April 11, 2014
Practice Groups:
Environmental, Land
and Natural
Resources;
Maritime;
Public Policy and
Law;
Global Government
Solutions
Federal Appellate Court Stays Initial Date for
Meeting New Ballast Water Discharge Limits – But
Only for Canadian Shipowners Association
Members
By: Barry M. Hartman, James A. Sartucci, Christine A. Jochim and William C. Cleveland, IV
On April 9, 2014, the United States Court of Appeals for the Second Circuit granted a stay of
the January 1, 2014 deadline for installation of ballast water treatment technology required
by the U.S. Environmental Protection Agency’s (“EPA’s”) 2013 Vessel General Permit (the
“VGP”). The stay only applies to vessels owned or operated by members of the Canadian
Shipowners Association (“CSA”). This Order partially eases the predicament vessel
operators face because the U.S. Coast Guard has granted legally enforceable extensions to
well over a hundred vessels operating in waters of the United States, but EPA has not,
leaving operators exposed to significant potential liability. See our prior publication on this
topic.
Before EPA issued the VGP, the U.S. Coast Guard (the “Coast Guard”) identified certain
ballast water treatment technologies as appropriate for installation under the National
Invasive Species Act. When it issued the 2013 VGP, EPA determined that these
technologies constituted the Best Available Technology Economically Achievable (“BAT”)
under the Clean Water Act and required vessel owners and operators to install BAT on all
appropriate vessels on the same schedule as adopted by the Coast Guard.
On December 19, 2013, CSA filed a petition seeking to reopen the VGP, challenging the
EPA’s BAT determination on the grounds that the technology was not yet type-approved in
the United States, and, therefore, could not constitute BAT (the “Administrative Petition”).1
Since that time, the Coast Guard has not type-approved a single system as adequate under
their regulations, and instead has granted extensions of its deadlines.2 Despite the absence
of type-approved technology, EPA has declined to extend its deadlines. CSA then filed a
lawsuit challenging the validity of EPA’s BAT finding given the lack of any type-approved
systems for use in the United States (the “Judicial Petition”). EPA countered that the Court
should disregard CSA’s Judicial Petition because CSA filed it too late. CSA asked the Court
to stay the VGP requirements until it could rule on the Judicial Petition,3 and the Court
agreed to stay the VGP until a merits panel resolved the question of whether the Judicial
Petition was timely.
CSA submitted the request for a stay because it claimed several of its members’ vessels
would not be able to operate lawfully in U.S. waters under the VGP’s deadlines. Specifically,
the VGP requires vessels to comply with certain technology-based effluent limits, which they
may achieve through (1) onboard treatment systems, (2) onshore treatment systems, (3) use
of water from public water supplies, or (4) not discharging ballast water.
CSA argued that, as both EPA and the Coast Guard concede, there simply are no onboard
technologies currently available that CSA’s members could install to comply with the VGP by
Federal Appellate Court Stays Initial Date for Meeting New
Ballast Water Discharge Limits – But Only for Canadian
Shipowners Association Members
the applicable deadline.4 Likewise, since CSA’s members ship on the Great Lakes, there are
no onshore facilities or onshore sources of public water in that region that CSA’s members
could use to meet the standards. Lastly, simply not discharging ballast water ignores the
realities of shipping and is akin to telling vessel operators to stop operating to avoid violating
the VGP. CSA repeatedly brought these issues to EPA’s attention,5 yet EPA failed to
respond or amend the compliance deadlines, even though the Coast Guard extended
deadlines required by their parallel regulations and EPA knew compliance was more or less
impossible.
CSA also argued that the VGP requirements were not economically achievable, which is part
of the BAT analysis required before EPA may impose new obligations under the Clean Water
Act.6 EPA assumed that the VGP would not impose additional costs on shipping because of
preexisting Coast Guard ballast treatment requirements. CSA argued that EPA failed to
consider, however, that the Coast Guard extended the deadlines for its standards, leaving
the VGP as the only standard requiring near-term expenditures. Additionally, it asserted that
EPA radically underestimated the cost of installation at between $444,730 and $526,525 per
vessel. In contrast, the Coast Guard estimated installation costs between $3.5 million to
$11.7 million per vessel.7
In short, CSA claimed that the VGP forced its members to choose between (1) terminating all
operations in U.S. waters; or (2) operating in knowing violation of the Clean Water Act.
Choosing the first option would require operators to breach or suspend shipping contracts,
lose significant revenue, and suffer injury to their professional reputations. As CSA argued,
such injuries would irreparably harm CSA’s members, while a stay of the VGP would in no
way harm EPA or the general public, since a stay would merely maintain the status quo.8
EPA opposed CSA’s motion for stay and simultaneously moved to dismiss CSA’s Judicial
Petition on the grounds that it was untimely.9 EPA argued that interested parties had 120
days to challenge the VGP, and that the window for such challenges closed on August 26,
2013. CSA filed its Judicial Petition on January 1, 2014 (when the ballast water treatment
standards took effect) and its motion for stay on January 16, 2014.
The Second Circuit issued a narrow ruling, referring EPA’s motion to dismiss CSA’s Judicial
Petition to a merits panel. Pending the merits panel’s decision, the Court stayed application
of the VGP only as to CSA member vessels. The parties will have a revised schedule for
briefing, and the case will be assigned to the first merits panel after May 23, 2014.10 The
most significant aspect of the ruling is the Court’s apparent view — as is always the case
with injunctions — that EPA is not acting fairly to the regulated community by not addressing
this issue.
2
Federal Appellate Court Stays Initial Date for Meeting New
Ballast Water Discharge Limits – But Only for Canadian
Shipowners Association Members
What’s Next?
In addition to CSA’s Judicial Petition, which the Second Circuit has now referred to a merits
panel (as noted above), CSA also filed an Administrative Petition, requesting that EPA
reopen the VGP for review and change the dates of compliance for the same reasons it
noted in its Judicial Petition. EPA has taken no public action on the Administrative Petition.
The situation raises a number of issues for the maritime industry.
• How will the Court’s stay affect how EPA views the Administrative Petition?
• How will EPA react to the Court’s apparent view that it is not acting fairly to the regulated
community?
• Will EPA take the initiative to stay the VGP requirements while it considers the
Administrative Petition?
• Will EPA be willing to stay the VGP deadlines as to other vessels elsewhere in the United
States — including the U.S. domestic fleet, which is in the same predicament — or will it
do nothing to address this unless a Court orders it to?
The Court is likely to rule on whether CSA’s petition is timely this fall. At that point, the 2015
compliance deadlines will be looming. Most agree that obtaining type approval for ballast
water technology will take at least a year. Even when type-approved, commercial production
must follow, and capacity is limited. If the Court dismisses CSA’s Judicial Petition as
untimely, the stay will be lifted and even CSA members will face the compliance conundrum
again. Either way, the rest of the maritime industry remains in limbo.
Authors:
Barry M. Hartman
Christine A. Jochim
Partner
barry.hartman@klgates.com
+1.202.778.9338
Associate
christine.jochim@klgates.com
+1.202.778.9222
James A. Sartucci
William C. Cleveland, IV
Government Affairs Counselor
jim.sartucci@klgates.com
+1.202.778.9374
Associate
will.cleveland@klgates.com
+1.843.579.5639
3
Federal Appellate Court Stays Initial Date for Meeting New
Ballast Water Discharge Limits – But Only for Canadian
Shipowners Association Members
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1
CSA, Petition to the U.S. EPA to Postpone and Modify Certain Requirements of the 2013 Vessel General Permit (Dec.
19, 2013).
2
Because of the uncertainty regarding the criteria for type approval, and the cost of seeking type approval, to date only
one company has even sought that approval.
3
Petitioner’s Memorandum of Law in Support of Its Motion for Stay, or in the Alternative, Preliminary Injunction or
Postponement, Canadian Shipowners Ass’n v. EPA, No. 14-0039 (2nd Cir. Jan. 16, 2014) (“Mot. to Stay”).
4
Mot. to Stay at 5.
5
Id. at 3-5; see also Ltr. from Robert Lewis-Manning, President, CSA, to Dr. Ryan Albert, Office of Water, EPA (Sept. 13,
2013).
6
Mot. to Stay at 17.
7
Id. at 19.
8
Id.
9
CSA’s Judicial Petition was consolidated with three cases in which environmental groups challenged the final VGP,
largely on grounds that the ballast water discharge requirements are too lenient. Those cases are still pending. CSA and
the Lake Carriers’ Association intervened with EPA in defending the VGP’s discharge levels. This means CSA is on both
sides of the case. CSA thinks the IMO ballast water discharge standards are appropriate, but disagrees with the VGP’s
timing for installation.
10
Order at 1, NRDC v. EPA, No. 13-1745 (2nd Cir. April 9, 2014) (“Order to Stay”).
4