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Maritime Environmental Law Update (February 2022 Edition)

February 28, 2022

We are providing this update on significant new developments in international and U.S. environmental maritime law, regulation, technology, and enforcement, including an update on the continuing disruption caused by the ongoing COVID-19 pandemic. Our prior update was issued in July 2021 and can be found here. We hope that our readers remain safe during this difficult time.

International Developments

IMO Continues to Focus on Energy Efficiency and Emissions Goals

In June 2021, the Marine Environmental Protection Committee (MEPC) of the International Maritime Organization (IMO) adopted amendments to the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI. The amendments include technical and operational requirements to improve the energy efficiency of ships in order to meet the targets established in the 2018 Initial IMO Strategy on Reduction of Greenhouse Gas (GHG) Emissions from Ships. Among other requirements, the amendments will require all vessels to calculate their Energy Efficiency Existing Ship Index (EEXI), take certain technical steps to improve their energy efficiency, and establish their annual operational carbon intensity indicator (CII), which compares a vessel’s GHG emissions to the transport work performed by such vessel. The amendments to MARPOL Annex VI will take effect on November 1, 2022, with the EEXI and CII certification requirements coming into effect on January 1, 2023. The IMO is also required to review the effectiveness of the EEXI and CII requirements by January 1, 2026.

The 77th meeting of the MEPC (MEPC77) was held during week of November 22, 2021. MEPC77 acknowledged that the IMO’s current goal of reducing shipping GHG emissions 50% by 2050 does not go far enough to address the impact of the global shipping industry on climate change and that the search for new fuels and other decarbonization strategies for shipping has never been more urgent. MEPC intends to initiate a revision of its GHG targets by 2023, but it is unclear whether MEPC will aim for net-zero GHG emissions by 2050 or if a less ambitious goal will instead be selected. The Biden Administration signaled in April 2021 that the United States will support a net-zero emissions goal, and the U.S. is expected to continue pushing for more aggressive emissions requirements going forward.

European Union to Extend Emissions Trading System to Shipping Sector

In July 2021, the European Union (EU) published proposed legislation to extend its Emissions Trading System (ETS) to the maritime transport sector. Under the proposal, ships over 5,000 gross tonnes that transport passengers or cargo to or from EU member state ports would be required to purchase and surrender emissions allowances equivalent to emissions for all or a half of a covered voyage, depending on whether the voyage was between two EU ports or an EU and a non-EU port. The requirements are proposed to be phased in from 2023 to 2026. Beginning in 2023, covered entities would be required to surrender allowances equivalent to 20% of their verified emissions, with the amount increasing to 45% in 2024, 70% in 2026, and 100% in 2026. The proposed legislation, included within the EU’s broader “Fit for 55” program (in reference to the 55% reduction in carbon emissions targeted for 2030), remains under discussion, though the scheduled start date of 2023 means the EU will likely push to finalize and formally approve the new legislation in 2022.

U.S. Developments

Judge Orders EPA to Update Oil Spill Rule by 2023

On August 10, 2021, a federal judge ordered the U.S. Environmental Protection Agency (EPA) to issue a final rule amending the oil spill response provisions included in the National Contingency Plan (NCP). After the Deepwater Horizon oil spill in 2010, the EPA began reevaluating the role of chemical dispersants to mitigate the environmental impacts of oil spills. In 2015, the EPA released a proposed rule to amend the NCP. The proposed rule would modify the monitoring, data and information, and procedural requirements for the authorization of certain chemical dispersants used in response to oil spills. In January 2020, a group of environmental organizations sued to force the EPA to finalize its proposed rule, arguing that the agency has a nondiscretionary duty to update the oil spill provision of the NCP to reflect the best available scientific information as required by the Clean Water Act and that the agency failed to timely fulfill this duty as required by the Administrative Procedure Act. Judge William H. Orrick of the U.S. District Court for the Northern District of California granted summary judgment in favor of the environmental groups and ordered the EPA to issue a final rule amending the NCP by May 2023. The case is Earth Island Institute et al. v. Wheeler et al., case number 3:20-cv-00670.

U.S. House of Representatives Passes Ocean Shipping Reform Act

On December 8, 2021, the U.S. House of Representatives passed H.R. 4996, cited as the Ocean Shipping Reform Act of 2021 (OSRA). Described as the first major overhaul of Federal regulations governing the international shipping industry since 1998, OSRA would modify the existing Shipping Act of 1984 (the “Shipping Act”) in several key ways:

  • OSRA would expand the anti-retaliation and discrimination provisions contained in Section 41104(a)(3) of the Shipping Act to apply to marine terminal operators (MTOs), and OSRA would prohibit discrimination against shippers’ agents and motor carriers in addition to prohibiting discrimination against shippers.
  • Common carriers and MTOs would be prohibited from charging detention or demurrage under a tariff or service contract unless such charges are accompanied by an accurate certification stating that they comply with the rules and regulations concerning demurrage and detention issued by the Federal Maritime Commission (FMC). Failure to include this certification will eliminate any obligation of the charged party to pay the applicable charge.
  • To address congestion at U.S. ports, OSRA would make it a violation of the Shipping Act for a common carrier to (1) unreasonably reduce shipper accessibility to equipment necessary for the loading and unloading of cargo, (2) fail to furnish containers or other facilities needed to perform transportation services, including allocation of vessel space accommodations, in consideration of reasonably foreseeable import and export demands, or (3) unreasonably decline export cargo bookings if such cargo can be loaded safely and timely and carried on a vessel for the immediate destination of such cargo.
  • OSRA would also require the FMC, within 90 days after OSRA’s enactment, to commence a rulemaking proceeding to set “minimum service standards” as contemplated by OSRA, including requirements for MTOs and common carriers to (1) adopt reasonable rules and practices related to the furnishing and allocation of adequate and suitable equipment, vessel space accommodations, containers, and other instrumentalities necessary for the receiving, loading, carriage, unloading, and delivery of cargo, (2) perform the contract of carriage with reasonable dispatch, (3) carry United States export cargo if such cargo can be loaded safely and timely and carried on a vessel scheduled for such cargo’s immediate destination, and (4) establish contingency service plans to address and mitigate service disruptions and inefficiencies during periods of port congestion and other market disruptions.

OSRA has been referred to the U.S. Senate Committee on Commerce, Science, and Transportation. If passed by the U.S. Senate and signed into law, OSRA and the implementing regulations to be developed by the FMC will require substantial operational changes and could introduce significant challenges for common carriers and MTOs.

New Maritime Technologies

Wind Propulsion Technologies Continue to Gain Momentum

Last summer, Michelin Group unveiled its new Wing Sail Mobility (WISAMO) system, which uses inflatable fabric “wings” as a hybrid wind propulsion solution to increase vessel fuel efficiency and reduce associated greenhouse gas emissions. The WISAMO system relies on telescoping masts up to 17 meters high, which automatically retract when the vessel approaches a bridge or encounters rough weather. Attached to the masts are 93-square meter inflatable wings, which create lift to help propel the vessel forward, improving fuel efficiency by up to twenty percent. Michelin plans to test the WISAMO technology on a commercial freighter in 2022.

The WISAMO project is one of a number of wind-assisted propulsion initiatives gaining momentum around the world. Other wind propulsion projects include rotor sails used on the bulk carrier MV Afros and suction wings used on the cargo vessel Lysbris Seaways. In 2021, Airseas, an affiliate of Airbus, also developed an automated kite, called Seawing, to harness wind power and achieve a 20% reduction in vessel fuel consumption. Seawing is a 1000-square meter inflatable parafoil that flies at an altitude of 300 meters and is capable of automatically adjusting its position based on wind conditions and vessel speed.

The International Windship Association estimates that by late 2022 the total number of cargo ships sailing with wind-assisted propulsion devices could reach 40 vessels. While this remains a small fraction of the roughly 60,000 cargo ships operating globally, the development and adoption of wind propulsion technologies is only expected to increase, especially in light of growing concerns about GHG emissions from global shipping operations. Cargo shipping is currently estimated to account for nearly 3% of the world’s total GHG emissions. Wind propulsion systems may offer a fast and cost-effective avenue for reducing GHG emissions, as many of these systems can be retrofitted to existing vessels.

First Autonomous Zero-Emission Container Ship Completes Maiden Voyage

In November 2021, the world’s first autonomous zero-emission container ship Yara Birkeland completed its maiden voyage in the Oslo Fjord. The 80-meter-long Yara Birkeland uses an all-electric propulsion system and a combination of GPS, radar, cameras, and sensors to autonomously transport up to 120 20-foot containers per trip. The ship’s maiden voyage will be followed by a two-year technology test phase before the vessel is certified as fully autonomous. Yara Birkeland will contribute to the Oslo Port’s goal of cutting 85% of GHG and particulate emissions by 2030 and ultimately becoming the world’s first zero-emissions port.

Southern Hemisphere’s First Electric Passenger Ferry Begins Service in New Zealand

East by West Ferries recently launched Ika Rere, a fully electric, zero-emission passenger ferry that will carry up to 132 passengers across Wellington Harbor in Wellington, New Zealand. The ferry, the first of its kind in the Southern Hemisphere, was commissioned following research by the New Zealand Government showing that domestic ships in the country emit close to 300,000 tons of carbon dioxide every year and that half of the City of Wellington’s GHG emissions came from the transportation sector in 2020. Ika Rere is built for a run of 25 kilometers before charging dockside at a rate of one megawatt for 15 minutes while passengers disembark and board. The ferry also uses a 300-kilowatt charger at its overnight berth. Ika Rere is predicted to eliminate approximate 640 tons of carbon dioxide emissions annually compared to a similar-sized diesel alternative. East by West Ferries predicts that Ika Rere, despite costing more to build than a similar-sized diesel ferry, will return this investment over time due to cheaper fuel and maintenance costs.

Two Electric Car Ferries to Begin Service in Lake Ontario

Two electric car ferries, Amherst Islander II and Wolfe Islander IV, are scheduled to begin service in Lake Ontario, Canada in spring 2022. The vessels, which were built by Damen Shipyards, are capable of running fully electric, but they are also equipped with twin diesel generators to allow both hybrid and full diesel propulsion. The 68-meter Amherst Islander II has a capacity for 40 cars, while Wolfe Islander IV, which measures nearly 100 meters, can carry 75 cars. The ferries are expected to carry over one million passengers and over 500,000 vehicles annually. The DC charging station for the ferries will use shore batteries that can be fully charged from the grid in 50 minutes. The shore batteries will in turn deliver 6MW of power in 10 minutes to charge the vessels’ on-board batteries. British Columbia has also engaged Damen Shipyards to build and deliver six hybrid ferries that are designed to be adapted for fully electric propulsion in the future.

Thames Clippers to Launch First Hybrid Ferries in London

Thames Clippers, operating as “Uber Boats” under a sponsorship agreement with Uber, is building the United Kingdom’s first hybrid high-speed passenger ferries, which are scheduled to launch in autumn 2022 and spring 2023. The ferries will provide public transportation across the Thames river between eastern and central London and will rely solely on battery power while operating in central London. Unlike most hybrid or fully electric vessels, these ferries will not rely on shore-based charging. Instead, the ferries will operate using biofuels while outside of central London, and excess power from the biofuel engines will be used to recharge the vessels’ batteries for the central London stretch.

PortsToronto Launches Canada’s First Retrofitted Zero-Emission Ferry

Canal Marine & Industrial Inc. (CANAL) recently completed a 20-week retrofit of Marilyn Bell I, a 96-foot ferry used by PortsToronto to transport cars, passengers, and supplies to and from Billy Bishop Toronto City Airport on Toronto Island. Marilyn Bell I was originally built in 2010 as a diesel-powered vessel, and the ship’s diesel engines have now been fully replaced with two 250kw electric induction motors. The retrofit cost approximately $3.8 million and is expected to reduce GHG emissions by 530 metric tons per year. Marilyn Bell I will rely on CANAL’s Automatic Shore Charging System, which automatically tops off the vessel’s batteries in five minutes during unloading and loading.

ABS Launches Simulation Technology for Maritime Decarbonization

The American Bureau of Shipping (ABS) recently launched its Simulation-based Energy Efficiency Evaluation Service, which uses simulation technology to address the impact of decarbonization technologies for both new and existing vessels. The service will enable both planned and existing vessels to compare different design and operational options and evaluate the impact of adding new fuels and energy efficiency technologies. ABS has opened global simulation centers in Singapore, Houston, and Athens to provide wider access to this new simulation technology. For new vessels, ABS predicts this technology will allow better optimization of propulsion systems and will support more robust life-cycle cost analysis. For existing vessels, simulation technology can help evaluate both retrofitting options and operational changes designed to reduce fuel consumption and maintain compliance with emissions regulations.

LED Technology Offers Energy and Cost Savings for Shipboard Lighting

The growing availability of solid-state light-emitting diode (LED) lighting for commercial and industrial uses, including on ships and in other maritime settings, presents an opportunity to reduce both energy consumption and maintenance costs compared to traditional incandescent or fluorescent bulbs. The U.S. Navy recently began installing LED lighting on its ships , though in some cases military and commercial specifications for maritime lighting still lag behind the current state of LED technology. As specifications are brought up to date, expanded use of LED lighting on ships is expected to generate significant benefits. LED lights are more energy efficient and produce less heat than incandescent and fluorescent bulbs, which can translate to decreased fuel consumption and increased endurance for shipboard generators. While more expensive than incandescent and fluorescent bulbs, LED lights have a longer useful life and therefore reduce long-term costs associated with bulb replacement and disposal.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Eric Rothenberg, an O'Melveny of counsel licensed to practice law in New York, Melody Drummond Hansen, an O'Melveny partner licensed to practice law in California, the District of Columbia, and Illinois, and Chris Bowman, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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