New Development
In a decision issued only fifteen days following oral argument, a panel of the United States Court of Appeals for the Ninth Circuit issued an opinion on February 27, 2008, ruling that California's "Marine Vessel Rules" are preempted by the Clean Air Act and prohibiting California from enforcing the regulations.1 It appears that this ruling brings an end to the regulatory confusion for the marine industry created by the Rules themselves and by the constantly shifting opinions concerning their enforceability. The decision decisively re-shifts attention concerning the regulation of air emissions from oceangoing vessels back to the proposed rulemaking concerning the control of emissions from Category 3 engines recently issued by the Environmental Protection Agency ("EPA") and the draft amendments of the MARPOL Annex VI regulations recently agreed to by the International Maritime Organization's Sub-committee on Bulk Liquids and Gases.
Background
On January 1, 2007, the California Air Resources Board ("CARB") began enforcing Marine Vessel Rules regarding the limitation of certain emissions from auxiliary diesel engines aboard oceangoing vessels on waters within 24 nautical miles of the California coast. The regulations prohibited the operation of auxiliary engines within the regulated waters which would emit levels of particulate matter, nitrogen oxide or sulfur oxide, in excess of the rates that would result had the engine used certain specified fuels with a sulfur content of no more than 0.5 percent by weight.
The Pacific Merchant Shipping Association ("PMSA") filed an action against CARB to enjoin the enforcement of the regulations and seeking a ruling that they were preempted by federal law. On August 30, 2007, the district court issued an order granting PMSA's motion for summary judgment and ruling that the regulations were "standards relating to the control of emissions" and were preempted by the provisions of the Clean Air Act which regulate emissions from nonroad sources, including vessels. The district court permanently enjoined CARB from enforcing the regulations, and CARB appealed. On October 24, 2007, a motions panel of the Ninth Circuit granted preliminary relief to CARB, permitting the agency to enforce the Rules while the case was on appeal.
Ninth Circuit Decision
On appeal, CARB argued that its Marine Vessel Rules were mere "inuse" requirements and not emission standards because the regulations regulated the sulfur content of fuel. CARB also contended that the restrictions concerning emissions from nonroad sources under the Clean Air Act apply only to new engines and, there- fore, did not preempt the regulation of non-new engines under the Marine Vessel Rules.
The Ninth Circuit emphatically rejected both arguments advanced by CARB. As a threshold issue, the court agreed with an earlier ruling from the D.C. Circuit and held that the implied preemption for nonroad sources under the Clean Air Act applied to both new and existing engines. Although this section of the Clean Air Act permits California to seek authorization from the EPA to adopt its own standards for the control of emissions from nonroad sources, the court noted that CARB had neither sought nor been granted such authorization for the challenged Rules. The court found that the Marine Vessel Rules came squarely within the definition of "standards" under the Clean Air Act, as that term has been interpreted by the Supreme Court, because they prohibit the operation of auxiliary diesel engines which emit levels of certain pollutants in excess of certain specified limits. The court also rejected CARB's argument that the regulations were permissible "in-use requirements" because they were tied to the sulfur content of particular fuels. The court noted that the plain language of the Rules regulated emissions, and the fact that the Rules provided a presumed mode of compliance, i.e., use of particular fuels, does not change the nature of the regulations.
The Ninth Circuit ruled that the Marine Vessel Rules constitute "emissions standards" for oceangoing vessels and are, therefore, preempted by the Clean Air Act unless California first obtains authorization from the EPA. Accordingly, the court vacated a stay of the district court's permanent injunction which had previously been entered by a motion's panel.
Current State of Play
As a result of the Ninth Circuit's ruling, CARB is prohibited from enforcing its Marine Vessel Rules, unless it seeks and prevails in further appellate review or obtains authorization from EPA. Both of these options would appear to have a low probability of success.
The ruling provides some welcome clarity regarding the development of regulations in the United States for air emissions from large propulsion engines used on oceangoing ships, and places renewed importance on the need for companies involved in the construction, repair, or operation of U.S.-flag and foreign-flag vessels operating in U.S. waters to review and consider commenting on EPA's proposed rulemaking for Control of Emissions from Category 3 marine diesel engines. (See the January 2008 Marine Developments Advisory, "EPA Proposes More Stringent Emission Standards for Marine Disel Engines on Oceangoing Vessels.") Comments are due by March 6, 2008.
Another component of this evolving regulatory framework is the approval by the International Maritime Organization's Sub-committee on Bulk Liquids and Gases in early February 2008 of draft amendments to revise the MARPOL Annex VI. The draft amendments seek to achieve greater reductions in the emission of air pollution from ships; but a number of options concerning these draft amendments remain open for discussion at the next meeting of the Marine Environment Protection Committee from March 31 through April 4, 2008.
Annex VI–implementing legislation was passed by the U.S. House and referred to the Senate Commerce Committee for action in 2007, but no action has been taken on this legislation to date this year.
Finally, following a decision by the Supreme Court last year, the EPA must determine whether the Clean Air Act requires the agency to regulate the emission of greenhouse gases. It is unclear when that determination will be made and what impact, if any, a decision from EPA to regulate greenhouse gas emissions may have on the marine industry.
