What can we learn from the Irika sentencing

The US DoJ posted their news release on the Sentencing of Irika Shipping S.A.

When the MV IORANA arrived in Baltimore in January 2010, crew members alerted the USCG port state control officer of illegal dumping of oil and garbage at sea. Granted, this was a blatant case of willful pollution, which no respectable company will tolerate, however, there are a few points in the press release worth noting, if a company operates into the USA.

From reading some of the USCG publications and comments by lawyers, it seems to me the following 2 things probably played a significant part why the fine for the offence was ultimately $ 4,000,000.

• Irika admitted the company had no budget for the vessel and no waste management plan, and crew members received little training regarding the company's environmental policies.
• Irika admitted obstructing justice in a couple of ways, including false statements by ship officers, destroying evidence, etc.

As far as I know a company can shield itself from criminal prosecution in such a case, if the company has in place a vigorously implemented, robust environmental plan, which should also include an environmental budget for the ship. With such a plan the intentional illegal disposal of oily wastes should be eliminated. If it does occur, it would be an act by a rogue employee rather than condoned practice.

Irika pleaded guilty, by my count, to 8 felony charges, each carrying a maximum penalty of $ 500,000. While lawyers frown upon admitting guilt, it seems to me that cooperation by ship officers can significantly reduce the criminal penalty. My math suggests that the court imposed the maximum $500,000 per felony. Cooperation by the senior officers would have reduced the count by at least 2, or the fine by $ 1,000,000 or more!

What I suggest is that a company who's ships call on US ports, should have in place a vigorously implemented environmental policy and that their ship officers are aware on how to work with USCG officers during a port state control.

Residual Fuel

As a follow up to last week, in the September issue of OPEC's monthly oil market report, on page 30 they show a pie chart of the projected demand growth for the various refinery products from 2010 to 2011. OPEC predicts a 1,0 million barrel/day increase in oil demand for 2011 and predicts all products to increase - except for residual fuel. OPEC predicts a decline in residual oil by 143,000 barrels/ day for the coming year.

In the previous blog I stated that according to data published by the IEA residual fuel represented 15.1% of global refinery output in 2008. Based on that figure the 143,000 barrel reduction in residual fuel, for the coming year, represents essentially a 1.1% drop in the supply of feed stock for heavy fuel blending. In other words, the quality of the blended fuel will continue to deteriorate and availability of IMO compliant HFO may become an issue, maybe not immediately but probably in the long term.

International Energy Agency

The 2010 Key statistics by the IEA are rather interesting. Oil consumption keeps rising, residual fuel production is declining and we see a shift in the global refining picture. The developing economies of China, Asia and the Middle East are adding refinery capacity aggressively while in the developed world capacity is being consolidated.

In 1973 33.8% of refinery throughput ended up as residual fuel, by 2008 this shrank to 15.1% globally. In Canada refineries produce only about 7% residual oil from their feedstock, in the USA it is lower still. The fact that refiners today produce more light product per barrel of oil, suggests that the quality of the residual fuel is deteriorating.

Regulations are tightening, calling for cleaner stack emissions from ships, on the other hand residual fuel quality is declining. The question then is, how will ship owners comply with these tightening regulations? Will they be able to burn lower quality residual fuels forever with secondary treatment of the exhaust gases, or will they be forced to burn premium-priced light fuel, because marine fuel won't be available anymore; in part due to the increased refinery yield, in part due to the shift in refining to the emerging economies?

Is it possible that tightening oil supply will some day force ship owners to burn distilled product?

Air Toxics from Cement Plants

In the most recent EM magazine by the Air & Waste Management Association, on page 44 there is an article on the threat to the American cement industry by tight EPA air emission standards. According to the Portland Cement Association the stringent standards and need to install expensive controls could force 30 plants to close and it puts another 12 plants "at risk" of being forced out of business.

What the EPA wants to achieve with the tighter emission rules is a reduction in the annual emissions of mercury (by 11,600 tons), hydrocarbons (by 11,700 tons), particulate matter (by 10,500 tons), hydrochloric acid (by 2,800 tons) and sulfur oxides (by 160,000 tons).

The Portland Cement Association did a webinar on this and the power point presentation, as a summary, is posted on the web. What I found interesting is how well the cement plant population aligns with marine transportation arteries (as per slide 4 of the presentation).

To put two of the cement industry's toxins into perspective, considering the coming ECA:

• With an ECA in domestic waters, SOx from ships would be cut by less than 40,000 tons, and
  
• Marine does not contribute to mercury pollution.
  

Horse Power

From time-to-time I wonder about the need for high powered personal vehicles.

A recent write-up on the new Jaguar cars got me thinking whether we needed 510HP in a car to go 280km/h rather than only the pedestrian speed of 240km/hr. Similarly, North American motor journalists tell us we need monster bikes of more then 1000cc to move us.

I think it is understood that oil is a finite source of energy, we will deplete it. The World Business Council for Sustainable Development (WBCSD) in their Vision 2050, suggest that with business as usual we will require every last resource on Earth, and another Earth, and a third more. "That's obviously a huge issue" says Dr. Mohammad Zaidi, executive VP and chief technical officer at ALCOA.

Vision 2050 suggests we better start acting now, changing from the current exploitation model to a sustainable model. Maybe we should look at the horse power issue on our vehicles?

In 2008 Canada generated 734Mt of greenhouse gases; emissions from cars, SUVs and motor cycles accounted for 85.664Mt equal to 11.67% of the total. I wonder how much the emissions from personal vehicles could be reduced by scaling back on engine power in our cars and bikes. My guess is that we'd be just as mobile with less than half the current average engine power. The reason I say this is that in North America we tend to drive European cars with larger engines than are common in Europe.

Vision 2050 suggests we are exceeding now Earth's capacity. If we look for sustainability to 2050 I suggest we heed WBCSD's call for action now; maybe reducing the engine power in our personal transportation is a good start?

How will that pan out?

The Dow Jones News wire gave updates on the vehicle sales in China, India and Russia. China has surpassed the USA as the world's largest car market. For the January to July 2010 period car sales in China grew by 42.8% year-over year! Sales increases in India and Russia on the side of personal use vehicles as well as trucks grow also in double digit percentages. In addition to the car sales there are then the sales of motor cycles and scooters, which are significant in these developing markets. Obviously gasoline and diesel consumption in these emerging markets will increase much faster than in the OECD, and with it there will be a shift in the global oil supply and refining markets.

The OECD is supplied by multinational oil companies within a free market trading principle. On the other hand, most emerging economies are supplied from state run oil companies. I am wondering whether or not this will affect easy access to oil for the OECD refiners.

A recent oil pollution case in the USA

The latest press release from the United States Dept. of Justice on a case of falsifying oil record book entries is interesting for the following reasons:

• The US lays criminal charges based on the "fraudulent statements" to the port state control officer, e.g. presenting an ORB with false entries. - In this case, the company and officers were convicted.
• The severity of the sentence and fines decreases with cooperation and forthcoming statements by the company and crew. - In this case the fine to the company and the sentences handed down (so far) are relatively mild.
• The fate of the C/E will be determined in a separate hearing. - Of interest is the reference to the sentencing guidelines in this paragraph.
• The company agreed to implement an elaborate and detailed environmental compliance plan for the fleet.