Marine Transport of Hydrocarbons A Perspective on Risk & Regulation

Darryl Anderson, Wave Point Consulting Ltd. June 6, 2013

Standing Senate Committee on Energy, the Environment and Natural Resources

Presentation Overview

q Introduction. q A Framework for Evaluating the

Policy Response to Oil Spill Risks. q International Context. q Canadas West Coast Context. q Opportunities for Improvement. q Appendix.

A Framework for Evaluating the Policy Response to

Oil Spill Risks q Prevention: measures intended to reduce the probability of an incident.

q Response: preparedness measures or activities planned in advance for prompt and effective pollution response.

q Mitigation: measures intended to minimize the consequences of oil pollution incidents.

q Restoration: are those actions and rehabilitation activities that address the damage caused by an oil spill incident. While very important are outside the scope of research my colleagues and I have conduced.

Note: See slides in the Appendix for a list of the tools used to manage oil spill risks in various countries.

Characteristics of Robust Maritime Oil Spill Regimes

q Oil Spill Preparedness And Response: q Cascading and complimentary layers of federal and state policy,

regulations and operational response, q Active Networks of Expertise: comprising federal and state

governments, relevant agencies, knowledge centres (for scientific input) and community networks (for social licence and two-way information sharing),

q Regular Reviews To Recognise And Update Capability.

q Prevention Is Better Than Responding: however, when response is required, it needs to be quick, practised, measured and effective.

q A Robust And Well-Informed Regulatory System Is Crucial For Enforcement.

Oil Spill Regimes & the Use of Tanker Exclusion Zones

q Tanker Exclusion Zones, over large geographic areas, are generally not implemented. Rather, the full complement of policy and risk management tools and industry best practices are used to address specific areas of concern

q However, if the circumstances (both environmental and political) demand, specific areas where tanker exclusion zones are created, or areas of heighted levels of ship operating safety and reduced environmental discharge these type of measures can be considered and implemented to have the best outcomes for all - the oil industry, the local communities and the environment.

International Context How are Tankers Governed?

Flag State: This is the party who regulates the vessel, construction and operation through its laws anywhere in the world.

Coastal State (Canada):The Law of the Sea Convention allows the Coastal State to subject foreign flag vessels to its laws concerning pollution prevention which can work concurrently with the Flag State.

Port State Control: based on Memorandum (i.e. Paris and Tokyo) between countries, it allows the port state to exercise inspection and enforcement of standards on foreign vessels within its waters.

International Regulations Places Emphasis on Oil Spill Prevention

q Canada as a Coastal State has obligations under the Law of the Sea Convention to protect the marine environment. Canadas Ocean Act includes the precautionary principle.

Obligations Under Maritime Law Conventions: q Canada chooses to follow the international regulations and conventions. Canadian

maritime law is applied by the federal court. It underpinned by the principle of uniform application: especially as it relates to pollution and environmental protection.

q These international conventions (developed by the International Maritime Organization (IMO)) govern shipping and are adopted into Canadian law and give effect to a global recognized regime which governs all aspects of shipping

q The regime for the international and Canadian regulation of ships/tankers places an emphasis on minimizing marine pollution incidents. Thus, there is a higher degree of international uniformity at this stage of the risk management process.

Results of International Regulations

Key Questions: Does ratification matter & do major conventions improve safety & decrease pollution in shipping?

Answer: Yes. q Econometric analysis in 2009 demonstrated that the various MARPOL

amendments in relation to the phase out of single hull tankers and the condition assessment program decreased the number of causalities with pollution and to a certain degree also the amount of the pollution.

q There is value in having in place instrumentalities (legal/regulatory, financial, organizational) that give support to the implementation of the requirements of that convention.

Results of International Regulations

q Intertanko data reveals that 99.9% of oil transported by ship arrived safely and that the total volume of cargo involved in oil spills declined significantly while the total tonnes miles of cargo has increased.

q Internationally, risks associated with an oil spill in the marine environment have decreased over the years due to increased preventive measures:

q the phase-in of double-hulled tankers, qthe requirements to have contracts with response

organizations; q increased monitoring and inspection.

Results of International Regulations Incidence'of'Spills'

Tanker Shipping Canada

Average Number of Marine Occurrences Per Yea, by Region (2000 to 2009)

Shipping Accidents

Newfoundland Region

Maritime Region

Laurentian Region

Central Region Western Region

Tankers 0.6 1 5.3 3.1 0.1

All vessels 62.4 100.2 72.5 56.6 130.7

Data Source: Transportation Safety Board of Canada.

Location of Pacific North West Tanker Ship Traffic: Strait of Juan de Fuca

0

100

200

300

400

500

600

700

800

900

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

# of Tank Ships Bound for Salish Sea Ports via Strait of Juan de Fuca (1993-2012)

Canadian Ports Entering Transits

Washington Ports Entering Transits

Data Source: Washington State Department of Ecology - Vessel Entry and Transit Statics 1993 to 2013.

Pacific North West Tank Barge Traffic

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

# of Tank Barges Puget Sound (1993-2012)

Transits

Data Source: Washington State Department of Ecology - Vessel Entry and Transit Statics 1993 to 2013. Note: Canadian tank barge data is difficult to obtain. Nevertheless, tank barges do travel in the Canadian portion of the Salish Sea and the north coast of British Columbia.

BC Tanker Shipping Traffic

q British Columbias South Coast: q An average of 300 tankers visit Port Metro Vancouver

each year. q 328 Pacific Pilotage petroleum assignments in Port

Metro Vancouver in 2011.

q British Columbias North Coast: q An average about 60 petrochemical tankers per year

have visited Kitimat harbour over the last quarter century.

q 36 Pacific Pilotage assignments to Kitimats Metanex terminal in 2011.

Potential Impact of Oil & LNG Export Projects in BC

q British Columbias South Coast: q Would somewhat increase the intensity of shipping traffic in

the Strait of Juan de Fuca and Canadas internal waters.

q British Columbias North Coast: q Would significantly increase the intensity of shipping traffic

in Canadas internal waters. Implications:

q The impact of a expanded Pacific tidewater access for oil sands& natural gas production will shift the geographic location of much of the shipping activity.

q New and different resources would be required to address the unique needs of Canadas north Pacific Coast.

q Increased need for international and provincial government cooperation due to traffic in international straits and internal waters.

Key Canadian Policy Question

Regardless of the present governance framework and scope of shipping activity:

qWill existing plans adequately address the present, and foreseeable risks in my community as the result of increased hydro carbon vessel traffic?

Opportunities for Value Creation

Opportunities+for+Value+Creation+in+Maritime+Commerce+Leadership+&+Policy+ Primary' '

Objectives++

Human+Resources+&+Training+ Oversight' 'Environmental+Protection+&+Risk+Management+Systems+ Functions'

Service+&+Product+Development+Initiatives+MarineFbased+Logistics+

Marine+Terminal+Operations+

LandFbased+Logistics+

Support+Services+

Commercial+Services+Activities'

Business' 'Primary' '

' 'Wave'Point'Consulting'Ltd.''

Opportunities for Improvement Leadership & Policy

q Apply strategic level thinking & leadership to maritime governance and shipping policy issues.

q Adopt a more robust way of talking about and describing tanker shipping risks. Include the following types of risk assessments tools and include analysis of where spills occur (marine terminal/port, restricted/coastal waters, or open sea): q Hazard and Operability Studies, q Frequency & Probability Analysis, q Event Tree Modeling, q Consequence Modeling.

q Currently, much of the public debate is focused on the accuracy of spill frequency & probability analysis. This type of analysis is become statistically irrelevant as the number of tanker incidents has now become very low.

q Include data sources such as vessels Automatic Identification System (AIS) in periodic updates to oil spill risk assessments so changes in traffic patterns can be identified and resources allocated to the areas of highest risk: including the North.

Opportunities for Improvement

Environmental & Emergency Protection

q Managing the risks associated with all types of marine traffic, this includes large tankers and smaller barge traffic.

q Provide independent funding to the Regional Advisory Council (RAC) on Oil Spill Response: dont rely on internal departmental budget decisions.

q Commit to coastal zone management and ocean spatial planning initiatives.

q Protect the most environmentally sensitive areas. q Engage coastal communities in developing a robust ports of refuge

plan. q New service delivery model involving Ground Search and Rescue

(GSAR) and Civil Air Search and Rescue Association (CSARA).

Opportunities for Improvement Marine-based Logistics

q Consider creating a North Coast certified response organizations for oil spills.

qFund Canadian Coast Guard investments. qDevelop Douglas channel specific vessel traffic

schemes & pilotage requirements. qEstablish places of refuge along each shipping

route with community consultation. q Consider establish an dedicated emergency

response tug for each sensitive region.

Opportunities for Improvement Marine-based Logistics

qCreate a independent Authority responsible for conducting oil spill risk assessments & making investments in spill prevention measures.

qNavigation governance model. Consider the NAV CANADA model.

qExplore the possibility of requiring Canadian Flagged Vessels, or a second registry for certain types of tankers.

Opportunities for Improvement Marine Port/Terminal Operations

q Provide sufficient resources so there is port authority style management functions in remote locations (i.e. Kitimat).

q Port authority risk management & operating procedures & planning (land use, security, emergency response etc.) need to be more transparent.

q Terminal owner need to be more transparent regarding their operating procedures & quality of ship they will accept at marine facility.

Mr. Darryl Anderson is the Managing Director of Wave Point Consulting Ltd. He holds an MBA (Distinction) from the Australian Maritime College, a BA from Trinity Western University, and a Certificate in Shipping & Marine Operations from the British Columbia Institute of Technology. Wave Point team members research papers and articles are posted on the Blog Shipping Matters: http://wavepointconsulting.ca/category/oil-tanker. These provide information in greater detail than what is available in the PowerPoint summary.

Shipping Matters Blog http://wavepointconsulting.ca/shipping-matters

Wave Point Consulting Ltd. 1321 Blanshard Street, Suite 301

Victoria, BC Canada V8W 0B6 T: 778-410-5031

Email: wavepoint@shaw.ca

Appendix

Note: Wave Point Consulting developed the material in this Appendix (by stage of risk management process) from the following primary existing literature: Exploring A Methodology to Assess Countries Preparedness Practices - Outcomes from a Comparative Analysis of the European and North American Approaches, A Comparative Analysis of the European and North-American Approaches to Dealing with Major Oil Spills, Has An Appropriate Level of Preparedness Response Been Established Following Major Oil Spills? and ISOC Workshop Report: A Proposed International Guide for Oil Spill Response Planning and Readiness Assessment. We acknowledge other sources too numerous to include here.

Prevention Tools to Manage Oil Spill Risks

MARPOL Double hulls on tankers International Safety Management Code

International Ship and Port Facility Security Code Port State Control

Ship-Source Oil Pollution Fund Aids to Navigation

Compulsory Marine Pilotage Port Authority and Terminal Procedures

Vessel Traffic Services Places of Refuge

MARPOL Special areas (Annex I: oil) and particularly sensitive sea areas (areas to be avoided)

Organization for Preparedness Tools to Manage Oil Spill Risks

Scope of authority (inland, coastal/territorial waters)

Leadership, expertise ,and work of competent authorities (dissemination activities)

Approval and readiness audit of plans by authorities (private response and government organizations)

Command and control structure (designation, authority and exercise)

Mission statement and objectives (with measurable parameters)

Inputs from the community and other stakeholders (public workshops)

Plan Contents and Format Tools to Manage Oil Spill Risks

Role/responsibility of competent authorities and stakeholders Multilevel plans

(international, national, regional, and local)

Scenario development Oil storage sites

Environmental resource inventory (public and private sector at national and international level)

Data compilation (regular analysis and dissemination)

Environmentally sensitive areas

Response Resources to Manage Oil Spill Risks

Identification of response resources

Private response organizations

State-of-the-art equipment (innovative & traditional technologies)

Response time (with scenario based exercises)

Sustainable funding (maritime transport user and/or polluter pay philosophy)

Risk assessment of oil spills (from several sources, in coastal and inland navigation)

Budget allocations (based on traffic pattern and risks)

Emergency Towing Arrangements to Manage Oil Spill Risks

Tug coverage in high risk areas Joint arrangements with neighbouring countries

(sharing costs) Command & control of salvage operations

(designation, authority, exercise) Evaluation of the adequacy of towing arrangements (cost benefit analysis)

Multipurpose salvage tugs Integration of salvage in contingency plans (checklists/procedures for the command

& control) Ports of refuge

(location, decision making, scenarios) Sustainable means of financing emergency towing arrangements (potential

maritime transport user &/or polluter pay philosophy) Research & development

(behaviour of disabled tankers in rough seas) Expert system and lessons learned

(database of lessons learned in past salvage operations

Plan Implementation Tools to Manage Oil Spill Risks

Fines & penalty systems (supported by modern surveillance systems for detection)

Training (based on lesson learned from past events /exercises)

Exercises (timetable & guidelines)

Research & development (contributes to reduce spill impact)

Estimation of environmental damage to and non-market value natural resources Assessment of short, medium and

long term impact of the spill Usefulness of contingency plans

(during the response) Support provided by the polluter

(during clean up) Review & update plans

(schedule & evaluation procedures)