WILL “MAGIC FUEL” BE THE NEXT “MAGIC PIPE”? ALASKAN FEDERAL EMISSIONS CONTROL AREA LAWSUIT RAISES QUESTIONS ABOUT INDUSTRY EXPOSURE UNDER NEW RULES highlights the processes employed by the federal government in applying and enforcing Introduction and Background international standards in areas that extend beyond U.S. territorial waters. Regardless of In a lawsuit that raises unique the outcome of the case, two things are very questions about international and federal law, clear: (1) increasingly stricter air emissions the State of Alaska is seeking an injunction requirements for ships, in some shape or form, against the Federal government which, if are here to stay, and (2) the Federal granted, would prevent Federal agencies from government is serious about enforcing them. enforcing an offshore segment of the newly As a matter of fact, the first known U.S. created North American Emissions Control citation for ECA related deficiencies occurred Area (ECA). The case, which is the first of its in early February of this year, when a kind involving new international standards Panamanian flagged bulk carrier was issued and corresponding U.S. laws that came into two operational deficiencies in New Orleans effect in August 2012, argues that by the U.S. Coast Guard. According to the Environmental Protection Agency (EPA) Coast Guard’s Port State Control Report, the regulations requiring ships transiting the area vessel had compliant fuel onboard, but failed of the ECA off of Alaska’s coast to burn lower to use it while operating in the North sulfur fuel will have the practical effect of an American ECA, and both the Master and additional corporate tax on the shipping and Chief Engineer were not familiar with the tourism industries so vital to Alaska’s operation of Annex VI related equipment and economy. According to Alaska, the additional the current ECA rules. While there has been costs of complying with the ECA, which no report of any subsequent criminal encompasses areas off of the southeastern and investigation of the vessel or her crew, this central parts of Alaska that include shipping incident signals that U.S. inspectors are routes, will ultimately be passed on to the actively paying attention to vessel compliance consumer, making the already high cost of with the new ECA and low sulfur fuel shipping goods to the state and the cruise ship standards and will be on the lookout for passenger fares even more expensive. violations. The suit is one of the latest Similarities in the recordkeeping developments in the government’s “phased” requirements of Annex VI to those employed approach to cutting sulfur emissions that has in respect to MARPOL1 Annex I (prevention seen some states, like California, seek tighter of oil pollution) and Annex V (garbage regulation of maritime emissions, and others, management), when coupled with the U.S. like Alaska, seek fewer restrictions. Although government’s aggressive pursuit of maritime the immediate impacts of the case may not be environmental crimes cases, makes one recognized by the broader shipping industry, wonder: will the stricter fuel requirements the dispute underscores the varied reactions expose vessels and vessel interests to criminal state governments and industry are having to and civil liability the way oily water separator the new federal emission requirements, and (“OWS”) cases have to date? After all, in the 1 The information contained in this document is for general informational purposes only, does not constitute legal advice, and is presented without any representation or warranty as to its accuracy, completeness, or timeliness. The use of, including the transmission through or receipt of information from, this website does not create an attorney-client relationship with Chalos O'Connor, LLP, or any of its attorneys, and you. last five years alone, U.S. criminal and enforcement of certain types of violations investigations and prosecutions of alleged based upon each agency’s expertise and OWS related misconduct and Oil Record authority. Book log entries have resulted in millions of dollars in criminal fines and community In general, suspected violations of service payments, and thousands of months of MARPOL and the APPS in which there is criminal probation for vessel owners and probable cause to believe a criminal violation operators, including the mandatory has occurred are referred, normally by the implementation of expensive environmental Coast Guard, to the Department of Justice for compliance monitoring programs by many of further investigation and prosecution. In the these entities for their fleets. 30 years since the enactment of APPS, U.S. agencies have refined their tactics for Moreover, the very same statute relied investigating suspected APPS matters and upon by the U.S. government for the improved their coordination, leading to more investigation and prosecution of suspected frequent and successful criminal prosecutions MARPOL Annex I (oil) and V (garbage) under the statute, which in turn deliver violations also governs Annex VI. The U.S. positive publicity and substantial fines to the Act to Prevent Pollution from Ships government. In particular, the U.S. (commonly referred to as the “APPS”) government has increasingly credited the implements all of the international MARPOL allegations of and relied upon testimony from treaty and its Protocol, outlining among other so called “whistleblowers,” who may receive things the administration and enforcement of up to half of a criminal fine levied in a MARPOL, issuance of certificates, reporting criminal APPS case. A mere allegation alone requirements, violations, and penalties for by a whistleblower that a vessel has violated violations of the APPS. The APPS provides the APPS will, in almost all cases, trigger a for both civil and criminal penalties, making lengthy (and costly) investigation by U.S. the knowing violation of the APPS a Class D authorities in port. felony. With such a the powerful tool at its The APPS, for the most part, provides disposal, substantial incentives for successful inspection, examination and investigation APPS prosecutions, and an established authority for suspected violations of the Act to statutory framework for handling such matters two agencies: the U.S. Coast Guard, and the under the APPS, there is little reason the Coast EPA. In 2011, the two agencies entered into a Guard, EPA and Department of Justice will non-binding Memorandum of Understanding approach suspected violations of Annex VI to establish how they would mutually under the APPS any differently than those implement and enforce the newly created involving the other MARPOL annexes (i.e. oil ECAs, including the referral of violations and and garbage). evidence from one agency to another and the provision of relevant technical expertise. For their part, there are steps vessels, While the EPA has authority to issue Engine their owner and operators can take if indeed International Air Pollution Prevention the current pattern for enforcement of (EIAPP) certificates, the Coast Guard has law international environmental standards enforcement authority to board ships on the continues. Vessels calling in U.S. waters and high seas and waters subject to U.S. at U.S. ports, can expect rigorous scrutiny of jurisdiction, as well as certain facilities ashore. their records concerning the purchase and use The agreement delineates the investigation of compliant fuels. Consequently, owners and 2 The information contained in this document is for general informational purposes only, does not constitute legal advice, and is presented without any representation or warranty as to its accuracy, completeness, or timeliness. The use of, including the transmission through or receipt of information from, this website does not create an attorney-client relationship with Chalos O'Connor, LLP, or any of its attorneys, and you. operators should be vigilant about compliance, the area.2 Beginning in August, 2012, ships International Safety Management (ISM) Code subject to MARPOL regulations transiting the policies and procedures, and onboard training North American ECA, which extends 200 of vessel personnel; and, regulated entities nautical miles from a substantial portion of such as corporate vessel owners and technical both the American and Canadian coastlines, managers, should be knowledgeable about must burn low sulfur fuel oil (not exceeding government requirements, policies and one percent or 10,000 “parts per million.”). In options, with a view towards avoiding many addition to the new North American ECA and of the pitfalls the maritime industry has seen existing ECA’s in the Baltic and North Seas, with OWS cases and Oil Record Book another ECA in the Caribbean Sea is slated to requirements. enter into force in January 2013 and take effect in 2014 and 2015. In general, by 2015 MARPOL, APPS, ECAs and the New most ships will have to cut their fuel sulfur Lower Sulfur Fuel Requirements standard to .10 percent when operating within ECAs, and by 2020 all ships operating When the revised Annex VI to the anywhere (i.e. outside of ECAs) must cut their International Convention to Prevent Maritime fuel sulfur standard to .5 percent. Increasingly Pollution (MARPOL) entered into force in stringent emissions requirements and fuel June 2010, new limitations on sulfur oxides, standards therefore already apply, or will soon which will progressively increase over the apply, to ships whether they are operating next seven years, were put into place. These inside or outside