Hot Regulatory and Enforcement Issues: ECA, Ballast Water, VGP and the Jones Act Jeanne M. Grasso March 25, 2015 Stamford, CT The information contained herein is abridged and summarized from numerous sources, the accuracy and completeness of which cannot be assured. This should not be construed as legal advice or opinion and is not a substitute for the advice of counsel.
We ll be talking about hot topics - Emission Control Areas - Vessel General Permit - Ballast Water - Jones Act 2
North American and Caribbean ECAs Effective August 1, 2012 and January 1, 2014, respectively - Written procedures for fuel switching - Extensive recordkeeping requirements - Covers most of North America, plus Puerto Rico and U.S. Virgin Islands As of January 1, 2015, vessels required to use fuel with a sulfur content 0.10% or less. 3
North American and Caribbean ECAs (cont.) Guidance EPA Interim Guidance on Fuel Oil Non-Availability Notices of Protest Coast Guard Policy Letter, ECA Job Aid, FAQS Coast Guard Safety Alert regarding fuel switching (March 2015) Enforcement USCG and EPA joint enforcement EPA Penalty Policy (January 2015) Trades calling for strict enforcement of.1% limit EPA/USCG revised Protocols on Referrals under MARPOL Annex VI (March 2015) 4
ECA Enforcement Status Three Annex VI detentions Four subpoenas issued in 2014 - Extensive documents requested: Corporate policies and procedures, SMS, IAPP, bunker suppliers and related correspondence, fuel contracts and procurement policies, proof of FONAR information Some enforcement actions ongoing Multiple voluntary requests to explain why so many FONARs About 140 FONARs in 2015 "It's better to tell us first, than have us discover it later. - CDR Ryan Allain, USCG 5
EPA Penalty Policy Domestic legislation requires penalties be calculated taking into account the nature, circumstances, extent, and gravity of the prohibited acts committed and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and other matters as justice may require. 6
ECA Enforcement EPA Targets: - Shoreside fuel suppliers - Ships detained by the Coast Guard - Ships that fail to get compliant fuel or do not make best efforts Civil Penalties $25,000 / day - Goals Level playing field Deterrence - Penalties gravity, economic benefit, equitable adjustments Criminal Penalties - Extensive recordkeeping requirements could make these the next MARPOL Annex I cases. 7
EPA s 2013 Vessel General Permit ( VGP ) Effective date December 19, 2013 27 discharges covered Some key differences from 2008 VGP 1) Ballast water (numeric limits) 2) Oil-to-Sea Interfaces / Environmentally Acceptable Lubricants ( EALs ) 3) Monitoring and sampling requirements for ballast water, bilge water, graywater and exhaust gas scrubber effluent 4) Administrative improvements Extensive recordkeeping, inspections, corrective actions 8
U.S. Coast Guard / EPA Coast Guard inspects / EPA enforces - Coast Guard Job Aid for VGP Inspections on July 15, 2014 When deficiencies discovered: - Focus on record keeping - Encourage immediate corrective action - Entered into MISLE, which is available to EPA for review and enforcement - Penalties issued by EPA 9
VGP Enforcement Recent Examples Failure to conduct inspections required by the VGP - $6,600 Accidental discharge of pool water (reported to EPA) - $20,000 penalty Excessive underwater ship husbandry discharges that were not reported to EPA, but were reported to the USCG - Development of Standard Operating Procedures and training materials Discharges exceeding water quality limits for mercury - $25,000 Warnings for smaller companies for failure to conduct inspections and failure to submit NOIs 10
Coast Guard Ballast Water Management Mandatory ballast water management and reporting Applies to vessels operating in U.S. waters with ballast tanks Civil and criminal penalties for non-compliance Coast Guard Final Rule (March 2012) Options: Install and operate a USCG type-approved BWMS on a phased-in schedule Use only water from the U.S. public water system Do not discharge ballast water in U.S. waters Discharge to a shore-based treatment facility Complete BWE at least 200 nm from shore until required to have BWMS or Alternate Management System or Extension 11
BWM Requirements Comparison: Coast Guard and EPA Requirement USCG EPA VGP Discharge Standard IMO IMO BWMS Approval USCG Type approval None (BAT) BWMS Performance Testing 46 CFR 162.060 None BWMS Installation New Vessels BWMS Installation Existing Vessels Keel laid after 1 Dec 2013: Upon Delivery First drydocking after: <1,500 m 3.2016 1,500-5,000 m 3 2014 >5,000 m 3.2016 Same as USCG Same as USCG Extensions Yes No 12
Ballast Water Conundrum So, what is a company to do? The Conundrum: - No Type-Approved Systems or Practical Alternatives - USCG Extension Letter Now until January 1, 2017 - EPA Low Enforcement Priority Letter - Non enforcement Compliance Implications - Non-compliance - Public filings - Enforcement - Citizen Suits - Vetting / Charter Terms 13
The Jones Act Origins 1789, with fees imposed on foreignbuilt vessels, and tax / duty preferences given to U.S.-built and owned vessels. Section 27 of the Merchant Marine Act of 1920 (now 46 USC 55102) commonly referred to as the Jones Act restricts the U.S. coastwise trade in merchandise to coastwise-qualified vessels. Senator Wesley L. Jones (R-WA) Targeted amendments since then, but no wholesale changes
Coastwise Laws Transportation of merchandise Transportation of passengers Towing Dredging Salvage
Many Intricacies to the Jones Act... A vessel may not provide any part of the transportation of merchandise by water, or by land and water Or via a foreign port unless the continuity of the voyage is broken Or unless a new and different product is created - Gasoline blending And offshore operations have created the most controversy
Customs Rulings Numerous subtleties to the coastwise laws as they are very fact specific and company specific "...no other persons should rely on the ruling letter or assume that the principles of that ruling will be applied in connection with any transaction other than the one described in the letter." CBP interprets the coastwise laws the Coast Guard deals with vessel documentation and citizenship issues. Advisable to seek a ruling if activities do not fit squarely within the coastwise laws to avoid enforcement actions and questions from competitors or others.
Enforcement/Penalties Merchandise Violations - Penalties may be assessed against any person transporting the merchandise or causing it to be transported, including the importer, consignee, master, vessel agent, or vessel owner/operator. Penalties - Include seizure of the merchandise transported illegally or a penalty up to the domestic value of the merchandise or actual cost of the transportation, whichever is greater. CBP s Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages - Unless vessel in distress or some humanitarian reason for coastwise violation, it will be considered commercial expediency. - First violations commonly mitigated to 10% - Repeat offense hurts possibility of mitigation
Congressional Involvement Jones Act Issues are Highly Politicized Coast Guard Authorization Act 2010 - SEC. 217. ENFORCEMENT OF COASTWISE TRADE LAWS. Officers and members of the Coast Guard are authorized to enforce the coastwise trade laws. The Secretary shall establish a program for these officers to enforce these laws, including vessels that support the exploration, development, and production of oil, gas, or mineral resources in the Gulf of Mexico.. DHS Appropriations Bill Report 2014 (Senate Report 113-077) Senator Mary Landrieu, Chair of Appropriations Subcommittee: - Urges CBP to levy penalties for violations and to continue working with OMSA to investigate future violations and vigorously enforce the Jones Act on the Outer Continental Shelf - Directs CBP to develop a system to track status of Jones Act violations and make information available to the public on a quarterly basis 21
CBP Rulings and Enforcement Today Cases Date Assessed Amount 1 11/10/11 $2,870,000.00 Sleds/ Transponders 2 11/15/13 $23,845.00 Mats Merchandise Port of Lading Port of Unlading Port Forchon, LA Port Forchon, LA Walker Ridge Block 249 of OCS Various coastwise points along OCS 3 11/19/13 $30,945.00 Mats Port Forchon, LA Various coastwise points along OCS 4 11/19/13 $36,750.00 Mats Port Forchon, LA Various coastwise points along OCS 5 12/03/13 $1,150,140.00 Tripod Support Frames Port Forchon, LA Various coastwise points along OCS 6 08/29/13 $24,655,000.00 Pipe Laying Equipment Mobile, AL Gulf of Mexico OCS 7 12/16/11 $1,346,977.00 Offshore Equipment Mobile, AL Gulf of Mexico OCS
Questions? Jeanne M. Grasso Blank Rome LLP 600 New Hampshire Avenue, NW Washington, DC 20037 Tel: (202) 772-5927 Mob: (202) 431-2240 grasso@blankrome.com 21