MARITIME ENVIRONMENTAL COMPLIANCE

MARITIME ENVIRONMENTAL COMPLIANCE NEW YORK SHIPPING CONFERENCE January 7, 2006 New York City, NY *The views expressed in this presentation are those of the author. Richard A. Udell* Senior Trial Attorney Environmental Crimes Section U.S. Department of Justice 601 D Street, NW - #2008 Washington, D.C. 20004 202-305-0361 Richard.Udell@usdoj.gov

Summary of U.S. Enforcement All types of commercial vessels - U.S. and foreign flag. Corporate: $133 million dollars in criminal fines since 1998. Plus restitution, community service and probation with court supervised environmental compliance programs. Individual targets: 19 years of incarceration since 1998. Senior shipboard officers and responsible shore side officials.

Summary of U.S. Enforcement Continued Crimes committed for financial motive. Most cases involve deliberate discharges of tons of waste oil, sludge and other pollutants. Intentional bypassing of pollution prevention equipment and falsification of vessel records to deceive port authorities. Concealment: : discharges made at night, hiding of bypass equipment, use of dispersants, tricking of OCM, falsification of Oil Record Book and Tank Sounding Log, etc. Most cases involve obstruction of justice (witness tampering, destruction of evidence, alteration of documents, perjury).

Detection Remote sensing. Routine inspections. Enhanced physical and record inspections. Targeting. Marine casualty investigations. Mystery Spill investigations. Referrals from foreign countries. Whistleblower allegations.

Prosecution Goals Protect the environment. Assure accurate ship records and verbal statements to port authorities. Deter future criminal conduct. Punish deliberate and intentional violations. Create an even playing field where law abiding companies are not disadvantaged.

Each of these vessels was ISM certified and had passed Class, Flag and Port State inspections.

U.S. v. MSC Ship Management (Hong Kong) Ltd. Bypass pipes and hoses found in a USCG inspection on May 16, 2005. Approximately 40 cubic meters of sludge and a larger quantity of bilge waste discharged in approximately 6 months. Oil Record Book and a Sounding Log were falsified to conceal discharges Crew members directed to lie to the Coast Guard by senior ship engineers and by shor-eside eside managers. Documents concealed on the ship. Computer printer disabled, alarm printout hidden, and false statements made to USCG.

MSC Elena Bypass Discharge to Overboard Valve Suction Side

MSC Elena Bypass

MSC Elena OWS Bypass Portable Welden Pump and Flexible Rubber Hose Used to Bypass the Oil Water Separator

U.S. v. MSC Ship Management Summary Corporate Defendant: MSC Ship Management (Hong Kong) Ltd. Charges: Conspiracy, Obstruction, False Statements, and Act to Prevent Pollution from Ships. Criminal Fine: $10 million Community Service: $500,000 To National Fish & Wildlife Foundation to fund non-profit organizations to provide environmental education to seafarers, including how to report r environmental crimes to the U.S. Coast Guard. Probation: 5 years. Subject to the terms of an Environmental Compliance C Plan. Individuals: Chief Engineer: Pleaded guilty to charges of Conspiracy, Obstruction, False Statements and Act to Prevent Pollution from Ships. Second Engineer: Pleaded guilty to charges of Act to Prevent Pollution from Ships.

Procedures to Achieve Compliance Increase shore-side side accountability. Waste stream audit and minimization. Upgrade best available technology (OWS, OCM, Incinerator, ODME, MSDS, etc.). Flexible budget for environmental compliance. Establish formal written policies: Corporate compliance statement. Operational procedures regarding storage, treatment and disposal of each waste stream and testing, use and maintenance of equipment. Recordkeeping and log entry requirements. Job position descriptions. Rewards and punishment for compliance/non-compliance. Conduct Internal/External audits at sea that are designed to investigate compliance. Operational testing of key equipment while vessel is underway using actual waste streams. Provide meaningful training. Develop direct communication with crew. Reward compliance and penalize non-compliance. Install control devices (e.g., tags, seals and lock boxes) that will send a message to employees and provide a check on shipboard conduct. Verify: Enhanced physical inspections. Operational tests. Document analysis. Crew certifications. Address motives.

To save on cost of offloading waste in port. To save on cost of parts and to save maintenance time necessary if equipment used properly. Corporate culture: Environmental compliance perceived to be low priority in relation to other priorities. Equipment not operable. Fear of losing job. Blind obedience to authority. No fear of getting caught or being subjected to consequences by employer. Addressing Motives Response: Emphasize environmental compliance. Have waste removal available in every port. Minimize waste stream. Have flexible budget for environmental compliance. Remove any financial incentives for crew c to pollute. Reward compliance. Punish violators. Response: Emphasize environmental compliance. Have waste removal available in every port. Minimize waste streams. Have flexible budget for environmental compliance. Remove any financial incentives for crew c to pollute. Reward compliance. Punish violators. Make essential parts p a budget line item. Make Port Engineer responsible for having spares on board. Consider need for equipment upgrade. Response: Emphasize environmental compliance. Display top level environmental commitment through training, policies, audits, etc.. Make environmental compliance a positive factor in personnel evaluations. Reward compliance. Punish violators. Emphasize importance through audits, turnover, maintenance schedules, and shore-side side supervision. Communication with those directly responsible. Consider additional staffing. Response: Emphasize environmental compliance. Determine root cause. Consider upgrade. Minimize waste streams. Make operability everyone ryone s responsibility. Open lines of communication with shore and flexible budget to handle contingencies. Response: All of the above. Address cultural issues. Establish direct lines for reporting violations. Reward and protect employees who make internal reports. Zero tolerance for retaliation against employees who report r violators. Report violators to flag state and to port state authorities. Response: Create shore-side side and shipboard accountability. Establish internal procedures that make violations more difficult to commit t without detection. Reward and protect employees who make internal reports. Punish violators. Zero tolerance for retaliation against employees who report violators. Report violators to flag state and to port state authorities.

How to Encourage Internal Reporting Establish clear environmental policies. Take measures to convince employees that owner/operator really wish to comply fully with all applicable laws, including MARPOL. Display top level commitment to environmental compliance. Establish direct and anonymous lines of communication to senior management with regard to environmental and safety matters. Zero tolerance for retaliation against those that report violations. Zero tolerance for violators. Reward employees who report violations. Establish safety and environmental compliance as positive factors in employee evaluations.

Technical Approaches Uniquely numbered environmental tags on flanges to prevent unauthorized bypassing. Use of seals on overboard valves and cross connections. Placards. Surveillance cameras. Control Devices Note: Control devices alone cannot guarantee compliance.

Technical Approaches Control Devices Use of tamper resistant recorder systems, alarms and printouts to verify equipment operation, valve position, flow, OWS ppm, incineration, position, etc. Lock boxes/cages on monitoring equipment. Interlocks to prevent tricking of monitoring equipment. Use of meters to record equipment run-time and volume for all engine room pumps. Note: Control devices alone cannot guarantee compliance.

Technical Approaches Installation of best available technology (OWS, OCM, Incinerator, ODME, MSDS, etc. Upgrade related equipment to minimize waste production. Pre-processing of waste (staged operations). Increase tank capacity for various waste streams. System modification to allow in-port testing of treatment systems and development of Class-approved approved test procedures. Sampling and testing of waste streams and effluent to verify technology. Use of cleaning agents consistent with equipment design and capability.

Response Dictates Outcomes DOJ and EPA have existing voluntary disclosure programs that can lead to non-prosecution or leniency as appropriate. A company under investigation may choose to: Cooperate (including waive privilege and work product doctrine and provide the government with facts from an internal investigation). Conduct a comprehensive internal investigation and determine root causes. Audit entire fleet and take prompt and effective remedial measures to achieve fleet-wide compliance. Promptly and thoroughly produce requested records. Take disciplinary action taken against violators. Support seafarers. Accept responsibility. How a company responds to an investigation may be factored into the outcome of the case, as well as help determine the company s s future image.

Why????? Why do senior engineers and other crew members deliberately risk their liberty, career and company s s image? Why does a convicted company continue to commit crimes while on probation? Why does a company under investigation continue to commit crimes? Why have senior engineers deliberately tricked newly installed anti-tricking tricking equipment?

Why do port engineers, class, ISM auditors and flag states not find and/or not report evidence of bypassing to the owner/operator or to port state authorities? Why do flag administrations not take any action against ship, owner, operator or crew members who have been convicted of intentional MARPOL violations and deliberate falsification of records? Why have ISM auditors not recorded major non-conformities against ship, owner, or operator after a criminal conviction? Why do Insurance Clubs pay criminal costs? Why??? Continued.

Lessons Learned Class, Flag State and Port State certifications do not alone provide assurance of compliance. Operator needs to minimize waste streams, know how much waste is generated, establish correct procedures and budget. Operator has ultimate responsibility for establishing corporate compliance culture Experience shows many crew members engage in illegal conduct to benefit employer or to preserve job. Control procedures and devices alone cannot guarantee compliance. Environmental crimes represent a management failure. Environmental non-compliance is usually an indication of other non-compliance and management deficiencies. Costs of non-compliance is going up.