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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
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1 Moderator Adam 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
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2 Topics Overview of Major Regulatory Changes Air Issues Emissions and GHGs, SO 2 emissions regulations Waste Issues TSCA and waste disposal Water Issues Vessel permits under CWA
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3 Overview of Major Environmental Regulatory Changes Barry Hartman K&L Gates
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4 Water Air Waste
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5 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
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6 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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7 Waste TSCA regulates disposal of PCBs Vessels contain PCBs
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8 2010 2012 Coast Guard Ballast Water Compliance Phase I 2016 2020 Clean Air Compliance Benchmark I 2030 Clean Air Compliance Benchmark II 0 $3.5 $3 $2.5 $2 $1.5 $0.5 $1 Phase I Phase II ● $1.66B ● $1.91B Coast Guard Ballast Water Compliance Phase II (All costs are estimated based on data in rulemakings) Dollars (in billions) ● $267M ● $3.14B New Annual Maritime Industry Compliance Costs
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9 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.
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10 Air Issues Annie Petsonk Environmental Defense Fund
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11 Air Issues Bryan Wood-Thomas World Shipping Council
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12 Waste Issues Michaela Noble Maritime Administration (MarAd)
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Air Emissions from Ships: The Changing Landscape Bryan Wood-Thomas ELI and K&L Gates WebCast World Shipping Council 19 May 2010
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World Shipping Council Represent global liner industry Carry >90% of the world’s containers 29 Member Companies –Container ships –Transoceanic Vehicle Carriers
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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?
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New International Standards New engines Tier 2: 20% reduction from Tier 1 in 2012 Tier 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 ECAs 2012: 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
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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.
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Where May We See New Emission Control Areas? Candidate ECAs: - Mediterranean -Tokyo Bay -Hong Kong -Shanghai -Eastern Atlantic Coast of Europe -Black Sea
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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
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The Global Fuels Market Demand for lighter fuels is increasing … Uncertainty in supply will be a reality Scrubbers – Are they a viable option?
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Exhaust Gas Cleaning Seawater scrubbers Freshwater systems Other systems…
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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?
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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
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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)
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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.
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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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Questions Bryan Wood-Thomas, Vice-President World Shipping Council bwoodthomas@worldshipping.org
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28 Water Issues Vessel Discharge Regulation Under the Clean Water Act: The Vessel General Permit Jennifer Carpenter The American Waterways Operators May 19, 2010
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29 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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30 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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31 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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32 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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33 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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34 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
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35 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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36 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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37 Questions?
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38 Thank you for joining us. Jennifer Carpenter, AWO jcarpenter@vesselalliance.com Barry Hartman, K&L Gates barry.hartman@klgates.com Michaela Noble, MarAd michaela.noble@dot.gov Annie Petsonk, EDF apetsonk@edf.org Bryan Wood-Thomas, World Shipping Council bwoodthomas@worldshipping.org
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