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On March 28, 2011 the U.S. Court of Appeals for the Ninth
Circuit rejected an appeal by the Pacific Merchant Shipping
Association ("PMSA"), a mutual benefit corporation
comprised of owners and operators of U.S. and foreign-flag vessels,
in which it sought to prevent the state of California from
expanding its enforcement of vessel fuel standards to 24 miles,
well beyond the state's traditional 3-mile territorial limit.
Unless PMSA successfully appeals this decision to the U.S. Supreme
Court, a vessel en route to a California port will continue to need
to switch to low-sulfur fuel once the vessel is within 24 miles of
the California coast. As the Court itself stated in its opinion,
"We are clearly dealing with an expansive and even possibly
unprecedented state regulatory scheme. However, the severe
environmental problems confronting California (especially Southern
California) are themselves unusual and even
unprecedented."
Background
Over the last few years, the state of California, led by its
state agency known as the California Air Resources Board
("CARB"), has attempted to implement and enforce state
regulations intended to reduce certain air emissions from
oceangoing vessels. CARB has sought to enforce these regulations
within 24 miles of the California coast, well beyond the
traditional state territorial limits of 3 miles from the coastline.
A series of court challenges and decisions resulted in CARB
modifying these rules to require vessels calling in California
ports to use low-sulfur fuel, rather than specifically regulating
the air emissions from those vessels. On June 30, 2009, the U.S.
District Court held, among other things, that the California
low-sulfur fuel rules were not preempted by U.S. federal law and
that states were allowed to adopt their own fuel mandates. PMSA
appealed the District Court's ruling.
What Does This Mean for Vessel Owners and Operators?
Unless PMSA chooses to appeal this latest decision to the U.S.
Supreme Court and is successful in its appeal, it appears unlikely
that any changes will be made to these California vessel fuel
rules. The rules currently require vessels to use either marine gas
oil or marine diesel oil with a sulfur limit of 0.5% or less. After
January 1, 2012, both fuels must not exceed 0.1% sulfur. There are
also enhanced recordkeeping requirements and increased penalties
for non-compliance.
The rules may have a limited shelf life, however. The North
American Emissions Control Area ("ECA"), adopted by the
IMO on March 26, 2010, will become effective in August 2012. This
will result in all oceangoing vessels operating with 200 nautical
miles of the coastlines of the United States, Canada, and Mexico to
use fuel not exceeding the standard of 1% sulfur. In 2015 this
standard will be reduced to 0.1% sulfur. The California vessel fuel
standards regulations contain a "sunset" clause, which
provides for termination of the regulations when CARB determines
that the federal government has adopted and is enforcing
requirements that will achieve similar air emission reductions to
the California rules. As 0.1% sulfur fuel is the standard under
both the California rules and the MARPOL Annex VI rules governing
the fuel standards in the North American ECA, it is possible that
CARB will terminate its own regulations by 2015, if not sooner.
Conclusion
Vessel owners and operators whose ships are navigating in and
out of California ports should be aware of the California fuel
standards and the related recordkeeping and other requirements.
Low-sulfur fuel is a necessity and a reality for vessels trading
into California and, in just a few years, 0.1% sulfur fuel will be
required within 200 nautical miles of the coasts of the United
States, Canada, and Mexico.
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