Environmental Compliance Challenges for the Future North American Marine Environment Protection Association Environmental Compliance Challenges for the Future Houston, TX February 23, 2017 Michael K. Bell #105154784

Compliance Challenges Trump Administration Ballast Water Management EPA’s Vessel General Permit 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Environmental Regulations Under the Trump Administration 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Environmental Regulations Industry closely following to what extent the new Trump administration will impact the maritime industry environmental regulations Short answer: probably not very much 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Environmental Regulations Generally, the Trump administration aims to cut back on environmental regulations But, we do not anticipate significant changes for the maritime industry since most of environmental regulation of shipping is driven by issues which carry over to administrations unchanged For example: International conventions Agreements 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Offshore Energy Obama administration gave strong support to Offshore Wind/Renewable Energy 12 commercial leases (Atlantic OCS) Unclear if Trump administration will support Offshore Oil and Gas Expect Trump administration to be friendlier to offshore oil and gas May be policy action to assist offshore drilling 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Marine Environmental Grants Congress recently appropriated close to $3 million for grants Hydrogen Fuel Cells Batteries Ballast Water Technology May not survive President Trump cuts, leaving to Congress to decide if worth funding 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Ballast Water Management 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

IMO Ballast Water Convention One of most challenging regulatory issues over the past decade Overarching Authorities: IMO: Ballast Water Convention U.S. Coast Guard: Ballast Water Management Program EPA: Vessel General Permit 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

IMO Ballast Water Convention Entry into force September 8, 2017 Uses numerical standards that limit the number of organisms and indicator microbes permitted in ballast water discharges Type-approval of Ballast Water Management Systems—different protocol that the US Coast Guard 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard—Ballast Water Management Final Rule (March 2012) Mandatory ballast water management and reporting regulations Require compliance with treatment standard Same as IMO’s but a different testing protocol for type-approvals Applies to vessels operating in U.S. waters with ballast tanks Compliance with ballast water requirements is a port state control priority Civil and criminal penalties for non-compliance 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard—Five Options for Ballast Water Management Systems (“BWMS”) Discharge ballast water to an onshore facility or to another vessel for purposes of treatment Compliance Challenge: None available at this time 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard—Five Options for BWMS Use water from a U.S. public water system Compliance Challenge: Not generally practical except for limited group of domestic operators 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard—Five Options for BWMS Use an IMO-approved and USCG-authorized Alternate Management System (“AMS”) for up to five years from the vessel’s compliance date Compliance Challenge: Not generally practical unless assurance they will ultimately be U.S. Coast Guard approved (no assurances…) Current Regulatory Posture: Vessels with AMS must use them and no extensions unless non-operational 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard—Five Options for BWMS Do not discharge ballast water into U.S. waters (i.e., within 12 miles of the U.S. coast) Compliance Challenge: Not practical, save for some limited number of vessels, generally passenger vessels 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard—Five Options for BWMS Install/operate a USCG type-approved BWMS Optimarin - ultraviolet system Operational Challenge: Requires 72-hour hold time Alfa Laval - ultraviolet system OceanSaver - electro-chlorination system Safety Challenge: Hydrogen by-product must be vented Current Development: USCG reviewing fourth BWMS BalClor electrolysis system (Manufacturer: Sunrui) 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard BWMS Type-Approval Extension Requests If no BWMS are appropriate: USCG may still grant an extension to a vessel’s compliance date (requests must be submitted at least on year in advance) Owner/operator must document that, despite all efforts, compliance is not possible Owner/operator must provide justification to the USCG: an explicit statement of why none of three BWMS are appropriate for each vessel supported by documentation/analyses 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

U.S. Coast Guard BWMS Type-Approval Extension Requests Future Compliance Challenges: USCG policy is shifting Becoming more difficult to obtain extensions Timeliness and thorough documentation critical USCG currently developing new guidance and policy 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Ballast Water Enforcement Feb. 2, 2017: U.S. Coast Guard (Seattle) initiated ballast water civil penalty proceeding against bulk carrier operator Vessel alleged to have discharged ballast water without the use of a USCG approved BWMS or other approved means violation of the National Invasive Species Act maximum penalty: $38,175 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

EPA’s Vessel General Permit 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

EPA’s 2013 Vessel General Permit (“VGP”) VGP regulates “discharges incidental to the normal operation of commercial vessels” greater than 79 feet in length Key “incidental discharges”: Ballast water Bilge water Gray water Deck washdown and runoff Oil to sea interfaces 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

EPA’s 2013 Vessel General Permit (“VGP”) VGP effective from December 19, 2013, to December 18, 2018 (5 years) Includes numeric limits for ballast water, consistent with IMO and the U.S. Coast Guard Enforcement (reportedly) on the rise Notice of Intent requirements Routine inspections (outside 3 miles) Documentation critical 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

VGP Litigation: Possible Future Legal Challenge On October 5, 2015, U.S. Court of Appeals for the Second Circuit ruled that the EPA acted “arbitrarily and capriciously” in drafting the ballast water discharge provisions of its 2013 VGP EPA must revise the permit or justify its decision Changes to the VGP ballast water management requirements mandated by the Second Circuit’s ruling likely will not be seen until the 2018 VGP Draft 2018 VGP like out for comment by this fall 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Significant shift towards federal management of ballast water Legislative Development: Senate Bill 168 Commercial Vessel Incidental Discharge Act Introduced on January 17, 2017 Preempts states from regulating incidental ballast water discharges into navigable U.S. waters Significant shift towards federal management of ballast water Will remain difficult to enact Continued strong state interests in opposition 10 Attorneys General have objected 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Questions? 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future

Michael K. Bell Blank Rome LLP 717 Texas Avenue Suite 1400 Houston, TX 77002 Phone: 713.402.7630 Email: MBell@BlankRome.com 2/23/2017 NAMEPA - Environmental Compliance Challenges for the future