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Copyright © 2010 by K&L Gates LLP. All rights reserved.
The New Maritime Paradigm: U.S. Environmental Regulation of the Maritime Industry
May 19, 2010
2
ModeratorAdam Schempp, Environmental Law Institute
Panelists
Jennifer Carpenter, American Waterways Operators
Barry Hartman, K&L Gates
Michaela Noble, Maritime Administration (MarAd)
Annie Petsonk, Environmental Defense Fund
Bryan Wood-Thomas, World Shipping Council
3
Topics
Overview of Major Regulatory Changes
Air Issues Emissions and GHGs, SO2 emissions regulations
Waste Issues
TSCA and waste disposal
Water Issues Vessel permits under CWA
6
Water
EPA: New Vessel General Permit Governing Incidental Discharges
Coast Guard: Ballast Water Phase One (“IMO”) / Phase Two 2014 or 2016
for existing vessels Estimated cost of compliance $1.1 billion
7
Air
Large “category 3” marine diesel engines “Tier II” provisions – reduce NOx by 15 to 25 percent, starting in
2011; “Tier III” provisions – achieve NOx reductions 80 percent below
current levels, by 2016; Estimated cost of compliance $1.85 billion in 2020, increasing to
$3.11 billion by 2030.
Additionally, in 2009, California implemented state regulations that require all oceangoing vessels within 24 nautical miles of the California coastline to use cleaner burning diesel fuel, aimed at reducing SOx, NOx and PM emissions.
Kerry-Lieberman
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2010 2012Coast GuardBallast WaterCompliance
Phase I
2016 2020Clean Air
ComplianceBenchmark I
2030Clean Air
ComplianceBenchmark II
0
$3.5
$3
$2.5
$2
$1.5
$0.5
$1
Phase I
Phase II
● $1.66B
● $1.91B
Coast GuardBallast WaterCompliance
Phase II
(All costs are estimated based on data in rulemakings)
Do
lla
rs (
in b
illi
on
s)
● $267M
● $3.14B
New Annual Maritime Industry Compliance Costs
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States
California, Michigan, Minnesota, New York, and Washington have adopted or have begun the process of adopting their own stringent ballast water or emissions rules.
The agency estimated that compliance with the regulations would typically add $30,000 to a California port visit.
Air Emissions from Ships: The Changing Landscape
Bryan Wood-Thomas ELI and K&L Gates WebCast World Shipping Council 19 May 2010
World Shipping Council
• Represent global liner industry
• Carry >90% of the world’s containers
• 29 Member Companies– Container ships– Transoceanic Vehicle
Carriers
Overview
• Annex VI and the Designation of Emission Control Areas
• Key Questions & Challenges:– Fuel Availability– Scrubbers ?
• Climate – Where is the Debate going in the IMO?
New International Standards
New enginesTier 2: 20% reduction from Tier 1 in 2012Tier 3: 80% reduction from Tier 1 in 2016
Geographic standard – applies in Emission Control Areas (ECAs)
Fuel Sulfur Limits (to address SOx and PM)
July 2010: 1% in ECAs2012: Global cap falls to 3.5%2015: ECA cap falls to .1%2020: Global cap falls to .5%
- subject to review in 2018
New Standards will result in large reductions
Effects of the New Annex VI Standards
• Costs will be significant, but uniform across competitors.
• New engine technologies will emerge to meet the Tier III NOx standards. – Some will drive a departure from the usual trade-off
between NOx and CO2.
• Requirements to burn cleaner 1000 PPM fuel in 2015 represent a significant change in demand in the international oil market.
Where May We See New Emission Control Areas?
• Candidate ECAs:
- Mediterranean
- Tokyo Bay
- Hong Kong
- Shanghai
- Eastern Atlantic Coast of Europe
- Black Sea
What Engine Technologies Will emerge to meet Tier III?
• SCR-based Systems– Allows dramatic Improvement in NOx emissions w/o
traditional trade-off in fuel economy
– Requires urea and presents challenges for some other technology applications
• Advanced EGR with HAM – Test bed efforts underway
to reach Tier III levels
The Global Fuels Market
• Demand for lighter fuels is increasing …
• Uncertainty in supply will be a reality
• Scrubbers – Are they a viable option?
CO2 Generation in the Global Supply Chain
- Marine transportation accounts for some 2- 3.5% of total anthropogenic CO2 emissions worldwide.
- Generation of CO2 in the transoceanic leg is tremendously low when compared to all other transportation options
- What does this suggest about future trends in a changing economy?
- movement of production?- vessel speed?- changes in design?
The GHG Debate at the IMO
• Development of a legally-binding treaty is under debate
• Scope of application is highly contentious
• Most parties want universal application
• What system is to be employed?– Fuel tax– Differentiated tax scheme
with rebates– Mandatory efficiency
standards– Trading scheme– A hybrid of above
approaches
UNFCCC
Specific Proposals
• GHG Fund (Denmark et al)
• Leveraged Incentive Scheme (Japan)
• ETS (Multiple variants)
• Efficiency Standards with trading (USA)
• Efficiency Standards with fund (WSC)
• Import Levy with Rebates (IUCN)
• Port Fees (Jamaica)
• Proportionality (Bahamas)
Where Can We Expect the IMO Debate on GHG to Go?
□ Development of mandatory efficiency standards for new builds is highly likely.
□ Industry is fully supportive of a global, legally-binding treaty.
□ Scope of application and what type of system or treaty architecture is most appropriate will remain contentious.
□ At the WSC, we believe an efficiency-based scheme drawing on elements tabled by the U.S., Denmark, the WSC, and Japan will produce the most effective regime.
Discussions Currently Underway at the IMO
• Experts group formed under the IMO to evaluate the different proposals before the Committee- will not recommend a specific proposal, but will assess the effectiveness of the respective proposals
- present report to next MEPC
• MEPC moving forward with development of mandatory efficiency standards for new builds.
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Water Issues
Vessel Discharge Regulation Under the Clean Water Act:The Vessel General Permit
Jennifer CarpenterThe American Waterways Operators
May 19, 2010
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The Bottom Line
Vessel discharges in U.S. waters prohibited except as provided by CWA permit
Out to 3 miles from shore Limited exceptions for certain discharges
already subject to CWA regulation
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The VGP: Two Views
A square peg in a round hole?OR . . .
Making the best of a bad situation?
Answer: Yes!
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The Challenge of VGP Development
First application of NPDES program to mobile sources
Individual or general permit 401 certification process
Constrained time frame
Limited EPA experience with vessel operations
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VGP Basics
26 covered discharges Best Management Practices Notice of intent to comply Reporting and recordkeeping Corrective action State-specific conditions
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The Challenge of VGP Implementation
Application to vessel operations BMPs Notice of Intent process Recordkeeping
Compliance with state conditions Some not technically feasible
Enforcement: who and how?
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Trying to Make it Work
Industry self-help BMP guides, template forms
EPA Q&A Guidance to be posted on Web
State conditions Advocacy on multiple fronts
Interagency cooperation Coast Guard-EPA MOU pending
36
Signs of Progress
Practical EPA interpretations NOI holder for barges Definition of voyage Definition of visible sheen Electronic recordkeeping?
State conditions Removal of IL, NJ, CA conditions IA and PA requests for removal
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The Next Chapter
“VGP 2.0” VGP expires 12/18/13 Needs: lead time, transparency, improved
EPA/state process
A new legislative framework for regulation of vessel discharges?
Will Congress take up the challenge?
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Thank you for joining us.
Jennifer Carpenter, [email protected]
Barry Hartman, K&L [email protected]
Michaela Noble, [email protected]
Annie Petsonk, [email protected]
Bryan Wood-Thomas, World Shipping [email protected]