Environmental Regulatory Challenges Facing the Maritime Industry NMEA Conference June 30 , 2015 Environmental Regulatory Challenges Facing the Maritime Industry JOSEPH ANGELO DEPUTY MANAGING DIRECTOR

INTERTANKO BALLAST WATER MANAGEMENT AIR EMISSIONS GREENHOUSE GAS

INTERNATIONAL ASSOCIATION OF INDEPENDENT TANKER OWNERS Non-profit organization whose aims are: to work for safety at sea and the protection of the marine environment to further the interests of independent tanker owners to promote a free and competitive tanker market

INTERTANKO MISSION Provide Leadership to the Tanker Industry in serving the World with the SAFE, ENVIRONMENTALLY SOUND AND EFFICIENT seaborne transportation of oil, gas and chemical products

Major Goal Lead the continuous improvement of the Tanker Industry’s performance in striving to achieve the goals of - Zero fatalities - Zero pollution - Zero detentions

MEMBERSHIP is open to independent tanker owners and operators of oil and chemical tankers (i.e. non-oil companies and non- state controlled tanker owners) who meet the membership criteria ASSOCIATE MEMBERSHIP is available to any entity with an interest in the shipping of oil and chemicals, i.e. oil companies, marine suppliers, educational bodies, etc.

MEMBERSHIP 204 Members 3,000+ Tankers 270+ Million DWT Members in 42 countries 287 Associate Members

Resources Secretariat of 20 people located in four offices in London (11), Oslo (7), Singapore (1) and the United States (1) Supplemented by a Member supported network of 10 committees and five regional panels

International Involvement Observer Status at International Maritime Organization (IMO) International Oil Pollution Compensation (IOPC) Funds United Nations Framework Convention on Climate Change (UNFCCC) Organization for Economic Cooperation and Development (OECD) United Nations Conference on Trade and Development (UNCTAD)

International Maritime Organization(IMO) United Nations specialized agency responsible for the safety and security of shipping and the prevention of marine pollution by ships, located in London, UK Currently 170 member states, 3 associate members, 51 Inter-Governmental Organizations and 72 Non-Governmental Organizations in Consultative Status Establishes international standards for maritime safety, maritime security and protection of the marine environment through the development of international conventions/ protocols (50+), codes, and recommendations Conducts work through 5 committees (safety, environment, legal, facilitation and technical cooperation) and 7 supporting subcommittees

Ballast Water Management Why is Ballast Water Management a major issue for the shipping industry? INTERNATIONALLY – IMO Ballast Water Management Convention was adopted in 2004 as a “prospective” treaty, i.e. It mandated standards that were not achievable when the treaty was adopted with ambitious implementation dates. 2. NATIONALLY IN THE US – US Congress passed two separate laws giving two separate federal government agencies, the US Coast Guard and the US Environmental Protection Agency (EPA), authority to regulate ballast water management and their requirements vary from each other and IMO

Ballast Water Management INTERTANKO’s Five Year Strategic Plan Desired Outcome for Ballast Water Management: Tanker industry is able to achieve compliance with current and future discharge standards (both regionally and internationally) Focus: Installation and Operation of appropriate and adequate ballast water management systems Compliance and enforcement – need strong, well defined and realistic international regulations

Ballast Water Management – IMO IMO Ballast Water Management Convention Adopted in 2004 Entry into force requires ratification by 30 countries, 35% world’s grt Currently, 44 countries, 32.86% grt Bahamas, China, Greece, Malta, Panama, Singapore or UK, each alone could bring the convention into force Argentina, India, Indonesia and Italy in the process COMMENT: IMO SG committed to brining the Convention into force as soon as possible and has written to all key flag administrations urging them to ratify. Stats updated 4th Feb.

Ballast Water Management – IMO Main INTERTANKO Concerns with IMO Ballast Water Management Convention Guidelines for approval of ballast water management systems (G8) – not robust enough to provide reliable equipment 2. Availability of Ballast Water Management Systems (BWMS) to meet convention implementation schedule – unrealistic Procedures for port State control – more onerous than type approval COMMENT: IMO SG committed to brining the Convention into force as soon as possible and has written to all key flag administrations urging them to ratify. Stats updated 4th Feb.

Ballast Water Management – IMO INTERTANKO (etal) made submission to MEPC 64 (October 2012) to address these issues Port State Control should not be more rigorous than BWMS Type Approval testing procedures IMO Assembly resolution should be developed with a realistic schedule for the installation of BWMS when treaty enters into force G8 guidelines should be revised to require more rigorous Type Approval testing COMMENT: IMO SG committed to brining the Convention into force as soon as possible and has written to all key flag administrations urging them to ratify. Stats updated 4th Feb.

Ballast Water Management – IMO Port State Control – MEPC 65 (May 2013) Trial Period (initially for 3 years) following entry into force To trial sampling and testing procedures During this period, port states will ‘refrain from detaining a ship or initiating criminals sanctions in the event a BWMS does not meet the discharge standard’ (USA reserves its position) MEPC 67 (Oct 2014) adopts Guidelines for PSC with four stage approach

Ballast Water Management – IMO IMO Guidelines for PSC Stage 1 – Initial inspection. Focus on documentation and crew training to operate BWMS If there are “clear grounds” Stage 2 – More detailed inspection. Check to ensure that BWMS operates properly Stage 3 – Indicative sampling. Without unduly delaying ship, an indicative analysis of ballast water can be taken Stage 4 – Detailed analysis. If indicative sampling exceeds D2 standard by a certain threshold, a detailed analysis of ballast water can be taken

Ballast Water Management – IMO Implementation schedule (availability of BWMS) IMO Assembly Resolution (A.1088(28)) adopted, Dec 4, 2013 recommends governments: implement the Convention based on the entry into force date of the Convention considers ALL vessels constructed (keel laid) before entry into force as existing vessels existing vessels to install a BWMS at the first renewal survey (IOPP Certificate under Annex I of MARPOL) after entry into force of the Convention

Ballast Water Management BWMS Type Approvals INTERTANKO (etal) make three submissions to IMO to revise G8 BWMS approval guidelines 1. MEPC 64 (Oct 2012) – Rejected, but agree to guidelines to improve transparency of equipment operational limits 2. MEPC 66 (April 2014) – Rejected, but agree to study on the implementation of the BWMS performance standard 3. MEPC 67 (Oct 2014) – Cautiously optimistic!!

Ballast Water Management – IMO BWMS Type Approvals Outcome of MEPC 67, October 2014 – Success!!(?) Adopts an MEPC Resolution 253(67) which agrees 1. To immediately begin a comprehensive review of G8 guidelines (and Plan of Action to do so) 2. Shipowners that have installed BWMS approved to existing G8 guidelines “should not be penalized” 3. Port States should refrain from applying criminal sanctions or detaining the ship, based on sampling during the trial period (US reserves its position) Agrees that proposals to implement decision to not penalize shipowners should be submitted to MEPC 68 (May 2015)

Ballast Water Management – IMO INTERTANKO and other industry associations submitted MEPC 68/2/16 to clarify MEPC 253(67) BWMS approved to existing G8 shall not be required to be replaced when new G8 guidelines become applicable BWMS approved to existing G8 shall not be required to be replaced for the life of the ship, provided they are installed, operated and maintained correctly PSC should not detain ship, or fine or take criminal action against shipowner, if such BWMS does not comply with discharge standard

Ballast Water Management – IMO OUTCOME – “protection of early movers Installed BWMS approved to the current type approval guidelines should not be required to be replaced once the new guidelines are introduced If current BWMS are installed, maintained and operated correctly then they should not be required to be replaced for the life of the ship or the BWMS, whichever comes first, due to occasional lack of efficacy Early movers should not be penalized (sanctioned, warned, detained or excluded) solely due to “occasional exceedance of BWMS (D-2) standard Footnote: non-penalization may be subject to review as additional information becomes available

Ballast Water Management – USCG Final Regulations issued March 23, 2012 BWM plan and recordkeeping (same as IMO) BWM discharge standard (same as IMO), review in 4 yrs Schedule for installation of BWMS similar to IMO, BUT NO intent to align schedule with Resolution A.1088 BWMS not required if no discharge of ballast water into US waters (12 miles) Acceptance of “Alternative” (AMS) BWMS for 5 years All ships must eventually install CG approved BWMS Ships may request an extension to compliance date for installation of a USCG approved BWMS

Ballast Water Management – USCG INTERTANKO Assisting Members with USCG regulations Implementation Schedule Decision Tree …

USCG Ballast Water Decision Tree

Ballast Water Management – USCG US Coast Guard INTERTANKO assisting Members Implementation Schedule Decision Tree Model Extension Request (MER) Letter

Ballast Water Management – USCG US Coast Guard – Extension requests January 1, 2016 extension date given to ships whose drydocking was scheduled for 2014 January 1, 2017 extension date given to ships whose drydocking was scheduled for 2015 January 1, 2018 extension date being given to ships whose drydockings are scheduled in 2016 Availability of USCG approved BWMS will be a factor in determining the length of time for future extensions INTERTANKO has developed Model Extension Request (MER) letter for members wishing to request extension

Ballast Water Management – USCG US Coast Guard – APPROVED BWM Systems CG has advised that 22 BWMS manufacturers have submitted “Letter of Intent” to pursue USCG approval (54 AMS accepted by USCG) For proprietary reasons, USCG cannot tell who those BWMS manufacturers are INTERTANKO has contacted BWMS manufacturers to determine which of them have submitted “Letter of Intent” (results on INTERTANKO web site) Only after the testing is completed and the results have been evaluated, will a BWMS manufacturer then submit an application to the USCG for approval of their BWMS

Ballast Water Management – USCG US Coast Guard – APPROVED BWM Systems USCG has received three applications for BWMS type approval (all three make use of UV treatment) UV BWMS need further USCG “validation” of methodology for biological efficacy CG indicates that they expect to have a USCG approved BWMS “sometime in 2015” CG indicates they will be “realistic” in requiring when a ship calling at US ports must have a CG approved BWM system installed

Ballast Water Management Shipowner dilemma!! US is not party to IMO BWM treaty. USCG regs: Allow use of Alternate Management System (AMS) for five years After five years, require installation of USCG approved BWMS Currently no BWMS is USCG approved Ship operator must decide to either install AMS (and hope it gets USCG approval!) OR request an extension and hope there is a CG approved BWMS available for installation on their ship prior to the required installation date under the IMO Convention.  

Ballast Water Management – USEPA EPA Vessel General Permit issued December 19, 2013 To a large extent EPA VGP requirements are the same as USCG (discharge standard, compliance schedule, etc.) Approval of BWMS is not required BWMS monitoring required (functionality, equipment calibration, effluent, biocides) New ship (keel laid after December 1, 2013) is required to install a BWMS to comply with the VGP, i.e. no acceptance of USCG extension provision in the VGP EPA /USCG MoU – EPA Enforcement Policy, 27 Dec 2013 Vessel with USCG extension is non-compliant (if discharges in US waters – 3 miles), but EPA regards as a low-enforcement priority, provided all other regs are met

AIR EMISSIONS Protocol to the International Convention for the Prevention of Pollution from Ships (MARPOL Annex VI) Adopted in 1997, entered into force in 2005 Addresses nitrogen oxides (NOx), sulphur oxides (Sox), volatile organics compounds (VOCs) and shipboard incineration Revision adopted in 2008, entered into force in 2010 Make significant changes to standards required for NOx and SOx emissions

AIR EMISSIONS MARPOL Annex VI revision adopted in 2008, includes INTERTANKO proposal for global switch from use of residual to distillate fuels: 1. with a global sulphur content cap using a two tiered approach: (i) from 2010, a maximum of 1.00% sulphur content; and (ii) for ships. engines installed on and after 2015, a maximum 0.50% sulphur content 2. a Global Sulphur Emission Control Area (SECA)

Air Emission Requirements (SOx)

Emission Control Areas (ECAs)

AIR EMISSIONS Major industry concerns Availability of fuel with sulphur content of less that 0.1% Operational aspects (fuel switching, fuel segregation, low viscosity, low lubricity) Fuel oil quality Port State Control enforcement which ensures a “level playing field”

AIR EMISSIONS Low Sulphur Fuel Oil (LSFO) Availability (0.1%) LS MGO generally available Sting of 0.1% soothed by oil price falls Premium expected to keep constant at ~$200-300 per ton New fuel/blends/hybrids (i.e. HDME 50)

AIR EMISSIONS ECAs – Fuel Change Over Challenges Safety aspects combustion characteristics heat transfer and circulation flash point temp. (would 60ºC be lowered?) Operational aspects fuel segregation/contamination incompatibility - fuel filter blockages low viscosity – leaks & loss in pressure low lubricity - pump seizure cloud point temperature bio element

AIR EMISSIONS HAZID to avoid mechanical failure & power loss INTERTANKO/OCIMF Recommendations on Fuel Change Over Procedures API Technical Considerations for Fuel Switching CIMAC Guideline for Operation of Marine Engines on Low Sulphur Diesel

FUEL OIL QUALITY Norway and INTERTANKO collected data from two fuel testing laboratories which together had more that 50% of all bunker deliveries worldwide Out of over 100,000 bunker samples, the receiving vessels have reported that on 1,468 occasions they have had machinery problems as a result of using the fuels as supplied. These were events resulting in machinery damage and black out events

FUEL OIL QUALITY Fuel oil quality for ships is regulated under Regulations 14 and 18 of MARPOL Annex VI However, the requirements are placed upon the ship to ensure that the fuel used on board the ship complies with these standards If the ship is found to be using fuel oil that is not in compliance with these standards, it is the ship and the ship operator that suffers the consequences of port state control action and penalties under national laws There are no requirements on the fuel supplier to ensure they provide the ship with fuel that meets the Annex VI requirements

FUEL OIL QUALITY INTERTANKO (etal) submission to MEPC 67 proposing amendments to Annex VI for Parties to: 1. Require that local bunker suppliers have procedures to confirm that fuel supplied to vessels is in compliance with IMO requirements 2. Make registries of locally recognised bunker suppliers available to IMO 3. Audit/inspect the local suppliers and report the investigation results and follow-up actions in response to any Note of Protest from ships that received non- compliant fuel

FUEL OIL QUALITY OUTCOME of MEPC 67 Agreement to develop guidelines for member states to use to ensure fuel quality compliance with MARPOL Annex VI Agreement to also consider the adequacy of the current legal framework for assuring fuel quality Work to progress through a Correspondence Group INTERTANKO supports outcome as the “beginning” of the process for our members to have confidence that fuels they receive are at or above the mandated standards

FUEL OIL QUALITY CORRESPONDENCE GROUP REPORT (MEPC 68) Initial approach on “guidance” could consist of a range or menu of options, from policies and quality control measures for fuel providers “Majority” of the CG participants indicate the current legal framework is adequate for assuring fuel quality INTERTANKO expresses “disappointment” with progress of CG and recommends development of “best practice” guidance and relook at adequacy of legal framework which is supported by majority of member states and almost all NGOs. CG tasked to develop draft guidance on best practice and to further examine the adequacy of the current legal framework

GREENHOUSE GAS Mandatory Energy Efficiency Design Index (EEDI) for new buildings (1 January 2013) Mandatory Ship Energy Efficiency Management Plan (SEEMP) for all ships (does not set a target for GHG emissions reduction of ship in operations) IMO considering Market Based Measures (MBMs) for shipping, but thus far, no agreement Alternative: Amendments to MARPOL Annex VI for Operational Energy Efficiency standards for international shipping

Reducing GHG emissions on new ships by 30% by 2025 GREENHOUSE GAS Reducing GHG emissions on new ships by 30% by 2025 Design Index (EEDI) Attained EEDI < Required EEDI 10% Phase 1 2015 - 2019 Reference Line Today Phase 2 2020 - 2024 20% Phase 3 on and after 2025 30% Ship Size (DWT)

GREENHOUSE GAS OPERATIONAL EFFICIENCY STANDARDS FOR INTERNATIONAL SHIPPING What does this mean? In principle, ships in operation would be expected to meet legally binding operational effeciency requirements OR Limit ships’ annual fuel consumption!!

GREENHOUSE GAS Shipping industry fully supports EEDI and SEEPM requirements Major industry concerns Market Based Measures (MBM) have not been justified Question the feasibility of legally binding operational efficiency standards for shipping Fuel efficiency standards for entire transportation sectors applied at design stage (IMO adopted EEDI) No other transportation sector subjected to operational efficiency standards

Shipping is energy efficient GREENHOUSE GAS Shipping is energy efficient (Toyota Prius - 1 tonne, 1 kg CO2, 12 km)

INT. SHIPPING CONTRIBUTIONS TO GLOBAL CO2 Ships reduce GHG emissions at a higher rate than land Source: IMO 3rd GHG Study (2014)

GREENHOUSE GAS INTERTANKO (etal) submission to MEPC 67 Operational efficiency standards account for many and complex criteria: not practical as a regulatory standard Costs of fuels, costs for compliance with ECA and global sulphur limits are already great incentives to ship operators for fuel emissions reductions List of key questions that IMO should answer before deciding, including: - if operational efficiency standards are adopted, can it be done to avoid de-facto slow-steaming "speed limit“? - how to account for the fact that fuel is consumed on board many vessels for purposes other than propulsion?

GREENHOUSE GAS OUTCOME of MEPC 67 (October 2014) No clear way forward on the need for an operational energy efficiency standard for ships (Political Issue!!) Unspoken issue – Common But Differentiated Responsibilities (CBDR) principle in UNFCCC There was a clear agreement, in principle, to develop a data collection system for fuel consumption, but different views on how it should be done Work should focus on the development of the details of a data collection system for fuel consumption

GREENHOUSE GAS OUTCOME of MEPC 68 (May 2015) Agreement that development of a data collection system for ships should follow a three step approach: 1. data collection 2. data analysis 3. decision-making on what further measures, if any, are required Many detail issues still unresolved, including whether cargo should be part of the data collection (cargo is part of the EU data collection system) Agreement to consider the matter further at intersessional meeting in September and its next session in April 2016

CONCLUSIONS INTERTANKO supports realistic, pragmatic and achievable measures to protect the marine environment INTERTANKO will work through IMO with member states and other stakeholders to develop practical international environmental regulations for shipping

THANK YOU! COMMENT: the +3 are BWMS with model variations, so there are 3 within the 13 BWMS approved that are simply variations of the approved BWMS, e.g. BWMS Mark 1 and BWMS Mark 2.