Key Developments Impacting Maritime And Offshore Industry In 2021
By Jeffrey H. Wood, Jared Wigginton and Austin R. Echols
Baker Botts LLC
Over the past four years, federal agencies have adopted broad regulatory reforms that affect the maritime and offshore industries. With the arrival of a new presidential administration, the regulatory pendulum is gearing up to swing with equal force in the opposite direction in 2021. This article identifies several key regulatory issues in 2021 that will impact the maritime and offshore industry.
Vessel Incidental Discharge Act
The year 2021 promises to bring new vessel discharge standards into place. In 2018, President Trump signed the Vessel Incidental Discharge Act (VIDA) into law, restructuring the U.S.’s framework for regulating incidental discharges from commercial vessels. VIDA established a new Clean Water Act (CWA) Section 312(p) titled “Uniform National Standards for Discharges Incidental to Normal Operations of Vessels.” Among other things, Section 312(p) directs the U.S. Environmental Protection Agency (EPA) to develop national performance standards for marine pollution control devices for each type of regulated discharge incidental to normal vessel operations. With limited exceptions, VIDA requires that the standards be at least as stringent as EPA’s 2013 National Pollutant Discharge Elimination System (NPDES) Vessel General Permit (VGP) requirements established under CWA Section 402. VIDA also requires that the standards be technology-based, using a similar approach to that outlined by the CWA for setting effluent limitation guidelines. Additionally, the VIDA requires the U.S. Coast Guard to develop corresponding implementation, compliance and enforcement regulations within two years after EPA publishes the national standards of performance. The Coast Guard implementing regulations may also include requirements governing the design, construction, testing, approval, installation and use of devices to achieve EPA’s national standards of performance.
On October 25, 2020, EPA proposed new regulations to implement the VIDA. The proposed VIDA rule, among other things, would replace the VGP program by establishing new national standards for most commercial vessels greater than 79 feet in length. The requirements generally would be as stringent as the current VGP requirements. However, with the proposed VIDA rule, EPA is transitioning the requirements from a system of mostly “best management practices” to “national technology-based standards of performance,” while also seeking to “enhance enforceability and implementation” of the requirements.
The discharge standards in the proposed VIDA rule remain substantially the same for boilers, cathodic protection, chain lockers, decks, elevator pits, fire protection equipment, gas turbines, inert gas systems, motor gasoline and compensating systems, non-oily machinery, pools and spas, refrigeration and air conditioning and sonar domes. The proposed VIDA rule, however, slightly modifies the standards applicable to bilges and desalination and purification systems and significantly changes discharge standards applicable to ballast tanks, exhaust gas emission control systems, graywater, hulls and associated niche areas and seawater piping.
Specific to barges, the proposed VIDA rule contains an extensive discussion of ballast water issues. Though not imposing any ballast water treatment mandates on barges, the rule explains that barges “are not exempt from compliance with the numeric ballast water discharge standard” when they are part of a dedicated vessel combination, such as an integrated or articulated tug barge. The proposed rule explains that although these barges “typically do not have dedicated ballast tanks, [they] can use wing tanks (void space) in the hull when ballasting is necessary.”
During the public comment period, which ended November 24, 2020, commenters raised a variety of questions and concerns, with several related to the new ballast water discharge standards. For example, some national trade associations for the tugboat, towboat and barge industries strongly urged EPA to maintain 2013 VGP ballast water discharge standards and to preserve the current ballast water discharge standard exemptions for certain barge types, such as those that are non-seagoing, under 1,600 gross tons or unmanned and unpowered. Commenters also encouraged the Coast Guard to consider reducing record-keeping and reporting requirements when it develops its rules.
EPA is expected to issue a final VIDA rule by mid-2021, and the Coast Guard is expected to propose corresponding rules implementing the standards within two years of that. Maritime and offshore companies should be considering how the final VIDA Rule and subsequent Coast Guard rules could impact their compliance programs and activities, especially if those programs and activities involve discharge standards that have been modified by the VIDA Rule.
Full implementation of vessel safety and security standards is another area to monitor in 2021. More than four years ago, the Coast Guard published the Inspection of Towing Vessels final rule, codified at 46 C.F.R., Subchapter, (Subchapter M), establishing regulations that govern the inspection, standards and safety management systems of towing vessels.
Notably, Subchapter M established an inspection regime for commercial towing vessels with keels laid since July 20, 2017. Owners of such vessels are required to have a percentage of their fleet inspected and issued a Certificate of Inspection (COI) by the Coast Guard over a four-year period. By July 22, 2019, towing vessel owners must have had valid COIs on board at least 25 percent of their towing vessels. By July 20, 2020, they must have had valid COIs onboard at least 50 percent of vessels; by July 19, 2021, at least 75 percent; and by July 19, 2022, 100 percent. In addition to necessitating the inspection of thousands of previously uninspected towing vessels, Subchapter M mandates safety, security, and environmental requirements on the same vessels.
Though a full review of the safety and security aspects of Subchapter M is beyond the scope of this article, it is important for maritime companies operating towing vessels to operate all of their vessels “in accordance with applicable laws and regulations and in such a manner as to afford protection against hazards to life, property, and the environment.” Importantly, all towing vessels must be in compliance with Subchapter M even if the vessels have not yet received a COI. Therefore, towing vessel owners must ensure that each of their vessels are operated in accordance with relevant sections of the CWA and the Act to Prevent Pollutions from Ships. Additionally, “towing vessel[s] must be capable of preventing all oil spills from reaching the water during transfers” by pre-closing scuppers, using sufficient fixed or portable containment or pre-deploying sorbent materials on the deck around vents and fills. They also must not “intentionally” drain any oil or hazardous materials into their bilge.
On January 1, 2020, a new global cap of .50 percent on marine fuel oil sulfur content went into effect (IMO 2020) requiring ships to shift away from the use of higher-sulfur fuel oils, which they used to comply with the previous 3.50 percent sulfur cap. Ship owners generally have responded to IMO 2020 by either transitioning to costly lower-sulfur fuels or installing exhaust gas cleaning systems, or “scrubbers,” to remove sulfur oxides from vessel emissions.
Ship owners generally have installed two types of scrubbers to comply with IMO 2020: open-loop systems, which discharge washwater overboard, and closed-loop systems, which retain washwater onboard. The increased use of open-loop systems, which are less expensive than closed-loop systems, has led numerous coastal states and ports—including California, Connecticu, and Hawaii, as well as several European and Asian countries—to enact local regulations that restrict or prohibit the use of open-loop scrubbers in port due to concerns about potential environmental harm from washwater discharges. Notably, EPA explained in the preamble to the proposed VIDA rule, that “[t]hese restrictions are typically precautionary rather than based on data or modeling in the specific ports or regions in question” and “that insufficient data exist at this time to warrant prohibiting these discharges under the Clean Water Act.” The Biden administration could review this finding and potentially take steps to prevent open-loop scrubber washwater discharges in U.S. waters.
In the proposed VIDA rule, EPA also proposed to harmonize VGP pH limit requirements for scrubber washwater discharges with existing International Maritime Organization pH limit requirements (e.g., raising the minimum washwater pH requirement from 6.0 to 6.5 for vessels using open-loop scrubbers). Scrubber washwater PAH, turbidity and nitrate requirements would remain mostly unchanged. With these and other changes in mind, ship owners and other stakeholders should continue to monitor developments related to scrubber washwater discharge compliance as well as general Coast Guard IMO 2020 compliance verification and enforcement efforts.
Section 404 Permits
For inland-water infrastructure and maintenance activities, the CWA imposes permitting requirements under several regulatory schemes that are or likely will be in flux, including CWA Section 404, which requires a permit to discharge dredge or fill materials into navigable waters, and Section 10 of the Rivers and Harbors Act. These permit requirements apply to, among other things, maintenance dredging imperative for maintaining port and inland-water navigability. Obtaining an individual Section 404 permit often is a time-intensive and otherwise costly process. Fortunately, the CWA provides a streamlined process through its nationwide permit (NWP) program for qualifying activities, including for certain maintenance dredging activities via NWP 35.
While the use of NWPs is well-established, individual NWPs have been occasionally challenged. One recent challenge, however, presents a unique risk of broadly disrupting the use of NWPs. In reviewing a challenge to the Keystone XL Pipeline, the U.S. District Court for the District of Montana concluded that the U.S. Army Corps of Engineers—the federal agency that administers CWA Section 404 and related NWPs—violated Section 7 of the Endangered Species Act (ESA) by not completing a programmatic consultation before issuing NWP 12, which covers utility line activities. Based on this conclusion and the narrow remedy requested, the district court vacated and enjoined the use of NWP 12 for new oil and gas pipelines. While the U.S. Supreme Court has stayed the vacatur and injunction of NWP 12 pending appeal (except as applied to the Keystone XL Pipeline), the U.S. Court of Appeals for the Ninth Circuit will determine whether the ESA required the Corps to complete a programmatic consultation before issuing NWP 12.
Although the above-mentioned decision only addresses NWP 12, the district court’s ruling has broader implications. The Corps did not, for instance, complete a programmatic consultation for any of the NWPs currently in effect, including those essential for development and maintenance activities in inland waters. Nor did the Corps complete a programmatic consultation for its final rule to reissuing certain NWPs for another five-year period.
As a result, if the Ninth Circuit determines that the ESA requires the Corps to engage in ESA consultation before issuing an NWP, then there will be a strong basis to invalidate recently reissued NWPs.
Clean Water Act Section 401
Also important for inland waterway infrastructure development and maintenance activities is CWA Section 401, which requires an applicant seeking a federal permit (e.g., a CWA Section 404 permit) for an activity that may cause a discharge of a pollutant into navigable waters (e.g., maintenance dredging or port development activities) to obtain a water quality certification from the state in which the proposed activities will occur. The purpose of the certification is to provide assurances that the proposed activities will comply with applicable water quality standards for that state. Under CWA Section 401, states must issue a decision on an application for water quality certification within a reasonable period of time not to exceed one year, or the proposed activity may proceed without certification.
In the recent past, some states circumvented the one-year deadline of Section 401 by threatening to deny an application for certification unless the applicant withdrew and resubmitted its application to restart the clock on the one-year deadline. Using this tactic, several states have delayed for years their decisions on certification applications for projects that are unpopular in their respective jurisdictions. For example, after delaying for more than five years its decision on whether to issue a water quality certification for Millennium Bulk Terminals—Longview’s proposed shipping terminal on the Columbia River to export coal, the Washington State Department of Ecology issued a decision denying certification with prejudice. Litigation challenging this decision has been ongoing for the past three years.
Last summer, EPA—which is responsible for administering the federal regulatory program for CWA Section 401—comprehensively updated its regulations implementing that statutory provision. The Section 401 Rule includes many amendments designed to increase regulatory certainty for applicants, including changes that prevent states from circumventing the one-year deadline for issuing a certification decision. While there are lawsuits challenging this rule in multiple courts, it is unlikely that any court will reach a decision on the merits before the new presidential administration takes office. As a result, the new administration likely will seek to stay the litigation while tasking EPA to engage in the rulemaking process to repeal or modify the Section 401 Rule. With a slim majority in both the House and Senate, the new administration could, at least in theory, seek to bypass the lengthy rulemaking process by asking Congress to repeal the 401 reform rule using the Congressional Review Act (“CRA”).
Additional relevant regulatory schemes that recently have been amended and will be subject to future changes with the incoming administration relate to the National Environmental Policy Act (NEPA) and the ESA. When triggered by a proposed major federal action—e.g., a proposed approval by the Bureau of Ocean Energy Management of a construction and operations plan for an offshore wind energy facility—the broad procedural requirements of NEPA apply and can significantly delay a project, especially when the proposed action requires the preparation of an environmental impact statement.
Last summer, the Council on Environmental Quality (CEQ) comprehensively updated its regulations implementing NEPA for the first time since their inception more than 40 years ago. This rule adopts multiple provisions intended to make NEPA reviews more efficient. For example, the rule directs agencies to begin the scoping process for a proposed action before publishing a notice of intent and as soon as doing so is possible. The rule also imposes presumptive page limitations on NEPA review documents and related presumptive time limits for completing those documents. Besides adopting measures to streamline the NEPA process, the rule also seeks to provide applicants with greater certainty by imposing requirements on would-be litigants (e.g., an express requirement that a potential litigant identify legal issues for the agency before suing because of that issue).
There are multiple pending lawsuits challenging CEQ’s NEPA rule. As with the CWA Section 401 Rule, the new administration likely will seek to stay these lawsuits while CEQ works on repealing in part or whole its recent NEPA rule. There also is the potential that a Democrat-controlled Congress could use the CRA to repeal the NEPA rule in whole. However, considering that the NEPA rule largely codifies existing case law and adopts other practical provisions, using the CRA here, which would require the repeal of the entire rule, seems less likely.
The Trump administration also made significant changes to the U.S. Fish and Wildlife Service’s (FWS’s) and the National Marine Fisheries Service’s regulations implementing Sections 4 and 7 of the ESA, which govern the listing of endangered and threatened species, the designation of critical habitat and the consultation process. In addition to codifying common practices that the services have used for years, the ESA rules adopt provisions that promise to provide greater regulatory certainty for businesses. For instance, the ESA rules define “foreseeable future” to reduce the likelihood that species are listed as threatened based on speculation; limit the circumstances under which the services can designate unoccupied areas as critical habitat; impose time limits on the informal consultation process; adopt an expedited formal consultation process; and, for FWS, adopt a species-by-species approach to determine what, if any, protective regulations are appropriate for species listed as threatened in the future.
Unlike other regulations, the ESA rules have been finalized for a significant period of time and would not be subject to a CRA repeal. Despite having been issued more than one year ago, the litigation challenging these rules remains pending, and the court reviewing these challenges will not have the opportunity to address the merits of these regulatory actions before the new administration takes office. Accordingly, as with the other rules, the new administration likely will seek to stay the ongoing litigation and direct the services to develop a new rulemaking repealing or modifying the ESA rules.
While this article has identified several key areas of focus, there certainly are other relevant regulatory developments that will impact the maritime and offshore industries. Given that the areas discussed above include regulatory provisions that facilitate the development and maintenance of infrastructure on inland waters and offshore that likely will be reconsidered by the new administration, it will be imperative for members of these industries to participate in the reconsideration process as stakeholders.
About The Authors
Jeffrey H. Wood, a partner in the Washington, D.C., office of Baker Botts LLP, is the former acting assistant attorney general of the U.S. Department of Justice’s Environment and Natural Resources Division and previously served as in-house counsel for one of the nation’s largest waterway companies.
Jared Wigginton is a senior associate in the Washington, D.C., office of Baker Botts LLP who serves clients across industries in matters involving environmental litigation, regulatory advocacy and compliance and permitting for infrastructure development.
Austin R. Echols is an associate in the Houston office of Baker Botts LLP whose practice focuses on a range of environmental, health and safety issues. Prior to practicing law, he served in the Coast Guard as a waterfront facility inspector and pollution investigator.