Shipping Execs: EPA’s Low-Sulphur Fuel Rule Will Hurt The Environment and Short Sea Shipping

North American Emissions Control Area

Shipping industry leaders told Members of Congress on Tuesday that higher fuel costs associated with upcoming low-sulphur fuel limits in North American Emission Control Areas could actually hurt the environment and the economy by forcing the movement of goods by less environmentally-friendly means.

Congressional leaders heard Tuesday from shipping industry representatives Rod Jones and Bill Terry about the well-intentioned new shipping fuel requirement from the Environmental Protection Agency (EPA), set to take effect in 2015, whose flawed design may actually spur increased onshore air pollution and higher shipping costs, as well as increased shipping prices for companies reliant on the short sea shipping industry.

Both Jones and Terry, President and CEO of the CSL Group and of Eagle Rock Aggregates, respectively, testified in person and via written statement as part of the “Maritime Transportation Regulations: Impacts on Safety, Security, Jobs and the Environment” hearing convened by the House Committee on Transportation and Infrastructure’s Subcommittee on Coast Guard and Maritime Transportation. Jones also presented an alternative proposal to the Committee that achieves the same environmental goals as the new regulation without the same prohibitive costs.

The new rule in question seeks to limit sulfur emissions from large vessels traveling within the 200 nm boundary of the North American Emission Control Area (ECA) by requiring the use of more expensive low-sulfur fuel. The 2015 fuel sulfur standard of 0.1 percent fuel sulfur (1,000 ppm) is expected to reduce PM and SOx emissions by more than 85 percent from 2010 levels, according to the EPA.

But according to the two executives, the EPA didn’t consider the short sea shipping industry, whose vessels travel almost entirely within the ECA, when crafting the policy. The new fuel’s price tag, they said, is so expensive that it is likely to displace cargo shipments onto substantially less environmentally-sound shipping modes, particularly trucks and trains. For the public, that means more onshore air emissions and crowded roadways.

Jones and Terry explained that transoceanic and short sea vessels will incur impacts from the rule in fundamentally different ways. A transoceanic vessel on an international passage will only spend a small portion of the voyage within the ECA, and will thus only see a small cost increase from the new fuel standard. But because short sea shipping vessels embark on voyages that are almost entirely within the ECA, their cost increases will be much higher. The EPA’s cost estimates considered only transoceanic shipping, and anticipate that the new fuel requirement will lead to a modest three percent cost increase. But CSL and other members of the short sea shipping sector estimate that they are likely instead to see a 35% increase in fuel costs.

“CSL calculated that, on average, each ship would bear about $815,000 of additional annual fuel costs,” explained Mr. Jones in his testimony. “For CSL alone, the cost could exceed 14 million dollars per year.” As an alternative, Jones proposed that the requirement be amended to only affect short sea ships until they reach 50 nm from shore, closer than the 200 nm’s included in the new rule. Short sea shipping vessels, he testified, have virtually no impact on coastal air quality once reaching their cruising distance of 50 nm out at sea. “This revision will move away from the current ‘one size fits all’ regulation and align with a scientifically based approach which achieves the same environmental protection goals,” concluded Jones.

Jones’ testimony also relayed environmental concerns that, with shipping costs expected to rise to cover the spike in fuel costs, more goods will be shipped instead by cheaper but less environmentally-friendly forms of transportation like truck and rail. Jones testified that short sea shipping is “seven times more efficient than truck, and 2.5 times more efficient than rail,” so that increasing reliance on truck and rail transport is likely to increase pollution, traffic and have an overall negative environmental impact, he said.

The EPA estimates that the overall cost of the North American ECA is estimated at $3.2 billion in 2020, while its benefits are expected to include preventing as many as 14,000 premature deaths and relieving respiratory symptoms for nearly five million people each year in the U.S. and Canada.

The CSL Group operates throughout the Americas and globally, specializing in short sea shipping, which transports cargo along coastal routes, usually within a few dozen miles of shore. Eagle Rock Aggregates, based in Richmond, California, relies on short sea shipping to transport the essential building materials it produces, used for the construction of roadways and buildings.

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