4/3/2019: CMA Shipping 2019 – Keynote remarks on “Countdown to Compliance of IMO 2020”

Rear Adm. John Nadeau, assistant commandant for prevention policy, attended Connecticut Maritime Association’s Shipping 2019 Conference in Stamford this week and gave keynote remarks at the opening session, “Countdown to Compliance of IMO 2020 and What’s Next.” The session was moderated by CMA President Joe Gross, and included remarks by Christopher Wiernicki of ABS and Martin Gaard Christiansen of V Group Limited. Although Nadeau also discussed various other initiatives the Coast Guard addressed in 2018,  in this post, we are sharing a portion of his remarks on IMO 2020. We will publish the remainder of his remarks in a separate post.

Countdown to Compliance of IMO 2020 and What’s Next

“Good afternoon, and thank you. It’s so great to be back again this year.

I’m here to give the Coast Guard’s perspective on today’s topic, “Countdown to Compliance of IMO 2020 and What’s Next.” As many of you know very well, there are a range of concerns regarding the 2020 Sulfur limit.

There have literally been hundreds of predictions and speculations made by economists, various parts of the shipping community, and trade groups about the impacts of the Sulfur Limit. These concerns primarily revolve around availability, quality, and cost. We have been listening to these concerns and have taken an active role at the IMO in working with others to develop guidelines for mitigating these issues.

Availability:
Here in the U.S., as you are all aware, we have had a Sulfur Emission Control Area, or ECA, since 2015. This requires ships operating within 200 miles of our shores to switch over and burn 0.1 percent sulfur fuel oil, which is lower than the 2020 global limit.

Based on our experience from the ECA implementation and the limited number of reports of non-availability we received, we know availability of compliant fuel has not been a major issue. U.S. refineries have completed significant upgrades to their infrastructure to accommodate the expected demand. We are fairly confident that in 2020 here in the U.S., availability issues will be very limited.

The issue may be with ships coming from other locations and areas of the world where refinery upgrades might not have been made yet. For ship owners, one of the keys to this transition is careful voyage planning that consider bunker availability to the maximum extent, whenever and wherever possible.

Quality:
There is concern about fuel oil quality. We know that the implications can be significant and that removal of non-compliant fuel or “de-bunkering” involves finding someone who will accept the fuel, possibly tank cleaning, and costly delays – it is expensive and difficult. We are working closely with other stakeholders to address any safety issues and encourage reporting and information sharing. We need transparency in order to drive compliance and consistent enforcement globally.

Cost:
Finally, there is the cost of low sulfur fuel oil. There has been a great deal of estimates regarding the cost and how long it will take for prices to normalize and the market to adjust. We understand the cost differential between the different types of fuel oil may be quite significant, and this concerns us when it comes to compliance.

To my surprise, and all too often, we still find cases where a ship’s crew bypassed their Oily Water Separator to, presumably, cut costs. So, the cost of compliance with the 2020 requirements, and the incentive for some to possibly try and cheat, gives us cause for concern. But, it is our expectation – and we know by and large – that the majority of owners and operators will comply with the new requirements. Scrubbers and alternative fuels may be attractive options and many companies and owners have already opted to make certain investments. But this is a business decision and it appears the majority have chosen to wait and see.

With regard to compliance and enforcement here in the U.S., you can expect the status quo from the Coast Guard. We are already enforcing the ECA. And as a party to MARPOL Annex VI, we are obligated to enforce the 2020 global cap and will do so using the mature and well developed inspection and enforcement regime we have in place.

Looking beyond 2020, as difficult as that may seem today, the industry and the Coast Guard have a lot on their plate in the coming years. With $4.6 trillion in economic activity flowing through our U.S. ports and waterways, we must keep pace with technological advances in the maritime industry.

With respect to Cyber Risk Management, IMO has given ship owners and operators until 2021 to incorporate cyber risk into their ship’s safety management systems, and we expect there will be more discussion on this in the future.

We are heavily engaged in IMO’s regulatory scoping exercise for autonomous ships, where the current goal is to identify areas where the current regulatory scheme may contain gaps or prevent autonomous operation. By leveraging our relationships with industry stakeholders, we will ensure the resiliency of maritime commerce in a safe, secure, and efficient manner.

Here in the U.S., the Vessel Incidental Discharge Act was signed into law on Dec. 4, 2018. This new law transfers authority for implementation and enforcement of several Clean Water Act items from the EPA to the Coast Guard. The EPA’s Vessel General Permit, or VGP, will be replaced by a new framework. The EPA will establish national standards of performance for marine pollution control devices and discharges incidental to the normal operation of vessels. The Coast Guard is responsible for developing implementation, compliance, and enforcement requirements for the standards of compliance developed by the EPA. We are and will continue to work closely with EPA to ensure a smooth transition over the next few years.

VIDA is a U.S. law, but I submit that the increasing stakeholder demand to reduce the environmental footprint is not unique to the United States. It will continue from stakeholders across the international community. Shipping is a convenient target, one of the few industries regulated on an international basis. You can expect that the pressure to reduce the environmental impact will likely continue to intensify.

I look forward to your questions. Thank you.”

This blog is not a replacement or substitute for the formal posting of regulations and updates or existing processes for receiving formal feedback of the same. Links provided on this blog will direct the reader to official source documents, such as the Federal Register, Homeport and the Code of Federal Regulations. These documents remain the official source for regulatory information published by the Coast Guard.

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