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Implementation of theNorth America Emissions Control Area(ECA)Frequently Asked QuestionsPresented by:20 April 2012Implementation of the North American Emissions Control Area(Information current as of April 20, 2012)On August 01, 2012, the governments of Canada and the United States will begin enforcement of the North American Emissions Control Area (ECA). However, many shipping companies, fuel suppliers and brokers still appear uncertain as to how industry will successfully comply with the ECA requirement that vessels running within 200 nautical miles of the Canadian and U.S. shorelines must burn fuel containing 1.0% sulfur or less. While considerable information has been published to date on this subject, no single source has attempted to include considerations of the regulatory, practical, and economic implications of the new requirements governing ship emissions. While many uncertainties remain at this point, this document is our attempt to summarize where industry currently stands with regard to low sulfur fuel supply, requirements and enforcement and what problems remain to be solved between now and August 01.General Background and Requirements:What is the origin of the North American ECA requirements? The United States and Canada both participate in the United Nations’ International Maritime Organization (IMO) and are signatories to the International Convention for the Prevention of Pollution from Ships or “MARPOL” Convention as it is commonly known. The MARPOL Convention contains six annexes, the most recent of which (Annex VI) deals with air pollution and spells out requirements for ozone depleting substances, nitrogen oxides (NOx), sulfur oxides (SOx), tanker cargo emissions (VOCs), and fuel quality and availability. All of these issues are directly related to or have an impact on ship operations.MARPOL Annex VI allows for the creation of special “Emission Control Areas” where fuel and emission limitations are stricter than other areas. The United States and Canada have taken the additional step of jointly requesting that the IMO declare the formation of an Emission Control Area out to 200 miles from their respective shorelines.By adopting Annex VI, the two countries have incorporated MARPOL requirements into their own laws. By establishing the North American ECA, Canada and the U.S. have set standards for emissions within the zone that are more stringent than for those seas outside the ECA. In the U.S., the subsequent act of Congress that put all this into motion for the United States is known as the Maritime Pollution Prevention Act of 2008.What are the specific fuel requirements of the North American ECA and when do they come into effect?This table is a summary ofthe timetable by whichthe new regulations comeinto effect in the monthsand years ahead.What are the boundaries of the North American ECA? Have they been clearly defined? As part of the process establishing the North American ECA, boundaries based on specific latitude and longitude coordinates have been drawn for the US and Canadian West Coasts, East Coasts, and most recently the Caribbean Seas. The boundaries published by the IMO are located on the website under MEPC Circular #723 published 13 MAY 2010. In general, the ECA boundary points are 200 nautical miles fromthe nearest shoreline or baseline including offshore islands. For those charts marking the Exclusive Economic Zone of Canada or the U.S., the ECA boundary will lie three nautical miles INSIDE the outer boundary of the respective EEZ’s. Of note, Mexican waters, the waters of western Alaska and arcticwaters north of both countries are not part of the North American ECA.For the North American west coast,the representative plot points forthe ECA boundary are indicated inpurple in the illustration to theright. Given the shape of theboundary lines coupled withestablished great circle courses tonorth and south Asia from theprimary west coast ports, it isobvious that vessels will likelyexpend more time and burn morelow sulfur fuel in the ECA than thatof just a 200-mile transit.This chart shows approximate great circle segment sailing distances to theECA boundary from pilot departure points at Port Angeles WA/Victoria BC andSan Francisco. For Southern California, the distance to the ECA boundary istaken from approximately 24 miles off Pt. Conception, where vessels wouldlikely clear the Channel Islands and the CARB zone. This diagram uses a NorthAsia great circle course line to Uraga Lighthouse, Japan for illustration.Enforcement in the United States:In the United States, what government bodies will administer and enforce ECA requirements? It appears that the law grants initial authority to the Environmental Protection Agency (EPA) to establish and administer the new protocols. The law further grants both the EPA and the U.S. Coast Guarde nforcement powers including provisions for civil penalties. A subsequent Memorandum of Understanding between the EPA and USCG in June, 2011 spelled out in detail how the two agencies will jointly enforce the ECA regulations. This would include inspections, investigation, and pursuing cases of non-compliance. A joint letter sent to industry immediately after the MOU was issued can be found here: /compliance/resources/agreements/caa/jointletter062711.pdfUnder the joint enforcement MOU, with whom is a shipowner, operator, or agent most likely to be dealing regarding Annex VI issues? As the agency already deeply involved in the inspection of vessels under Port State Control regulations, the U.S. Coast Guard is the most likely group involved in Annex VI compliance, inspection, and problem resolution. However, in the case of discovered violations, either the EPA or the USCG may bring enforcement action. Under the joint enforcement memorandum mentioned above, the EPA may also send representation and/or inquiries to interested parties regarding particular vessels or controlled fleets. They may also review operations of interest such as bunkering. Given their stated agreement to work closely together on implementation and enforcement of Annex VI regulations, USCG and EPA should coordinate inquiries to ships such that masters or owners are not having to answer to both agencies. Should this not be the case, it is advisable to let both agencies know of the duplicated effort.What will the USCG and/or EPA be looking for? For compliance with ECA requirements as well as all Annex VI stipulations, recordkeeping and fuel samples will be a key part of compliance examinations. Recordkeeping requirements include the presence of valid EIAPP and IAPP certificates, an engine technical file that supports the issued EIAPP , and an engine record book outlining all changes and adjustments to engine components and operating parameters. Furthermore, all bunkering operations must be documented with a Bunker Delivery Note provided by the supplier and maintained on-board for 36 months. Representative samples of delivered bunkers must also be maintained for 12 months. As in all Coast Guard marine Inspections, the USCG reserves the right to expand the scope of their inspection depending on initial findings and cause. The IMO’s working committee (Marine Environment Protection Committee or MEPC) issued a set of guidelines for procuring representative fuel samples which can be found here: /blast/blastDataHelper.asp?data_id=26467&filename=182(59).pdfIf unable to comply with the ECA requirements, what should a vessel operator do? Again, recordkeeping is important especially where efforts to procure compliant fuel were not successful. Under Annex VI, specific provisions are outlined for vessels and operators under Regulation 18 which requires them to document their efforts to procure compliant fuel. This includes exploration of alternative fuel sources based on circumstances of the voyage plan. This documentation would be required should a vessel be inspected and improper fuel use or lack of compliant fuel on-board is found. The vessel or its operator must also report cases of low sulfur fuel non-availability, both to the IAPP issuing body of their country of registry and to the IMO-MEPC. It is not completely known at this time how much leeway will be given in each case, but the better documented each situation is, the better the outcome should be.Is MDO/MGO considered a compliant fuel for the purposes of the ECA? If judged by only ISO standards (8217:2010) which specify the maximum levels of sulfur and other parameters of various grades of distillates (DMA, DMB, etc), the answer is “no”. That said, fuel buyers can and should specify their desired sulfur levels in their procurement order and in turn, receive those stated numbers on the Bunker Delivery Note when product is delivered. The ISO standards also call for a test methodology (ISO 4259:2006) which allows for a 95% confidence level on the test result. This creates a very small, but necessary range of error tolerance with a testing standard that is already in use by the fuel producers. The USCG has advised that they will accept this ISO test protocol and should be officially advising industry of this fact in forthcoming bulletins. If sufficient supplies of 1.0% IFO are not available, vessels are expected to use any compliant fuel available in the market including compliant MDO/MGO. In 2015, it appears that the only fuel that could be compliant under today’s offerings would be these types of distillates, modified in sulfur content to the acceptable limits.What are the penalties for not complying? Penalties for non-compliance can be assessed up to $25,000 per violation and potential detention of the ship. In their joint letter to the industry published June 27th, 2011, the EPA and USCG stated that “each day of a continuing violation may constitute a separate offense”. If penalties are compounded on a daily basis, the cost-benefit analysis of non-compliance is quickly rendered moot.Are there any other options to low sulfur fuel? The Annex VI regulations make an allowance for installation of proper emission treatment equipment if it accomplishes the objective of SOx / NOx and particulate matter (PM) removal from the emission stream. The allowable emissions for “stack scrubbers” under the current phase of the law are listed specifically for NOx in Annex VI. Those for SOx are simply the same target numbers as the fuel. Scrubbing technology is emerging quickly, but it would appear there is no “silver bullet” solution that meets both the technical requirements for NOx and SOx abatement while also being a sensible capital investment for a ship. We are sure to see more advancement in this area and greater closing of the “feasibility gap” as fuel requirements become stricter. The truest test for this technology will come in 2015 when fuel standards become even more stringent. One issue of current concern is the ability for scrubbing systems (either wet or dry) to remove enough particulate matter, NOx, and SOx on a continual basis while underway. In addition, further pollution must be avoided such as dumping water-based effluent into open seas or dealing inappropriately with the toxic solid wastes created by dry removal systems. Vessel owners should keep a close watch on developments in this area as the rules will likely remain in place for this as an alternative compliance method.Annex VI makes further allowance for other areas of innovation as outlined in Regulation 4, titled Equivalents. Here a provision is made to give a ship owner the ability to use “any fitting, material, appliance or apparatus to be fitted in a ship or other procedures, alternative fuel oils, or compliance methods used as an alternative” that will achieve the same emissions reductions required by the new standards. There are at least a couple of ideas in development under this provision, which will come under consideration in the near future.Fuel Supply Issues:Have the refiners, brokers, traders, transporters, and others in the supply chain figured out how to make and supply a 1.0% IFO product? 1.0% sulfur IFO is not yet available on an industry-wide, coast-to-coast basis. However, depending on the region and the individual refiner, several suppliers have stated their willingness to provide a 1.0% sulfur IFO-based product on a limited basis subject to volume commitments by their customers. KPI Bridge Oil is actively engaged in ongoing discussions with suppliers about formulations, blending, storage and ongoing availability of these supplies. We encourage marine fuel buyers to talk to us about their needs in various ports. Many considerations need to be weighed for each vessel and fleet, some of which are further outlined below under “Vessel Issues”.How will suppliers make this fuel? Based on current crude oil stocks typically available in US West Coast markets, suppliers have generally indicated that simply refining a residual IFO product down to a 1.0% sulfur specification is physically and economically impractical. East Coast and Gulf markets have better access to low-sulfur crude stocks, which makes 1.0% sulfur IFO possible to produce in those parts of the country. Where low sulfur crude stock is not available, many refiners have come up with plans for blending IFO grades with clean distillates to reach compliant sulfur levels. Additional expense aside, this blending plan is not without some challenges as will be discussed later.Is there a standard or set “formula” for a blended IFO 1.0% sulfur fuel? IFO, MDO, MGO are all products for which there is an ISO standard (2005, and 2010 revisions). The ISO has not yet issued a specific revision to address 1%S fuels, but may not have to since most specification elements are expressed as maximums. Given the components expected to be used in blends, there could be large variances in specific gravity, viscosity, and other physical characteristics. We would highly recommend consulting with engine manufacturers concerning lube oil compatibility (Base Number) with planned extended use of reduced-sulfur fuels.What other challenges are there on the supply side? Segregated storage capacity, logistics, and blend stability are emerging as challenges to overcome in order to meet ECA requirements. Widespread demand for yet another grade of marine fuel will require dedicated storage after production for both spot and contracted inventory. In many port areas, there are already constraints on tank storage and availability of marine fuel products sold in large, bulk quantities. The addition of another fuel grade of unknown demand requiring segregated storage and probable re-blending for stability will likely strain tankage capacity further. To the best of our knowledge, no ports or refiners have refused to supply low sulfur IFO solely due to lack of tankage, however many have indicated this will add further cost to an already expensive proposition.Logistical considerations pose a similar challenge when supplying 1.0% IFO blend by barge. Typical bunker deliveries to ships today can already include both IFO and distillate(s). Given the limited tank partitioning of fuel-oil barges and a limited ability to “overload” or “afterload” a tight-spec product and a dirtier product in order to avoid cleaning costs and barge downtime, the logistics of adding a 1.0% IFO blend into the logistics mix is problematic and potentially cost-incurring.We expect 1.0% sulfur propulsion fuels, as individual deliveries, to be stable in keeping with ISO standard. However, individual deliveries over time will have different characteristics that may lead to instability when mixed with other previous runs and blends of 1.0% sulfur IFO. This type of “load-over-load” supply of differing blends can happen at the refinery, storage tanks, barges, and the ship as well. For example, during bunkering, due to limited ship tankage, there could be top loading of one particularblend of 1.0% sulfur over a previous 1.0% sulfur blend that was already in the storage tank. This can be risky if there are any compatibility issues with the two products, and could potentially result in instability of the mix which would be evidenced by sludging, separation and other technical issues. Back ashore, factors such as how long the blended product will sit in tanks or barges, the temperature at which the blend is held, and the components of that particular blended lot will influence the separation tendencies as well.Are there additional safety considerations to this new fuel? The fuel itself should not have safety issues beyond what are presently there today with any petroleum fuel product. If the producers follow the expected path of blending marine distillates with current IFO grades, safety of the resultant fuel blend itself should not be an issue. All, or most, expected blending components will have 60 degree C flash points and be of known cetane, CCAI, and other burn characteristics. Based on early discussions with fuel producers, the blended fuels are expected to be of greatly reduced viscosity due to the blend components. This reduced viscosity poses other potential technical challenges for the vessel which we will discuss next.Vessel and Main Engine IssuesIs there a performance or safety consideration to underway fuel-switching? The answer is “yes” to both. Performance and safety are, in this case, inter-related due to the potential for Loss-Of-Power (LOP) incidents at critical moments when maneuvering inside ports. As industry’s experience with the fuel switching problem grows with use of new low-sulfur blends of fuel, it is expected that these issues will become more predictable and preventable. The low sulfur IFO blends will be, by nature, less dense, and therefore packing fewer hydrocarbons into a given volume of fuel. In many cases, vessels have had to re-configure fuel delivery rates to the engine while using 1.0% sulfur distillate fuels to ensure enough volume is arriving at the cylinder to support combustion and directional momentum of the engine, particularly during maneuvering.Other LOP events have been attributed to improper operating temperatures when switching to the lighter fuel. In-line flashing, premature cylinder ignition, and vaporizing in fuel pumps and distribution lines each contribute to engine failure shortly after fuel switching. In extreme cases, major engine damage by thermal cracking in cylinders and liners has been reported.Finally, the lighter, distillate qualities of the new blends have also reportedly caused “bleeding” of fuel delivery lines through pump seals, O-rings, and valves. This could lead to fire hazards as well as reduced fuel pressure. In addition, the solvent properties of distillates running through IFO fuel lines has caused loosening of asphaltenes and other sediments in the lines, leading to clogging of filtration systems as well as injectors. All of these factors can contribute to LOP incidents.Under the new North America ECA requirements, the initial fuel changeover will take place far offshore at the ECA boundary line. Therefore, LOP incidents immediately following fuel switching should be less problematic from a navigational standpoint, but should still be avoided if at all possible.Is there any official guidance relating to switching fuel? Yes, there exists plenty of official as well as unofficial (but useful) guidance. The U.S. Coast Guard has issued several circulars including Marine Safety Alert - #03-09, June 16, 2009. Another report by the API Working Group is re-published on the USCG website under:Missions > Investigations > Safety Reports > API - Technical Considerations of Fuel Switching Practices.Both documents are representative of a large amount of technical and practical information in the public domain regarding practices and procedures for safe and efficient fuel switching while underway. These documents have been issued based on reports by engine manufacturers as well as field reports by ships and the USCG regarding Loss of Power incidents and other issues related to fuel switching while underway.Can vessels blend their own 1.0% sulfur fuel on-board? Yes, but onboard blending may not be immediately practical without preparation, planning and potential capital equipment expense.Annex VI requires the use of fuel that meets the proper sulfur specification, not necessarily the purchase of that fuel as a delivered product. It does not explicitly exclude the vessel from blending the fuel itself, only stating that the proper fuel must be used. To be clear, there are specific prohibitions by MARPOL concerning blending of petroleum products when they are being carried as cargo, but not as a propulsion fuel source.There are programs already being offered to owners/operators by technical service firms to specify and conduct fuel blending management and optimization programs. Considerations are necessary such as compatibility of the components to be blended, blending techniques and equipment, optimal pre-heating temperature and nozzle pressure, specific engine requirements to support the program, etc. Special Mention - CARB Rules:The California Air Resources Board (CARB) is a state agency charged with providing research, guidance, and enforcement of emission standards within state land borders and coastlines. In July of 2009, CARB implemented emission standards for all oceangoing vessels transiting waters within 24 NM of its shores. Those guidelines and timetables for implementation are listed here:Source: CARB Marine Notice 2011-3Does implementation of the North American ECA replace the emission requirements for California? No, however CARB has made recent modifications to its regulations making them more in alignment with MARPOL Annex VI. Their next implementation level has been set for 01 August 2012 at the 1.0% sulfur level for fuel burned within the 24 NM zone. However, CARB stipulates that to meet the 1.0% sulfur requirement, ships must burn MGO (DMA spec). This is a notable requirement as it differs from the ECA rules. If ships burn MDO, that fuel must meet a lower 0.5% sulfur limit as an offset to other PM generating elements in that grade of fuel. Furthermore, CARB will NOT permit IFO of any grade with a 1.0% sulfur specification to meet their requirements. So, on the approach to the California coastline, unless a vessel is burning 1.0% sulfur MGO or 0.5% sulfur MDO from the ECA boundary inward, there will be yet another fuel change after transiting the ECA zone and when entering the CARB zone. California also expanded CARB zone boundaries in and around the Santa Barbara Channel Islands, giving them additional margin as well. In those areas, effectively the zone starts approximately 50-70 miles from the mainland coastline. This should be taken into consideration when formulating voyage plans. CARB’s most recent circular can be found at:/ports/marinevess/documents/marinenote2011_1.pdfThe information in this document is current to the best of our knowledge as of 20 April, 2012.For more information or questions on this document or any ECA related matters, please feel free to contact us at your convenience.Peter LindseySales & Marketing, AmericasKPI Bridge Oil, Inc.Seattle, Washington206.505.9333peter.lindsey@。