O’Melveny Worldwide

Maritime Environmental Law Update (September 2022 Edition)

September 9, 2022

We are providing this update on significant new developments in international and U.S. environmental maritime law, regulation, technology, and enforcement. Our prior update was issued in February 2022, and can be found here.

International Developments

UK to Adopt Nuclear Powered Ship Regulations

The UK’s Department for Transportation and Maritime and Coastguard Agency are poised to enact new Merchant Shipping Regulations covering nuclear powered vessels later this year. The new regulations, which are expected to become effective at the end of November 2022, will incorporate International Convention for the Safety of Life at Sea (SOLAS) elements and will provide needed structure to support the use of nuclear power in merchant ships. Specifically, the regulations will implement the requirements of SOLAS Chapter VIII, which codifies the building and operating standards in the Code of Safety for Nuclear Merchant Ships. The regulations also require nuclear powered vessels to comply with the radioactive waste management requirements set forth in the UK’s Nuclear Code.

SEA-LNG Promotes LNG Conversions to Meet IMO’s Carbon Regulations

Industry coalition SEA-LNG recently released a report offering the view that converting existing vessels to liquefied natural gas (LNG) should be an economically viable strategy for compliance with the International Maritime Organization’s (IMO) upcoming Carbon Intensity Indicator (CII). The CII, which measures how efficiently a ship transports goods or passengers from a carbon emissions perspective, will begin to take effect later this year as part of the extensive CO2 regulations adopted by the IMO in 2021. Ships will be given an annual CII rating ranging from “A” to “E,” with the rating thresholds becoming increasingly stringent between now and 2030. Ships that receive ratings of “D” or “E” for three consecutive years will be required to submit a corrective action plan showing how a C rating or above will be achieved. The SEA-LNG report notes that an existing vessel retrofitted to run on LNG could maintain a “B” rating in the CII scheme before falling to a “C” rating in 2027, and a “D” rating in 2032, while a non retrofitted vessel operating on heavy fuel oil with a scrubber would at first have a “C” rating and would fall to an “E” rating by 2028. The report estimates that retrofitting an existing 300,000 dwt tanker to run on LNG would cost $4.7 million, but retrofitting could result in strong returns on investment given the expected commercial advantage in chartering a vessel with a higher CII rating. SEA-LNG also predicts that the cost of LNG conversions will decline over the coming years as retrofitting becomes more common.

U.S. Developments

California Updates CHC Emissions Regulations

The California Air Resources Board (CARB) recently approved amendments to its regulations on commercial harbor craft (CHC) emissions. While the initial CHC regulations focused on larger vessels like passenger ferries, excursion vessels and tugboats, the amended regulations apply emissions reduction requirements to a broader range of vessel types, including commercial fishing vessels, tank barges, and pilot vessels. The amended regulations also accelerate the transition to cleaner combustion engines (including hybrid or fully electric engines where feasible). The vessel emissions requirements will be phased in starting January 1, 2023 through 2032, with the exact compliance schedule varying by vessel type. The amended regulations also accelerate the adoption of electric shore power infrastructure, requiring port facility owners and operators to provide non-fossil fuel shore power sufficient to meet the auxiliary power needs of each vessel up to 99 kilowatts by January 1, 2024. Facility owners and operators must also cooperate with zero-emission vessel owners to facilitate the installation of charging infrastructure.

Shipping Company and Chief Engineer Convicted of MARPOL Violations for Oily Bilge Water Discharges

Greek shipping company New Trade Ship Management and Dennis Plasabas, chief engineer of the bulker Longshore, pleaded guilty to a felony violation of the International Convention for the Prevention of Pollution from Ships (MARPOL) in a case brought by the U.S. Justice Department. New Trade and Plasabas admitted that oily bilge water was illegally dumped from the Longshore directly into the ocean without being properly processed through required pollution prevention equipment on two separate occasions between October and December of last year. The U.S. further charged that Plasabas failed to record the discharges in the vessel’s oil record book and ordered lower-ranking crew members to process clean seawater through the vessel’s pollution prevention equipment to make it appear that the equipment was being properly used. Under the terms of the plea agreement, the company will pay a fine of $1.1 million and serve a four-year probation during which its vessels calling in U.S. ports will be required to implement a robust environmental compliance plan.

Chief Engineer Sentenced to Prison for Oily Bilge Water Discharge

Chief engineer Kirill Kompaniets of the bulk tanker Gannet Bulker was sentenced to a year in prison for ordering the illegal discharge of 10,000 gallons of oily bilge water off the coast of Louisiana. Kompaniets ordered a subordinate crew member to discharge the oily bilge water after the vessel’s ballast water treatment system failed. The incident was not recorded in the vessel’s oil record book, and Kompaniets ordered his subordinates to destroy alarm records and give a false story to the U.S. Coast Guard’s marine inspectors when they arrived to examine the ship. Kompaniets pled guilty to two felony pollution charges in May. A federal investigation of the incident is still in progress.

New Maritime Technologies

Alma Clean Power Aims for Zero-Emission, Long-Distance Shipping

Norwegian company Alma Clean Power is introducing high-temperature solid oxide fuel cells (SOFCs) as a potential approach to the decarbonizing long-distance shipping. True zero-emission, long-distance shipping faces significant challenges with current technologies, including battery capacity limitations and hydrogen fuel supply availability. SOFCs may help address these problems via their unique ability to use a variety of fuels with high efficiency levels and low carbon emissions. SOFCs are modular and scalable, and they can switch between conventional and synthetic fuels, including LNG, ammonia, LOHC and hydrogen. Carbon is emitted from SOFCs in a concentrated form where most of the emissions are CO2, making CO2 capture much easier and more efficient. Alma Clean Power hopes that vessels utilizing SOFCs will realize significant savings in both fuel costs and carbon taxes.

Commercial Bulker with Rigid Sail Launched in Japan

The first installation of a rigid, winged sail was recently completed on a commercial bulker being built for Mitsui O.S.K. Lines (MOL) in Oshima Shipyard, Japan. The vessel is part of MOL’s Wind Challenger project. The glass reinforced plastic sail, which is nearly 170 feet high when fully raised, is expected to generate a five to eight percent reduction in fuel consumption for the 100,000 ton bulk carrier. The sail can automatically extend and rotate to take advantage of wind conditions.

Solid Form Hydrogen Vessel to be Built in the Netherlands

The construction contract for a demonstration vessel that will use a new solid form of hydrogen for propulsion was recently awarded to Next Generation Shipyards in the Netherlands. The vessel, called the Neo Orbis, will be approximately 65 feet long and is designed to operate in Amsterdam’s canals and nearby seaport areas. The Neo Orbis will be the first ship in the world propelled by hydrogen in a solid form. Project proponents note that this new solid form of hydrogen is safer and more stable than hydrogen gas. The vessel will also employ two 25 Kwh batteries to provide backup energy. The Neo Orbis is expected to start trials in June 2023, and is part of the multi-year European H2Ships program.

Creation of Global Bio-Methanol Supply

Shipping giant Maersk is leading efforts to develop a global supply of environmentally friendly green bio-methanol to support the transition of the shipping industry away from traditional fossil fuels. Maersk recently signed its seventh methanol production partnership, adding to a growing global network of green methanol production Maersk originally launched in March 2022, to secure a sufficient quantity of bio-methanol to support the company’s new fleet of dual-fuel vessels due to start entering service in 2024. The new partnership is with Chinese bioenergy enterprise Debo, which will produce 200,000 tons of bio-methanol per year beginning in 2024, using agricultural residues as the feedstock. Maersk stated that the availability of green methanol at scale is critical to the company’s end-to-end, net-zero emissions goal for 2040.

China Launches World’s Largest Electric Cruise Ship

The 100-meter Yangtze River Three Gorges 1, claimed to be the largest electric cruise ship in the world, started its maiden voyage in Yichang, Hubei province earlier this year. The ship was developed by China Yangtze Power at a cost of $23.5 million and has room for 1,300 passengers. It is equipped with 15 independent battery packs adding up to approximately 7.5 megawatt hours, with a range of approximately 100 kilometers on a single charge. The project was sponsored by the Chinese Ministry of Industry and Information Technology and the Ministry of Transport as part of a broader initiative to promote clean energy and green transportation.

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 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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