   UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

        ANN ARBOR, MI 48105

December 2, 2009

                                                                        
                                        	      			                    
OFFICE OF 	                                                             
                                                                        
                       	               									             AIR AND
RADIATION

MEMORANDUM

SUBJECT:	Meeting with the Canadian Shipowners Association on November
30, 2009

FROM:	Mike Samulski

		Office of Transportation and Air Quality

TO:		Docket EPA-HQ-OAR-2007-0121		

	On November 30, 2009, representatives of the U.S. EPA engaged in a
phone conference with members of the Canadian Shipowners Association
(CSA).  The purpose of this meeting was for CSA to present an
alternative approach to compliance with the proposed lower fuel sulfur
requirements for ships on the Great Lakes.  This alternative compliance
approach was described in supplemental comment submission from CSA,
which is attached.  Participants in this conference call included:

	Byron Bunker		   U.S. EPA

	Jean-Marie Revelt	   U.S. EPA

	Mike Samulski	   U.S. EPA

	Bruce Bowie		   Canadian Shipowners Association

	Azine Moradhassel	   Canadian Shipowners Association

	Andrew Minkiewicz	   Kelly Drye

	Kurt Jones		   Canadian Steamship Lines



November 30, 2009

Mr. Byron Bunker 

U.S. Environmental Protection Agency

National Vehicle and Fuel Emissions Laboratory 

2565 Plymouth Road 

Ann Arbor, MI 48105, U.S.A

  HYPERLINK "mailto:bunker.byron@epa.gov"  bunker.byron@epa.gov     

SUBMITTED VIA EMAIL

RE: 	Addendum to Canadian Shipowners Association September 25, 2009
submission on the proposed rulemaking “Control of Emissions from New
Marine Compression-Ignition Engines at or above 30 Liters per
Cylinder,” as requested.

Dear Mr. Bunker:

The Canadian Shipowners Association (CSA) respectfully submits this
addendum to our September 25, 2009 submission on the U.S. Environmental
Protection Agency’s (EPA) proposed rulemaking “Control of Emissions
from New Marine Compression-Ignition Engines at or above 30 Liters per
Cylinder” as requested.

About CSA

The CSA represents the owners of Canadian-flagged ships operating in the
Great Lakes and St. Lawrence Seaway.  Our members include seven
companies operating a fleet of 68 vessels with an annual capacity of
over 62 million metric tonnes in 2008 – over half of this capacity was
carried between Canada and the United States.

The CSA is a founding member and active participant the Green Marine
Program.  The Green Marine Program is a voluntary environmental program
to achieve continuous improvement in the environmental performance of
the marine industry.   

The Canadian domestic marine industry supports the objective of
addressing air emissions through a policy approach based on economically
achievable and technically feasible performance objectives.  

Background

The CSA is concerned that the proposed rulemaking to implement
ECA-equivalent fuel standards on vessels operating within the Great
Lakes St. Lawrence Seaway will significantly impact the competitiveness
of the marine mode.  To recap, below is an overview of the concerns
originally outlined in our September 25, 2009 submission document:

The U.S. EPA is proposing to apply the International Maritime
Organization (IMO) Emission Control Area (ECA) standards to vessels
operating in the Great Lakes and St. Lawrence Seaway.  In doing so, the
proposed rulemaking inappropriately extends the cost-benefit analysis,
undertaken specifically for ocean-going vessels and the proposed North
American ECA, to vessels operating in the Great Lakes and St. Lawrence
Seaway. 

Unfortunately, there are fundamental differences between ocean-going
vessels and vessels operating within the Great Lakes and St. Lawrence
Seaway that are not addressed in this analysis.  The domestic marine
shipping industry is a significant contributor to the competitiveness of
North American industries operating within the Great Lakes and St.
Lawrence Seaway area, providing an economic and an environmentally
beneficial mode of transport.  The potential economic and environmental
impacts of a loss of marine capacity or a modal shift to other fully
utilized transportation corridors have not been assessed.  Further, the
potential competitiveness impacts on other industrial sectors, which
rely on the economic benefits of marine transportation in both Canada
and the U.S., have not been assessed, including the potential for the
leakage of production to offshore industrial facilities.

The approach being proposed by the EPA does not promote sustainability
and will create a negative environmental benefit by promoting a shift to
other modes of transport with greater negative environmental impact per
tonne-mile.  The timelines being proposed will result in a reduction in
the Canadian-flagged fleet and curtail investment in fleet renewal. 
Already, investment plans for significant fleet renewal have been put at
risk as a result of this proposed rulemaking. 

The proposed rulemaking does not provide the flexibility required by
companies to achieve the proposed emissions reductions.  Rather, a
performance standard that provides the flexibility to achieve equivalent
emissions levels through abatement technology, as included within the
revised Annex VI to the MARPOL 73/78, is required. 

The currently proposed timeline for the achievement of the proposed fuel
standards must be revisited in order to provide incentive and the
necessary timeframe for new technology and fleet renewal and to ensure
adequate fuel supply.  In addition, the proposed rulemaking will impact
current contracts with customers as the associated fuel cost increases
will cause the fuel variable to be unsustainable within the short
timeframe being proposed.  Since our initial submission, the CSA has
undertaken a preliminary survey regarding fuel supply.  This survey
indicates that availability of a stable blended fuel at a reasonable
cost in 2012 is a serious concern. 

Further, recent studies by the Finish Ministry of Transport and
Communications and the Swedish Maritime Administration regarding the
impacts on fuel costs of ECA requirements support these initial
findings.  While the analysis supporting the proposed rulemaking
estimates that the increased fuel costs will be 39%, the study by the
Swedish Maritime Administration indicates that “For vessels that
mostly transport cargoes between ports within a SECA, the increase in
the fuel costs may, however, amount to around 70%.”  This is inline
with the CSA’s estimations as previously supplied.  This finding
highlights the need for a specific analysis of the costs and benefits of
the proposed rulemaking for vessels operating within the Great Lakes and
St. Lawrence Seaway.

Since the release of the proposed rulemaking, the U.S. Congress has
directed that the U.S. EPA undertake extensive review of both the costs
and benefits of the proposed rulemaking with respect to the inclusion of
the Great Lakes and St. Lawrence Seaway.  In addition, in response to
the concerns raised by the U.S.-flagged vessels, the U.S. Congress has
provided an exemption for steamships from the proposed rule as well as
the addition of an economic hardship waiver provision.  

This latter development, however, does not address the concerns or
realities of the Canadian-flagged fleet.  Further, this exemption does
not appropriately address the realities of the bi-national waterway, nor
does it provide the appropriate signals to encourage investments in new
technologies and fleet renewal – required to improve environmental
performance of the vessels operating on the Great Lakes and St. Lawrence
Seaway.  While these amendments have alleviated some of the adverse
economic consequences of the proposed rulemaking in addressing some of
the concerns of the US Great Lakes fleet, they will result in a negative
impact on the Canadian fleet’s ability to improve its environmental
performance.  Specifically, this change discourages investment in the
Canadian fleet to retire and replace Canadian steamships as originally
scheduled due to the competitiveness concerns introduced by the
exemption.  

Finally, through this proposed rulemaking, the U.S. EPA is effectively
establishing bi-national policy that does not account for the impacts on
Canadian-flagged vessels or the Canadian economy.  Bi-national impacts
should be recognized by both U.S. and Canadian regulators when
developing policies that affect the Great Lakes St. Lawrence Seaway –
a bi-national waterway. 

Within this context, the CSA strongly recommends that the U.S. EPA
initiate a bi-national arrangement with Canada that will reduce air
emissions but also preserve the benefits of marine transportation in
this continental corridor.  This can be accomplished by enabling
emission reductions on a fleet average basis that promotes both fleet
renewal and the adoption of environmental technology as it becomes
commercially available. 

Alternative Approach 

The alternative approach proposes a bi-national reciprocity arrangement
between Canada and the United States.  Within such an approach, Canadian
flagged vessels within the Great Lakes and St. Lawrence Seaway would
operate within the requirements of a Canadian air emissions regulatory
regime that is responsive to the ECA-equivalent limits advanced by the
U.S. EPA.    

If it is not feasible to incorporate a reciprocity arrangement into the
U.S. EPA regulatory process, then the same result could be achieved by
designing the waiver process to incorporate fleet averaging where it can
be demonstrated that this will result in better environmental
performance than a simple waiver or exemption.

Fleet Averaging Approach

The fleet averaging approach would be considered as an alternative
approach for achieving a net improvement in the environmental
performance in the Great Lakes and St. Lawrence.  It would:

Result in significant reductions in air emissions from the Canadian
fleet operating in the Great Lakes and St. Lawrence Seaway over current
levels;

Set economically achievable environmental performance standards without
significant disruption to maritime commerce or other economic impacts;

Maintain an investment climate that is conducive to fleet renewal and
the adoption of new abatement technologies, and that encourages
continued investment;

Achieve a significantly improved emission standard by 2020; and,

Mitigate many of the adverse environmental consequences not quantified
in the EPA proposal (i.e., increased GHGs, air emissions, health and
environmental impacts resulting from modal shifts, production shifts and
a disrupted fuel supply chain).

As part of the fleet averaging approach in U.S. waters, the U.S. EPA
would accept a certificate issued by Transport Canada as recognition
that this vessel is part of a fleet that complies with the emission
standard.  In Canadian waters, Transport Canada would accept U.S.
flagged vessels certified to meet U.S. EPA standards.

The CSA strongly holds that a longer timeframe is required to develop
the tools necessary to average the Canadian fleet sulphur emissions in a
downward direction toward a 2020 target of 0.1% sulphur content.  The
graph below demonstrates the agreed position of the CSA member companies
on how to accomplish the desired outcomes while addressing our primary
concerns regarding the proposed rulemaking. This will allow the
necessary timeframe to investigate abatement technology and implement
investment options.  Technical expertise within the CSA membership
indicates blending fuels to achieve low sulphur levels is not a reliable
option.  A blended fuel with a high percentage of MDO results in
stability and compatibility issues making these low viscosity blends
unsuitable for use.  This may prompt a much earlier change over to MDO,
which would be unsustainable from a commercial perspective.

Graph 1: Fleet Averaging Approach, 2011-2020

 

Within the fleet averaging approach, it is envisioned that a fleet owner
will have the flexibility necessary to achieve an average fleet
reduction through the ability to employ one or more of the following
tools available to achieve the performance targets (this list is not
exhaustive):

Retire older less fuel efficient vessels burning high sulphur content
fuel such as Canadian-flagged steamships;

Invest in new, more fuel efficient vessels to reduce overall emissions;

Alternate abatement technology – New freshwater scrubber technology is
 being developed which would be installed in new builds and retrofitted
to existing vessels where practical.  Sufficient time is required to
facilitate this development;

Change existing vessels over to MDO - Allow a more controlled and
commercially acceptable change over to MDO if other abatement methods
are not practical;

Retrofit marine engines to improve fuel efficiency and fleet average;
and,

Consider alternative fuels such as biodiesel and natural gas.

The fleet averaging approach, together with the flexibility to employ
numerous tools to achieve improvements, addresses many of CSA member
companies’ concerns regarding the proposed rulemaking.  This approach
will provide the Canadian-flagged fleet with both the flexibility and
the incentive to achieve the desired outcomes in a graduated approach.
Rather than curtailing investment, this approach will provide the
predictability needed to invest in fleet renewal.

It is important to note that, although preferable, implementation of
this fleet averaging approach is not contingent upon the establishment
of a reciprocity arrangement with the Government of Canada.  This
approach could be incorporated into the waiver process as a condition of
approval as long as the waiver process is designed to accommodate it. 
In our view it is much better to provide a waiver that leads to fleet
renewal and the adoption of new technology than one that simply exempts
current operations.  A waiver conditional on continuous improvement to
environmental performance as outlined in the fleet averaging approach
will result in cleaner air in the Great Lakes and St. Lawrence Seaway
area in the long-run.

Conclusion

The CSA strongly recommends that the U.S. EPA engage our industry and
the Government of Canada as the development of the proposed rulemaking
moves forward.  I look forward to working with you on this initiative
and addressing any concerns you may have regarding the alternative
approach discussed herein.

Sincerely,

Original signed by

Bruce Bowie

President

Canadian Shipowners Association

 Finland.  Ministry of Transport and Communications. “Sulphur content
in ships bunker fuel in 2015: A study on the impacts of new IMO
regulations on transportation costs.” Helsinki, 2009.

 Sweden. Swedish Maritime Administration. “Consequences of the IMO’s
New Marine Fuel Sulphur Regulations.” Norrköping, 2009.

