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Web alert: EPA Releases Penalty Policy for MARPOL Annex VI Sulphur Emissions Violations

20 January 2015

On 16 January 2015, the US Environmental Protection Agency (EPA) released a penalty policy for violations of the sulphur emissions limit for ships operating in the North American and US Caribbean Sea Emission Control Areas. The policy reinforces the EPA’s commitment to pursue MARPOL violations.
 
As many are aware, the North American Emission Control Area (ECA), under the International Convention for the Prevention of Pollution from Ships (MARPOL), came into effect on 1 August 2012, establishing strict controls on emissions of sulphur oxide (SOx), nitrogen oxide (NOx) and particulate matter for ships trading primarily off the coasts of Canada and the United States. Since 1 January 2015, the sulphur content of fuel oil burned within the ECAs must be no more than 0.10% m/m.
 
In practical terms, this means that ships must burn fuel oil of a lower sulphur content within an ECA than elsewhere. Other requirements include:

  • maintaining a written fuel change-over procedure;
  • maintaining bunker delivery notes on board for a period of three years from the date the fuel was delivered;
  • maintaining a sealed bunker sample on board for a period of twelve months after delivery.

If this is not possible, the ship may use any “fitting, material, appliance or apparatus or other procedure, alternative fuel oil, or compliance methods”, which are at least as effective in terms of emissions reduction, if approved by the enforcing agency who is a party to MARPOL Annex VI. In the United States, the US Coast Guard and the EPA have the authority to investigate potential MARPOL violations.
 
Furthermore, if a ship is not able to comply with the new sulphur emissions limit while transiting the North American ECA, the EPA has advised that a Fuel Oil Non-Availability Report (FONAR) can be filed to demonstrate the ship’s inability to obtain compliant fuel. There are several restrictions placed on the filing of a FONAR. First, the FONAR must be submitted to the EPA at least 96 hours before entering the ECA. The FONAR must include a record of actions taken in an attempt to achieve compliance; and evidence that the ship used its “best efforts” to obtain compliant fuel. Although the EPA encourages voluntary disclosures, it states that “[t]he filing of a [FONAR] does not mean your ship is deemed to be in compliance… .” It should also be noted that cost is not a valid basis for asserting non-availability of compliant fuel.
 
The newly released penalty policy applies to violations of the sulphur emissions standards that came into effect on 1 January 2015 and for violations under the previous standards. According to the EPA memorandum, the EPA may impose a civil penalty of $25,000 per violation, per day. The duty of burning compliant fuel, maintaining written procedures, recording the fuel change-over in the log book, and retaining bunker delivery notes and samples of the fuel oil are all considered separate obligations and, thus, separate violations if breached. Notably, each day a violation continues constitutes a separate penalty of $25,000. The penalties will be calculated “taking into account the nature, circumstances, extent, and gravity of the prohibited acts committed and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and other matters as justice may require”. Adjustment factors are further explained in the penalty policy.
 
According to the EPA’s memorandum, the procedures in the penalty policy were created for guidance purposes only and do not create substantive or procedural right for any party in litigation in the United States. The EPA reserves the right to change the policy at any time.
 
As previously reported there are a variety of legal considerations and contractual allocation of risks that should be examined in the context of the sulphur emissions standards.  Members are reminded that, aside from the civil penalties discussed above, non-compliance with the sulphur emissions standards can include increased inspections/targeting by authorities, vessel delays, business reputation issues and criminal penalties. Also, it should be noted that the government will proceed against the owner and operator, at least initially, regardless of the contractual relationship between owner and charterer. Thus, even if the charterer is responsible for arranging and purchasing bunkers, the owner may still face liability for non-compliance.   
 

  • For information about the sulphur emission standards in general, please see the EPA website
  • For a Memorandum of Understanding between EPA and Coast Guard in regards to enforcement, please click here
  • For the EPA Penalty Policy, please see here