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Coastal Shippers Want New ECA Line Drawn

By MarEx 2014-04-11 19:23:00

By Julie Gedeon

Leading marine industry stakeholders are sounding the alarm when it comes to next year’s fuel requirements under North American Emissions Control Area (ECA). As of January 2015, ships will be required to use fuel containing no more than 0.1 per cent sulfur whenever they voyage within 200 nautical miles from shore.

“The legislation is well-intentioned, but it threatens to shift cargo to less environmentally sustainable transportation modes that will create more air pollution rather than less,” warned Kirk Jones, vice-president of Sustainability, Government and Industry Affairs at Canada Steamship Lines (CSL), and a founding member of the Maritime Industrial Transportation Alliance (MITA).

Stephen J. Brooks, president of both MITA and the Ottawa-based Chamber of Marine Commerce, echoed the caution. “Shipping companies are concerned about the cost increases arising from the ECA that have already taken effect to achieve 1.0 per cent sulfur content in 2012 and, more particularly, the significant increases in fuel costs to come to meet the 0.1 per cent sulfur content by 2015,” he said. 

“Equally concerned are the industrial shippers that depend on inexpensive, efficient and environmentally smart marine transportation who foresee a ballooning of expenses that will hurt competitiveness and cost jobs,” he added.

The marine industry fully backs the ECA goal of reducing ship emissions that might be harmful to people’s health and coastal environments. It has demonstrated its support over the past few years through major investments in efficiency upgrades, fleet renewal, and efforts to meet the 2012 ECA requirements.

What key stakeholders are questioning is the offshore distance that an ECA needs to occupy to be effective – especially when it comes to the smaller/lower-horsepower vessels typically used in coastal shipping.

The Short Sea Shipping Coalition, which has since become MITA, sponsored an independent air-dispersion study that supports having a narrower zone for the lower-horsepower vessels. Using research models approved by the (U.S.) Environmental Protection Agency (EPA), the study determined that onshore air-quality impacts diminished as these smaller vessels sail farther away from land, and they became insignificant at 50 nm offshore. The findings held even when using fuel as high in sulfur content as the current global average of 2.6 per cent. 

“Based on these findings, we’re asking for the 2015 ECA requirements  to be revised so that ships with no more than 20,000 horsepower will use fuel with 0.1 sulfur content within 50 miles of the shoreline, but can operate with 1.0 per cent sulfur content fuel out to 200 miles,”  Jones said. “This would achieve the goal of preventing sulfur dioxide from ship emissions reaching shoreline communities without penalizing short sea shipping.”

According to a 2008 study by the World Shipping Council, fuel costs often account for approximately 50 per cent or more of a vessel’s operating costs. The added cost of using 0.1 per cent sulfur content throughout a 200 nm zone threatens to cause short sea shipping to lose business to rail and trucking companies that don’t face the same strict fuel restrictions, even though each of their modes consumes more fuel and produces higher levels or carbon emissions on a per tonne-mile basis. (A ship can transport one tonne of cargo 1,610 kilometres (more than 1,000 mi) on a single gallon of fuel, compared to rail going 700 km (435 mi), and a truck covering 32 km (20 mi), based on an independent analysis.

“If left as is, the 2015 ECA requirement will likely result in cargo being transported by cheaper but less efficient modes with greater fuel usage, higher fossil fuel emissions, more road congestion, and increased safety hazards,” Jones said. “There’s also the real risk of industry being lost from the U.S. and Canada to overseas production if the 2015 ECA requirement drives up overall marine costs for delivering primary resources.”

The greatest risk is to the movement of bulk commodities, including steel, iron ore, gypsum, aggregates, coal, grain, salt and sugar, along North American’s coastal shipping lanes, according to Brooks.

“Unlike the very large, transoceanic vessels that operate in the ECA only five- to 15-per-cent of the time, short sea shipping vessels operate almost entirely within the 200-mile ECA, where they may compete with rail and trucking,” he said. “As a result, these ships are forced to use higher-cost low-sulfur fuel at least 80 per cent of their operational time.”

The cost of obtaining fuel refined to 0.1 per cent sulfur content is a real concern with prices having already risen to accommodate the 2012 1.0 per cent ECA requirement. With costs so tied to availability, the industry is fearful overall prices will skyrocket for the industry – coastal and oceangoing – with the 0.1 per cent requirement.

Seeking to elucidate the issue for cargo carriers and cruise lines expressing concern, the Port of Seattle conducted an internal analysis of how the 0.1 per cent requirement could affect both domestic and international shipping.

The U.S. West Coast is not connected to the Midwest pipeline systems. In general, the West obtains its crude primarily from the Gulf of Mexico through pipelines from Texas to the California markets, and from Alaska's North Slope by tanker into Anacortes and Cherry Point in Washington State. To a lesser extent, Washington State’s five refineries also receive crude from Alberta by pipeline. 

Ships and boats account for only four per cent of the fuel products made from a barrel of crude oil, according to the U.S. Energy Information Administration’s Annual Energy Outlook 2012 report. The marine industry’s concern is that a high local demand for a small quantity of 0.1 per cent sulfur-content fuel will significantly drive up prices for all marine fuel.

Refineries focus on products that have the biggest markets and highest value. In Washington State, as most elsewhere, that’s gasoline for automotive vehicles and diesel fuel for trucks. 
The greater monetary value of fuel with low sulfur content has refineries shifting towards making and storing more of this highly processed fuel. However, the shift is happening at the expense of the residual fuel oil (RFO) that is primarily used by oceangoing vessels. West Coast states had only 3.5 million barrels of RFO stored as inventory at the end of 2011 – down from 5.5 million barrels in 1993.

What the Port of Seattle found was that RFO refinery production has decreased from 10 per cent of overall refinery yield to only five per cent. Overall sales of RFO have declined in Washington State from a high of 900,000 gallons in 1992 to 300,000 in 2011.

The reduced availability of RFO is likely to make all shipping related to North America more expensive, driving up costs for bulk commodities, consumer products, and cruise travel. Industry stakeholders caution this could lead to economic and employment losses.

“As part of the recently updated Northwest Ports Clean Air Strategy, the port has been trying to support oceangoing carriers by providing an incentive to cover part of the cost of early use of 2015 ECA-compliant fuel,” Stephanie Jones Stebbins, the director of Seaport Environmental and Planning at the Port of Seattle, noted. “Once the final ECA sulfur limits go into effect in January 2015, the port plans to implement other programs to help offset the increased costs of ECA fuels.”

MITA argues there’s no need to harm the marine industry’s competitiveness given that research shows human health and coastal habitat would be safeguarded by fuel containing 0.1 per cent sulfur being used for the first 50 nm off shore. 

This story originally appeared in Green Marine Magazine. To read the entire issue and to find out more about the Green Marine environmental program, please go here.

Picture credit: Diamantino Rosa