Delivering on the IMO 2020 sulphur cap regulations is far more complex than ship owners having specific implementation plans. Compliance will prove to have far reaching effects in almost every segment of the industry.
At CMA Shipping in April, we spoke with Joe Gross (President, Connecticut Maritime Association), Jeffrey Lantz (Director of Commercial Regulations and Standards, U.S. Coast Guard) and Rear Admiral John Nadeau (Assistant Commandant for Prevention Policy, U.S. Coast Guard) about sulphur cap implementation, their views on how prepared the industry is for 1 January, and VIDA implementation.
Readiness for the IMO global sulphur cap
Mr. Gross, President of the Connecticut Maritime Association, was very positive about the industry’s level of preparedness. He believes that the industry is doing what it needs to do.
"We got together as an industry, we developed the regulatory framework going forward, we are embracing the time-frame, and we realise that there will be an initial cost involved. But at the same time, we recognise that we have an obligation.”
While options for complying with the sulphur-cap are various, in an economic sense he believed it will impact everyone, no matter which compliance route is chosen. “The choices are either to install a scrubber and continue to use fuel oil - where the ship becomes part of the refining process to remove that last bit of sulphur. Or to clean your tanks and use an ultra-low sulphur oil that will be compliant with the new regulation. Whether one of those options has lesser or greater economic benefits, only time will tell,” Gross said.
"For those using the ultra-low sulphur fuel oil, they will spend more money on the fuel oil. The owners who are choosing to install scrubbers, they are going to spend approximately $1-2 million, and the downtime on the ship to install those scrubbers. There will then be an amortization period which will need to be factored in to their operations - when the owners who decided to install scrubbers have paid the unit off and they benefit from the lower fuel costs."
Mr. Gross noted that, “Owners are working with their counter parties, whether they are owners from whom they have long-term vessels on charter or their charterers, to co-ordinate what needs to be done to bunker the tanks in the sequence it needs to be done.”
“They could be cleaning the tanks by hand or chemical dosing. I think people are pretty well squared-away for the implementation of the new regulations."
Mr. Lantz, from the United States Coast Guard, expects some bumps in the road to compliance. He believes confidence in the industry is “relatively high”, but that the industry will need to take appropriate action where needed.
Mr. Lantz said, "Reports are coming in that refineries have taken a very aggressive action to meet the demand for the 2020. From the perspective of the United States Coast Guard, we remain hopeful that issues of non-compliance or unavailability of fuel to be few and far between, but we need to be prepared and take the correct action should something pop up."
Knut Ørbeck-Nilssen, of DNV GL, believes that many questions remain to be answered about what challenges the sulphur cap will bring.
“There's lots of questions about availability, compatibility, and the price. I think everyone has the intention to comply and there are different pathways to comply, whether you want to use scrubbers, or you want to use blended fuels.
“The question of enforcement is one that is really up to the port states and how they will enforce these regulations. This may vary significantly depending on their geographies. I have no doubt that the maritime industry will comply.”
Rear Admiral John Nadeau, from the United States Coast Guard, noted that administration of the regulations could be difficult due to availability and the difference in fuels costs.
"There could be a lot of incentive to perhaps cheat or pursue areas of non-compliance due to price differentials.
"I think industry at large really wants to see regulators, port state authorities and flag states all come together to ensure that we are consistent in our enforcement. We need to be transparent in our findings. We all need to share information about whether there are fuel availability problems, or we find problems with the oil qualities. That information needs to be shared with all stakeholders so that we can refer to that when we're trying to deal with issues that might come up.
“For instance, if I have a ship coming into the United States that was not able to get fuel. Reports need to be created so we can look back and see if others are having the same problem at the same locations, and we can use that information to determine what actions we should take. Again, allowing us to have a level playing field across the board for all stakeholders."
VIDA on the horizon
The VIDA act establishes a new framework for the regulation of vessel incidental discharges, adding a new Clean Water Act (CWA) which looks to establish a uniform set of standards for the management of discharges incidental to the normal operation of a vessel.
The act charges the Environmental Protection Agency (EPA) with primary responsibility to establish standards relating to the discharge of pollutants from vessels, and the USCG with primary responsibility for prescribing, administering and enforcing regulations consistent with these standards.
The act also phases out provisions of the VGP (Vessel General Permit) and existing USCG regulations over an approximate time of 4 years.
When asked about the implementation of VIDA, Mr. Lance said that “There are some tight deadlines for both EPA and the Coast Guard. We hope to make it as smooth as possible, and I can tell you that the Coast Guard and EPA are working very closely together to make that happen.
“It's hard to predict when regulations are involved how quickly they can get done, but I think both agencies are very committed to getting it out there and meeting the desires of the mandate.”
Rear Admiral Nadeau noted that "VIDA is quite a comprehensive new law passed in the U.S. in December of 2018. It looks at the entire framework for dealing with incidental discharges from vessel operations. It will require the Coast Guard and the EPA to work very closely together. The EPA is the first point of focus of this - to develop the discharge standards themselves. And then we (USCG) will take those standards and apply them to vessels in terms of equipment and operating procedures.
Like Mr. Lantz, Admiral Nadeau believes a close working relationship between the Coast Guard and the EPA is key to the success of VIDA, “…my staff are working with EPA on a frequently to ensure that we stay latched up tight. We recognize that we need to be closely aligned for this to work properly and minimize any unnecessary impacts on the stakeholders and industry."
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