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November 30, 2009 Mr. Byron Bunker U.S. Environmental Protection Agency National Vehicle and Fuel Emissions Laboratory 2565 Plymouth Road Ann Arbor, MI 48105 , U.S.A bunker.byron@epa.gov SUBMITTED VIA E MAIL

RE: Ad dendum to Canadian Shipowners A ssociation September 25, 2009 submission on the proposed rulemaking “Control of Emissions from New Marine Compression -Ignition Engines at or above 30 Liters per Cylinder, ” as requested.
Dear Mr. Bunker: The Canadian Shipowners Association (CSA) respectfully submits this addendum to our September 25, 2009 submission on the U.S. Environmental Protection Agency’s (EPA) proposed rulemaking “Control of Emissions from New Marine Compression
- Ignition Engines at or ab ove 30 Liters per Cylinder” as requested. Ab out CSA The CSA represents the owners of Canadian
-flagged ships operating in the Great Lakes and St. Lawrence Seaway. Our members include seven companies operating a fleet of 68 vessels with an annual capacity of over 62 million metric tonnes in 2008

– over half of this capacity was carried between Canada and the United States. The CSA is a founding member and active participant the Green Marine Program. The Green Marine Program is a voluntary environmental p rogram to achieve continuous improvement in the environmental performance of the marine industry. The Canadian domestic marine industry supports the objective of addressing air emissions through a policy approach based on economically achievable and te chnically feasible performance objectives.2

Background The CSA is concerned that the proposed rulemaking to implement ECA
equivalent fuel standards on vessels operating within the Great Lakes St. Lawrence Seaway will significant ly impact the competiti veness of the marine mode . To recap, below is an overview of the concerns originally outlined in our Septem ber 25, 2009 submission document :

 The U.S. EPA is proposing to apply the International Maritime Organization (IMO) Emission Control Area (ECA) stan dards to vessels operating in the Great Lakes and St. Lawrence Seaway. In doing so, the proposed rulemaking inappropriately extends the cost
- benefit analysis , undertaken specifically for ocean
-going vessels and the proposed North American ECA , to vessels operating in the Great Lakes and St. Lawrence Seaway.

 Unfortunately, there are fundamental differences between ocean
-going vessels and vessels operating within the Great Lakes and St. Lawrence Seaway that are not addressed in this analysis. The domestic marine shipping industry is a significant contributor to the competitiveness of North American industries operating within the Great Lakes and St. Lawrence Seaway area, providing an economic and an environmental ly beneficial mode of transport. The potent ial economic and environmental impacts of a loss of marine capacity or a modal shift to other fully utilized transportation corridors have not been assessed. Further, the potential competitiveness impacts on other industrial sectors, which rely on the eco nomic be nefits of marine transportation in both Canada and the U.S., have not been assessed, including the potential for the leakage of production to offsh ore industrial facilities

.

 The approach being proposed by the EPA does not promote sustainability an d will create a negative environmental benefit by promoting a shift to other modes of transport with greater negative environmental impact per tonne
- mile. The timelines being proposed will result in a reduction in the Canadian
-flagged fleet and curtail in vestment in fleet renewal. Already, investment plans for significant fleet renewal have been put at risk as a result of this proposed rulemaking.

 The proposed rulemaking does not provide the flexibility required by companies to achieve the proposed emissions reductions

. Rather, a performance standard that provides the flexibility to achieve equivalent emissions levels through abatement technology, as included within the revised Annex VI to the MARPOL 73/78 , is required.

 The currently proposed timeline for the achievement of the proposed fuel standards must be revisited in order to provide incentive and the3 necessary timeframe for new technology and fl eet renewal and to ensure adequate fuel supply

. In addition, the proposed rulemaking will impact curre nt contracts with customers as the associated fuel cost increases will cause the fuel variable to be unsustainable within the short timeframe being proposed. Since our initial submission, the CSA has undertaken a preliminary survey regarding fuel supply. This survey indicates that availability of a stable blended fuel at a reasonable cost in 2012 is a serious concern. Further, recent studies by the Finish Ministry of Transport and Communications 1 and the Swedish Maritime Administration regarding the impacts on fuel costs of ECA requirements support these initial findings. Wh ile the analysis supporting the proposed rulemaking estimates that the increased fuel costs will be 39%, the study by the Swedish Maritime Administration indicates that “ F or vessels that mostly transport cargoes between ports within a SECA, the increase in the fuel costs may, however, amount to around 70% .” 2 This is inline with the CSA’s estimations as previously supplied. This finding highlights the need for a specific analysis of the costs and benefits of the proposed rulemaking for vessels operating within the Great Lakes and St. Lawrence Seaway. Since the release of the proposed rulemaking, the U.S. Congress has directed that the U.S. EPA undertake extensive review of both the costs and benefits of the proposed rulemaking with respect to the inclusion of the Great Lakes and St. Lawrence Seaway. In addition, in response to the concerns raised by the U.S.
- flagged vessels, the U.S. Congress has provided an exemption for steamships from the proposed rule as well as the addition of an economic hardship waiver provision. This latter development , however, does not address the concerns or realities of the Canadian
-flagged fleet. Further, t h is exemption does not appropriately address the realities of the bi
- national waterway, nor does it provide the appropriate signals to encourage investments in new technologies and fl eet renewal

– required to im prove environmental performance of the vessels operating on the Great Lakes and St. Lawren ce Seaway

. Wh ile these amendments have alleviated some of the adverse economic consequences of the proposed rulemaking in addressing some of the concerns of the US Great Lakes fleet , th ey will result in a negative impact on the Canadian fleet’s ability to improve its environmental performance . Specifically, this change discourages investment in the Canadian fleet to retire and replace Canadian steamships as originally scheduled due to the competitiveness concerns introduced by the exemption

.

1 Finland. Ministry of Transport and Communications. “Sulphur content in ships bunker fuel in 2015: A study on the impacts of new IMO regulations on transportation costs.” Helsinki, 2009. 2 Sweden. Swedish Maritime Administration. “Consequences of the IMO’s New Marine Fuel Sulphur Regulations.” Norrköping, 2009.4

Finally, t hrough this proposed rulemaking , the U.S. EPA is effectively establishing bi
- national policy that does not account for the impacts on Canadian
flagged vessels or the Canadian economy. Bi
- national impacts should be recognized by both U.S. and Canadian regu lators when developing policies that affect the Great Lakes St. Lawrence Seaway

– a bi
- national waterway. Wi thin this context, the CSA strongly recommends that the U.S. EPA initiate a bi
national arrangement with Canada that will reduce air emissions but also preserve the benefits of marine transportation in this continental corridor. This can be accomplished by enabling emission reductions on a fleet average basis that promotes both fl eet renewal and the adoption of environmental technology as it become s commercially available

. Al ternative Ap proach The alternative approach proposes a bi
- national reciprocity arrangement between Canada and the United States. Wi thin such an approach, Canadian flagged vessels within the Great Lakes and St. Lawrence Seaway would operate within the requirements of a Canadian air emissions regulatory regime that is responsive to the ECA
-equivalent limits advanced by the U.S. EPA. If it is not feasible to incorporate a reciprocity arrangement into the U.S. EPA regulatory process, then the same result could be achieved by designing the waiver process to incorporate fleet averaging where it can be demonstrated that this will result in better environmental performance than a simple waiver or exemption. Fleet A veraging Ap proach The fleet averaging approach would be considered as an alternative approach for achieving a net improvement in the environmental performance in the Great Lakes and St. Lawrence

. It would: 1. Result in significant reductions in air emissions from the Canadian fle et operating in the Great Lakes and St. Lawrence Seaway over current levels ; 2. S et economically achievable environmental performance standards without significant disruption to maritime commerce or other economic impacts ; 3. M aintain an investment cl imate that is conduci ve to fleet renewal and the adoption of new abatement technologies , and that encourages continued investment; 4. Achieve a significantly imp roved emission standard by 2020; and, 5. M itigate many of the adverse environmental consequences not quantified in the EPA proposal ( i.e., increased GHGs, air emissions , health and5 environmental impacts resulting from modal shifts , production shifts and a disrupted fuel supply chain )

. As part of the fleet averaging approach i n U

. S

. waters, the U.S. EPA would accept a certificate issued by Transport Canada as recognition that this vessel is part of a fleet that complies with the emission standard. In Canadian waters, Transport Canada would accept U.S. flagged vessels certified to meet U.S. EPA standards. The CSA strongly holds that a longer timeframe is required to develop the tools necessary to average the Canadian fleet sulphur emissions in a downward direction toward a 2020 target of 0.1% sulphur content . Th e graph below demonstrates the agreed positi on of the CSA member companies on how to accomplish the desired outcomes while address ing our primary concerns regarding the proposed rulemaking

. This will allow the necessary timeframe to investigate abatement technology and implement investment options. Technical expertise within the CSA membership indicates blending fuels to achieve low sulphur levels is not a reliable option. A blended fuel with a high percentage of MDO results in stability and compatibility issues making these low viscosity blends un suitable for use. This may prompt a much earlier change over to MDO, which would be unsustainable from a commercial perspective. Graph 1: Fleet Averaging Approach, 2011
-2020

1. 60 1.45 1.3 0 1.20 1.1 0 1.00 0.7 8 0.60 0.4 5
0.10 

### 0. 000 0. 125 0. 250 0. 375 0. 500 0. 625 0. 750 0. 875 1. 000 1. 125 1. 250 1. 375 1. 500 1. 625

2011 2013 2015 2017 2019 Fl ee t Av g6

Wi thin the fleet averaging approach, it is envisioned that a fleet owner will have the flexibility necessary to achieve an average fleet reduction through the ability to employ one or more of the following tools available to achieve the performance targets (this list is not exhaustive): 1. Retire old er less fuel efficient vessels burning high sulphur content fuel such as Canadian
-flag ged steamships; 2. Invest in new, more fuel efficient vessels to reduce overall emissions; 3. Alternate abatement technology

– New freshwater scrubber technology is being deve loped which would be installed in new builds and retrofitted to existing vessels where practical. Sufficient time is required to facilitate this development; 4. Change existing vessels over to MDO
- Allow a more controlled and commercially acceptable change over to MDO if other abatement methods are not practical; 5. Retrofit marine engines to improve fuel efficiency and fleet average; and, 6. Consider alternative fuels such as biodiesel and natural gas

. The fleet averaging approach, together with the flexibility to employ numerous tools to achieve improvements, addresses many of CSA member companies’ concerns regarding the proposed rulemaking. This approach will provide the Canadian
-flagged fleet with both the flexibility and the incentive to achieve the desired outcomes in a graduated approach. Rather than curtailing investment, this approach will provide the predictability needed to invest in fleet renewal. It is important to note that, although preferable, implementation of this fleet averaging approach is not contingent upon the establishment of a reciprocity arrangement with the Government of Canada. This approach could be incorporated into the waiver process as a condition of approval as long as the waiver process is designed to accommodate it. In our view it is much better to provide a waiver that leads to fleet renewal and the adoption of new technology than one that simply exempts current operations. A waiver conditional on continuous improve ment to environmental performance as outlined in the fleet ave raging approach will result in cleaner air in the Great Lakes and St. Lawrence Seaway area in the long
- run.7

Conclusion The CSA strongly recommends that the U.S. EPA engage our industry and the Government of Canada as the development of the prop osed rulemaking moves forward. I look forward to working with you on this initiative and addressing any concerns you may have regarding the alternative approach discussed herein

. Sincerely, Original signed by
Bruce Bowie President Canadian Shipowners Association