Category: Environmental Compliance

Implications of Jones Act Changes to the Offshore Energy Industry

Jonathan K. Waldron and Stefanos N. Roulakis

Vessels are the backbone of any offshore construction project, and the Jones Act, which celebrated its centennial this month, regulates their operations in U.S. waters on the Outer Continental Shelf. Originally promulgated as a transportation statute, the Jones Act has governed vessels engaging in offshore construction for nearly four decades. While offshore oil and gas construction operations have been conducted in compliance with the Jones Act for decades, with the burgeoning offshore wind sector there is renewed interest on how the Jones Act will be applied to such projects. Indeed, planning for Jones Act compliance is a major component of successful wind farm installation operations, as has been the case for years with oil and gas-related work. Interestingly, despite the fact that the Jones Act is now a century old, there have been recent significant regulatory and legal developments in its interpretation.

Specifically, after years of debate within the offshore industry, on December 19, 2019, U.S. Customs and Border Protection (“CBP”) issued its decision in its Customs Bulletin, “Modification and Revocation of Ruling Letters Relating to CBP’s Application of the Jones Act to the Transportation of Certain Merchandise and Equipment Between Coastwise Points” (the “Decision”). The Decision became effective on February 17, 2020. Offshore developers, vessel operators, and other stakeholders must now face the question: How does the Decision affect offshore activities?

Further, the Decision currently faces challenges both in Congress and the courts. Some members of Congress who are not pleased with CBP’s actions have been focused on legislating in this area and modifying the Jones Act to include restrictions on lifting operations undertaken by installation vessels. This would effectively overrule parts of the Decision. Stakeholders in the offshore wind, ocean renewable energy, and offshore oil and gas sectors should pay attention to these developments as they will intimately impact offshore construction activities.

Background on the CPB Decision

In both 2009 and 2017, CBP published notices to revoke or modify various rulings, which potentially could have overturned decades of precedent with regard to a sweeping range of offshore operations that have never been subject to the Jones Act. To be frank, CBP did not fully understand how the offshore industry operated offshore, and the proposals were potentially overbroad without CBP understanding the economic impacts on the various types of offshore operations these proposals would have adversely affected. As a result of strong industry backlash on both occasions, the proposals were withdrawn for reconsideration.  Finally, following the 2017 withdrawal, CBP undertook an intensive exchange of information with all facets of industry to fully understand how industry actually operates offshore and to fine-tune and focus its 2019 proposal on vessel equipment issues and lifting operations, which resulted in a decision that took into account comments and input from all stakeholders.

As far as substance, the Decision eliminates previous erroneous decisions that permitted non-coastwise-qualified vessels to transport items that should have been considered merchandise under the Jones Act. The Decision also clarifies that lifting operations may be conducted by non-Jones Act vessels. Specifically, as discussed in more detail below, the Decision 1) broadens the definition of merchandise to make it clear that non-Jones Act vessels can no longer carry out certain offshore activities that they have performed for years under a misguided and overly broad “mission of the vessel” theory, and 2) establishes a new interpretation of “Lifting Operations” to specify the movements that a non-Jones Act vessel can perform when conducting installation or decommissioning operations, which will not be considered “transportation” within the meaning of the Jones Act.

Should the Decision be overturned either in court or through legislation, it will have a significant impact on the market for offshore construction, whether for renewable energy or fossil fuel production. Currently, there are few or no Jones Act-qualified vessels that can perform the necessary lifting operations needed to undertake the multitude of varying construction projects offshore, depending on the crane capacity and vessel and stability characteristics required for a particular lifting operation. Continue Reading

Offshore Wind: Driving Factors and Recent Impediments

Joan M. Bondareff and Dana S. Merkel

This article contains a brief review of the latest developments in offshore wind, including state laws and policies, federal laws and permitting practices, and the impact of COVID-19. The main issue we are now watching is the Department of the Interior’s supplemental environmental review of the proposed Vineyard Wind project, discussed below. Until a final environmental review is completed, we are unable to predict with certainty how many offshore wind construction plans will be approved this year by the Bureau of Ocean and Energy Management (“BOEM”) in the Department of the Interior.

States Are Driving the Offshore Wind Process along the Atlantic Coast

We have reviewed state laws and policies before (see our article in the April 2019 edition of Mainbrace). Although developments offshore California and Hawaii are still being considered, they have been hampered by objections from the Department of Defense to siting wind farms near adjacent military bases. Meanwhile, development along the mid-Atlantic and New England coasts remains strong.

We conclude, as we have before, that the governors are taking the lead in promoting offshore wind by adopting new laws and/or executive orders and promoting renewable energy, including offshore wind. Their goal is to bring in some of the more than 40,000 new offshore wind jobs predicted by 2030. Continue Reading

 

The Emerging U.S. Offshore Wind Industry in a Post-COVID-19 World

Thomas H. Belknap Jr. and Lauren B. Wilgus

Just when it was looking like the offshore wind industry was finally about to take off in the United States, the COVID-19 pandemic has introduced one more significant layer of uncertainty upon an already very complicated playing field. There are currently 15 active offshore wind projects in the planning stages that, if completed, could add approximately 25 gigawatts of electricity to the power grid.

The State of Play

Things were hard enough already. Cape Wind, the United States’ first—and very ambitious—130-turbine offshore wind project, died under its own weight after years-long delays and caused its energy providers to end power supply contracts for the project in 2015. Indeed, just one project—the five-turbine (30 megawatt) Deepwater Wind farm off Block Island—is up and running so far. But, there are a slew of other projects in the pipeline. The two-turbine (12 megawatt) Coastal Virginia Offshore Wind facility—a “test” construction in advance of the planned 2,640-megawatt Dominion Energy Wind Farm—has already started construction and reportedly remains largely on schedule.

Several other large projects are in the pipeline to start construction within the next two to three years. The 800-megawatt Vineyard Wind 1 project in Massachusetts was initially scheduled to commence last year until federal regulators determined that they needed more time to analyze environmental impacts before they would issue the necessary permit. Recently, the Department of Energy’s Bureau of Ocean Management has indicated that it will issue its findings by December 2020, setting that project back at least a couple of years from their initial projections. Since the new analysis will require a consideration of the potential “cumulative” environmental impact if other offshore windfarms are built, this delay is likely to cascade to other projects.

Revolution Wind, a 704-megawatt project off the coast of Connecticut and Rhode Island targeted for completion by 2023, has announced delays of their own, also due to permitting issues and effects of the COVID-19 pandemic. Other large projects are facing similar delays.

Among other problems, the delays have jeopardized the projects’ access to federal tax credit and investment tax credits. Originally expiring in 2019, the credits were extended for one year to include facilities that begin construction within 2020. The credits can be claimed where a project is placed into service within four years of starting construction—a timetable that may be increasingly challenging due to COVID-19-related delays. Recently, the Treasury Department has signaled to Congress that they will be looking at possible modifications to this rule.

So what does all this mean for the maritime sector? Offshore wind has been tantalizing the industry for years now, and it’s no wonder why. The American Wind Energy Association (“AWEA”) predicts that the offshore wind projects could create up to 83,000 jobs and $25 billion in annual economic output by 2030. Already, the AWEA reports, companies have announced well over a billion dollars in port-related infrastructure, transmission infrastructure, manufacturing facilities, and supply chain development.

Meanwhile, in other parts of the world, offshore wind development and infrastructure is already well developed, particularly in places like northern Europe where the first offshore wind farm was erected in 1991. Unsurprisingly, many companies from those markets are looking closely at the United States as a major new opportunity—and not just for the installations, but also for design, fabrication, consulting, service and maintenance, and every other aspect of this specialized work. And they are right to do so, for there remains a shortage of expertise in the United States when it comes to offshore wind projects, and experienced companies will have much to offer in this new market. Continue Reading

This article was first published in the June 2020 edition of Maritime Reporter & Engineering News. Reprinted with permission.

MARPOL Annex VI Enforcement—Are You Prepared?

Tips to Enhance Compliance and Reduce Enforcement Risk

Jeanne M. Grasso and Kierstan L. Carlson

The United States has been aggressively enforcing compliance with the International Convention for the Prevention of Pollution from Ships (“MARPOL”) for nearly 30 years. Enforcement actions have been brought against ship owners and operators across the industry, as well as against individual masters, engineers, shoreside personnel, and other corporate officers.

To date, most MARPOL prosecutions have involved violations of MARPOL Annex I through “magic pipe” bypasses of the Oily Water Separator (“OWS”) or improper discharges of sludge, though some have involved Annex V garbage violations and, very recently, Annex VI emissions violations. Few, other than in the early 1990s, have involved illegal discharges in U.S. waters; rather, virtually all cases have been brought for false entries in the ship’s records, including the Oil Record Book (“ORB”) and Garbage Record Book. This is because maintaining inaccurate records while in domestic waters or presenting inaccurate records to the U.S. Coast Guard (“USCG”) during an inspection is a crime and the jurisdictional hook needed for prosecution. Most cases also involve some kind of unlawful “post-incident conduct” that constitutes an independent crime under U.S. law, such as destroying records or lying to USCG inspectors or special agents. Continue reading “MARPOL Annex VI Enforcement—Are You Prepared?”

New Developments in MARPOL Annex VI Compliance and Implementation

Jeanne M. Grasso, Jonathan K. Waldron, and Dana S. Merkel

 

The International Maritime Organization (“IMO”), in preparing for the global 0.5 percent fuel oil sulfur limit, recently adopted an amendment to MARPOL Annex VI to support consistent implementation and enforcement of the new requirement. At the same time, the IMO rejected a proposal for an “experience building phase” during the first months of implementation. This put to rest any rumors of a delay in implementation. Meanwhile, the U.S. Coast Guard published procedures by which owners may seek authorization to operate engines that do not meet MARPOL Annex VI NOx Tier III requirements for qualified vessels.

New Developments

The IMO adopted an amendment to support consistent implementation of the forthcoming 0.5 percent limit on sulfur in ships fuel oil on October 26, 2018, during the recent session of its Marine Environment Protection Committee (“MEPC 73”). This amendment, effective on March 1, 2020, prohibits the carriage of non-compliant fuel oil for use on the vessel unless the vessel is outfitted with an exhaust gas cleaning system, often referred to as a scrubber. The amendment does not alter the January 1, 2020 implementation date for the 0.5 percent sulfur limit.

Also related to MARPOL Annex VI, the U.S. Coast Guard published an enforcement Work Instruction formally addressing how the U.S. Coast Guard will enforce the Annex VI nitrogen oxides (“NOx”) Tier III standards within the North American and U.S. Caribbean Sea Emission Control Areas (“ECAs”). See Exercise of Enforcement Discretion with Regard to MARPOL Annex VI Regulation 13.5.1.2; CVC-WI-014(1) (October 17, 2018). Because engines meeting the NOx Tier III standards were largely unavailable after the Tier III standards took effect in 2016, the U.S. Coast Guard is allowing impacted vessels to instead be certified as meeting U.S. Environmental Protection Agency (“EPA”) Clean Air Act Tier 3 requirements pursuant to 40 C.F.R. Part 1042. Once individually recognized by the U.S. Coast Guard, such engines may be used indefinitely, even after NOx Tier III compliant engines become available.

Please click here for the full client alert. 

EPA’s 2013 Vessel General Permit to Be Continued into 2019

Jeanne M. Grasso, Jonathan K. Waldron, and Emma C. Jones

 

The U.S. Environmental Protection Agency (“EPA”) recently published an update on its website notifying the industry that it would administratively continue the 2013 Vessel General Permit (“VGP”) until a new permit is issued sometime in 2019.

New Development

EPA’s 2013 VGP, which regulates incidental discharges from vessels, is set to expire on December 18, 2018. On October 10, 2018, EPA issued a statement on its website that the current 2013 VGP will not be reissued prior to the expiration date, but will be administratively continued and remain in effect until the new VGP is issued. EPA identifies its target timeframe for publishing a draft VGP, for public comment, as spring 2019. This will likely include a comment period of at least 30 days. This will be followed by a few months of EPA review before a new final VGP is published, likely during the summer. The link to the website can be found at epa.gov/npdes/vessels-vgp.

Practically, this means that vessels currently covered under the 2013 VGP will automatically be covered by the administrative continuance without further action, and new vessels with keels laid prior to December 18, 2018, must file a Notice of Intent (“NOI”) prior to December 18, 2018, to be covered by the 2013 VGP, otherwise they will not be covered until the 2018 VGP is finalized. If new vessels do not file an NOI before December 18, 2018, they will not be able to discharge in the United States, which basically prohibits them from operating in the United States.

Please click here for the full client alert. 

The Ocean Is Awash with Plastic: How Can the Maritime Industry Help?

Joan M. Bondareff and Jeanne M. Grasso

The eight-part series, Blue Planet II, narrated by Sir David Attenborough last year on BBC, seems to have awoken the public’s attention to the crisis of our oceans being littered with vast amounts of plastic, fishing gear, and other types of marine debris. As a result, cities, states, and nations around the world, as well as major cruise lines, are proactively looking at ways to reduce plastic to keep it from entering the sea.

The Extent of the Problem

Most plastic or marine debris comes from land-based sources, including from rivers that enter the sea, especially from coun­tries with less responsible garbage practices. For example, according to the BBC, most garbage in the ocean comes from 15 nations around the Pacific Rim, including China, Indonesia, the Philippines, Sri Lanka, Vietnam, and Thailand.

According to a study published in Nature magazine and also reported in USA Today in March 2018, the “Great Pacific Garbage Patch,” a collection of floating plastic trash halfway between Hawaii and California, has grown to more than 600,000 square miles—an area twice the size of Texas. The trash is said to come from the Pacific Rim as well as North and South America. Since the garbage patch is in international waters, no nation has stepped up to clean it up. (Id.) Continue reading “The Ocean Is Awash with Plastic: How Can the Maritime Industry Help?”

Environmental Compliance Aboard Commercial Ships: Electronic Recordkeeping Is Overdue

Mainbrace | March 2018 (No.1)

Gregory F. Linsin and Kierstan L. Carlson

Environmental laws and regulations in the United States impose substantial recordkeeping and reporting obliga­tions on regulated industries. These requirements are designed to document a company’s compliance with the requirements and limitations established by the regulatory scheme as well as any applicable environmental permits. Regulated companies also are required to maintain their compliance documentation and to submit periodic com­prehensive reports to regulators detailing their compliance with environmental standards. These records are used by the Environmental Protection Agency (“EPA”) and the delegated state regu­latory agencies to monitor compliance and, if permit exceedances or irregu­larities in the compliance records are detected, to evaluate the need for enforcement actions.

These substantial recordkeeping and reporting requirements were par­ticularly onerous on both industry and government, in part because records historically were required to be maintained and submitted in hard copy, which presented challenges inherent in managing enormous volumes of paper. Until recently, the U.S. Department of Justice (“DOJ”) and the EPA have resisted transitioning to electronic recordkeeping systems for environmental compli­ance data. This resistance was rooted in concerns about the reliability and security of electronic reporting (e.g., the gov­ernment wanted assurance that data submitted by private parties had not been manipulated and that the govern­ment’s ability to verify that the records were prepared and signed by a responsible corporate representative remained intact). Nevertheless, in the last few years and in light of the enhanced reliability of electronic information systems, the EPA decided to enter the 21st century: Continue reading “Environmental Compliance Aboard Commercial Ships: Electronic Recordkeeping Is Overdue”

Regulatory Stalemate in the Trump Era

Mainbrace | October 2017 (No.4)

Sean T. Pribyl, Jonathan K. Waldron, and Joan M. Bondareff

In the lead up to the general election, then-candidate Donald Trump often repeated campaign promises to massively cut federal regulations that he viewed as stifling to business growth and killing jobs. True to his word, in his first 200 days of office, President Trump has generally delivered on his promise to stymie new federal regulations, including those impacting the maritime industry. Continue reading “Regulatory Stalemate in the Trump Era”

U.S. Ballast Water Compliance Challenges and Considerations Now That Imo’s Ballast Water Convention Has Been Ratified

Jonathan K. Waldron, Jeanne M. Grasso, and Stefanos N. Roulakis

Action Item: Although the ratification of the IMO’s Ballast Water Convention will not alter U.S. compliance obligations, industry stakeholders must now consider their obligations under international law to ensure compliance with both regimes. Until the U.S. Coast Guard type-approves a ballast water management system (“BWMS”), owners and operators of both U.S. and foreign-flag vessels trading in U.S. waters should take steps to evaluate the compliance obligations under both regimes before making capital investments in BWMSs that may not comply with U.S. law. Continue reading “U.S. Ballast Water Compliance Challenges and Considerations Now That Imo’s Ballast Water Convention Has Been Ratified”