Maritime Environmental Law Update (March 2020 Edition)
March 25, 2020
We are providing this update on significant new developments in international and US environmental maritime law, regulation, technology, and enforcement, including a discussion on disruption caused by the current novel coronavirus (COVID-19) outbreak. Our prior update was issued in June 2019 and can be found here. We hope that our readers remain safe during this difficult time.
Cruise Lines COVID-19 Response
Cruise ship passengers who contracted or were exposed to COVID-19 have commenced proceedings against cruise lines seeking economic and special damages. It appears that recovery under such proceedings will be subject to limitations under contracts and applicable law. Passengers may also face comparative fault in circumstances where they chose to go on a cruise despite knowing of the risk of contracting COVID-19.
The cruise line industry has significant prior experience with disease outbreaks, including norovirus (which can be spread through food) and Legionnaire’s bacterial pneumonia. This has prompted the companies to implement cleaning protocols mandated by the Centers for Disease Control and Prevention that can be drawn upon in defense of COVID-19 suits.
In addition, cruise ship passenger injury case law mostly comes out of the Eleventh Circuit, which encompasses Florida, home of several major cruise lines. This Circuit tends to be more favorable to those companies, so efforts will likely be made to have cases originating elsewhere transferred to Florida.
January 2020 Deadline for 0.5 Percent Sulfur Content May Continue to Present Challenges
With the imposition of new sulfur limits at the start of the year, vessel operators have increased training to help avoid fuel-related disruptions. Heavy residual fuel oil had relatively predictable and constant properties and was well understood by users. On the other hand, newer fuels, including low-sulfur and distillate varieties, are highly variable. Impacts will likely be unique to each ship, so broad-brush advisories may have limited application.
IMO Cyber Security Deadline Fast Approaching
The International Maritime Organization (IMO) has set a January 2021 deadline for shipping interests to incorporate cyber risk management into their existing Safety Management Systems. Several of these systems should be considered at high risk, including bridge systems, cargo-handling and management systems, propulsion and machinery management and power control systems, access control systems, passenger-servicing and management systems, passenger-facing public networks, administrative and crew welfare systems, and communication systems. Cyber response plans need to detail tasks to be undertaken when a cyber incident occurs.
Insurers will play a key role in the management of risk and development of the subject plans. In addition, the US Coast Guard (USCG) has guidance available on cyber security exposure that maritime interests may find helpful (see https://homeport.uscg.mil/missions/cybersecurity).
Reducing Maritime Shipping’s Carbon Footprint Is a Challenge
The IMO has set an ambitious goal in its preliminary greenhouse gas (GHG) strategy: (1) carbon dioxide (CO2) emissions are to be reduced from 2008 levels by at least 40% per cargo tonne-mile by 2030, and 70% by 2050, and (2) overall GHG emissions are to be reduced by 50% by 2050. With emissions from international shipping estimated at around 2.6% of global CO2 emissions, consensus has formed that, if left unchecked, strong demand for seaborne transport will see shipping’s carbon output grow faster than that of other major industry sectors. Significant reductions in fuel consumption have been achieved via vessel designs and operating methods. However, application of current technologies is not likely to achieve these goals.
Fuel Rules Cloud New Vessel Construction
With no industry standard yet set for lower carbon intensity maritime fuels, executives are finding it difficult to order new ships, particularly where it is unclear which fuel will best suit environmental regulations in the future. With sulfur rules now in effect for ships, owners can comply by either using scrubbers to reduce sulfur emissions or by utilizing low-sulfur fuel. However, with efforts to cut the carbon intensity of maritime fuels—by up to 40% by 2030—owners may continue to operate older ships until the path to achieving this level of emission reductions becomes more clear.
Efforts Underway to Limit Container Ship Fires
Container ship fires have been the subject of recent press coverage. It has been reported that a container ship fire occurs somewhere in the world approximately once every 60 days. The National Cargo Bureau reports that in a recent survey, hazardous material and general cargo containers had a combined failure rate of 55%. Of that, 69% of hazardous material containers failed inspection, 44% had cargo that was improperly secured, 39% of containers were not properly marked or placarded, and 8% had cargo that was miss-declared. Shipping lines have responded by imposing penalties on shippers, in addition to requiring reimbursement for any actual costs incurred as a result of improperly utilized containers. In addition, governmental enforcement is likely to increase, with potential seizure of cargos that have been improperly declared. Carriers are encouraged to increase training and provide the necessary equipment to quickly and safely respond to container fires.
Rising Concerns About Sea Levels
The melting of Antarctic glaciers appears to be occurring at a faster pace than scientists previously thought, possibly requiring revised modeling for construction and rehab of port and navigation structures. A new NASA-led study has found that ice melt on the eastern coast of the continent, long thought to be more shielded from rapid ice melt, is now increasing rapidly. For example, the massive Denman Glacier receded almost three miles between 1996 and 2018. The study will likely influence future projections of sea-level rise, with worst-case scenarios now looking at an increase of eight feet by the year 2100.
Turning Back the Maritime Clock
In an effort to overcome traffic delays in and around the New York Metropolitan Area, some agricultural interests are turning to maritime deliveries as the way to get fresh produce and foods to the marketplace. Sixty-five foot catamarans powered by hybrid technologies are being used by a Norwalk, Connecticut-based company to transport goods from regional family farms around Long Island Sound. Each of the catamarans can haul shipments equal to that of five truckloads.
Shipping in the Arctic
It has been 30 years since the Oil Pollution Act (OPA 90) was signed into law, and with climate change opening up the Arctic Ocean to greater commercialization, changes to the law may be needed to protect this unique ecosystem. For example, OPA 90 has been interpreted by the USCG as allowing vessel owners to propose their own alternatives to meet key oil spill requirements in Alaska and the Arctic. While this flexibility has benefits, in some cases it has led to confusion and a lack of consistency, clarity, and quality in terms of oil spill prevention and response readiness. Also, risks are potentially greater now due to the tremendous increase in vessel transits through the region as compared to the number 30 years ago. Given the changes in the maritime industry, critics believe that a fresh look at OPA 90 may be appropriate.
EPA Delays NOx Control Rule
On September 6, 2019, the US Environmental Protection Agency (EPA) proposed to delay implementation of the Tier 4 marine diesel requirements in certain high-speed commercial vessels. Three kinds of vessels were mentioned: lobster boats, pilot boats, and “other high-speed boats.” The proposal is limited to engines with rated power between 600 and 1400 kW, including vessels with one or two engines and under 65 feet in length. The EPA is also adjusting Tier 4 certification requirements. The EPA believes that the delay is warranted because of concerns that suitable Tier 4 engines with tighter NOx controls are not available for certain vessels with unique demands for speed and power. New implementation dates are 2022 for most engines, with 2024 being the deadline for a narrower set of vessels that the EPA believes “require additional lead time.” It is unclear when the EPA will take action to finalize the rule.
Understanding Maritime Accident Investigations
There are two primary US agencies involved in maritime investigations: the National Transportation Safety Board (NTSB) and the USCG. While the NTSB’s principal purpose is to investigate aviation accidents, it is also responsible for investigating significant maritime accidents. The size of the NTSB response team varies with the severity of the incident, with potentially dozens of specialists being assigned to various aspects of an investigation. The investigation typically includes comprehensive document requests, interviews with those involved, and a careful examination of the Safety Management Systems and safety culture of the affected operation. Preliminary and final reports are eventually issued and made publicly available; however, the NTSB will not specifically attribute fault to any individual or entity, nor will it recommend penalties, punishments, or sanctions. The USCG also utilizes a team of specialists to help establish the facts of the incident, determine causes, and initiate corrective actions. It will request documents, access to computers, and testimony from witnesses. At the end of the investigation, a Report of Investigation will be issued. Unlike the NTSB process where a preliminary report is issued for comment before the report is finalized, the USCG only issues final reports. Where the facts warrant, the USCG may turn a matter over to the Department of Justice for criminal prosecution.
New Maritime Technologies
Decarbonization and the Role of Financiers
With maritime shipping being largely a privately owned industry and with many shipowners (who would be responsible for investing in fuel-efficient technologies) turning their ships over to charterers (who generally pay for the fuel), incentivizing shipowners to reduce emissions has been difficult. However, financiers may have a role to play in decarbonizing the shipping industry. For example, placing a hypothetical price on carbon can help a financial institution benchmark an investment and determine how competitive a vessel will be in a carbon-constrained market.
Another tool for financiers is the Poseidon Principles. Eleven leading maritime lenders have established a global framework, both for assessing and disclosing the climate alignment of their ships’ financial portfolios, and for ensuring consistency with the IMO’s policies and goals.
These two tools represent first steps in linking financing and decarbonization.
Digital Revolution in the Maritime Arena
Greater digitalization is rippling through the maritime industry, and the ability to access and analyze vessel data using cloud-based solutions is now a realistic option for most commercial operators. Collaborations between industrial software companies and maritime equipment providers are resulting in greater use of digitalization to increase safety, reliability, and predictability of vessel and fleet performance. As the industry moves towards greater automation in everything from supply chains and logistics to vessel control and port operations, the need to adopt a long-term digital strategy becomes ever-more pressing.
Carnival Reports Progress on Environmental Programs
In December, Carnival Corp. reported to a Florida federal court on its progress in meeting obligations imposed in connection with prior spill and dumping-event proceedings. This included progress on its environmental compliance, including improved reporting, and updated equipment and policies to reduce waste and prevent illegal dumping. Earlier, Carnival pled guilty to pollution violations and agreed to pay a $20 million penalty. This comes on the heals of an earlier $40 million settlement for illegal dumping.
The company stated that it has completed fleet-wide upgrades to prevent oily, bilge water from spilling into the ocean and has begun a program of implementing dry bilges that will reduce the risk of spills. The company has revised its sewage discharge policy and will be working in the next two years to reduce food waste. In addition, Carnival stated that it is ahead of schedule on its target to reduce its carbon emissions by 40% by 2030.
Court Sets New Standard for Maritime Asbestos Cases
An Ohio appellate panel recently revived a suit accusing U.S. Steel of causing a worker’s mesothelioma death due to asbestos exposure on company-owned ships, saying the trial court judge was wrong to apply state law rather than federal law to the estate’s federal Jones Act and unseaworthiness claims. The suit accuses the company and others of causing a former U.S. Steel employee’s 2018 death due to his work on asbestos-containing pipe insulation aboard ships owned by U.S. Steel.
The suit, filed by the former merchant marine’s widow, alleged that her husband was exposed to asbestos during his employment with U.S. Steel from 1960 to 1961 and asserted a claim under the Jones Act—a federal law that regulates US maritime commerce—as well as an alleged breach of the general maritime duty to provide a seaworthy vessel, among other claims.
Enforcement Actions and Civil Penalties
Italian Shipping Co. Hit With $4M Penalty For Oil Dump
A New Jersey federal judge has ordered an Italian shipping company to pay a $4 million penalty and serve four years of probation for dumping oily waste and other pollutants from a tanker into the ocean and trying to hide its misconduct from the USCG. d’Amico Shipping Italia SpA pled guilty to violating the Act to Prevent Pollution from Ships.
The penalty includes a $3 million fine to be paid to the government, as well as a $1 million community service payment to the National Fish and Wildlife Foundation. d'Amico also must implement an environmental compliance plan as part of the terms of its probation.
At the direction of two engineers aboard the M/T Cielo di Milano, engine department crew members pumped machinery space bilge water and oily mixtures into a sewage holding tank and then discharged that material into the ocean without it having been processed through a pollution-control device, according to court documents. The engineers both pled guilty to related criminal charges.
Convictions Continue for Illegal Dumping
Nikolaos Vastardis, Evridiki Navigation Inc., and Liquimar Tankers Management Services Inc. were convicted by a federal jury in Wilmington, Delaware, of violating the Act to Prevent Pollution from Ships, falsifying ship’s documents, obstructing a USCG inspection, and making false statements to USCG inspectors. The crimes were committed to conceal Vastardis’ bypassing of required pollution-control equipment in order to illegally discharge oil-contaminated bilge waste overboard from the foreign-flagged Motor Tanker Evridiki. Each defendant was convicted of four felony counts.
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 partner licensed to practice law in Missouri and New York, and Bob Nicksin, an O’Melveny counsel 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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