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Gard News 203, August/October 2011

Ninth Circuit Court of Appeals upholds California Air Resources Board (CARB) Regulations requiring use of low sulphur fuels within 24 nautical miles of California coast for vessels calling at California ports.

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Gard News has followed the judicial twists and turns that have taken place in connection with California's on-going efforts to regulate vessel fuel emissions since 2008.1 The most recent development is a decision handed down by the Ninth Circuit Court of Appeals affirming the denial of an application for summary judgment by the Pacific Merchant Shipping Association (PMSA), which sought to enjoin the CARB from enforcing regulations requiring vessels calling at California ports2 to use low sulphur fuel when operating within 24 nautical miles of the California coast.3  The PMSA challenged the regulations on the basis that California could only permissibly regulate waters falling within three nautical miles of its coast - its "seaward boundary" as provided for in the Submerged Lands Act (SLA).4 They also argued that the regulations were unconstitutional under the Commerce Clause and the maritime law pre-emption doctrine.

The regulations at issue have been in effect since July 2009. They require that ocean-going vessels calling at California ports use marine gas oil with 0.3 per cent - 1.5 per cent sulphur content or marine diesel oil with a sulphur content of 0.5 per cent or less in all main engines, auxiliary engines and auxiliary boilers when operating within the 24 nautical miles limit. These sulphur content limits will decrease as of January 2012 to 0.1 per cent. As the court noted, vessel owners are required to maintain detailed records of their fuel use, and non-compliance with the regulations can result in a wide range of sanctions being imposed, including fines and criminal prosecution.

The Court of Appeals decision
The court acknowledged that "the regulatory scheme at issue here pushes a state's legal authority to its very limits" but was persuaded that there was sufficient evidence that "the state had clear justifications for doing so" and that "the sovereign police powers retained by California allow[ed] the state to adopt a wide range of laws in order to protect the health, safety and welfare of its own residents".5

Insofar as the regulations were challenged as an improper extension of California's power beyond the three nautical miles boundary of state territorial waters established by the SLA, the court found that CARB was not purporting to extend the border of California, but rather seeking "to regulate conduct beyond the state's territorial boundaries because of the serious harmful effects of this conduct on the state and its residents".6  The regulations therefore did not violate the SLA.

Dealing with the argument that California was invading a "field" already pre-empted by federal law-maritime commerce, conduct at sea outside state boundaries - the court distinguished the CARB regulations as "ultimately implicat[ing] the prevention and control of air pollution", which the Supreme Court has held falls within the police power of the states.7  Yet, as the court readily conceded, air pollution caused by vessel emissions has most definitely been addressed by the federal government in its implementation of MARPOL Annex VI, pursuant to which waters lying up to 200 nautical miles seaward of the Canadian and US coasts will be designated an Emission Control Area (ECA) as of July 2012.8

It is notable that the CARB regulations contain a sunset clause. As the court stated: "it is reasonable to predict that, once the heightened standards established by the ECA go into effect, the [CARB regulations] will be terminated".9  Although its lengthy opinion conscientiously addressed the myriad legal issues raised, it would appear that ultimately the court was prepared to countenance California's push of its legal authority "to its very limits" because it knew that the CARB regulations would have a fairly limited "shelf life".

CARB has proposed amendments to the regulations, including postponement from 1st January 2012 until 1st January 2014 of the 0.1 per cent sulphur content limitation.  A public hearing is scheduled to be held in Sacramento, California on 23rd June 2011.  The amendments will include extending the area to which the regulations will apply to include waters within 24 nautical miles of the Santa Barbara Channel Islands.10 This is apparently a response to what CARB believes is a strategy by ships to change their routes to avoid application of the regulations as well as to the fact that the US Navy is concerned about a sharp increase in traffic through the Point Magu Sea Range, which is used for Navy testing and training.  Finally, CARB is proposing that fees for vessel non-compliance be reduced if vessels buy and use the correct fuel upon reaching a California port. 11

Footnotes
1 See articles "The new California Vessel Air Emission Regulations - Facing legal challenges" in Gard News issue No. 186, "Airing differences - Vessel air emissions in the US" in Gard News issue No. 188 and "US Vessel General Permit deadline reminder" in Gard News issue No. 195.
2 Vessels that are only transiting ("innocent passage") are exempt.
3Pac.  Merch.  Shipping Ass'n v. Goldstene, 2011 U.S. App. LEXIS 6239 (9th Cir.  2011).
4 67 Stat. 29, 43 U.S.C. sec. 1301 et seq.
5Pac. Merch. Shipping Ass'n v. Goldstene, supra, *14-15.
6 Id., *30-31.
7 Id., *27.  The Court took care to distinguish the CARB regulations from those at issue in United States v. Locke, 529 U.S. 89 (2000) where the Supreme Court ruled that certain aspects of Washington state's regulation of oil tankers could not stand because state action had the same purpose as federal legislation - preventing oil tanker accidents. Id., *28-29.
8 The sulphur content for fuel used by vessels travelling within the ECA will be 1 per cent until 2015, when it will decrease to 0.1 per cent.
9Pac. Merch. Shipping Ass'n. v. Goldstene, supra, *69.
10 Source: News from Bryant's Maritime Consulting, May 17, 2011, http://brymar-consulting.com.
11 See Keesal, Young & Logan article, "Court Upholds California Low Sulfur Regulations", 8th April 2011, at www.kyl.com.

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