United States: Shipping Fuels: New Sulfur Content Requirements For US Caribbean Waters

Cruise ships, tankers and other large ocean-going vessels entering coastal waters near Puerto Rico and the US Virgin Islands face a new regulatory challenge. Starting in January 2014, those ships are required to use fuel with a sulfur content of just 1 per cent, or 10,000 parts per million (ppm), which is significantly lower than what those ships are currently required to use.

The requirements grow even stricter in January 2015. At that time, ships in this area will be required to use fuel with a sulfur content of just 0.1 per cent, or 1,000 ppm. The new fuel requirements are intended to reduce air emissions of sulfur dioxide and particulate matter. They mirror requirements already in effect for other US waters, such as along the coasts of the continental United States. Cruise and shipping lines that have already prepared their fleets to use low sulfur fuel may not be affected by the new Caribbean area requirements, but companies that have not made such changes may face significant compliance costs for their Caribbean-area vessels.

The new requirements arise under Annex VI of the International Convention for the Prevention of Pollution from Ships, better known as the MARPOL convention, and the US Act to Prevent Pollution from Ships (APPS). Failure to comply with the new requirements can subject ship owners and operators to criminal and civil penalties. Notably, the new requirements take effect at a time when environmental authorities in the eastern United States are under increasing pressure to find new ways of reducing sulfur dioxide and particulate matter emissions. Thus, 2014 may see increased fuel-related enforcement activity, not simply near Puerto Rico, but all along the eastern coast of the United States.

The MARPOL Convention's Fuel Requirements

The MARPOL convention is an agreement among roughly 150 countries to control pollution from ships. The convention is overseen by the International Maritime Organization, but is enforced by individual parties to the convention, such as the United States. Additionally, the United States has enacted APPS, 42 U.S.C. Section 1901 et seq., which makes it unlawful to violate the MARPOL convention within US controlled waters, including but not limited to waters around Puerto Rico and the US Virgin Islands, and waters up to 200 nautical miles from the coasts of the continental United States.

Annex VI to the MARPOL convention governs air pollution. Among its many provisions is Regulation 14, which prohibits ships from using fuels that have a sulfur content higher than the limits found in Regulation 14.

Regulation 14 contains two such limits, one applies throughout the world and the other applies only in designated emission control areas (ECAs). The global limit on sulfur content is currently 3.5 per cent, or 35,000 ppm, but the ECA limit is 1 per cent, or 10,000 ppm. The ECA limit will be reduced even lower, to 0.1 per cent, or 1,000 ppm, in January 2015.

The US Caribbean Sea ECA

Until recently, there were just three ECAs: the Baltic Sea ECA, the North Sea ECA and the North American ECA, which extends up to 200 nautical miles from the coasts of the continental United States and Canada. Starting in January 2014, the newly designated US Caribbean Sea ECA will come into effect. This new ECA covers an irregularly shaped area of ocean that extends up to 50 nautical miles from Puerto Rico. A drawing of the boundaries can be found at www.epa.gov/otaq/regs/nonroad/marine/ci/420f11024.pdf.

Once the new ECA takes effect, ships entering the ECA will be subject to the fuel requirements that apply there.

Compliance Options

The most obvious way to comply with the new requirements is to either use ECA compliant fuel (such as natural gas) at all times, or to switch to that fuel when entering an ECA. But ship owners should be aware of two alternative compliance options that may be less costly or less burdensome in some situations. First, Annex VI Regulation 4 allows the use of alternative compliance measures (such as exhaust gas scrubbers) provided the ship's home country certifies that those alternative measures "are at least as effective in terms of emissions reductions" as using ECA-compliant fuels.

Second, Annex VI Regulation 3 provides that ships may be exempted from the fuel sulfur content requirements for a period of 18 months, provided they obtain a special permit from their home country. The special permit can, however, only be granted where the exempted ship (or ships) will participate in "trials for the development of ship emission reduction and control technologies and engine design programmes," and where requiring compliance with Regulation 14 could actually impede such research.

Enforcement

In the new US Caribbean Sea ECA and the US portions of the existing North American ECA, the MARPOL Convention and APPS are enforced by two US agencies: the US Environmental Protection Agency (EPA) and the US Coast Guard. These agencies are authorised to board ships to take fuel samples. They are also authorised to take fuel samples from fueling stations and to obtain the fueling records that all large vessel operators are required to maintain. If the Coast Guard finds violations on a ship, it is authorised to detain it, even if it is a non-US ship.

MARPOL Annex VI violations are punishable by civil penalties of up to US$25,000 per day, per violation. The Coast Guard and the EPA are authorised to impose those penalties through an administrative hearing process and to enforce the penalties in a civil collection action in US courts. The agencies can also bring a criminal penalty proceeding in the US courts against anyone who knowingly commits a violation of the applicable requirements.

APPS also contains a citizen suit provision under which any person adversely affected by an ongoing MARPOL convention violation can bring an action against the alleged violator. The citizen suit provision does not, however, authorise civil penalties, which means that the only type of relief that might be available in such an action would be injunctive relief (to compel compliance), plus attorneys' fees and costs.

As the low sulfur fuel requirements take effect in the new US Caribbean Sea ECA, the EPA may also increase its fuel-related enforcement activity in the existing North American ECA. This is because, in certain coastal US areas, such as around New York City, other types of sources have already largely reduced their sulfur dioxide and particulate matter emissions. With those other sources already largely controlled, ocean-going vessels may become an increasingly attractive target for air quality enforcement officials.

Shipping companies concerned about potential enforcement should ensure they are familiar with the applicable Annex VI requirements, including the applicable recordkeeping requirements. They should also consider the alternative compliance options mentioned above.

Finally, the EPA has indicated that it may seek reduced penalties for fuel-related violations where the shipping company demonstrates that it was unable to purchase ECA-compliant fuel despite diligent efforts to do so. To qualify for such consideration, ship owners must not only use their best efforts to purchase low sulfur fuel, they must also notify the United States of their efforts before entering the ECA. They should also undertake other efforts to reduce emissions. The EPA has published guidance about this topic, which can be found at www.epa.gov/compliance/resources/policies/civil/caa/mobile/finalfuelavailabilityguidance-0626.pdf .

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.