Maritime Environmental Law Update (January 2015 edition)

January 7, 2015 | Ports, Rail, Roads, Maritime Transport & Shipping

 

We are providing our quarterly update on significant developments in regard to international marine vessel air emissions and effluent discharges, regulation of spills and releases, and maritime enforcement cases. Our prior update was issued in September 2014, and can be found here. Our monograph on maritime environmental law can be found here.

Foremost among current developments is the implementation in Emission Control Areas (“ECAs”) of the low sulfur fuel requirements on January 1, 2015, with a number of significant new phases of requirements to follow. In response, the impacted sectors (especially tankers, container vessels, and cruise lines) have implemented a host of improvements in connection with stack emissions (including greenhouse gas controls), energy efficiency (including LED lighting), noise controls (hybrid propulsion systems), effluent treatment, and ballast water treatment (including use of UV systems). Notably, this year will see the launch of the first LNG-powered vessels. We have been covering some of the more significant technology developments in our recent updates.

International Developments

ECA Standards Go Into Effect

Ships operating in areas off the coasts of North America and Europe will be required to use low sulfur fuel starting January 1, 2015; however, ship owners operating in the Baltic and North seas are still trying to determine if using sulfur scrubbers is an approved method of compliance under European Union (“EU”) law.

Shippers have asked the EU to provide guidance explicitly authorizing scrubber technology as an alternative to burning low-sulfur fuel to meet the standard. The EU has expressed concern over water quality, particularly with open-loop scrubber systems that wash exhaust gases with seawater, which is then discharged into the sea. Even though the wash water is treated to remove pollutants and reduce acidity, the U.S. Environmental Protection Agency (“EPA”) has reported that the technology carries risks to water quality.

The EU has not formally approved open-loop scrubber technology as a compliant-alternative technology, in part because wash water from the scrubbers, as well as water that escapes from closed-loop scrubbers that reprocess water, could exceed standards for some marine areas under the EU Water Framework Directive.

IMO’s New Noise Standards

The International Maritime Organization’s (“IMO”) new noise standards are now in effect for new ships that are 1,600 gross tons or larger and for which the building contract was placed on or after July 1, 2014. Certain vessels are excluded, including fishing vessels, offshore drilling units, pleasure yachts, military ships, and various types of barges. The new noise standards set specific limits for various shipboard locations, including machinery spaces, workshops, radio rooms, radar rooms, mess rooms, galleys, chart rooms, and the navigating bridge, among others. The primary goal of the new standards is to protect the crew from noise-induced hearing loss, provide an acceptable degree of comfort for passengers and crew, and ensure the ability to hear audible alarms.

The IMO has also approved non-mandatory guidelines for underwater noise, presented initially by the U.S. Coast Guard. Concerns have been raised regarding the effect of underwater noise on marine mammals and fish. The new guidelines are directed at ship designers, builders, and owners, focusing largely on propeller noise and noise from onboard machinery. No numerical noise limits are included in the guidelines.  

IMO’s Polar Code to Take Effect

In consideration of increased transit, especially in the Arctic Ocean, due to sea ice melt, the IMO has updated the International Code for Ships Operating in Polar Waters, commonly known as the Polar Code. The Polar Code could be enforced as early as January 1, 2017, after approval by the IMO’s Marine Environmental Protection Committee.

The Polar Code contains mandatory rules under international law for a range of shipping operations in waters surrounding the poles, including the following:

  • Prevention of oil pollution, including discharge restrictions prohibiting any discharge into the sea of oil or oily mixtures from any ship;
  • Control of noxious liquid substances being shipped in bulk;
  • Prevention of sewage pollution from ships; and
  • Prevention of garbage pollution from ships.

The new rules will be in addition to regulations previously established under the International Convention for the Prevention of Pollution from Ships.

IMO Issues Greenhouse Gas (“GHG”) Study

The IMO’s “Third IMO GHG Study 2014,” released in October, indicates that the world’s shippers produced less GHG emissions in 2012 than in 2007, but that without major policy changes, by mid-century GHG emissions could increase by between 50 and 250 percent over 2012 figures.

The study, which is issued in conjunction with IMO’s consideration of GHG regulations, points to speed reductions as one of the key factors in recent GHG reductions. This “slow steaming” resulted in daily fuel reductions of approximately 27 percent. IMO notes that, with an improving world economy, shippers may not be able or willing to observe slow steaming practices in the future.

Carbon Dioxide Emissions Reporting

EU environmental ministers have ratified a regulation that will require ships over 5,000 gross tons docking in EU ports to monitor and report their fuel consumption and carbon dioxide emissions. The regulation applies to all journeys made by such ships to and from EU ports, irrespective of the country of ownership of the vessel.

Some EU environmental ministers had voiced the opinion that a global agreement under the IMO would be preferable to the EU-wide regulation. While the regulation, which takes effect on January 1, 2018, does not require any reduction in emissions, it is believed to be a first step toward eventual limitations on port-related emissions.

Shenzhen Offers Subsidy for Fuel Switching

The South China city of Shenzhen announced plans to subsidize the use of low-sulfur fuel while ships are berthed in that city’s port and to assist ships wishing to tie into the city’s electrical grid. About $32.5 million is being allocated for these two programs. Ships that switch to fuels with sulfur content no higher than 0.5 percent will be eligible to receive a 75 to 100 percent reimbursement to cover the higher cost of the fuel. For onshore power utilization, the city will subsidize up to 30 percent of the cost of installation, and will reimburse the ship operator approximately 10 percent of the cost of electricity and maintenance fees.

U.S. Supreme Court Petition Seeks Limits on Oil Pollution Act (“OPA”) Claims

River shipping company American Commercial Lines LLC (“ACL”) has filed a petition with the U.S. Supreme Court in connection with a 2008 oil barge collision, which resulted in the release of 300,000 gallons of oil into the Mississippi River.

ACL asked the court to decide whether the OPA is the controlling authority over general maritime law in a lawsuit filed against two companies hired to handle the cleanup. The suit seeks to recover payments the U.S. Coast Guard made to the cleanup companies for labor and equipment, which ACL claims were never supplied, and for untrained or illegal workers.

ACL has cited a split of authority between the Second and Fifth circuits regarding the extent to which OPA trumps general maritime law, and whether the company properly invoked a rule by which a third-party plaintiff may demand judgment in the plaintiff’s favor against a third-party defendant in a suit dealing with maritime law.

Cruise Line Energy Efficiency

Carnival Corporation & plc has released results of its multiyear Fleet Fuel Conservation Program, and reports that, by the end of 2014, it will have saved more than one billion gallons of fuel and reduced carbon emissions by 12 billion kilograms over a seven-year period. Carnival’s energy-saving efforts include:

  • Improved propulsion, including optimizing ship speeds, cruise distances, and itineraries;
  • New hull coatings and cleaning technologies to minimize the growth of marine organisms that create drag on the hull;
  • Energy-efficient air conditioning systems that reduce the energy needed to cool the ships;
  • Low wattage lighting systems with greater use of LED bulbs;
  • Reduced rate of onboard water usage; and
  • Improved education and training.

In addition, Carnival reports an investment of approximately $400 million in exhaust gas cleaning technology called ECO-EGC, which uses filters and seawater to remove pollutants from exhaust gases.

U.S. Regulatory Developments

Coast Guard Agrees to Update Oil Spill Response Plans as to Endangered Species

In settlement of a case brought by the Center for Biological Diversity against the U.S. Coast Guard and the EPA for allegedly failing to update the oil spill response plans for New York and New Jersey, the Coast Guard has agreed to initiate an Endangered Species Act (“ESA”) consultation process.

The Center had accused the agencies of violating the ESA by failing to complete consultation and ensure that oil spill response planning in the New York Harbor and lower Hudson River will not harm critical habitats or endangered species. Of concern is the growing transport of oil by rail and barge through the region. The complaint listed 17 federally-listed endangered species, including the shortnose sturgeon, Atlantic sturgeon, sea turtles, whales, roseate tern, and piping plover.

The agencies have begun the consultation process by sending letters to the U.S. Fish and Wildlife Service and National Marine Fisheries Service asking for a list of any proposed endangered species or designated critical habitat that may be present in the area subject to emergency response activities under the New York-New Jersey Area Contingency Plan.

EPA Issues Guidance on Controlling Legionella

The EPA is developing guidance on controlling the bacterium that causes Legionnaire’s Disease, (or legionelliosis), in collaboration with the Centers for Disease Control and Prevention, and state regulators. The guidance is expected to be released in mid-2015.

The EPA’s guidance document will include a characterization of the effectiveness of different treatment technologies and other approaches against legionella, associated technology evaluation and water quality issues, recommended operational conditions, and potential regulatory implications.

The EPA is developing the guidance document after becoming aware of facilities that have installed or wish to install treatment for legionella. Several facilities have asked the agency for guidance on available treatment technologies designed to control the pathogen.
Legionnaires’ disease is a potentially fatal illness, involving pneumonia, according to the EPA. The bacteria are relatively resistant to standard water disinfection procedures, and can occur in potable water, the agency said.

Congress Extends Small-Vessel Permit Ban

Clean Water Act discharge permits will not be required for vessels shorter than 79 feet for another three years, pursuant to a bill reauthorizing U.S. Coast Guard programs that both chambers of Congress adopted on December 10, 2014, by unanimous consent. The moratorium applies to vessels used for commercial fishing and for transporting passengers, researchers, freight, and offshore supplies. The bill, which reauthorizes $8.72 billion for Coast Guard programs through fiscal year 2015, now heads to President Barack Obama for his signature.

The moratorium would prohibit the EPA from regulating any discharge of effluent from properly functioning marine engines; any discharge of laundry, shower, and galley sink wastes; and any other discharge incidental to the normal operation of a covered vessel.  

Royal Caribbean Receives Temporary Fuel Sulfur Content Exemption

With new sulfur limits of 1,000 ppm becoming effective within the ECAs on January 1, 2015, the EPA has given a temporary fuel sulfur content exemption to Royal Caribbean Cruises Ltd. ships to allow the company to expand its exhaust gas scrubber research program. The ECAs off the U.S. coasts require ships to use low-sulfur fuels; however, the EPA will allow Royal Caribbean to use cheaper fuel with a higher sulfur content in order to allow the company an opportunity to demonstrate its scrubber technology. The EPA has stated that the gas scrubber technology has the potential to provide major emissions reductions at a much lower cost than low-sulfur fuel.

Royal Caribbean is increasing the number of ships utilizing the scrubbers from six to 19. Installation of the systems on some of the ships will begin in January, with each installation taking eight months, according to Royal Caribbean. The company said that most installations will be completed by the end of 2017. The scrubbers are being manufactured by Alfa Laval AB of Sweden and Wartsila of Finland.

Enforcement

EPA Increasing Administrative Enforcement

The EPA is expanding its administrative civil penalty procedures to include air pollution penalties assessed pursuant to the Act to Prevent Pollution from Ships. The EPA is generally authorized to institute administrative enforcement proceedings against alleged violators under a variety of environmental statutes, including the Clean Air Act, the Clean Water Act, and the Federal Insecticide, Fungicide, and Rodenticide Act, among others.

The new rules, once finally approved (approval is expected this month), are anticipated to provide uniform procedures for administrative enforcement adjudications conducted by the EPA’s administrative law judges or regional judicial officers. The EPA believes that applying administrative enforcement proceedings to ship pollution will provide an efficient and effective adjudication, including administrative appeals, of such proceedings consistent with statutory requirements.

Bureau of Ocean Energy Management (BOEM) Raises Ceiling for Fines

In response to President Obama’s efforts to ensure safe production of domestic offshore energy resources, BOEM has raised the limit for offshore compliance penalties to about $134 million, nearly double the previous amount of $75 million. The increase is based on Consumer Price Index increases since 1990. The increase to $134 million is the maximum that can be implemented without new legislation. The increase applies to facilities handling oil and gas in federal and state waters, and to damages resulting from oil spills. The cap does not apply to other spill-related liabilities such as oil spill removal costs, which remain unlimited. The changes go into effect in January 2015.

Oil Fleet Operator Fined $12 Million

Noble Corp. has agreed to pay $12 million and plead guilty to eight felony environmental and maritime charges related to record-keeping and failing to notify regulators of potential water polluting problems on board two oil vessels at a Shell Oil Co. offshore drilling site.

The releases allegedly occurred in Broad Bay, Unalaska, in July 2012, when a holding tank overflowed and its contents went overboard, creating a sheen on the water. In addition, Noble admitted it knowingly made false entries and failed to properly record its collection, transfer, storage, and disposal of oil in the record books of the two vessels that year.

Noble, a British contract drilling services company with a fleet of 35 offshore drilling units, is to pay $8.2 million in fines and spend $4 million on community service projects.

Cargo Ship Chief Engineer Convicted Of Falsifying Vessel Oil Record Book

The chief engineer of a bulk carrier cargo ship was convicted by a federal jury of falsifying the vessel’s oil record book in violation of the Act to Prevent Pollution from Ships, obstruction of justice, and witness tampering.

In late December 2013, chief engineer Matthaios Fafalios ordered his engineering crew to construct a “magic hose” to discharge the oily wastewater that was in the vessel’s bilge holding tank. Two crew members on the vessel reported the illegal discharge to the Coast Guard, according to prosecutors. When Coast Guard inspectors boarded the vessel in January, Fafalios attempted to hide critical documents, such as the vessel’s sounding log, from the inspectors, which indicated that the illegal discharge had occurred.

The operator of the M/V Trident Navigator, Marine Managers LTD., had earlier pleaded guilty to knowingly falsifying the oil record book and obstruction of justice, and paid a criminal penalty of $900,000.00.

Italian Shipping Co. To Pay $2.8M For Ship Pollution

A Genoa-based Italian shipping firm, Carbofin SPA, has pleaded guilty to violating federal ship pollution laws by falsifying documents to hide illegal discharges of oil-contaminated waste into the ocean, according to the U.S. Department of Justice and U.S. Coast Guard. Three violations of the Act to Prevent Pollution from Ships occurred in 2013 and 2014. Engineers on the ship also pleaded guilty to violating the Act.

After speaking with the crew members, Coast Guard inspectors discovered that a “magic hose” was being used to discharge sludge, waste oil, and bilge water directly into the sea, bypassing the ship’s required pollution prevention equipment, according to authorities.

Australian Court Fines Ship Owner $1.2M

The New South Wales Land and Environment Court in Australia imposed a fine of $1.2 million on the owner of a ship involved in an oil spill in Newcastle Harbor. In Newcastle Port Corporation v. MS Magdalene Schiffahrtsgesellschaft MBH, both the ship owner and master pleaded guilty to discharging oil or an oily mixture into state waters. The ship owner also paid $1.7 million in cleanup costs.

The MS Magdalene was a Liberian-registered, German-owned and managed, 20-year-old bulk carrier. The ship made an inadvertent discharge in the course of deballasting while berthed in the Port of Newcastle to take on coal. Oil had seeped into a ballast tank through a hole in an internal bulkhead. Oil entered the harbor when the ballast tank was later emptied.

The master escaped criminal conviction when the court determined that he had justifiably relied on a major survey conducted prior to the master joining the crew.

California Dry Bulk Terminal Settles Pollution Runoff Case

A Richmond, California dry bulk terminal has agreed to pay $1.2 million in attorneys’ fees and for installation of water pollution control measures to resolve a U.S. Clean Water Act citizen suit. The legal action, brought by environmental group San Francisco Baykeeper, accused Levin Enterprises, Inc. of allowing storm water runoff from its coal, petroleum coke, and iron ore handling operations to enter the bay and related waterways. Of particular concern were discharges of nickel, copper, zinc, lead, aluminum, and iron. The consent decree requires the company to implement measures consistent with its long-term plans to improve storm water management, including equipment upgrades and advanced storm water treatment.

Marine Infrastructure

Emerging Issues Regarding Dredging of Ports and Inland Waterways

With the ever-increasing size of ships, ports of entry will face greater challenges in the years ahead in maintaining water depth to ensure ship passage. At the same time, ports have been challenged by increasingly severe storm events and water level changes.

Shippers are seeking ever-larger ships to maximize economies of scale. Just thirty-five years ago, the largest container ships carried about 4,100 twenty-foot containers. Today, the largest container ships can carry as many as 18,000 containers.

While the U.S. and China dredge markets are closed to foreign competitors, other markets are open. The main Chinese dredging company, CCCC Guangzhou Dredging Co., Ltd., has signaled its intention to enter the global dredging market.

Inland waterways will also require attention to ensure that commodities and raw materials can continue to be efficiently transported to export markets. In the U.S., the Water Resources Reform and Development Act of 2014 (“WRRDA”) requires the Secretary of the Army to conduct a study on the use of federally tax-exempt bonds and other potential revenue sources to fund infrastructure improvements through the Inland Waterways Trust Fund. Currently, the Fund’s (established in 1978) funding is limited to taxes on fuels utilized by vessels in the waterway system. WRRDA 2014 also provides for a pilot program to study and evaluate the cost effectiveness and efficiency of public-private partnerships with respect to infrastructure projects.

Port of Miami Can Proceed With Dredging

An environmental group has dropped its request for an injunction, allowing the dredging of the Miami harbor to continue without court intervention. At issue was Endangered Species Act protection of threatened staghorn coral populations and their designated critical habitat.

The U.S. Army Corps of Engineers has agreed to relocate between 200 and 300 colonies of the threatened coral species to a University of Miami coral nursery. U.S. Justice Department attorneys, representing the Corps, reaffirmed that the dredging contractor would follow the terms of its contract related to monitoring and controlling sedimentation.

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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