Tides Are Turning: The Arrival of Subchapter M

*This article was prepared by our summer law clerk, Ridge Miguez.

 

On June 20, 2016 the U.S. Coast Guard posted a preview of the final version of the long-awaited Subchapter M regulation, which will extend inspection requirements to the majority of tugs and towboats for the first time. In 2004, Congress reclassified towing vessels as vessels subject to inspection, and consistent with 46 U.S.C. 3305, this rule sets out the scope and standards of inspection. Now with the implementation of Subchapter M the U.S. Coast Guard has created a comprehensive safety system that includes company compliance, vessel compliance, vessel standards, and oversight in a new Code of Federal Regulations (CFR) subchapter dedicated to towing vessels. This rule, which generally applies to all U.S. flag towing vessels 26 feet or greater, and those less than 26 feet moving a barge carrying oil or hazardous material in bulk, lays out both inspection mechanisms as well as new equipment, construction, and operational requirements for towing vessels.

 

To provide flexibility, vessel operators will have the choice of two inspection regimes. Under the Towing Safety Management System (TSMS) option, routine inspections of towing vessels will primarily be performed by third-party organizations (TPOs), including certain classification societies, and this rule creates a framework for oversight and audits of such TPOs by the Coast Guard. The TSMS will provide operators with the flexibility to tailor their safety management system to their own needs, while still ensuring an overall level of safety acceptable to the Coast Guard. Alternatively, under the Coast Guard inspection option, routine inspections would be conducted by the Coast Guard, providing an option for those operators who choose not to develop and implement their own TSMS.

 

Subchapter M also creates many new requirements for design, construction, equipment, and operation of towing vessels. Those requirements are typically based on industry consensus standards or existing Coast Guard requirements for similar vessels.

 

The most important change to the final revision of Subchapter M has been the changes made to the Coast Guard’s proposal in the NPRM. They have clarified the system for Coast Guard oversight and inspection of towing vessels that complements the TPO system. To address concerns about the cost impact of the rule, they have added “grandfathering” provisions to several requirements, so the requirements will not apply to existing vessels or vessels whose construction began before the effective date of the rule. Also, they have reorganized several parts for greater clarity or to better align with the existing text of other parts of the CFR. As noted in the NPRM (7 FR 49985), the Coast Guard still plans to promulgate a separate rulemaking for an annual inspection fee for towing vessels that will reflect the specific program costs associated with the TSMS and Coast Guard inspection options. As of now the Coast Guard is establishing the existing fee of $1,030 in 46 CFR 2.10-101 for any inspected vessel not listed in Table 2.10-101, as the annual inspection fee for towing vessels subject to Subchapter M. Furthermore, this fee will not be charged for a vessel being inspected for the initial issuance of a certificate of inspection (COI), however the fee will be charged annually starting the following year.

 

The Coast Guard released a statement that Subchapter M will affect approximately 5,509 U.S. flag towing vessels engaged in pushing, pulling, or hauling alongside, and the 1,096 companies that own or operate them. Towing vessels exempt from this rule include towing vessels inspected under Subchapter I, work boats, and recreational vessel towing vessels.

 

The estimate for total industry and net government costs is $41.5 million annualized at a 7 percent discount rate over a 10 –year period of analysis. The estimate for monetized benefits is $46.4 million annualized at a 7 percent discount rate, based on the mitigation of risks from towing vessel accidents in terms of lives lost, injuries, oil spilled, and property damage. Thus, a net benefit of $4.9 million is estimated from implementing Subchapter M.

 

The new rule became effective July 20, 2016. However, certain existing towing vessels subject to this rule will have an additional 2 years before having to comply with most of its requirements. It will be interesting to see how small operators are affected by the changes Subchapter M brings their way. Only time will tell, but it seems the rule change is in the greater interest of the industry as a whole.

 

Coast Guard to Increase the Limits of Liability under Oil Pollution Act of 1990

The Coast Guard is issuing a final rule which increases the statutory limits of liability for vessels, deepwater ports, and onshore facilities, under the Oil Pollution Act of 1990 (OPA 90). The increase is standard procedure for the Coast Guard, as it is required by the OPA 90 to adjust the statutory limits every three years to reflect the increases in the Consumer Price Index. Under Title I of the OPA 90, the responsible party for any vessel or any facility from which oil is discharged, or which poses a substantial threat of discharge of oil, into navigable waters or adjoining shorelines…are strictly liable, jointly and severally, under 33 U.S.C. §2702 for removal costs and damages resulting from the incident. Yet, a responsible party’s liability is limited to a specified dollar amount, pursuant to 33 U.S.C. §2702.

 

To prevent the real value of the statutory limits from depreciating over time, and preserve the “polluter pays” principle embodied in the OPA 90, 33 U.S.C. §2704(d)(4) requires that the limits of liability be adjusted “not less than every three years…to reflect significant increases in the Consumer Price Index.” The timing of the three-year adjustment is rather unfortunate for oil and gas companies, given that the industry is currently facing bleak economic conditions with record low oil prices.

Investigation of Marine Casualties – Rights of Parties in Interest

Flickr Coast Guard InvestigationWhen a marine casualty occurs the U.S. Coast Guard is empowered to conduct an investigation to determine “as closely as possible” the cause of the casualty, cause of any death, whether an act of misconduct, incompetence, negligence, unskillfulness, or willful violation of law committed by any licensed or certified individual or member of the Coast Guard contributed to the cause of the casualty, whether there is evidence that an act subjecting the offender to a civil or criminal penalty has been committed and whether there is a need for new laws or regulations, or amendment or appeal of existing laws or regulations. 46 U.S.C. 6301.

But what about the rights of the parties to the casualty? What is the extent of their participation in the investigation?  46 U.S.C. 6303 provides that in such an investigation parties in interest (PII) shall be allowed to be represented by counsel, cross-examine and call witnesses.  PIIs include an owner, any holder of a license or certificate of registry, holder of a merchant mariner’s document, any person whose conduct is under investigation, and any other party in interest.  This has been expanded to include any person who the USCG finds to have a “direct interest” into the investigation.  However, in practice these guidelines do not provide much relief to the owner of a subject vessel when on-the-scene interviews and inspections by the Coast Guard are underway in the immediate wake of a significant marine casualty.  The degree that the PII could actively participate and be privy to interviews, statements and other discovered evidence was largely dependent upon the discretion of the investigating officers.

In 2010, in response to industry calls for more active participation, inclusion and transparency, the Coast Guard issued CG-545 Policy Letter 3-10. In it the Coast Guard made clear that PIIs have the right to participate in “all levels of investigation”, not just formal hearings.  This is important.  The PII has the right to immediate participation.  This includes the right to be present during interviews of all witnesses (not just those of its own crew or employees), to be present during on-scene inspections, to present evidence to the Coast Guard and request that particular witnesses be interviewed.

To be clear, however, the Policy Letter mandates that the Marine Board of Investigation or Investigating Officer (IO) are in charge of all aspects of the investigation. In order for an interested party to participate it must be recognized by the Board or IO as a PII.  The IO has the prerogative to formally designate PIIs during the course of the investigation.  But the party that believes it is a stakeholder in the casualty is best served by making formal application with the IO to be designated as a PII.  When application is made the IO must give it due consideration.  If the applicant meets the criteria found in Part 6303 and Part 2 of the Policy Letter it “shall” be given PII status.  The request for PII recognition may be made verbally, but needs to be followed in writing within 24 hours.  The IO’s initial designation may be verbal, but needs to be made in writing by the IO within 5 business days of receipt of the written request for PII designation.

The stakeholder needs to know that the IO is not required to designate PIIs. It is incumbent on the stakeholder to act early and promptly to contact the IO and make clear that it seeks PII status.  The IO is required to notify the PII when witnesses will be interviewed, but is not obligated to accommodate the schedule of the PII.  If the PII provides a witness the IO shall determine if the witness is relevant to the investigation.  If the IO finds that the witness is not relevant, the witness will not be interviewed.

During interviews the IO is in charge. When the IO has completed his portion of the interview, the PII then may ask questions.  The IO is empowered to determine if the questions the PII asks are relevant.  If he finds that a question is not relevant it will not be allowed and the witness informed not to respond.  Part 4e of the Letter provides that the rights of the PII apply only to conducting witness interviews.  The IO “may” allow the PII to review any or all evidence gathered during the fact-finding portion of the investigation.  The PII is not allowed to have its own copies (in any form) of any documentation (read: statements) with the exception of the names and work information of the witnesses.  Additionally the IO “may” allow the PII to review the findings of fact portion of the report of investigation, but the PII is prohibited from being involved in the development or review of analysis, conclusions or recommendations for a marine casualty investigation.  As is obvious, while the Policy Letter does provide for active PII participation, it does leave to the IO significant discretion what witness or evidence he will deem worthy of consideration.  Irrespective of this, the PII should take every opportunity to submit witnesses and evidence it believes is favorable to its interests.

While the language in Part 4c restricts access by the PII to third-party documents such as log books, photos, witness statements and other evidence and what witnesses will be deemed relevant, in practice I have found that the on-site Coast Guard investigators more times than not want to work with industry and will share documents, provide access to evidence that is developed, and will accommodate the work schedules of witnesses and company representatives or PIIs.

Excellent Flickr Photo courtesy of Jonathan James.

Marine Safety Alerts

On October 9, 2014 the U.S. Coast Guard issued two Marine Safety Alerts that are of particular interest to barge fleeting, terminals and repair facilities situated on the navigable waters of our state. These Alerts do not break new ground, but are worthy of review.

Safety Alert 11-14 addresses barge fleet lighting. The Coast Guard reminds industry that in the last 12 years there have been at least 44 collisions by recreational vessels with moored barges that have resulted in 26 fatalities and 44 injuries in the Eight District, which includes the Mississippi River and its tributaries. Lighting of the moored barges was a factor in most of these casualties. The intent of the Alert is to not only to remind fleet and terminal operators of the importance and necessity of proper, sufficient lighting, but to remind boaters of the dangers present when operating near and around barge fleets.

Rule 30 of the Inland Rules of the Road, “Anchored Vessels and Vessels Aground”, was amended in July of this year to incorporate barge lighting requirements that were previously found in other regulations. Part (h) requires that barges projecting into a buoyed or restricted channel, any barge moored so that it reduces a navigable channel to less than 80 meters (263 ft.), barges moored in groups of two or more wide, and every barge not moored parallel to a dock or the bank must carry two unobstructed all around white lights of an intensity to be visible for at least one nautical mile. Part (j) requires that such lights be placed on the outboard corners or extremities of single and groups of barges so as to mark their perimeters.

That these requirements are clearly spelled out in the Rule has significance from a legal liability perspective. In the general maritime law, the alleged violator of a statutory rule intended to prevent marine casualties is presumed at fault and the burden is on the alleged violator to prove not only that its violation was not a contributing cause of the casualty, but that it could not have been a cause. This is a heavy burden to carry. Diligent adherence to these regulations is a must.

Safety Alert 10-14 speaks to preventing barge explosions. This alert was issued in response to recent casualties from explosions aboard barges in tank cleaning, stripping and gas-freeing operations. The Coast Guard’s review of such events has shown that their cause is typically not limited to one party, but by the combined lapses on the part of vessel personnel, facility personnel and shoreside managers.

Those in the industry are well aware that the Coast Guard requires each such facility to have in place Operations Manuals. 33 CFR §154.300, 310, et. seq., sets forth in detail the necessary contents of the Manual. The list is lengthy, but essentially must set out the business of the facility, types of vessels and cargo being worked and handled, operating procedures and emergency response protocols. Each facility must have a Manual approved by the Captain of the Port. Having found that the most common causal factor associated with tank barge explosions is the failure to follow key Operating Manual procedures, the Coast Guard expects strict compliance.

The Alert reminds operators to ensure that personnel are thoroughly trained and credentialed, proper ventilation be in effect, that the barge/vessel is properly grounded and that spark-producing equipment be removed, prohibit vessels operating nearby so as to avoid the introduction of a source of vapor ignition, and the barge/vessel be certified safe by a Certified Marine Chemist before any hot work is conducted or closed spaces entered.

Much of what is contained in these Alerts may be self-evident to those who are engaged daily in these practices. However, being familiar with a practice is no guarantee that the persons engaged will not start taking for granted that procedures are being followed. An isolated lapse can lead to serious injury and property damage. Thus, reminders such as these Alerts help to insure that all personnel remain vigilant.

These Marine Safety Alerts may be found by visiting the U.S. Coast Guard 8th District website, www.uscg.mil/d8/.