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A new frontier in EPA’s mobile source enforcement program: air emissions from large ships and ocean-going vessels

Kirkland & Ellis LLP

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USA April 5 2014

EPA is signaling an emerging area for its enforcement program — air pollution from large ships and ocean vessels, commonly referred to as “ocean-going vessels.” Statements by Agency personnel indicate that EPA is poised to enforce SO2 and NOx requirements implemented through the Clean Air Act and Annex VI to “MARPOL,”  the  International  Convention  for  the  Prevention  of  Pollution  from Ships.

These requirements affect a large swath of the maritime sector, including companies that manufacture, sell, or import marine diesel engines, companies that make ves- sels that use such engines, the owners and operators of large vessels (such as cruise ships, tankers, container ships, and bulk carriers), and marine diesel fuel suppliers. The regulations also affect the short-sea shipping industry, whose routes tend to be within the 200 nautical mile border around the United States, the same area where the SO2 and NOx requirements apply — referred to as the North American Emis- sion Control Area (ECA).

North American Emission Control Area

Attorney AdvertisingEPA is poised to en- force stringent SO2 and NOx requirements that take effect in 2015 and 2016, respectively.

Starting in 2015, these regulated marine vessels are subject to stringent fuel sulfur emission limits. Once inside the ECA border, vessels are subject to the sulfur limit of 1,000 ppm. Beginning in 2016, stringent NOx aftermarket requirements be-

come applicable in the ECA. However, the International Maritime Organization,

Marine Environment Protection Committee is currently meeting in London (March 31-April 4, 2014) and is considering an amendment to Annex VI that would delay the NOx requirements to 2021. The United States, joined by other countries, opposed this delay.

Overview of EPA’s Ocean-Going Vessels Program

There are three prongs to EPA’s strategy to address emissions from large marine ves- sels: (1) engine and emission limitations promulgated under the Clean Air Act, (2) domestic implementation of the international standards for marine engines and fuels contained in Annex VI to MARPOL, and (3) the designation of U.S. coasts as “Emission Control Areas” through amendment to Annex VI. Fact Sheet, EPA Final- izes More Stringent Standards for Control of Emissions from new Marine Com- pression-Ignition Engines at or Above 30 Liters per Cylinder, December 2009 Each    of these prongs has been implemented. In April 2010, EPA promulgated a rule to implement the first and second prongs, and in March 2010, the International Mar- itime Organization officially designated waters off North American coasts as an Emission Control Area, thereby implementing the third prong.

In its April 2010 rulemaking, EPA adopted emission standards that apply to “Cate- gory 3” marine diesel engines and to marine diesel fuels produced and distributed  in the United States. Control of Emissions From New Marine Compression-Igni-  tion Engines at or Above 30 Liters per Cylinder, 75 Fed. Reg. 22896 (Apr. 30,         2010) Category 3 engines are the main propulsion engines used on most large ships such as container ships, tankers, bulk carriers, cruise ships, and lakers. In that same rulemaking, EPA promulgated a regulatory program to implement Annex VI to MARPOL in the United States, including engine and fuel sulfur limits, and ex- tended the international ECA engine and fuel requirements to U.S. internal waters. The rule also revised EPA’s domestic diesel fuel program.

New Engine Standards

The 2010 rule added two new tiers of NOx standards for new Category 3 marine diesel engines installed on vessels flagged or registered in the United States. While the Tier 1 standards went into effect in 2011, the Tier 3 standards take effect in 2016 and will require the use of high efficiency emission control technology, such as selective catalytic reduction, to meet the aggressive NOx limits, which range from 2.0 to 3.4 g/kW-h, depending upon engine speed.

New Fuel Standards

The 2010 rule also revised EPA’s domestic diesel fuel program to allow for the pro- duction and sale of diesel fuel with up to 1,000 ppm sulfur for use in Category 3

marine vessels by 2015. The rule generally prohibits the production and sale of ma- rine diesel fuel oil above 1,000 ppm sulfur, unless the vessel employs alternative de- vices, procedures, or compliance methods that achieve equivalent emission reductions. For instance, ship operators may elect to equip their vessels with exhaust gas cleaning devices, known as “scrubbers,” to remove SO2 from higher sulfur fuels. Shipping and cruise line companies are exploring innovative methods to achieve the required reductions. U.S. Emission Control Areas, December 13, 2012 (at 23-30); Letter to IMO from EPA and U.S. Coast Guard regarding equivalent methods to  comply with the ECA fuel sulfur requirements, March 12, 2012

Non-U.S. flagged ships can be detained at port for suspected violations of Annex VI.

A New Frontier for EPA Enforcement

On March 20, 2014, Janet McCabe, EPA’s acting assistant administrator for the Office of Air and Radiation (OAR), commented at an American Bar Association conference that reducing air pollution from marine vessels was a prominent emerg- ing issue for the Agency. Also in March 2014, OAR’s Director of the Office of Transportation Air Quality, Christopher Grundler, testified before a House of Rep- resentatives subcommittee about the program. Grundler stated that the marine ves- sel program is “one of the most important and cost-effective air quality programs the U.S. government has put into place in the past decade.” Christopher Grundler, Written Statement, Subcommittee on Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure, March 4, 2014

As the programmatic side of EPA has been touting the benefits of the program, the enforcement side of EPA is gearing up to enforce the new SO2 and NOx require- ments in 2015 and 2016, respectively. At a presentation to the Ship Operations Co- operative Program (SOCP) in November 2013, an attorney with EPA’s Air Enforcement Division (AED), in the Office of Enforcement and Compliance As- surance (OECA), explained that this is an important area for EPA because “ocean- going vessels are the last uncontrolled source of air emissions in the United States.” Panel Discussion: Maritime Regulatory Issues, ECA Regulatory Enforcement   The AED attorney also said that the assistant administrator for OECA, Cynthia Giles, is paying attention to the marine vessels program, and wants the enforcement pro- gram to ensure that the emissions benefits expected from EPA’s rule are realized.

Federal Enforcement: A Shared Responsibility Between EPA and Coast Guard

The AED representative speaking at the SOCP conference also commented that EPA has been joining the Coast Guard in recent marine vessel inspection-related ac- tivities. EPA and the Coast Guard entered into a Memorandum of Understanding (MOU) regarding the enforcement of Annex VI to MARPOL. The Annex VI   MOU provides that EPA and the Coast Guard will jointly and cooperatively en- force the provisions of Annex VI. These efforts include inspections, investigations, and enforcement actions if a violation is detected through oversight of marine fuel- ing facilities, on board compliance inspections, and record reviews.

 

Both EPA and the Coast Guard have issued guidance documents regarding compli- ance and enforcement of the marine vessels program. MARPOL Annex VI Air Pol- lution Prevention Requirements, June 27, 2011; Guidelines for Compliance and Enforcement of the Emission Control Areas Established Within the United States Jurisdiction as Designated in MARPOL Annex VI Regulation 14

EPA is obtaining plume samples from flyovers to assess compliance with SO2 requirements.

U.S. flagged vessels and non-U.S. flagged vessels are subject to inspection at U.S. ports. The Coast Guard has the authority to detain a non-U.S. flagged ship for sus- pected violations of MARPOL Annex VI. Both EPA and the Coast Guard can commence enforcement actions for violations of Annex VI, and the regulatory SO2 and NOx limits. Violators may be liable for a civil penalty of up to $25,000 for each violation. Furthermore, knowing violations of Annex VI are subject to poten- tial criminal liability.

Each regulated diesel engine in U.S. flagged vessels must have an Engine Interna- tional Air Pollution Prevention (EIAPP) certificate, issued by EPA, to document that the engine meets Annex VI NOx standards. Certain vessels are also required to have an International Air Pollution Prevention (IAPP) certificate, which is issued by

the Coast Guard. Ship operators must also maintain records on board regarding their compliance with the emission standards, fuels requirements, and other provi- sions of Annex VI.

Currently, EPA and the Coast Guard are obtaining emission samples from vessel plumes during flyovers, where the amount of SO2 can be estimated based on the CO2 concentration in the plume. This is one way that EPA and the Coast Guard will investigate compliance with the fuel sulfur limits. Other investigative mecha- nisms include inspections of vessel log books at ports.

EPA is also scrutinizing the Fuel Oil Non-availability Reports that it receives. Own- ers and operators of vessels who cannot obtain compliant fuel oil can make a fuel oil non-availability claim. EPA has published guidance regarding such claims. EPA may see increased fuel oil non-availability reports with the impending fuel sulfur limits, taking effect in 2015.

Kirkland & Ellis LLP - Granta Y. Nakayama, P.C. and Ilana Saltzbart
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