Marine Transportation System

Archive for the ‘Environment’ Category

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Uncertain Future for Marine LNG

In Energy/Environ, Environment on December 14, 2015 at 12:48 am

We welcome a new post by John Graykowski on the subject of LNG as a marine fuel. He describes this period as a “crossroads moment” requiring parties to hold fast to the original timeframe for vessel emissions reductions as set by the IMO in MARPOL Annex VI.

Despite many indications that LNG is gaining acceptance as a marine and transportation fuel, ship owners still appear reluctant to fully embrace the new fuel. Many owners are hedging their bets by installing dual fuel engines and other LNG-specific features on their new vessels, but delaying the installation of the fuel tank and fuel gas system until some later date. Others are placing new build orders with conventional propulsion systems, effectively dismissing LNG as a credible alternative.

Since stringent worldwide limits on fuel sulfur content are scheduled to become effective in 2020, these decisions might seem questionable. A provision in MARPOL Annex VI, however, creates significant uncertainty whether the IMO will in fact hold to this schedule, thus allowing some operators to make a strategic calculation that the limits will be delayed.

Adopted in 2008, Annex VI created a two tiered regulatory structure to phase in fuel sulfur requirements. For those states that implemented emissions control areas (ECAs), fuel sulfur limits were reduced in two stages from 1.5% to 1% in 2012 with a final reduction in January 2015 to 0.1%. Outside the ECAs, the current 3.5% limit is scheduled to be reduced to 0.5% in 2020. However, this will happen only after a mandatory 2018 IMO review which must find that sufficient compliant fuel will be available in 2020; otherwise the limit will remain at 3.5% until 2025.

At that time, there were only two “viable” compliance options for ship owners: use marine gas oil (MGO) or install exhaust gas scrubbers. The natural gas “revolution” was in its infancy and there was little, if any, discussion of LNG as a cleaner and more economical alternative to either MGO or scrubbers. Despite giving fuel suppliers over a decade of advance notice to prepare, the potential magnitude of demand for compliant fuel and concerns that MGO production would be insufficient led the IMO to create this 2018 “gate” before the 0.5% limit would become effective.

A fortuitous confluence of factors led to the emergence of LNG as an alternative marine fuel. The ECAs created unambiguous regulatory imperatives and hard deadlines; the unforeseen increase in worldwide gas production led to a steep decline in prices; and there were no technological barriers to the use of LNG as a propulsion fuel. MGO and scrubbers involve significant expense, provide less comprehensive emissions reductions, and, in the case of scrubbers, increased risk, In contrast, LNG offers compliance with sulfur limits, significant improvements across the entire spectrum of emissions and long term cost advantages. Even with the current drop in oil prices, LNG is projected to maintain its economic and environmental advantages for many years to come. The ECAs made it possible for the first adopters to move forward in the U.S.; the EU to propound a formal policy to support LNG deployment throughout Europe; and Norway to emerge as a dominant player in the marine LNG world.

Experience in the ECAs has demonstrated that concerns about fuel availability are largely unfounded, and that the fuel supply industry can and will respond to demand signals, particularly those driven by clear regulatory requirements and deadlines. The phased approach in the ECAs allowed fuel suppliers and operators to first adjust to the 1% standard and then to prepare for the lower limits in 2015 and resulted in a smooth transition to MGO earlier this year with no apparent supply shortages. This approach had another important impact on marine operators in the ECAs who began looking at LNG as a credible alternative to either MGO or scrubbers.

The Annex VI review provision allows the IMO to consider “other relevant issues” and thus offers the means to include LNG in the analysis of fuel availability. LNG adoption that has already occurred is directly related to the implementation of the ECAs with their interim steps and fixed deadlines. The IMO should emulate this approach by requiring global fuel sulfur limits to be reduced to 1% in 2020 with a permanent reduction to 0.5% in 2025. The ECA experiences and the growth of LNG as a marine fuel provide ample justification to support this decision, rather than simply allowing the 3.5% limit to remain in place.

By 2018, more than 150 vessels worldwide will be using LNG as a fuel; the EU will have bunkering capabilities in several of its major ports; LNG powered ships will be operating in the US; China will be well on its way to transforming its inland fleet to LNG, and Singapore and Korea will be in the midst of building LNG bunkering infrastructure. The adoption of an interim 1% standard would likely galvanize the world shipping community to accelerate the movement to LNG when new vessels are ordered. In turn, this would be an unequivocal signal to the gas supply industries to move forward with infrastructure development, thus banishing forever the chicken and egg cliché in connection with LNG development.

This is a crossroads moment for the IMO and it can make a clear, definitive, and compelling statement to advance environmental quality and affirm its commitment to continued reductions. The US, Canada, and the EU made the hard political decisions to implement stringent marine emissions standards, and the markets have adjusted. As 2018 approaches, the IMO will be under increasing scrutiny from many parties, including those with a vested interest in LNG development. I would urge those nations that have implemented ECAs, or are contemplating them, those that have enacted formal policies to encourage the development of LNG as a marine fuel, and the natural gas suppliers and the environmental communities –admittedly a somewhat nontraditional alliance – to insist that the IMO adopt this phased approach.

Anything less would be a lost opportunity to take a giant step forward in the effort to reduce marine air emissions, and likely would slow the pace of LNG adoption for another five years.   John Graykowski

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The Late Senator Frank Lautenberg

In Congress, Environment, Federal Government, Leadership, MTS Policy, New York Harbor, Politics, Ports, Security, Surface Transportation Policy, Water Resources on June 9, 2013 at 11:53 pm
Frank_Lautenberg,_official_portrait

Senator Frank Lautenberg
1924 – 2013

Last Friday was a somber day of steady rain as New Jersey Senator Frank Lautenberg was buried at Arlington National Cemetery. News reports this past week cited how his passing was notable because he was the last sitting senator of the “greatest generation,” that chamber’s last veteran of World War II. His death came just months after Hawaii’s Senator Daniel Inouye, a wounded veteran of that war, took his resting place among the nation’s noted military and civilian leaders at Arlington.

(They also had a common  interest in the MTS—the marine transportation system. Inouye was a reliable and principal advocate for American shipping; Lautenberg for the landside elements—the ports and intermodal connections. Both were friends of labor.)

It need be said that Senator Lautenberg’s death on June 3, also is notable because it marked the passing of a champion of Federal policy to making communities healthier, the environment cleaner, and industry and travel safer and better. It was a personal agenda well suited to his home State of New Jersey but carried out with no less than the nation in mind.

In his 28 years as a senator he served on virtually every committee and subcommittee that touched on authorizing and funding transportation, civil works and environmental policy. For a period he chaired the Transportation Subcommittee on Appropriations while as a senior member of the Environment & Public Works Committee (EPW).  For a few years after the attack of September 2001 he also was on the Homeland Security & Governmental Affairs Committee. In recent years he chaired the Surface Transportation and Merchant Marine, Infrastructure, Safety and Security Subcommittee of the Senate Commerce, Science & Transportation Committee (CST). In recent years he served on EPW, CST and Appropriations, including the Corps funding subcommittee, concurrently.

As was evident in his committee work his approach to legislating was to cover all the bases, or at least as many as he could. He championed improving airports and the aviation system, expanding the use of transit and passenger rail, modernizing freight transportation, bringing American port infrastructure to world standards, and securing them all from the those who would do us harm.

He was appointed to the President’s Commission on Aviation Security and Terrorism after the tragic downing of Pan Am Flight 103 over Lockerbie, Scotland, and returned to the Senate, after a two-year hiatus, to help write and oversee anti-terrorism law after the downing of the World Trade Center towers. In those towers he had served on the Board of Commissioners of the Port Authority of New York & New Jersey before being elected senator in 1982. His time with the Port Authority–and his building the Automatic Data Processing Corporation (ADP) from scratch–were credits on his resume in which he took great pride and enjoyed telling people about if the occasion would allow.

Frank Lautenberg put much effort into environmental issues. He gave his attention to the recovery of old industrial wastelands through brownfields initiatives and Superfund legislation and to making the Toxic Substances Control Act more effective. He was protecting the coastline whether the recreation beaches or the nurturing marshlands. In his last year he walked the Jersey Shore in the wake of Superstorm Sandy, secured bi-partisan support for his toxic substances legislation and, from his wheel chair, cast his final vote in support of tighter gun legislation.

He was a tough fellow and could be an relentless advocate.  Just ask the trucking industry that couldn’t budge him from the centerline where he stood in the way of increasing truck size and weight limits year after year after year. Ask the FAA whose employees’ merit increases were at risk while their work was incomplete on the redesign of East Coast airspace in the Newark/LaGuardia/JFK market. Ask Norfolk Southern and CSX who found the Senator immovable on key issues pertaining to assuring competitive rail service for his home port when Conrail’s assets were on the block. Was he always the advocate that some of us wanted him to be? No, but then you rarely find a senator who is that agreeable.

From start-to-finish Senator Frank Lautenberg was an advocate for his New Jersey and his United States, which he strove to make  better by improving the quality of people’s lives and the means of commerce.    Pbea

(A version of this ran on The Ferguson Group blog.)

 
 

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A Red Cape Wish List

In Environment, Infrastructure, Ports, Water Resources on March 17, 2013 at 11:28 pm

The first formal expression of what the Obama Administration is looking for in a water resources bill came to light the other day in a March 14 letter from Assistant Secretary of the Army for Civil Works Jo-Ellen Darcy to Senate Environment & Public Works Committee Chairman Barbara Boxer (D-CA). The letter provides requested “input on the development of a Water Resources Development Act.” It arrives none too soon. The chairman, with ranking Republican David Vitter (R-LA), is about to release their bipartisan recommendations for WRDA 2013.  A Committee mark-up session is scheduled days from now.

Ms. Darcy outlines a sort of policy wish list, one that has familiar themes from current and past Administrations–watershed planning, process improvement, and authorization of projects “most likely to generate a high return to the Nation.”  More notably the letter’s message crosses into territory that knowingly will have the effect of a matadors’ red cape in a dirt-floor arena.

For flood plain communities…the letter suggests that Congress “re-examine the Federal role following a flood in reconstructing public infrastructure including levees and other flood and storm damage reduction features.” It goes on to suggest reconsideration of “law and policies that influence where and how we rebuild.”

For shoreline and other flood prone communities…the Administration view goes further, calling on the legislature to “retroactively revise the stated purpose of all existing [Corps of Engineers] authorities that include flood control, storm or hurricane protection, or shore protection as a project purpose.” Reducing “the risk of flood damage in areas beyond the shore” is one thing; protecting and defending a shoreline alignment “for its own sake” is quite another.  Either way, it’s a timely subject just months after Superstorm Sandy carved its mark on the coastline.

What is driving this call for new water resources policy? Probably not much more than concerns about program cost and environmental consequence, aggravated by a whole lot of meteorological weirdness. Yes, global warming. And while both of those are concerns shared by some folks in Congress the letter’s recommendations run counter to civil works tradition and to the inclination of public officials to say yes to building and repairing solutions to flooding and the disappearance of coastline back home.

The letter doesn’t have a lot new—or reassuring—for the port/navigation community.  The statement on the navigation trust funds may break a few hearts but not new ground. The letter reiterates the Administration’s proposed fix for the broken Inland Waterways Trust Fund including a new fee structure, which the waterway industry has opposed in favor of building on the existing fuel tax regime.

It also expresses an unambiguous view in counter direction to the lobbying by ports and dredgers to increase channel maintenance funding and have full-use made of the Harbor Maintenance Trust Fund. Instead, the Darcy letter flatly states, “spending should not be based on the level of receipts from the current tax.”

That principle could be debated, but it fails to acknowledge the fact that the Corps of Engineers she oversees is on record as saying the annualized national need for port maintenance dredging is in the neighborhood of $1.5 billon, which is a whole lot closer to the HMT annual tax receipts, projected to be $1.659 billion this year, than the roughly $850 million budgeted by the Administration for O&M this year.

It’s hard to understand walking away from the obligation to maintain what you built when the lack of money ain’t an available excuse.  This from the White House that recently announced a “Fix It First” policy for U.S. infrastructure.

Interestingly enough, arriving the same day as ASA Darcy’s letter was an email message with a transcript of a recent meeting at which President Obama talked to mayors, seemingly off-the-cuff, about the need to address port and waterway infrastructure in order to keep the U.S. competitive on the export market. In fact there are faint signs that his next budget (FY 2014) will have a fairly strong channel maintenance budget, but the Darcy letter is a clear indication that we should not look for any structural improvements in policy to guarantee full-use of the HMTF.

The Senate committee will meet soon to take up a WRDA bill. It will attempt to address the HMTF issue, the insufferable slowness of the civil works project planning process, the brutalizing of coastal areas by powerful storms, and a lot of other things in need of attention. But views expressed in the Darcy letter, on behalf of the Administration, may not be represented to any significant degree, in a bill that is a bipartisan product. And it won’t come close to resembling the bill that the Republican dominated House will produce later this year.  Pbea

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Searching for Common Sense in the Gulf

In Environment, Federal Government on August 3, 2010 at 8:34 am

Around the time that the Clinton Administration tried to tackle the abundance of red tape in Washington, with VP Al Gore in charge of the regulatory reform effort, a great small book was published.   It is Philip K. Howard’s “The Death of Common Sense: How Law is Suffocating America.”

Philip Howard’s book came to mind when I listened to this Marketplace story on the radio.  The piece by Stephen Beard is about Dutch expertise, a Dutch approach to addressing an oil spill, and how that compares to what took place in Gulf waters.

No, I’m not leaping aboard the SS Anti-Jones Act whose crew thought they found a rhetorical goldmine in the Gulf.  (Nor am I a JA apologist.)  For an intelligent discussion on what role US cabotage law did or did not play in the Gulf response look here.

The Marketplace piece is not just about oil skimming equipment and berm building.  It is about taking charge.  It is about being prepared.  It’s about bringing all the smart people and into the room and all available resources to the task.  And maybe it is even about giving a little less attention to the default positions (litigation potential and fine points of regulation) when a prompt response to a crisis is required.  If that didn’t happen it’s a shame.   Pbea

 

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CAFE for Ships?

In Efficiency, Environment on January 20, 2010 at 11:06 pm

The liner shipping industry, through its World Shipping Council, has proposed a regime for improving ocean-going vessel emissions worldwide.  It’s a good move.  The WSC considered what proposals were already on the table–fuel tax and emissions trading system–and offered something different and credible.

The Vessel Efficiency System (VES) takes a cue from regulatory regimes like American CAFE standards for vehicles.  Reduce fuel consumption and increase efficiency to reduce carbon emissions.

An international standard is a must for such a borderless, multinational industry.  The industry knows that at least one proposal on the table has in mind using ocean shipping as a revenue source for the broader GHG reduction strategy discussed at COP15 in December.   (Simply a tax on bunker also would not address enviro complaints that emission reduction is not directly addressed.)  WSC doesn’t want GHG tax revenues raised on ships to stray far and so proposes “that some significant portion of the funds be dedicated” to R&D ‘targeted at increasing the energy efficiency of the world’s fleet.”

Presumably the proposal will have some support among major flag nations.  Undoubtedly the proposal will be picked apart in some quarters.  But then WSC President Chris Koch and environmental VP Bryan Wood-Thomas know that.   Better to have your own proposal in the mix.  “The Committee is invited to consider the information in this document and take action as appropriate.”

Below are some excerpts from the VES proposal; the full document is here; a JoC story is here.   Pbea

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World Shipping Council – Vessel Efficiency System (VES)

  • Establish efficiency design standards or targets for new and existing vessels where calculation of an Energy Efficiency Design Index baseline is feasible,
  • Establish mandatory efficiency standards applicable to new builds, with subsequent standards established through successive tiers,
  • Establish different (less stringent) efficiency standards that apply to the existing fleet after a given year,
  • Assess charges on fuel consumption for existing vessels failing to meet the standard for existing vessels, and
  • Establish a fund populated by the revenue.

The purpose of combining vessel design efficiency with the fund concept is to:

  • Produce an enhanced environmental result;
  • Address criticisms that the other proposal to establish a fund through fees on bunker sales would be a commodity tax with limited impact on improving carbon efficiency across the world’s fleet;
  • Provide greater incentive to vessel operators to invest in efficiency improvement; and
  • Discourage the long-term operation of the most inefficient vessels.

For those ships subject to the charge…the relative cost per ton is less for those ships that miss the standard by a smaller margin.  The least efficient ships of a given class and size would pay the highest charge.

Like the Danish proposal, such a system would generate funds for an IMO administered “fund;” however, this approach would also financially reward those ships that meet the specified efficiency standards and create an incentive to improve or retire the least efficient vessels within a given class and size grouping.

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Green Move at FMC

In Environment, Green Transportation, Ports on January 8, 2010 at 2:49 pm

The Federal Maritime Commission has formed a Maritime Environmental Advisory Committee.  This isn’t fresh news–the FMC announced the action last November–but it’s still worth noting.

It is a smart move by Chairman Rick Lidinsky.  He announced it, appropriately so, while on a visit to the San Pedro Bay ports.  Says the FMC press release: “I wanted to recognize these ports’ leadership in demonstrating that the maritime industry can remain commercially competitive while acting in a manner consistent with the country’s commitment to energy independence and environmental standards.”  While those two largest of US ports have led the way in greening seaport operations the Lidinsky comments were a particular reference to the ports’ more recent Clean Trucks Program. It was his way to demonstrate the agency’s new leadership.

The program–in conjunction with the efforts of an enlightened shipper community–has been very successful in reducing port drayage trucking diesel emissions by a praiseworthy 80 percent.  Doing it well ahead of schedule.  The program has inspired similar action in other parts of the country and, with the exception of one particular element, has the strong support of both public and private interests.  (The exception is the controversial “employee driver” provision in the Los Angeles plan that is being challenged by the American Trucking Association in court.)

The formation of the FMC panel followed by several months a decision in the FMC to halt its action against the ports of Los Angeles and Long Beach.  Their joint action raised technical issues under the Shipping Act and that prompted an FMC complaint in court as well as the decision to start an FMC enforcement investigation.   (The environmental objectives of the  clean trucks program were not challenged.)   The decision to withdraw the complaint took place before Lidinsky’s arrival at the FMC.

The bid in court  proved unproductive.  I’ve not the training to judge the merits of the  complaint.   But I do know that the new chairman–a sharp fellow–knew what he was doing when he asked his staff what was their understanding of the environmental issues that color and confront maritime related activity in the United States today.

On learning the answer Lidinsky took action.  A Maritime Environmental Advisory Committee was formed.  Strictly an internal panel, the press release notes that the staff committee’s purpose is “consistent” with Obama administration policy for the development of “green jobs”, etc.  A reference to creating jobs is de rigueur for a government  press release these days, likewise an ethos statement on seeking “a more sustainable approach to maritime issues.”

On a more basic level, however, the new advisory committee would help the commissioners understand what is going on in the maritime realm and tune the agency’s work–its deliberations and services–to what is an undeniably changed environment–regardless of the party in power–in which business and government now has to operate.  And smartly so.   Pbea

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Will Ports Be Ready? (Part 2)

In Environment, Ports on September 15, 2009 at 5:14 pm

Will U.S. ports, especially those on the Atlantic and Gulf coasts, be ready to operate in the changing domestic and international commercial environment? With major shifts on the way the ports that adequately prepare will be the ones to maintain and gain market share.  The change in environment—at local, national and global levels—will be a constant factor not easily addressed.

Environmental Concerns
From 2002 to 2007 many ports found it necessary to have a proactive environmental policy to get community approval to operate and expand.  Most major ports experienced double digit volume increases that resulted in problems with surrounding communities over increasing road congestion, noxious air emissions, and safety concerns.  In the San Pedro Bay ports communities voiced their anger to local politicians and in short order port projects were put on hold.

With the collapse of global trade, the pressure subsided as the number of containers and trucks decreased.  However, all indications suggest that world trade will rebound and cargo volumes will double by 2040.  Community concerns and political problems will re-emerge as well.  Other environmental issues may also emerge to affect port business practices—consumption of non-renewable resources, bio-hazards, and concerns about species redistribution that may persist even with ballast water regulation.  A proactive policy may again be a necessity for certain major ports if their environmental performance is seen as problematic for their neighbors.

Green house gases (GHG) are probably going to be the biggest environmental game changer for businesses as climate change policy is put in place and businesses calculate the added expense.  The U.S. contributes 20 percent of the world’s emissions from burning fossil fuels; India contributes 4 percent.  Will there be a carbon tax or cap and trade policy established worldwide?  What will be the cost penalty for oceanborne cargo here or worldwide?  How fast will engine room and terminal equipment technology adapt?  Those questions await answers and clarification.

As climate change concerns and political acceptance addressing those concerns increase, the pressures to aggressively address GHG will be enormous.  (That is likely notwithstanding the relative environmental and energy per-ton/mile efficiency of the marine and rail elements of MTS related transportation.)  These issues will have even greater impacts on the cost of ports, particularly if dealt with retroactively.

Next: Consumer demand and the bottom line.

T. H. Wakeman