Facing the possibility of up to $1 million in unplanned fuel costs, Steamship Authority management is taking a hard look at slowing down its ferries to and from Martha's Vineyard as a way to cut costs.

SSA General manager Wayne Lamson said yesterday that reducing speeds would be "at the top of our list" for reining in operating costs at the boat line.

The Steamship Authority has forecasted operating expenses this year of $63.5 million.

Also unexpected, though more welcome, was news that Gov. Mitt Romney's 20-year transportation plan will earmark $25 million for the replacement of the Steamship ferry Islander, to be known as the Island Home. The boat line had already planned to pay for the new ferry, now under construction in Alabama, by itself.

Members suggested that the money, should any of it come through, could be applied to defray the cost of renovating the Oak Bluffs ferry terminal, or building a replacement for the boat line's fast ferry, the Flying Cloud, which has been plagued by mechanical problems.

Despite word of a potential funding windfall, the issue of skyrocketing fuel prices hovered over much of yesterday's monthly meeting held at the New Bedford Public Library.

As of mid-week, fuel oil was selling for around $50 per barrel, 35 percent higher than a year ago. At present, Mr. Lamson said, the Steamship Authority is paying a little over $1.60 a gallon for fuel oil, a vital commodity for the boat line

The SSA anticipated using 2.7 million gallons of fuel oil this year at a cost of $3.4 million. But the higher prices, should they remain at their current level, would add $1 million to that budget.

Through the first two months of the year, Mr. Lamson said, fuel costs were running $63,000 higher than anticipated. He said that the extra expense could climb to the $1 million mark.

Given that he doesn't anticipate higher operating revenues, "We will need to start addressing the shortfall by reducing operating expenses whenever possible."

Falmouth member Robert Marshall suggested that the boat line explore running its ferries more slowly. Adding 10 minutes to a trip was a reasonable response, he said.

Mr. Lamson said some vessels, such as the Martha's Vineyard, actually cover the trip between the Vineyard and Woods Hole five to 10 minutes faster than the scheduled 45 minutes and recommended that the boat line could run these vessels slightly more slowly and stay within the existing schedule.

Mr. Lamson said the boat line needs to put together a speed and consumption graph for its vessels to see how much fuel could be saved by turning down the engine throttle. "It probably should have been done before now," he said.

Vineyard Haven resident Arthur Flathers, who frequently attends Steamship meetings, said the boat line also should examine cutting its basic schedule, and run extra sections as needed to carry any surplus traffic.

Following the meeting, Vineyard Steamship governor Marc Hanover, who is also chairman of the board, said the boat line should be prepared to compensate for higher fuel costs by examining changes in its schedule, and cutting costs in other areas to compensate for the higher fuel costs. "We need to look at all options," Mr. Hanover said.

"The biggest expense has been payroll," he said. "That's always been an issue."

He said that that cost of running the boat line ultimately is borne by its customers. "It's important that people understand that," he said.

The belated appearance of $25 million in possible government funding for the Island Home ferry was brought up for discussion at yesterday's meeting by New Bedford member David Oliveira, who asked whether the boat line could redirect the money.

The Martha's Vineyard Commission had asked the state to include the vessel funding in the transportation program. The amount reflects earlier Authority estimates that the ferry would cost between $22 and $25 million. The contract price is $30.5 million, with the overall cost estimated around $33 million.

Mr. Marshall asked whether the boat line could have used the money, as initially proposed, to help fund the ferry Island Home. "Does this become a lost opportunity for us?" he asked.

"Eventually, it may be," Mr. Lamson replied.

But he said waiting for the money would have cost the Authority in signing a construction contract and building the new vessel. Further, Mr. Lamson said, "It was never on the table. It was never offered to us."

Boat line general counsel Steven Sayers said the SSA has made use of the transportation funding in the past, such as for the Hyannis terminal reconstruction project and the construction of the Flying Cloud fast ferry. But Mr. Sayers cautioned that, given national competition for the funding, the boat line at best receives partial funding through the program for its applications. For example, the program provided $2 million of the $8 million needed to build the Flying Cloud.

Nantucket member Flint Ranney suggested that the boat line draft a long-range capital plan and ask regional transportation planning agencies, such as the MVC, to routinely file for funding several years in advance for particular capital items, so that the money is on hand when the projects go out to bid. Mr. Lamson said that the boat line would do so in the future.

In other action at the meeting, SSA governors unanimously approved a new license agreement for the seasonal Vineyard-Nantucket ferry service operated by Hy-Line, a private ferry company based in Hyannis. Hy-Line plans to base a vessel on each island with the intention of providing a more convenient schedule. The service begins June 25.

The board also discussed a proposal by Mr. Ranney to explore arranging an affinity credit card for the Steamship. Mr. Ranney said such a card could generate $3 to $5 million a year in revenue for the program, in addition to making Falmouth and Hyannis realize that boat line customers generate more than traffic.

Under such programs, a credit card company provides a small percentage of spending that people charge to the card to a designated recipient, such as a charity, a fraternal organization, or, in this case, the Steamship Authority.

The boat line previously had considered setting up an affinity card program with its employees, but credit card representatives found the population too small. The new idea is to offer the card to all SSA customers. Last year, the boat line recorded 2.7 million passenger trips, although it's not known how many individual passengers made those trips.

Mr. Ranney suggested people may be willing to use the card as an altruistic way of helping the Steamship Authority. Mr. Oliveira said the boat line also might want to offer discounts to affinity card holders to encourage participation.

The Steamship board also deferred discussion on a proposed modification or elimination of the passenger canopy on Water street in Vineyard Haven until the June boat line meeting, which will held on the Vineyard.

Mr. Hanover said the matter should be discussed at the next boat line meeting on the Vineyard, which is set for June.

He said he doesn't particularly care whether the canopy goes, as boat line management has proposed, or stays. But he said some people who have contacted him about the issue say the canopy effectively screens people on the terminal grounds from views of a parking lot across the street. He also said the boat line might want to use the canopy platform in a plan to queue cars off the street and reduce traffic congestion on and near Water street.