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Are the US and Canada leading the enforcement of ECA regulations?

Are the US and Canada leading the enforcement of ECA regulations?
The initial impact of the first six months of the 0.1% sulphur limit for marine fuels has not been as drastic as some predicted. Most concerns were understandably focused on the cost of compliance; however, the steep and sustained drop in global oil prices offered relief at just the right time.

While the incremental cost of compliance remains high with low sulphur marine gas oil (MGO) selling at around 70 to 80% premiums to high sulphur fuel oil (HFO), the absolute cost of low sulphur MGO is almost the same as what ship owners were paying for high sulphur fuel oil last year.

There have been some challenges with fuel oil change over operation in the first few months of the North American Emission Control Area’s (ECA’s) 0.1% sulphur cap, with some vessels not having properly prepared and planned for the switch over process which led to equipment problems and in some cases, loss of propulsion. However, these incidents have been described as transitory or learning issues that have mostly been resolved. Transport Canada has the responsibility of enforcing safety and environmental regulations on shipping in Canadian waters. They issued a safety bulletin in late April advising ship operators of the need to properly prepare for the potential operational challenges.

There were also some issues with vessels not having adequate supplies of compliant fuel onboard and thus needing to file a Fuel Oil Non Availability Request (FONAR) earlier in the year. However, according to the US Coast Guard (USCG) these were mostly due to either vessels or suppliers not being ready on 1 January , and they have now largely disappeared. According to information maintained by the US Environmental Protection Agency (US EPA), the number of submissions to the EPA related to fuel non availability peaked in January at 88, but the rate has dropped to 7 - 10 submissions a month in the past four months. It was also noted that lately the reasons have been related to technical issues like scheduling, weather delays, etc. and not that complaint fuel was not available in the ports.

In the United States, the USCG is the lead enforcement agency for Marpol Annex VI. Lt. Alfred Giordano of the USCG informed the attendees at the annual Platts Bunker & Residual Fuel Oil conference last month that they remain vigilant, but cooperative in enforcing the requirements of the North American ECA. Vessels should expect to be asked to show proof of compliance with the ECA regulations during their routine Port State control audits. While the nature of the audits may vary from port to port, the primary focus will be on reviewing log books, bunker delivery notes, switch over procedures and times. This appears to be a “by the book” approach to enforcement of the requirements of Marpol Annex VI with the USCG actively enforcing the requirements of the regulations without implementing their own methods of compliance verification such as the spot sampling that is occurring in European countries enforcing the Baltic and North Sea ECAS.

The USCG categorizes non-compliance as “non-criminal deficiencies” when the vessel’s officers can demonstrate a good faith effort to comply and a valid reason for non-compliance. These cases are documented, logged, and reported to the US EPA for further action. As long as there is not a safety related issue associated with the violation, the USCG is not likely to take further action other than informing the US EPA. The US EPA then studies these deficiencies for trends rather than acting on each occurrence individually. In the past, when they have found patterns that suggest a vessel or owner is not acting in good faith they have initiated enforcement action and sought civil penalties. The penalties can accumulate quickly given that they are calculated on per deficiency, per day basis and include a “gravity” component that increases the fine with the degree of wilfulness, negligence, frequency, and non-cooperation. The US EPA has a number of ongoing cases that they are not able to discuss; however, they have not issued any fines to date.

By contrast, intentional acts of non-compliance including falsifying records are classified as “criminal deficiencies”. Criminal deficiencies are handled directly by the USCG and have led to immediate vessel detention, extended investigations, fines and probation for the vessel owners. In one case a vessel was detained for about three weeks while the investigation was conducted, and then subjected to fines and probation.

From Veritas Petroleum Services’ unique position as the global leader in the marine fuel testing market, we can see a high degree of compliance from the shipping community based on the drastic shift in the mix of fuel that vessels are using around the world. Prior to the 0.1% cap, marine distillates made up roughly 25% of the bunker samples that our laboratories around the world would receive. That ratio jumped to about 40% virtually overnight. This shift shows that on the whole ship owners are complying with the regulations and that distillate fuel is currently the most popular option. We are also testing an increasing number of Ultra Low Sulphur Fuel Oils (ULSFO) products that are being blended to meet the regulations and expect to see this trend continue to grow.

So six months into the new sulphur cap, it is fair to say that the regulators and the vessel operators deserve passing marks for enforcement and compliance respectively. There are differences in the approach to enforcement of the ECAs in the Americas versus the ECAs in Europe, but they seem to be working.

That said, how well enforcement and compliance will perform with a 0.5% global cap has many unanswered questions like: who is going to have authority to investigate compliance in waters outside of regulators’ territories? How much compliance will there be in areas without enforcement? Will the shipping industry be able to absorb the added cost? And how will the changing demand impact global refining and marine fuel supply?

Contributed by Michael McNamara, MD Americas at Veritas Petroleum Services. Email: [email protected]