Maritime Environmental Law Update (January 2017 Edition)

January 3, 2017

As we close out 2016, we are providing our annual update on significant developments in regard to international maritime laws and regulations, including increasingly stringent limits on air emissions and other discharges, innovation in environmental controls technology, maritime enforcement cases, and related issues. Our prior update was issued in October 2015 and can be found here.

International Developments

Greenhouse Gas Emissions from Maritime Sources in the Spotlight

Shipping currently accounts for 2.33% of global carbon dioxide (CO2) emissions, and given the recent ratification of the Paris Agreement, it is clear that maritime interests will have to contribute if the goal of keeping global temperature increases “well below” two degrees Celsius is to be achieved.

Lloyd’s Register (LR), the Shipping in Changing Climates project, and Great Britain’s Engineering and Physical Sciences Research Council (EPSRC) recently announced the results of a study entitled “Low Carbon Pathways 2050,” which details a number of potential pathways for the shipping industry’s transition to a low-carbon future. The key findings include:

  • Consideration of de-carbonization options should include hydrogen fuel cells, biofuels, and market-based offset (carbon trading) mechanisms.
  • A substitute for fossil fuel will still be required as energy efficiency improvements alone will not be sufficient in the medium to long term.
  • Energy storage in batteries and renewable energy sources will have important roles to play, but are likely to still leave a requirement for a liquid fuel source.
  • Additional regulations that may be developed for other emissions need to be considered, for example: methane, black carbon, and particulate matter.
  • Technological and operational characteristics are just some of the considerations that need to be taken into account.

Low Carbon Pathways 2050 is the latest Lloyd’s Register report looking at fuel and technology trends for the marine industry, and aimed at better informing the anticipated policy debates. The report suggests that the shipping industry must begin phasing in the noted measures now in order to avoid significant disruption as low-carbon requirements become reality. 

IMO’s MEPC Committee October 2016 Meeting Focuses on Emission Reductions

In a related development, the International Maritime Organization’s (IMO) Marine Environment Protection Committee (MEPC) dedicated much of its 70th session held in October to fuel efficiency and reduction of GHG’s and other air pollutants:

  • Adoption of mandatory data collection system for fuel oil consumption

The MEPC adopted amendments to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL Convention) requiring ships to record and report their fuel oil consumption. Under the amendments, ships of 5,000 gross tonnage and above will be required to collect consumption data for each type of fuel oil they use. The aggregated data will be reported to the flag state after the end of each calendar year, and the flag state, after review, will issue a Statement of Compliance to the ship. Flag states will be required to subsequently transfer this data to an IMO Ship Fuel Oil Consumption Database. The IMO will then produce an annual report to the MEPC summarizing the data collected. 

  • Roadmap for reducing GHG emissions approved

The MEPC approved a “roadmap” document for developing a comprehensive IMO strategy on reduction of greenhouse gas (GHG) emissions from ships. Along with delineating a list of activities to be conducted by MEPC, the roadmap targets 2018 for adoption of an initial GHG reduction strategy. This initial strategy will then be adjusted based on the analysis of the data collected, with the adoption of a revised strategy envisioned for spring of 2023. An initial strategy in 2018 will allow the maritime sector to communicate its progress pursuant to the Paris Agreement pledge scheme.

  • Energy efficiency of international shipping

The IMO first adopted legally binding energy-efficiency measures in 2011. Energy efficiency design standards for new ships and associated operational energy-efficiency measures for existing ships became mandatory in 2013, with the entry into force of the relevant amendments to MARPOL Annex VI.

The Committee continues to review and strengthen these standards, with Phase 2 set for implementation between 2020 and 2024. Currently, Phase 3 requirements (starting in 2025) require that new ships be 30% more energy efficient compared to the pre-established baseline.

Efficiency is measured via the Energy Efficiency Design Index (EEDI), a non-prescriptive, performance-based mechanism that leaves the choice of technologies to use in a specific ship design to the industry. As long as the required energy efficiency level is attained, ship designers and builders are free to use the most cost-efficient solutions for the ship to comply with the regulations. The EEDI provides a specific figure for an individual ship design, expressed in grams of CO2 per ship’s capacity-mile (the smaller the EEDI the more energy efficient ship design), and is calculated by a formula based on the technical design parameters for a given ship. 

  • 2020 global sulfur cap implementation

The IMO has decided to implement new fuel sulfur requirements, with marine fuels to be limited to a maximum of 5,000 parts per million (ppm) or 0.5% as of 2020. This is a sevenfold reduction from the current global limit of 35,000 ppm or 3.5%. The reduction in the sulfur content of fuel and commensurate reduction in sulfur dioxide emissions from ships is expected to have a beneficial impact on the environment and particularly on people living in and near port cities, and in coastal areas that are beyond existing emission control areas (ECAs). Regulations governing sulfur oxide (SOx) emissions from ships are included in MARPOL Annex VI.

The MEPC approved, with a view to adoption at MEPC 71, draft amendments to the MARPOL Annex VI bunker delivery note relating to the supply of marine fuel oil to ships that have fitted alternative mechanisms to address sulfur emissions requirements. The draft amendments are intended to address situations where the fuel oil supplied does not meet low sulfur requirements, but has been supplied to a ship that is using “equivalent means” (for example, abatement technology such as scrubbers) to reduce the SOx emissions in order to comply with MARPOL requirements.

EU Requires GHG Monitoring and Reporting for Ships

Last summer, the European Commission published four draft European Union (EU) regulations on monitoring and reporting GHG emissions from ships. The regulations include technical rules relating to an EU law on the monitoring, reporting, and verification of CO2 emissions from maritime transport (Regulation [EU] 2015/757), which was finalized in 2015. Under the monitoring and reporting law, shipping companies operating vessels of more than 5,000 gross tons that dock at EU ports must keep track of their CO2 emissions and submit reports to the European Commission, the EU’s executive arm, as of Jan. 1, 2018. The first reports are due April 30, 2019. The EU law does not oblige shipping companies to take any steps to reduce emissions, though it is seen as an initial step to requiring emissions cuts from ships. The EU monitoring requirements are similar to IMO measures agreed to in April.

The four EU draft technical regulations would set out requirements on verification bodies that would check shipping emissions reports, specify templates for shippers’ emissions reports, provide rules on the calculation of cargo loads, and provide methodologies for the calculation of emissions from ships. 

  • North Sea and Baltic Sea ECAs for nitrogen oxide (NOx) approved

The MEPC approved the designation of the North Sea and the Baltic Sea as ECAs for NOx. The draft amendments to formally designate the NOx ECAs will be put forward for adoption at the next session of the Committee (MEPC 71). 

The amendments would go into effect on Jan. 1, 2021. Designation as an NOx ECA would require marine diesel engines to comply with the Tier III NOx emission limit when installed on ships constructed on or after Jan. 1, 2021, and operating in the North Sea and the Baltic Sea. Provisions were also approved to allow ships fitted with non-Tier III compliant marine diesel engines to be built, converted, repaired, and/or maintained at shipyards located in the NOx Tier III ECAs. Both areas are already ECAs for sulfur oxides.

For a complete summary of recent MEPC developments, click here.

Impacts from Biological Spills May Eclipse Oil Spill Impact

Biological “spills” of non-native species could have a greater long-term effect on the environment than oil spills, according to the United Nations Food and Agriculture Organization. Most of the world’s biological spills—species of plants, animals, fungi, or other life forms that are introduced to a non-native habitat—are moved around the world as unintentional cargo, the UN body said.

International Plant Protection Convention data show the problem is getting worse, affecting agriculture and human health, clogging waterways, and triggering power plant shutdowns. It is also anticipated that rising worldwide temperatures related to climate change could significantly increase the impacts of non-native species over time. 

Regulations, including the International Convention for the Control & Management of Ships’ Ballast Water & Sediments which goes into effect in September 2017, are in place to reduce ballast-water transport of non-native species. Many ship owners already have or intend to install on-board water treatment systems that filter out large organisms and then treat the water to eliminate remaining species. However, several marine industry observers question whether ship owners will be able to comply with the treaty by the deadline, particularly because many owners have delayed installing systems because of both cost and lack of approval by US regulators of the treatment systems. Indeed, questions still remain as to what tests should be used to qualify the systems.

Industry sources estimate that the cost of designing and installing treatment systems could reach $60 billion over the next few years for the roughly 60,000 ships that will need them and that only about 3,000 ships have installed treatment systems so far. Many believe that regulators will be forced to extend the installation deadline by several years to enable ship owners to comply.

In a related development, the EPA’s Science Advisory Board (SAB) decided in November to not pursue concerns that data in a 2011 report tend to support the need for stronger standards on vessel discharges of ballast water. The SAB determined that the report need not be reopened because questions resulted from a difference of opinion rather than an error. The 2011 report was used by the EPA to craft its Clean Water Act 2013 vessel general permit.

New Chinese Air Emission Regulations

China has issued its first set of standards to limit airborne emissions from ships operating in inland waterways, ports, and coastal waters. The standards, which take effect in mid-2018, apply to engine exhaust limits for sulfur dioxide, NOx, and particulate matter from vessels with engine power of more than 37 kilowatts that burn diesel or fuel oil. Under the standards, diesel-powered or fuel-oil ships that travel inland waterways must use fuel with a sulfur content no higher than 5,000 milligrams per kilogram as of July 1, 2018, and no higher than 1,000 milligrams per kilogram of fuel as of July 1, 2021. The standards do not apply to oceangoing vessels or to private yachts that use gasoline. Ships may also meet emission requirements through the use of gas as fuel and exhaust gas cleaning systems, or “scrubbers.” 

EU Publishes List of Approved Ship Breakers

The EU has published a list of 18 approved shipbreaking yards, as required by a 2013 EU Ship Recycling Regulation. The regulation was designed to deter the sale of ships to yards in countries such as Bangladesh and India, where environmental and safety regulations are considered lax. The requirement to use only approved breaking yards will be phased in starting in mid-2017.  

The 18 yards are located in Belgium, Denmark, France, Latvia, Lithuania, the Netherlands, Poland, Portugal, Spain, and the United Kingdom.

While obsolete ships are considered hazardous waste and the export of ships from the EU is illegal, some ship owners have circumvented disposal requirements by selling old vessels to non-EU brokers for reflagging and subsequent shipbreaking, largely in Asian countries.

US Developments

US Hosts Forum on Ocean Health 

A forum hosted by US State Department and Secretary of State John Kerry has generated roughly $4.8 billion in pledges for conservation and other marine protection efforts from governments and business. The amount is nearly double the amount from the two previous summits combined, according to Kerry.

Commitments include the US’s expansion of the Papahānaumokuākea Marine National Monument off the coast of Hawaii to cover an additional 1,146,798 square kilometers, creating the world’s largest marine protected area and permanently protecting coral reefs, deep sea marine habitats, and important ecological resources; Seychelles plans to establish a marine protected area of up to a 400,000 square kilometers by 2020; the United Kingdom’s designation of a sustainable use marine protected area throughout whole of St. Helena’s 445,000 square kilometer maritime zone and the final establishment of the marine protected area around the Pitcairn Islands; Micronesia’s commitment to expand out to 24 nautical miles around each island its marine protected area that prohibits commercial fishing; and Canada’s commitment to meet marine conservation targets, including the commitment to protect 5% of Canada’s marine and coastal areas by 2017 and 10% by 2020. 

Secretary Kerry had launched the first oceans summit in 2014, aimed at bringing together environment ministers, oceans advocates, and the business sector to focus on expanding the protections for marine areas, cutting ocean pollution, and improving the sustainability of the fishing industry.

European ministers announced that next year’s Our Ocean conference will be held in Malta—the first time the summit will be in Europe—with an emphasis on improving the health of the Mediterranean Sea.

New Studies on Increased Coastal Flooding

According to a report by the research-and-news nonprofit Climate Central, US coastal cities are flooding more often, with two-thirds of floods since 1950 resulting, at least in part, on man-made climate change. The study is based, in part, on a new scientific article, published simultaneously in the Proceedings of the National Academy of Sciences (PNAS), which shows that the current pace of global sea-level rise is faster than it’s been in at least 3,000 years.

The PNAS study assembled a running 3,000-year global average of sea level rise and estimated that without man-made warming, the global average sea level would have risen less than 51 percent of the observed 20th-century rate of 5.4 inches.

A separate study by PNAS estimates that the oceans will swell about a meter by the end of the century if nothing is done to stop climate change. This study presents a worst-case scenario of sea level rise below 1.5 meters.

Even measuring sea level rise is not without its challenges. While mean sea level is generally defined as an average level for the surface of the ocean, oceans have different levels, and levels vary within the ocean. The causes of these differing levels are numerous, including the fact that the earth is not a perfect sphere and the density of matter beneath the sea floor is uneven, resulting in variations in gravitational pull. Differences in temperature, salinity, and circulation patterns all account for significant differences in sea level, even within an ocean. 

Mississippi River Dredging 

It is anticipated that among the impacts of climate change will be changes to river flow patterns and increased silt deposition. Increased dredging will likely be required, and nowhere is dredging more critical than on the lower Mississippi River, on which moves 500 million tons of cargo annually. The amount of dredging required depends largely on how much sediment the river carries downstream, and funding for dredging projects (largely from the federal government) does not always match the conditions on the river. 

Channel maintenance must be done annually in the area of Southwest Pass, the main access point to the Mississippi, with dredging often required for six to eight months each year, usually in the spring and fall, with a lull in the summer. The river deposits sediment in a manner that creates hazards for vessels, and if left unattended, these hazards can result in restricted shipping lanes, closures for deep-draft vessels, and grounding of vessels. 

About 70 percent of US agricultural exports are shipped via the Mississippi, and when this low-cost shipping alternative is unavailable due to river conditions, American farmers often lose their competitive advantage over crops grown in South America and elsewhere.

US Department of Defense Commits to Additional Maritime Requirements

The US Department of Defense and the US Environmental Protection Agency have published a set of proposals aimed at discharges from armed forces vessels. The proposals follow a January 2014 notice on the proposed standards, known as Uniform National Discharge Standards. The agencies believe that these proposals will reduce negative environmental impacts while spurring the development of pollution control devices. The proposals are also designed to bring armed forces vessels in line with the effluent limitations set in 2011 and imposed under the National Pollutant Discharge Elimination System (NPDES) general discharge permit required for nonmilitary vessels.

The discharges would apply to the normal operations of any armed forces vessels actively in use in US navigable waters, territorial seas, and the contiguous zone around those waters. The proposals would not apply to chartered vessels or those used by the US Army Corps of Engineers.

The 11 discharges covered in the proposals include the oily water skimmed from the water brake tank and the condensed steam discharged during catapult operations, hydraulic fluid released during routine maintenance of propellers, and deck runoff and wastewater from the ship’s shower and other sources, known as grey water. Garbage, sewage, air emissions, or discharges that already require permitting under NPDES are exempt from the proposal.

Coast Guard Revises Preparedness Guidelines

The US Coast Guard has revised its National Preparedness for response Exercise Program (PREP) Guidelines. Established under the Oil Pollution Act of 1990, the PREP Guidelines were developed to provide a mechanism for compliance with vessel response plan (VRP) drill and exercise requirements.

New requirements include remote assessment consultation exercises, shore-based salvage and marine firefighting table-top exercises, and equipment deployment for salvage and marine firefighting. 

Use of the PREP Guidelines is voluntary; however, their use satisfies regulatory requirements for maintaining the required VRP.

New Maritime Technologies

Cyber Security Aboard Ship

With driverless cars and trucks fast becoming a reality, the question of when such technologies might be available for maritime ship manning has been raised, along with related questions regarding cyber threats and cybercrime. Safeguarding the industrial control systems aboard vessels is viewed as a top priority. Remote attacks could be mounted via radio frequencies and communications channels aboard ships, but security must also be strengthened to avoid internal attacks via USB and serial ports on shipboard computers. Sabotage is also a threat, with terrorists or criminals potentially manipulating shipboard navigational devices to cause groundings or collisions. Collaboration between maritime interests, technology manufacturers, and the navies of the world are seen as the best avenue of neutralizing these threats.

Ships Inspected by Drones

Maritime surveyors have begun using camera-equipped drones to evaluate structural ship components. The move is seen as potentially reducing survey times and improving safety for surveyors. The video stream from the drone is recorded on a tablet computer for review and documentation purposes. Surveyors intend to work with drone manufacturers in the years ahead to develop tailor-made drones that are certified as explosion-proof for use in interior spaces.

Furthering Grey Water and Bilge Water Improvements

Even with current restrictions on discharges of grey water and bilge water, some industry observers believe that more should be done to limit undesirable discharges from these sources. For example, improvements to mechanical devices could help reduce the amount of hydrocarbon discharge in bilge water. Improved oil-content monitors and bilge alarms would allow greater control over these discharges. For grey water, bioremediation products and technology are available to reduce or remove contaminants from this waste system. Although an argument can be made that many of these improvements are not cost-effective, pressure will remain on ship owners and operators to do more to preserve water quality. 

LNG-Fueled Ships Prove Challenging to Owners 

Although liquefied natural gas (LNG) ships offer lower SOx, CO2, and NOx emissions, several owners of oil platform supply vessels are thinking of ending their decade-long experiment with greener fuels. Initial costs of green vessels tend to be higher than for conventional diesel-fueled ships, and resale values are reported to be considerably lower. That, combined with unstable LNG pricing and a lack of interest from clients who once demanded green specifications from supply-boat operators, has forced some vessel owners to convert ships to diesel. Hydrogen fuel cell vessels and LNG-battery hybrids have faced similar challenges. While charterers may appreciate the flexibility of having a variety of ships at their disposal, ship owners complain of income uncertainty, fuel unavailability, and uneven returns on ship investments.

Enforcement Actions and Civil Penalties

Princess Cruises

Princess Cruise Lines will pay a record $40 million fine for illegally dumping oily waste and plead guilty to seven felony charges under an agreement the Department of Justice announced in December. The company allegedly intentionally discharged oil-contaminated bilge water through a so-called “magic pipe” on its Caribbean Princess ship dating back to 2005, according to the factual statement and plea agreement filed in federal court. In some instances, the ship’s crew ran clean seawater through the ship’s equipment to create a false discharge record.

This is the largest criminal penalty ever imposed in a deliberate vessel pollution case. The case resulted from a joint investigation involving the US Coast Guard and British Maritime and Coastguard Agency after a newly hired engineer reported the illegal discharges to the British agency in 2013. 

Kirby Inland Marine

Kirby Inland Marine LP agreed to pay $4.9 million to settle claims stemming from a 2014 oil spill in the Houston Ship Channel. In addition to the Clean Water Act civil penalties, the company also has agreed to improve operations across its entire fleet of vessels, including the installation of enhanced navigational equipment on vessels and providing employee training on the new equipment and navigational skills. Kirby also agreed to waive any limits on its liability under the Oil Pollution Act related to the spill.

The settlement is a result of a complaint filed by federal prosecutors pursuant to the Clean Water Act Section 311(b), which makes it illegal to discharge oil and other hazardous substances into navigable waters or adjoining shorelines in quantities that may be harmful to the environment or public health. The penalty paid by Kirby will be paid to the federal Oil Spill Liability Trust Fund.

The March 22, 2014, spill occurred when a Kirby vessel, pushing two 300-foot oil barges, tried to cross the ship channel in front of a cargo ship, according to the complaint. Conditions were foggy, but the Kirby vessel had detected the 585-foot bulk cargo ship. The lead oil barge was struck by the cargo ship, and 4,000 barrels of heavy marine fuel oil spilled out of the barge into the water, according to prosecutors. About 160 miles of shoreline were damaged because of the oil spill. 

D’Amico Shipping Italia SpA.

Two high-ranking engineers on an Italian oil tanker have pled guilty to felony conspiracy charges related to a scheme to flush waste oil out of the ship’s sewage system and hide it from the US Coast Guard, according to federal prosecutors. The chief engineer aboard the M/T Cielo di Milano, owned by D’Amico Shipping Italia SpA., pled guilty to one felony count of failing to maintain an oil record book and was sentenced to eight months in prison, and ordered to pay a $5,000 fine. The first assistant engineer pled guilty to one felony count of conspiracy to obstruct justice for his role in covering up the scheme. His sentencing is scheduled for January 18, 2017.

According to prosecutors, the engineers and other crew members got rid of the oily waste that accumulated in the machinery rooms of the tanker by pumping it through hoses and into the sewage holding tank, from where it was dumped at sea. 

Court documents said that the scheme came to light during a Coast Guard inspection in January 2015, when the oil record book aboard the ship contained “materially false” information, concealing the fact that they had bypassed the pollution-control systems aboard the vessel. According to prosecutors, the chief engineer directed a crew member to fill a holding tank meant for oily waste with fresh water to dupe the Coast Guard into thinking that the crew was using it. They also said that the first assistant engineer and others hid the hoses and the pump they used from the Coast Guard inspectors.

Briese Schiffahrts GmbH & Co. KG

Cargo ship operator Briese Schiffahrts GmbH & Co. KG must pay a total of $1.5 million after pleading guilty to using a hose to dump oil waste directly into the ocean and then lying about it to investigators, according to federal prosecutors.

Prosecutors said that, along with the $1.25 million fine, the company must pay $250,000 to the National Fish and Wildlife Foundation to fund projects that enhance coastal habitats of the Gulf of Mexico and bolster priority fish and wildlife populations. The ship, M/V BBC Magellan, is also banned from doing business in the United States for the next five years, prosecutors said.

M/V Ocean Hope

Two officers of a ship will go to jail for their role in the dumping of oily waste into the sea and then covering up the illegal activity. The chief engineer and the second engineer of the M/V Ocean Hope were convicted by a jury with the US District Court for the Eastern District of North Carolina in September. On Dec. 7, the chief engineer was sentenced to nine months in prison, and the second engineer received a 12-month jail term.

Both men are citizens of the Philippines who served on the Ocean Hope, owned by Greek-based Oceanic Illsabe Limited. Oceanfleet Shipping Limited, also based in Greece, was the managing operator of the cargo ship.

The chief engineer was charged with bypassing pollution prevention equipment with an unauthorized hose connection to discharge oil sludge generated by the ship directly into the sea. He also ordered crew members to pump oily mixtures from the ship’s machinery and engines directly into the ocean using a pump rather than processing it with the vessel’s pollution prevention equipment.

Both engineers were also charged with failing to log overboard discharges of oil in a record book as required, and the second engineer allegedly made false entries in the book and provided them to the US Coast Guard. In addition to jail time, the two men were also given a year of supervised release, with special conditions, including deportation. Sentencing of the two Greek-based shipping companies is scheduled for January 2017.

American Commercial Lines LLC (ACL)

American Commercial Lines LLC has agreed to pay the federal government $20 million for removal costs and damages from a 2008 oil spill caused by a barge collision that released 300,000 gallons of oil into the Mississippi River.

ACL, in July 2016, contested claims submitted by businesses whose docks and boats were not directly damaged by the oil spill, but who lost the use of the Mississippi River because the government closed parts of it. The company also contested some reimbursement claims from contractors that the company said were inflated or not properly filed. The federal district court rejected the company’s arguments, as well as ACL’s defense that a third-party tugboat operator, DRD Towing Co. LLC, was solely at fault for the accident, along with the company’s argument that it was entitled to limit its liability under the Oil Pollution Act.

Ciner Gemi Acente Isletni Sanayi Ve Ticaret S.A. 

The US Department of Justice announced a $1.05 million plea agreement in Maryland federal court under which a Turkish shipping company admitted that its employees dumped oily waste water into the sea without using required pollution prevention equipment and then falsifyied records to cover it up.

Ciner Gemi Acente Isletni Sanayi Ve Ticaret S.A. pled guilty to violating the Act to Prevent Pollution from Ships and was sentenced to pay the penalty, $150,000 of which will go to the National Marine Sanctuary Foundation, the Justice Department said. The agreement follows pleas the same week from two crew members aboard the company’s M/V Artvin bulk cargo freighter who admitted to falsifying the ship’s oil record book and were sentenced to probation, according to the announcement.

The Artvin’s chief engineer was sentenced to six months of supervised probation and a $50,000 fine, and the second engineer received a one-year unsupervised probation sentence.

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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