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Friday, November 24, 2017

The Regulatory Hammer Pounds the Waterfront

Posted to Global Maritime Analysis with Joseph Keefe (by on August 17, 2017

You may have missed the memorandum, but it turns out that the maritime industry – you know, the one which moves 95% of what you use on a daily basis? – is bad for the environment. Very bad. I didn’t actually know this until I read a recent article that asked, “Can one of Southern California’s biggest sources of pollution turn itself into a model of green energy?” Not to worry: the ports of Los Angeles and Long Beach (prodded by the regulatory and political machines), above and beyond the remarkable progress they have already made to date, now seek to achieve, and where possible, accelerate to 100% zero-emissions cargo handling equipment by 2030.

Separately, a recent industry study, commissioned by the Pacific Merchant Shipping Association (PMSA), puts the cost of achieving this lofty goal at about $16 billion locally, not including infrastructure costs outside the marine terminal gates. Like safety, you can’t put a price on saving the environment. At least, that’s what the environmental lobby will tell you. What they don’t say is far more important. That’s because unfairly painting the waterfront as ‘a biggest source of pollution’ is one thing; putting the supply chain at risk is quite another.

I suppose that one lesson or ‘take-away’ is that environmental efforts are hard. Sometimes they are expensive and sometimes, people don’t look at the big picture as they push an agenda that a captive audience can scarcely afford, with long term benefits – and impacts – that are at best, uncertain. This was one of those times. I suspect that the ports of Los Angeles and Long Beach are experiencing a similar situation. In fact, I know it.

Predictable Decline: and Why?

On the U.S. West Coast – Los Angeles and Long Beach, to be sure, but there are other places facing similar challenges – local planners and statewide politicians would do well to look at what has happened to one of their more familiar trading partners – Hong Kong. Los Angeles recently boasted that it was the largest gateway in North America in terms of TEU throughput alone. Impressive stuff. Hong Kong, at one point enjoyed a similar regional perch. But, not anymore. And while the casual observer probably finds it difficult to feel sorry for a port that recently handled 20 million boxes in just one calendar year, that market share has declined and will continue to do so.

A local [Hong Kong] green initiative, looking to cut stack and industrial emissions in the port has 17 major freight liners signed up. The Fair Wind Charters (FWC), a voluntary commitment to switch from high-sulphur bunker oil to 0.5% sulphur diesel when berthing in Hong Kong, was the world’s first shipping-industry led fuel switching initiative. That’s nice, but it also costs money and gives an (unfair) advantage to other regional ports – Mainland China, for example, where the air quality is notoriously bad – and where they don’t necessarily practice similar environmental stewardship.


If you followed the recent so-called ‘Paris Accord’ drama, you also know that China has promised to make sure its total emissions “peak” in the year 2030 – ironically the same year that Los Angeles and Long Beach ports have been mandated to reduce theirs to “zero.” Hong Kong, to its ultimate credit, is taking the bull by the horns well before that happens. Speaking of peaking, Hong Kong’s TEU count peaked in 2008 (~24,500,000 TEU) and has declined ever since. In the meantime, and for shippers who care, at least one Hong Kong terminal operator has all ISO 14001 certified, environmentally friendly all-electric and/or LNG equipment. That’s not happening in mainland China. Not even close.

Operators, ports and terminals everywhere all hope that ‘green’ produces another kind of ‘green.’ That doesn’t always happen. What will be the impact of the West Coast Clean Air Action Plan (CAAP)? What if other regional ports don’t follow suit? Food for thought.

Only in California

California leads the nation in many ‘environmental’ categories, well beyond their early adoption of cold ironing. Nominally, this is a good thing. On the other hand, the road to hell is almost always paved with good intentions. For example, and for more than eight years, the Golden State required ships to use distillate fuel within just 24 miles of the coastline. As with many statutes created to improve life at one end of the spectrum, the requirements also came with the usual unintended consequences. A well-documented increase in casualties involving Loss of Propulsion (LOP) dogged the policy. The myriad reasons for this trend, to one extent or another, all center around the switching from heavy fuel oil to distillates as the vessels enter the local ‘ECA.’

California’s Loss of Propulsion (LOP) incidents averaged 23 incidents per year on HFO prior to 2009. Following the enactment of regulations requiring distillate fuel use there, that number jumped almost 200 percent. Extrapolating this data to other places where similar regulations have taken effect provides some chilling conclusions. For example, the potential number of LOP incidents in the Gulf of Mexico could increase by 164 – or one every other day based on current traffic levels. All of this could occur within shouting distance of as many as 4,000 shallow water oil rigs, 800 manned oil rigs and 94 deepwater oil rigs in the Gulf of Mexico.

Switching from heavy fuel oil to distillates is, to be fair, a learning curve for many seagoing marine engineers. But, California gave that little thought when they implemented the program. And in that regard, they have been exceedingly fortunate that cleaner air hasn’t (yet) translated into a preventable casualty that also meant dirtier water. Today, that fuel ‘switch’ occurs in most places some 200 miles offshore, when there is quite a bit more room for error should the loss of propulsion occur. Nevertheless, California’s precise recordkeeping gives insight into quantifying the issues which arise when one regulation, intended to obviate one problem, inadvertently causes another.

The Golden State’s progressive efforts don’t end there. California’s local effort to eradicate invasive species from local waters is certainly noteworthy, and admirable. But, when they called for and insisted upon equipment that could reduce invasive species to a level 1000X more stringent than the IMO’s benchmark, it contributed in no small part to the gridlock that has delayed implementation of global regulations to get the job done. Indeed, California’s Balkanized and radical approach was so severe that today, the equipment to verify that draconian (and, by most estimates, unnecessary) standard doesn’t even exist. This was one of those times when folks said, “If we build it (the rule), then the technology to solve it, will come.” Not so much, actually.

Arguably, and where this BWTS equipment should have already been installed on as many as 60,000 vessels worldwide, the task is only now gathering steam. It’s why industry advocates and stakeholders – like AWO for example – are insisting on the so-called federal VIDA legislation aimed at unifying environmental regulatory regulations under one regulatory body so that this sort of nonsense can be avoided in the future. Which brings us right back to CAAP.

Can we hope that CAAP has been any better thought out than the examples laid out above?

What’s the Real Story?

In just the past few years, it is a fact that tenants, customers, and vessel operators in the Port of Long Beach have reduced emissions faster than any other industrial sector. Without a doubt, this work needs to go on – and it will. But, calling the ports “one of the biggest sources of pollution” is beyond the pale. Cars are the largest source of pollution. That’s got nothing to do with the port beyond the fact that most of those vehicles are on their way home from the electronics superstore with their flat screen TV which was delivered on a boxship just in time, the week before.

The port of Long Beach calls itself the ‘Green Port.’ And, the port’s environmental efforts have been copied by seaports everywhere. Recognized internationally as one of the world’s best and locally as a partner dedicated to helping the community thrive, community relations here are good. That sort of accolade is nice, but in January, we asked then interim Chief Executive, Duane L. Kenagy to put some data behind the green slogans. “Over the last ten years, we’ve cut diesel emissions by 84%, Sulfur Oxides by 97% and Nitrogen Oxides by almost 50%,” says Kenagy, adding quickly, “We do get a lot of credit when you listen to the comments that come in. There is recognition of how far we have come, but there’s also recognition that this isn’t the end of the road. We can do even better. The challenge is that the last bits are always the hardest and a lot of the low hanging fruit has already been taken. We believe that by working with industry, and as long as we don’t specify the technologies or how to get there, we think industry will get closer to zero emissions.”

That ‘low hanging fruit’ has produced a bountiful environmental harvest already. The attached chartgleaned from South Coast Air Basin (SCAB) and Port of Los Angeles and Port of Long Beach 2015 Emissions Inventory Reports – is telling. In that chart, anything under the SCAB area includes everything except port emissions. SBPB – or San Pedro Bay Ports – data details emissions coming from the ports. The chart clearly shows just how much ‘pollution’ that can be attributed to the two ports that annually handle as much as 40 percent of the boxes that cross the collective wharf in the United States. It isn’t anywhere near as much as the environmental lobby would like you to think.

2015 San Pedro Bay Ports & South Coast Air Basin Major Sources Emissions Contributions in %

Source

NOx

PM10

PM2.5

DPM

SOx

CO2e

SPBP

Ocean Going Vessels

5.31%

0.310%

0.695%

4.71%

5.62%

0.374%

Harbor Craft

1.00%

0.106%

0.233%

2.06%

0.0200%

0.0736%

Cargo Equipment

0.716%

0.0333%

0.0736%

0.541%

0.0516%

0.192%

Locomotives

0.953%

0.100%

0.219%

1.95%

0.0216%

0.0816%

Trucks

2.05%

0.0254%

0.0582%

0.459%

0.114%

0.426%

SCAB

Stationary Equipment

15.0%

78.2%

70.0%

2.28%

58.5%

41.1%

On road mobile (w/o SPBP)

51.3%

16.4%

18.9%

41.7%

10.6%

46.1%

Other Mobile (w/o SPBP)

23.6%

4.78%

9.78%

46.3%

25.1%

11.7%

TOTALS

100%

100%

100%

100%

100%

100%

Outside the port’s gates – any port, for that matter – congestion is what is killing productivity. It is also creating its own considerable environmental footprint. With road and rail systems transporting volumes far beyond what they were designed for, gridlock and congestion are inevitable. For example, the American Transportation Research Institute has reported that congested highways cost the trucking industry $63 billion in 2015 and caused 996 million hours of lost productivity. That, they add, is equal to 362,000 trucks sitting idle for a year. Unknown is how many of those trucks are running their engines as they wait for the infrastructure to improve. I’d like to see that NOx, SOx and particulate matter output calculated. Spending that CAAP $16 billion on the roads, rail and intermodal connections to save $63 billion in lost productivity and increased pollution? Now, that’s a CAAP plan that many could rally behind.

In their well-intentioned haste to clean up the environment, CAAP proponents concentrate chiefly on the ports when far greater gains can be had – there’s that low hanging fruit analogy again – by improving highways, rail intermodal connections, inland locks and dams. There is clearly work still to be done on the nation’s collective waterfront, and if the progress achieved so far is any indication, that’s not going to stop any time soon. But laying the lion’s share of cost on the maritime sector – ports and vessels alike – to clean up something that has already been improved by leaps and bounds is not only unfair;  it’s also foolish. And someday, it might just take down the supply chain along the way. – MLPro

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Joseph Keefe is a 1980 (Deck) graduate of the Massachusetts Maritime Academy and lead commentator of MaritimeProfessional.com. Additionally, he is Editor of both Maritime Logistics Professional and MarineNews magazines. He can be reached at jkeefe@maritimeprofessional.com or at Keefe@marinelink.com. MaritimeProfessional.com is the largest business networking site devoted to the marine industry. Each day thousands of industry professionals around the world log on to network, connect, and communicate.

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