Maritime Environmental Law Update (February 2021 Edition)

We are providing this update on significant, new developments in international and US environmental maritime law, regulation, technology, and enforcement; including an update on the continuing disruption caused by the novel coronavirus (COVID-19) outbreak. Our prior update was issued in August 2020, and can be found here. We hope that our readers remain safe during this difficult time.

International Developments

Study Finds LNG-Powered Vessels Save on Interest Rates

A recent study by Sea-LNG found that vessels powered by liquefied natural gas (“LNG”) are likely to find favorable treatment from lenders under the Poseidon Principles. The Poseidon Principles represent a commitment by leading financiers in the shipping industry to align their portfolios with the emissions targets established by the International Marine Organization (the “IMO”). The Poseidon Principles have been signed by 18 major banks representing US$150 billion in shipping finance.

The Sea-LNG study found that the lower carbon intensity of LNG-powered vessels makes it easier for signatories of the Poseidon Principles to maintain compliance with the IMO’s emissions regulations. As a result, LNG-powered vessels enjoy an average discount of 1-2% on loan rates compared to vessels using conventional marine fuels. The Sea-LNG study also projects that LNG-powered vessels will maintain compliance with the IMO’s future emissions targets for several years longer than vessels using conventional marine fuels.

African Continental Free Trade Area Established

Implementation of the African Continental Free Trade Area (ACFTA) project began in January 2021. The project hopes to create a single continental market for goods and services in Africa, aiming to cover 1.2 billion people with an estimated combined consumer and business spending amounting to US$6.7 trillion by 2030. Among other objectives, ACFTA seeks to create a Continental Customs Union and borderless African continental market to harmonize customs matters and reduce customs delays. The project also aims to expand intra-African trade volumes and distances, which could help diversify African economies and spur an increase in containerized trade and port traffic volumes throughout the continent.

US Developments

EPA Terminates Temporary COVID-19 Enforcement Policies for MARPOL and APPS

On August 31, 2020, the United States Environmental Protection Agency (“EPA”) announced that it will not continue to exercise enforcement discretion for noncompliance with the International Convention for the Prevention of Pollution from Ships (“MARPOL”) or the United States Act to Prevent Pollution from Ships (“APPS”). Due to the COVID-19 pandemic, EPA had previously implemented temporary policies outlining enforcement discretion based on noncompliance, including, with respect to, the new global sulphur limit reductions under MARPOL Annex VI. Going forward, the agency is expected to resume strict enforcement of MARPOL and APPS. Noncompliance with either set of regulations can result in significant civil or criminal liability.

California’s Updated Ocean-Going Vessel At-Berth Regulation Takes Effect

California’s updated Ocean-Going Vessel At-Berth Regulation took effect on January 1, 2021. The new regulation, approved by the California Air Resources Board (“CARB”) in August 2020, expands California’s existing rule, which requires containers, refrigerated cargo, and cruise ships to use pollution suppression systems or plug into electricity rather than use auxiliary engines when at berth in certain ports. The new rule expands these requirements to tankers and roll-on roll-off auto carriers and adds additional ports, including independent marine terminals. Auto carriers must comply with the new rule beginning in 2025, and tankers by 2025 or 2027 depending on the port. Ship owners, terminals and ports will be able to petition for more time to comply. CARB estimates the new rule will cost terminal and vessel operations US$2.23 billion.

Texas Develops Standard Permit for Marine Loading Operations

In December 2020, the Texas Commission on Environmental Quality (TCEQ) published notice of its intent to issue a non-rule standard permit for Marine Loading Operations (MLOs). TCEQ is currently considering public comments on the proposed standard permit. The standard permit would simplify the permitting process for MLOs by applying a single set of requirements to most MLO facilities, replacing TCEQ’s current case-by-case permitting system. Among other requirements, the standard permit will require an air quality analysis of the potential impact on the environment and human health associated with MLO emissions, along with specific operational and monitoring requirements and performance testing for certain equipment.

New Maritime Technologies

10 Years Later, Experts Reflect on Lessons Learned from Deepwater Horizon Spill

September 2020 marked the tenth anniversary of the end of the Deepwater Horizon oil spill in the Gulf of Mexico. Experts have taken this opportunity to reflect on new technologies and lessons learned from the Deepwater Horizon response, both of which could help improve responses to future marine oil spills. Many experts agree that more robust long-term baseline data of marine ecosystems is necessary to better assess the efficacy of disaster response efforts. Scientists have called for expanded surveys of microbial and fish populations, along with more and better public health data, to inform evaluations of the ecological and human health impacts of future spills.

Several new relevant technologies have also been developed or improved during the last decade. These include improvements to mass spectrometry and ionization techniques, which have expanded scientists’ understanding of oil-weathering processes. More robust ocean modeling and advances in genome sequencing technology may also allow scientists to evaluate the ecological impacts of future oil spills in real time. Scientists also continue to debate the effectiveness of chemical dispersants, which were used extensively in the Deepwater Horizon response but also come with their own health and environmental concerns. Long-term studies of Deepwater Horizon response workers suggest that many have experienced ongoing health problems relating to exposure to chemical dispersants.

Scientists Explore New “Zwitterionic” Antifouling Surfaces

In order to reduce the widespread use of toxic biocidal antifouling paints, which often contain common regulatory targets such as copper and zinc, the US Office of Naval Research has funded research into biofouling alternatives for more than 20 years. This research may soon bear fruit in the form of zwitterionic antifouling materials. These materials use zwitterions, molecules with equal numbers of positively and negatively charged groups, to build a strong water layer that prevents organisms form adhering to a surface. Zwitterionic materials do not contain biocides and may therefore avoid the environmental impacts and potential regulatory risks of traditional antifouling paints. Researchers at the University of Michigan claim that commercialization of zwitterionic materials is in sight, with testing on actual ship hulls expected to begin soon.

ASKO and Massterly Invest in Fully Autonomous Freight Ferries

Norwegian grocery distributor ASKO and Kongsberg / Wilhelmsen's joint venture Massterly are investing in two fully autonomous, electrically powered freight ferries to transport cargo between two of ASKO’s facilities near Oslo. The ferries will operate across a distance of approximately five nautical miles. At each end, the ferries will be supported by automatic mooring systems, automatic loading ramps, electrical charging systems and automatic trailer movement facilities. ASKO and Massterly see this arrangement as a promising starting point for autonomous shipping, as the ferries’ operations will be greatly simplified by the use of fixed cargoes and short, fixed routes. The fully electric ferries will also help to decarbonize ASKO’s existing trucking operations.

Ore Liquefaction Continues to Threaten Bulk Carriers

Numerous bulk carriers and the lives of several hundred sailors have been lost due to capsizing caused by cargo liquefaction. Solid cargos including iron and nickel ore can liquefy as a result of stresses during transport, particularly during heavy weather. When this occurs on bulk carriers with large open cargo holds, the ships are subject to listing and can quickly capsize. The IMO’s International Maritime Solid Bulk Cargoes Code (IMSBC Code) regulates the moisture content (MC) and transportable moisture limit (TML) of bulk cargoes, but critics argue that the IMSBC Code does not sufficiently protect against liquefaction because MC and TML certifications are left to the shippers. One proposed solution is to divide large bulk cargo holds into smaller sections, much like the approach taken for tankers. This solution would increase construction costs and loading times, but could prevent bulk carriers from capsizing due to cargo liquefaction.

Litigation

Oil Spill Contractor Granted “Derivative Immunity” in Taylor Energy Suit

Couvillion Group LLC, a contractor hired by the US Coast Guard to help clean up Taylor Energy Co. LLC’s undersea oil spill off the coast of Louisiana, is shielded from Taylor’s legal claims under a theory of “derivative immunity.” In 2018, the Coast Guard hired Couvillion to install a temporary system to contain oil leaking from the site of a Taylor oil rig that was destroyed in 2004’s Hurricane Ivan. Taylor sued to block Couvillion from performing the work and to obtain any monetary damages that may arise from Couvillion’s activities. Applying the US Supreme Court’s 1940 holding in Yearsley v. W.A. Ross Construction Co., a Louisiana federal judge held that Couvillion was entitled to “derivative immunity” because it performed acts “pursuant to a valid authorization of Congress,” in this case directed by the Coast Guard. Key to this finding was the fact that Couvillion conducted all of its operations pursuant to contracts with the Coast Guard and did not exceed the scope of its authority.

London Judge Blocks Representative Action Over Shell Oil Spill in Nigeria

A London judge dismissed a representative action by 27,000 Nigerian residents and hundreds of communities demanding that Shell clean up pollution caused by the 2011 oil spill at its Bonga offshore field. The judge found that the claimants failed to prove they shared the same interest, emphasizing the difficulty in establishing causation when many other sources of oil pollution plague the Nigerian coast. In reaching this decision, the judge noted the lack of “individual evidence of damage” and “expert evidence on pollution migration and attributing damage to the Bonga oil spill.” The order also notes that the remediation relief sought by the claimants would not necessarily benefit the entire class if claims of certain communities succeed while others fail. The decision leaves the door open for individual suits, but reduces the chances of the remediation relief claims proceeding as one group; although many of the claimants have also signed on to parallel proceedings for monetary damages.

Shipping Company Assessed US$3 Million Criminal Fine for Illegal Oil Dumping in Guam  

On February 19, 2021, a federal judge ordered Pacific International Lines Ltd. to pay a US$3 million criminal fine and implement a rigorous four-year environmental compliance program after the company illegally dumped oily bilge into the Port of Guam. Court records indicate that the company discharged oily bilge without first going through pollution control devices and then falsified records to hide its noncompliance with federal requirements. According to the US Attorney who prosecuted the case, the substantial criminal fine is intended to increase accountability and deter future violations in Guam’s harbors.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Eric Rothenberg, an O’Melveny Of Counsel licensed to practice law in New York and Illinois, Melody Drummond Hansen, an O’Melveny Partner licensed to practice law in California, the District of Columbia, and Illinois, and Chris Bowman, an O’Melveny Associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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