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Maritime Environmental Law Update

September 3, 2014

 

In recent months, there have been significant developments in respect of international standards for marine vessel air emissions and effluent discharges, regulation of spills and releases, and enforcement cases of note. Our prior update was issued in September 2013 and can be found here.

International Standards for Air Emission and Marine Discharges

Implementation of Low Sulfur Fuel Standard

A lawsuit opposing extending the North American emission control area (“ECA”) to southern Alaska marine waters was dismissed by a federal judge in Anchorage September 17, 2013. The State of Alaska filed the lawsuit seeking to overturn a U.S. Environmental Protection Agency (“EPA”) 2012 rule extending an international requirement for use of low-sulfur marine fuel to ships near its coast. The State claimed the new rule violated the U.S. Constitution’s Treaty Clause (U.S. Const. art. II, § 2, cl. 2) because the North American ECA was an international treaty not approved by two-thirds of the U.S. Senate, as would generally be required.

The EPA’s ECA rule, effective August 1, 2012, established the ECA for most U.S. coastal waters, including southeastern and south-central Alaska. The EPA’s rule was designed to enforce the International Maritime Organization’s (“IMO”) International Convention for the Prevention of Pollution from Ships (“MARPOL”) Annex VI, which requires a phase-in of new marine fuel oil standards with lower sulfur limits. Even more stringent standards apply to ships operating in ECAs in the Baltic Sea, North Sea, North American waters, and U.S. Caribbean Sea.

In related developments, a group of ten global shipping companies offered qualified support for the ECA rule, but they are concerned that lax enforcement may put them at a disadvantage and compromise their interests.

The group, which refers to itself as the Trident Alliance and includes Maersk, Wallenius Wilhelmsen Logistics, Stena AB, American Roll-on Roll-off Carrier LLC, EUKOR Car Carriers Inc., Hoegh Autoliners Holdings A/S, J. Lauritzen A/S, Rickmers-Linie GmbH & Cie, Torvald Klaveness, and Unifeeder A/S issued a public statement supporting the ECA on July 7, 2014.

Meanwhile, the international trade association Baltic and International Maritime Council (“BIMCO”) has argued the IMO’s adoption of low-sulfur fuel and ballast water rules were not thoroughly vetted, and the IMO should be required to carry out a full impact assessment before adopting any measures to reduce greenhouse gas emissions (“GHG”) from international shipping.

EPA Sees Likely Maritime GHG Pact

In remarks made in November 2013, the EPA’s Office of Transportation & Air Quality Director, Chris Grundler, stated that recent success of IMO discussions suggests that an international pact to reduce emissions of maritime GHGs is more likely than a pact to control aviation GHGs. The opinion was based, in part, on the contrast between progress achieved by the IMO on maritime emissions and unsuccessful efforts by the International Civil Aviation Organization (“ICAO”) to reduce aircraft GHGs.

In October of last year, the ICAO committed to reach an agreement on market-based measures to limit GHGs by 2016, with the measures to be applicable by 2020. According to government data, GHGs from airplanes account for between 2.4 and 3.4 percent of U.S. GHGs, whereas ships account for less than 1 percent of GHGs.

EPA Emissions Requirements to Impact New Vessels

The EPA’s Tier 4 regulations are now applicable to high- and medium-speed diesel engines used in workboats, ferries, small cargo ships, and government vessels (found here). Specifically, the regulations apply to new marine diesel engines greater than 800 horsepower with per-cylinder displacements less than 30 liters. The regulations call for reductions of oxides of nitrogen by about 70% from Tier 2 levels. Compliance options generally include greater use of liquefied natural gas (“LNG”) as fuel, diesel engines incorporating exhaust gas recirculation, and diesel engines utilizing urea-based selective catalytic reduction.

EPA to be Flexible with Vessel Discharge Permits

In a statement made by Principal Deputy Assistant Administrator for Water Michael Shapiro, the EPA announced that it will give low enforcement priority to violations of the 2013 vessel general permit (“VGP”) where shippers won extensions to comply with related U.S. Coast Guard (“USCG”) technology standards. The statement came March 4, 2014 during a U.S. House of Representatives Transportation Subcommittee hearing on Coast Guard and Maritime Affairs. Shippers would like the EPA to re-open the VGP, which took effect January 1, 2014, to give them an additional two years to comply with the requirements.

The VGP sets numeric discharge standards and imposes other requirements on ballast and other discharges from large commercial vessels 79 feet in length or greater, and covers a wide range of discharges, including ballast water containing invasive species and other pollutants, deck runoff, graywater discharges, and bilgewater discharges.

The EPA issued the VGP under the authority of the Clean Water Act, while the USCG is acting under the authority of the National Invasive Species Act. The agencies expected the installation of USCG-approved technologies to allow the permitee to comply with both agencies’ rules, but the USCG has not approved any technologies, leaving shippers unable to comply. While the USCG has provided extensions to more than 200 vessels, the EPA has declined to provide similarly broad assurances sought by the industry.

DOD Proposes Rule to Limit Discharges from Vessels

On January 31, 2014, the U.S. Department of Defense (“DOD”) and the EPA issued a joint proposed rule setting standards for certain discharges by armed forces vessels operating in U.S. waters (found here). The proposed standards, known as Uniform National Discharge Standards, would align DOD standards with the effluent limitations set by the EPA in 2011 and imposed under the National Pollutant Discharge Elimination System in the VGP program.

The new standards would apply to armed forces vessels active in U.S. waters, territorial seas, and the contiguous zone around those waters, and would address 11 out of 25 types of discharges the DOD and EPA determined in 1999 should be subject to control. The 11 discharges include various types of brine and wastewater used in activities that may foul them with oil, chemicals, and other wastes, as well as aqueous film-forming foam, which is used to fight fires on board vessels.

New Rules Apply to Oil Service Ships

The USCG has issued an interim rule regarding the statutory size limit placed on offshore supply vessels (found here). The Coast Guard Authorization Act of 2010 removed the existing statutory size limit placed on offshore supply vessels (“OSVs”) and required the USCG to issue regulations mitigating the risk created as a result of the size removal, noting the need to ensure safe carriage of oil, hazardous substances, and individuals other than crew on OSVs of at least 6,000 gross tons.

These ships, used by the oil and gas industry to carry cargo, passengers, and equipment to offshore energy production facilities, would be required to meet new safety and environmental regulations, including the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78).

The USCG does not anticipate that the rule will result in additional immediate costs to industry or government because it will only impact OSVs constructed after the rule goes into effect. The USCG is accepting public comments on the interim rule until November 17.

Alaska Issues New Cruise Ship Marine Discharge General Permit

The Alaska Department of Environmental Conservation (“DEC”) issued a general permit on August 29, 2014 pursuant to Alaska Statute 46.03 and Title 18, Chapter 69 of the Alaska Administrative Code, for marine discharge of treated sewage, treated gray water, and other treated wastewater from large commercial passenger vessels operating in Alaska.

The most significant change is that the 2014 General Permit includes effluent limits that are less stringent than some 2010 general permit limits because of the allowance of mixing zones for ammonia, dissolved copper, dissolved nickel, and dissolved zinc. The DEC does not expect that this provision will result in an appreciable change in effluent quality across all ships. More information can be found here.

To be covered under the Permit, an operator of a large commercial passenger vessel must apply for coverage, have an operational Advanced Water Treatment System, or utilize other methods of pollution prevention, control, or treatment that the DEC finds will be comparable with an AWTS, and register the vessel with the Department.

Hong Kong Shippers Reduce Air Emissions

Members of Hong Kong’s shipping associations voluntarily pledged, on February 14, 2014, to switch to lower-sulfur fuels while ships are at berth through the end of 2014. The move comes as the Environmental Protection Department is drafting legislation to mandate that oceangoing vessels switch to lower sulfur fuels at berth. The legislation is expected to go before the Legislative Council later this year and is tentatively expected to go into effect in 2015.

Environmental authorities are also considering regulations to require the use of lower-sulfur fuels by smaller local vessels in the Pearl River Delta region, including the Guangdong province in the People’s Republic of China.

Regulatory Developments

New Liability Limits Proposed for Oil Spills

The USCG proposed, on August 18, 2014, higher offshore oil spill liability limits under the 1990 Oil Pollution Act to reflect increases in the Consumer Price Index (“CPI”) (see proposed changes to 33 C.F.R. Part 138 found here). Also included in the proposal is a simplified procedure for the U.S. Department of Homeland Security to make future periodic CPI liability limit increases for vessels, deep water ports, and onshore facilities. The liability limit for a single-hull vessel weighing more than 3,000 gross tons would rise to the greater of $3,500/gross ton or $25.4 million from $3,200/gross ton or $23.5 million; for other tank vessels weighing more than 3,000 gross tons to the greater of $2,200/gross ton or $18.5 million from $2,000/gross ton or $17.1 million; for a single-hull vessel weighing 3,000 gross tons or less to the greater of $3,500/gross ton or $6.9 million from $3,200/gross ton or $4.3 million; and for other tank vessels weighing 3,000 gross tons or less to the greater of $2,200/gross ton or $4.6 million from $2,000/gross ton or $4.3 million.

The public has until October 20, 2014, to comment.

Industry Groups Call for Changes to OPA 90

An oil spill response industry coalition is calling for expansion of immunity provided under the Oil Pollution Act of 1990 (“OPA 90”) to cover liability for exposure to discharged oil and hazardous substances, as well as to lawfully used dispersants. The Responder Immunity Coalition (“Coalition”) proposes a presumption that the noted exposures during response actions do not constitute gross negligence, and would require that claimants pay attorneys’ fees and court costs where the court finds that the injury claims are meritless. Responders would remain liable for Jones Act seaman’s claims for personal injury or wrongful death under existing law resulting from operations conducted by the responder and not related to exposure claims. The Coalition was born out of the Deepwater Horizon incident, where lawsuits were filed against segments of the response industry. The Coalition, which includes the salvage industry, oil clean-up industry, spill management industry, offshore vessel support industry, and the well containment industry, was formed to work with Congress to enact changes to OPA 90.

Coast Guard Proposes Barge Shipment of Fracking Wastewater

On October 29, 2013, the USCG issued a proposal allowing barges to carry hydraulic fracturing (“fracking”) wastewater in bulk to recycling or disposal sites (found here). Although some bulk liquid toxic chemicals can be transported by a tank vessel if it qualifies as “listed cargo” (in any of several specified tables in Coast Guard regulations) the USCG said those provisions do not extend to shale gas extraction wastewater because the chemical composition of the wastewater varies from one load to another. In addition, fracking wastewater does not qualify for barge shipment because, according to the USCG, it could contain radioactive isotopes like radium-226 and radium-228, or other hazardous materials.

The wastewater is currently stored at the drilling site or transported by rail or truck to remote facilities. The USCG accepted comments until November 29, 2013, and is now in the process of putting together a final policy letter and potentially determining an effective date, although there is no announced timeline by which this is to occur.

IMO Looks at Polar Code

The IMO has been developing a Polar Code that will include mandatory rules for operation of commercial vessels in polar waters. Voluntary guidelines were adopted by the IMO in 2010, and the draft Polar Code expands on those guidelines by requiring a Polar Ship Certificate for environmental and operational systems as well as conformance with a Polar Waters Operation Manual (more information can be found here). Ships operating in polar waters will be required to demonstrate that they meet certain construction specifications. The draft Polar Code will be discussed in October at the IMO’s Maritime Environment Protection Committee meeting, and considered for adoption at the May 2015 meeting. If approved, it will go into effect January 1, 2017.

Mexico Tightens Spill Laws

The law on Spills in Mexican maritime zones, which came into force on July 16, 2014, seeks to reduce pollution in Mexican waters by instating a system of discharge permits and setting penalty/enforcement guidelines for spills and dumping events. Specifically, the following events will be penalized if they are carried out without a permit issued by the Maritime Ministry:

  • the discharge, disposal, release, or introduction into Mexican maritime zones—whether deliberate or accidental—of waste or other materials, including alien ballast water from vessels, aircraft, platforms, or other structures;
  • the storage of waste or other materials on the seabed or subsoil thereof from vessels, aircraft, platforms, or other structures;
  • the discharge of any organic material in order to attract biological species that are not intended to be fished;
  • the placement of materials or objects of any kind in order to create artificial reefs, docks, jetties, breakwaters, or other structures;
  • the deliberate sinking or abandonment of vessels, aircraft, platforms, or other structures (as well as those derived therefrom) for the sole purpose of deliberate disposal thereof; and
  • the re-suspension of sediment—consisting of the return of deposited sediment into a state of suspension in the water body—by any method or procedure that results in sedimentation.

The law also states that to be granted a spill or dumping permit, the applicant must provide certain information, including an environmental impact authorization, a discharge spill program, the results of laboratory analysis of the material in question, and a characterization of the material or waste (e.g., toxicity, physical, chemical, and biological structures).

The penalties include suspension of the permit from one to 60 days or cancellation of the permit, and fines ranging from $1,295 to $258,807, depending on the severity of the release.

EU Regulates Ship Recycling

The European Council has adopted a regulation under which EU ship owners will now be able to export obsolete vessels for scrapping/recycling only if their destination is an approved breaking yard that meets minimum environmental and worker safety standards. The regulation became effective on December 30, 2013. More information can be found here.

Offshore LNG Liquefaction

Royal Dutch Shell is introducing one of the first floating liquid natural gas (“FLNG”) facilities. The Prelude, at 488 meters long and 600,000 tons fully ballasted, will be among the largest objects ever floated on the ocean. The ship will be used to liquefy, store, and offload natural gas, and will likely move from field to field as natural gas deposits are drained.

LNG demand is being driven by multiple factors, such as climate change (natural gas burns more cleanly than many other fuels), desires to minimize reliance on nuclear energy, and price, among others. Placing liquefaction aboard ship avoids the construction of expensive subsea pipelines that may have limited lifetimes based on the size of the gas field they serve.

Exxon Mobil, Malaysia’s Petronas, and GDF Suez of France and Santos are all looking to launch their own FLNG facilities.

Recently, the U.S. Department of Energy (“DOE”) announced that it would change the process by which proposals for the export of liquefied natural gas would be vetted. In a departure from its past “first-come, first-served” practice, the DOE will now only consider proposals that have been subjected to the extensive environmental impact studies required by its sister agency, the Federal Energy Regulatory Commission. The Obama administration views this as an example of how the U.S. is moving forward to develop the capacity to export LNG.

Enforcement

Plea Agreement in Odfjell Asia Waste Discharge Case

Odfjell Asia II Pte Ltd has agreed to pay U.S. $1.2 million in penalties to settle alleged illegal discharges of oily waste into international waters. The company and a senior crew member pleaded guilty in the U.S. District Court for the District of Connecticut to violating the Act to Prevent Pollution from Ships. The crew member also pleaded guilty to maintaining inaccurate records of the ship’s discharges.

The company will be placed on probation for three years in addition to the fines, and the crew member faces up to a prison term and a fine.

Odfjell Asia transports and stores bulk liquid chemicals, acids, edible oils, and other products. It was charged with disposing of oily waste into international waters three times from the M/T Bow Lind.


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