Pacific Maritime Magazine - Marine Business for the Operations Sector

Opinion – A Step Forward

 


The United States Coast Guard (USCG) has completed a critical first step in defining the regulatory structures that will govern the development of LNG as a marine fuel. The USCG issued two draft policy letters relating to vessels and waterfront facilities that will be conducting LNG bunkering operations. Once they are final, the letters will identify the minimum safety and security requirements for owners and operators of vessels and LNG facilities and, most importantly provide guidance to USCG Captains of the Port (COTP) who will be approving specific LNG bunkering plans.

At the outset, it is important to note that these policy letters are not formal regulatory actions, and final regulations in this area will require a substantial amount of time to work through the federal regulatory processes. However, since LNG projects are advancing in several regions of the country, these guidelines provide critical insight into the direction that the USCG is moving with regard to LNG regulation. Moreover, since LNG projects will presumably be in operation before final regulations are issued, these guidelines are a likely precursor to the permanent regulatory structures that will be imposed on the industry.

The policy letters discuss a range of issues related to LNG operations including different bunkering scenarios, required advance notification of bunkering operations, required crew training and competencies, and emergency procedures. In some areas, the draft policy letters adhere to existing procedures for bunkering operations, with some modification for LNG-specific requirements. Where appropriate, USCG also incorporates international standards that are under development by European authorities and technical and classification societies. In other areas, however, USCG appears to be adopting a more cautious approach, at least in the initial stages of LNG development, with the possibility of significant departures from current bunkering procedures when LNG is involved.

This is most evident in the reliance the documents place on the discretion of the individual COTPs – in conjunction with USCG headquarters – to prescribe such requirements as may be deemed necessary in their individual ports. Such discretion is explicitly granted to COTPs under existing USCG regulations, and the draft letters reference current language that allows vessel and facilities operators to propose alternatives to the guidelines if they “provide at least the same degree of safety provided by the regulations.” The burden, however, is on vessel and facility operators to prove “equivalence” which is complicated by the lack of specific standards that will be applied. While this is an expedient way for USCG to meet the immediate challenges of projects that are underway, it does raise some concerns about uniformity of application and uncertainty for projects that will be developed in future.

The draft policy letters fail to resolve the critical issue of whether simultaneous LNG bunkering and cargo/passenger operations will be permitted, which is an essential requirement for the adoption of LNG particularly for liner operators such as Matson and Tote. Both of those companies stated unequivocally that simultaneous operations must be allowed in order to meet schedule requirements that are built around the concept of fast turnarounds in port involving both bunkering and loading and discharge operations. Since both of these companies are building dual fuel capable vessels, there is a lot invested in an answer that allows simultaneous operations to occur.

The policy letters reference that this issue will remain open and unresolved until the completion of ongoing studies in Europe leaving the only avenue for approval a showing under the “equivalence” standard allowed for in existing regulation.

It must be noted as well that comments in opposition to simultaneous operations were submitted and others which suggested the imposition of mandatory safety zones and detailed risk and dispersion analyses before such operations can be allowed. Thus, there is a lack of consensus on this critical issue and one can only hope that the results of the work in Europe and elsewhere will provide a clear basis for USCG to approve such operations in a way that does not cause major disruptions to vessel operations or schedules.

A total of 26 comments to the draft guidelines were filed by vessel operators, LNG suppliers, class societies and individuals, and the comments ranged from detailed and comprehensive discussions of the proposed guidelines to one or two sentence summary comments. Given the fact that these guidelines can have a direct impact on the cost of LNG facilities and expense of bunkering operations, I would have expected greater participation; particularly since the USCG has explicitly sought broad industry involvement and participation in the development of LNG regulations. Lacking, for example, were any comments by US ports, particularly those where LNG projects have been announced. They are on the front line of LNG development, will have a significant role, and interest in the siting of LNG facilities, the local permitting review processes, and the management of LNG operations within their terminals.

I would also note that only two LNG suppliers submitted comments, with one supplier merely suggesting that Compressed Natural Gas (CNG) be included in the regulatory process as another potential marine fuel. Again, potential LNG suppliers should be engaged in the process since there is a direct correlation between regulatory requirements and the cost of LNG facilities.

This is certainly an important step toward outlining the regulatory environment that will determine whether LNG will develop as a marine fuel, how fast such development will occur, and the ultimate cost for the infrastructure and procedures to support LNG operations. But the draft guidelines also demonstrate how much work remains. USCG deserves recognition for its diligence and hard work in trying to stay abreast of market developments and meet the immediate needs of the first projects. But it is in everyone’s interest: operators, suppliers, ports, regulators to develop a common basis for regulations that promote and advance LNG but which also establish the highest standards of safety and security. This balance can only be attained through a cooperative and collaborative effort, which involves more than the number of individuals and companies that provided initial comments to the draft guidelines.

Failure to engage, in my view, presents a risk of regulations, which, despite the best and good faith efforts of the USCG, create unanticipated barriers, increased costs, and delays. I urge all interested parties to review the docket related to the draft guidelines that can be found at http://www.regulations.gov and when the USCG offers another opportunity to provide input from all segments of the industry. This is not only good government; it is also very good business.

John Graykowski is the former Deputy and Acting Maritime Administrator and is now a Principal of Maritime Industry Consultants most recently working with marine operators on the development of LNG as a marine fuel. John can be reached at johng@maritimeconsults.com.

 
 

Powered by ROAR Online Publication Software from Lions Light Corporation
© Copyright 2017

Rendered 12/17/2017 05:50