Jeanne M. Grasso and Kierstan L. Carlson
We are just over one year into the Biden administration and environmental enforcement is on the rise. Although enforcement dropped dramatically under the Trump administration, the current administration has been clear about its intent to use environmental enforcement tools to “encourage and incentivize compliance by private sector entities,” quoting Assistant Attorney General Todd Kim, head of the Environment and Natural Resources Division of the Department of Justice. This focus has borne out in several ways, including what seems to be an increase in inspections and enforcement of the U.S. Environmental Protection Agency’s (“EPA”) Vessel General Permit (“VGP”) in several EPA regions around the country. The risk of getting caught in the EPA’s crosshairs for a VGP violation is real and should be front-of-mind for companies across the shipping sector.
History of the VGP and Implementation of the Vessel Incidental Discharge Act
The VGP originated from a lawsuit challenging the EPA’s exemption of discharges “incidental to the normal operation of a vessel” from permitting requirements under the Clean Water Act’s (“CWA”) National Pollutant Discharge Elimination System (“NPDES”), an exemption that had been in place for about 30 years. In 2005, a federal court found that the EPA’s vessel exemption was illegal and required the agency to develop a permitting program for incidental discharges. From there the VGP was born.
The EPA issued the first version of the VGP in 2008, then another, more stringent version in 2013. The VGP provides NPDES permit coverage nationwide for discharges incidental to the normal operation of commercial vessels more than 79 feet in length, including establishing effluent limits and articulating Best Management Practices to control certain types of discharges. The VGP also requires vessels to carry out routine and annual inspections and imposes numerous recordkeeping obligations. To be covered under the VGP, vessel owners/operators must complete and submit to the EPA a Notice of Intent (“NOI”) or, for smaller vessels, complete a Permit Authorization and Record of Inspection (“PARI”) form and retain it on board. Without an NOI or PARI, discharges otherwise allowed under the permit are prohibited.
In December 2018, the Vessel Incidental Discharge Act (“VIDA”) was signed into law, intended to replace the VGP and bring uniformity, consistency, and certainty to the regulation of incidental discharges from U.S.-flag and foreign-flag vessels alike. VIDA amended the CWA and will alter how the EPA and the U.S. Coast Guard (“USCG”) regulate vessel discharges. It required the EPA to finalize uniform performance standards for each type of incidental discharge within two years, a deadline that the EPA has missed by more than 16 months already. Once those standards are finalized, VIDA requires the USCG to promulgate regulations implementing the EPA’s standards, including equipment, compliance, monitoring, inspections, and enforcement within two years.
Although VIDA was passed over three years ago, it is far from being implemented. Therefore, pursuant to VIDA, the 2013 VGP requirements remain in place—and will continue to be in place for the foreseeable future.
VGP Enforcement History
Until recently, the EPA had brought only a handful of enforcement actions for VGP violations. The penalties for these violations ranged from letters of warning to de minimis monetary penalties for minor violations, to fines between $20,000 and about $40,000 for more serious violations.
Examples of historic VGP enforcement actions through 2019 include a $1,500 fine for discharging without a permit and a $6,600 fine for failure to conduct required inspections on the low end, and a $38,397 fine for failure to submit NOIs or PARIs on the high end. The EPA also assessed penalties between $20,000–$25,000 for discharges of swimming pool water and discharges exceeding water quality limits for mercury. In one case, the EPA assessed a fine of $37,000 and required the company to develop standard operating procedures and training materials where it found excessive underwater ship husbandry discharges. Notably, at least some of these violations were self-reported.
Recent Increase in Inspections and Enforcement
Over the past two years, the EPA has seemingly increased the frequency with which it reviews vessel records and conducts vessel inspections. It has also begun to use its ability to issue Section 308 information requests under the Clean Water Act as an investigative tool to look into potential VGP violations. These efforts seem concentrated in EPA Regions VI, IX, and X, which all brought fairly significant enforcement actions in 2020–2021.
Section 308 of the CWA gives the EPA broad authority to request a host of corporate and vessel records, which may be used in an investigation or enforcement action. In some cases, the EPA has issued requests after self-disclosures in VGP Annual Reports or after it discovers potential non-compliances during a vessel inspection, seeking to find proof of a violation or additional violations beyond what it already has discovered. In particular, we are aware of companies that have received record requests relating to inconsistencies that the EPA discovered between VGP Annual Reports and other records, such as National Ballast Information Clearinghouse filings.
Relevant to all vessel owners and operators, the EPA appears to be focusing on the failures to comply with routine and comprehensive annual inspection requirements, as well as the failure to file NOIs. It is also important that companies file Notices of Termination if their vessels no longer operate in VGP waters, as failure to do so means that the vessel and company are still subject to the VGP, including the requirement to file Annual Reports.
The EPA also is closely evaluating several aspects of compliance for vessels using ballast water management systems (“BWMS”). The EPA is particularly focused on failures to sample biological indicators and biocide residuals, to calibrate various BWMS components, and to report functionality monitoring data.
Two cases from November 2021 exemplify the EPA’s upward enforcement trend. On November 15, 2021, the EPA announced that it had assessed penalties totaling $81,474 for violations discovered on two ships during EPA and USCG on-site visual inspections. The EPA fined the owner of a container ship $66,474 for the vessel’s failure to conduct routine visual inspections for 2016 through 2021, as well as for failing to submit Annual Reports for several years. The EPA also assessed a $15,000 penalty against a bulk carrier for violations relating to failures to report functionality monitoring data, to conduct an annual calibration of its BWMS, and to conduct biological monitoring. In addition to these two cases that have been resolved, we are aware of several others that are still pending.
Underscoring the need for heightened attention from shipping companies, the press release for these cases quoted an EPA official emphasizing that, “Vessels that do not comply with their CWA permits can have significant environmental impacts to our waterways, including the introduction of invasive species. . . Failure to comply with the Vessel General Permit requirements can result in significant penalties.” The EPA also has informally signaled that this enforcement aggressiveness is “just the beginning.” Consistent with this increased focus on the VGP, the EPA also recently brought an enforcement action for violations of another general CWA permit for offshore rigs operating in the Gulf of Mexico.
The EPA’s aggressive enforcement posture amid the delayed implementation of VIDA signals increased risks for shipping companies. Those risks include the possibility of penalties for VGP violations, as well as substantial costs required to comply with a Section 308 information request and increased exposure generally due to a higher level of scrutiny.
As a result, companies should promptly review their VGP compliance programs and address any vulnerabilities that may exist. This evaluation should include an assessment of whether the current policies and procedures comply with VGP requirements and verification that vessels are conducting routine and annual inspections as well as completing required monitoring and sampling, particularly in connection with BWMSs. Compliance programs should be practical and easy for crewmembers to follow, require robust internal auditing, and contain procedures for and training on internally reporting non-compliances.
Should you become aware of a violation, it is imperative to act immediately to determine what happened and take appropriate corrective actions. This may include conferring with counsel to determine the best path forward, which may involve conducting an internal investigation, filing amended Annual Reports, and disclosing previously unreported non-compliances.