EPA Releases Policy for Assessing Penalties on Ships that Violate the “Sulfur in Fuel” Standard

January 16, 2015

Yesterday the U.S. Environmental Protection Agency (“EPA”) published a “Policy for Violation by Ships of the Sulfur in Fuel Standard and Related Provisions.”  This policy describes the methods by which the EPA will assess civil penalties for violations of pollution regulations involving the North American and U.S. Caribbean Emissions Control Areas (“ECAs”), which were created under the International Convention for the Prevention of Pollution from Ships (“MARPOL”) and are enforceable in the U.S. under the Act to Prevent Pollution from Ships (“APPS”).An important goal for the EPA   is deterrence.  With that goal in mind, EPA’s policy concentrates on two components: (1) the “economic benefit” component; and (2) the “gravity” component.  These two components are then combined into a “preliminary deterrence amount” which is adjusted pursuant to subjective factors, as described below.

The “economic benefit” component is a mathematical formula based on factors such as the relative price difference between compliant and noncompliant fuel, and the amount of noncompliant fuel burned while within the ECAs.  The policy includes methods for estimating these factors when actual data is not available.

The “gravity” component is intended to reflect the seriousness of the violation.  One factor, for example, is the actual sulfur content of noncompliant fuel burned while within the ECA.  Another factor is the number of recordkeeping violations.

The “economic benefit” and “gravity” components are combined into a “preliminary deterrence amount.”  That combination is then adjusted according to factors designed to provide flexibility to account for the unique facts of each case such as degree of willfulness or negligence, degree of cooperation, history of noncompliance, litigation risk, ability to pay, and performance of a supplemental environmental project.

As of January 1, 2015, the permissible sulfur limit within ECAs was reduced to 0.1 percent.  In contrast with other areas of the world, it is clear that the U.S. Coast Guard and EPA are actively enforcing the North American and U.S. Caribbean ECAs.  Now, with the publication of this policy, there is also clarity as to the civil penalties that might be imposed on vessels that violate the ECAs.

This publication was written by the firm’s Maritime and Transportation group and should not be considered legal advice and should not be relied upon without consultation with appropriate professional advisers. This email alert is intended to provide general information only and nothing in it should be acted upon without consultation with legal counsel. Receipt of this email does not create an attorney-client relationship between the recipient and Montgomery McCracken. © 2015 Montgomery McCracken Walker & Rhoads LLP.