employed to thwart violations."

But a number of ships have sailed already. Since 2000, at least 91 vessels – including old oil tankers – were approved by MARAD for reflagging under a provision for overseas scrapping.

It isn't known whether those ships were inspected for PCBs. But even though ships of that vintage typically contain hundreds of tons of PCBs, MARAD currently does not require a proof of inspection from owners that shows a ship is free of PCBs before it grants a transfer order permitting reflagging and scrapping overseas, the agency confirms. Although not now required, such certification is within MARAD's right to demand under its regulations, Mr. Graykowski says.

Shannon Russell, a MARAD spokeswoman, denies that her agency, an arm of the US Department of Transportation, has routinely overlooked environmental laws in ship reflagging.

"I would completely disagree with that," she says. "At the end of every form we have, we say: 'You must comply with rules of the US, including its environmental laws.' We are a promotional agency, not a regulatory agency. We have no authority over any of these environmental laws."

In the US, companies have been scrapping old single-hull oil tankers as required by international agreement, 28 of them since 2000, says MARAD's website. At least some of those were reflagged and sold to a foreign owner for scrapping overseas, MARAD records show and Ms. Russell confirms.

For instance, in 2006, MARAD approved a Florida company's application to sell the tanker Chelsea to Grand International Shipping Co., a Liberian corporation, according to the agency's public notice. The agency expected "transfer of said vessel to Mongolia registry and flag for scrapping in India."

It's not known if PCBs were on board the Chelsea or any of the other 90 ships – or precisely where they were ultimately scrapped. Yet few ship owners seek bids from the lower-paying US shipyards where costs associated with tight regulation are higher than in the scrapping centers of India, Bangladesh, or Pakistan, maritime experts say.

"I don't know where US flag [commercial] ships are going.... I just know we aren't seeing them here in the US," says Werner Hoyt, program manager for Allied Defense Recycling of Petaluma, Calif., a start-up ship-recycling company.

At least some ship owners are concerned, according to Kathy Metcalf, maritime affairs director for Chamber of Shipping of America, a Washington-based trade organization whose membership includes several companies with fleets of oil tankers.

"We've had members consider sending their ships [to developing nations] and then they discover conditions there are just as bad as they always were," Ms. Metcalf says. "The option is to go somewhere else, and our members do. Unfortunately, there are always ships that will go and make headlines."

The Oceanic's end?

Until recently, the owner of the SS Oceanic was California Manufacturing Corporation, Coast Guard records show. That company appears to be affiliated with Miami-based NCL Corporation, Ltd., which operates Norwe­gian Cruise Line. The Oceanic was reportedly sold last summer, but its current owner has not been publicly revealed. Requests for an interview with NCL officials to clarify the vessel's ownership went answered.

Originally christened the SS Independence at the Quincy, Mass., shipyard in 1950, the SS Oceanic could easily follow another former NCL ship – the SS Norway, also known as the Blue Lady, Puckett says. That liner was driven onto a beach in Alang for scrapping in 2006.

"We no longer own the Oceanic," a woman answering NCL's press line in Miami said.