Shifting to greener fuels sounds easier than it is. The supply chains for common maritime fuels such as HSFO and marine gasoil are highly developed and complex. But for new fuels such as cooking oil, hydrogen, and ammonia, there aren’t any supply chains.
Even if we had excellent marine engines using these fuels, there would be no place to ‘gas up’. In many ways, it’s like the problem auto drivers have with electric cars; you need to know where you can fill up. The highly developed automotive fuel supply chain is one reason why electric cars are taking so long to catch on with the buying public.
Another issue, which plagues the electricity supply chain as well as the marine fuel one, is the ‘greenness’ of fuels. Some fuels burn green, producing less emissions, when they are propelling vehicles; but their means of production is not green at all.
For instance, hydrogen production takes a lot of electricity when it’s made by the usual method, by electrolyzing water. But how green is the energy source for the electricity? Did it come from a coal-fired plant, or from a solar or wind generation facility?
For maritime, we call this well-to-wake analysis of the greenness of fuels and their supply chains. Can we do effective well-to-wake analysis of marine fuel supply chains?
The article by Paul Bartlett below refers to a new report from Lloyd’s Register addressing this problem. The report is well worth getting for maritime pros. It’s going to be crucial to have a full understanding of the overall emissions benefits of all the possible marine fuels, if we are to build new greener ships and develop green trade lanes. A lot of work and money will be needed to set up effective maritime fuel supply chains and supplies.
The STB, struggling since inception in 1995 to develop a fast, affordable, and reasonable method that provides relief to rail shippers challenging unfair rates in “small” zero-sum disputes in which a single railroad dominates the market, will shortly employ Final Offer arbitration to make a binary choice between competing final proposals from railroad and shipper that make the case for what each considers the highest reasonable shipping rate.
Previous efforts by the STB to provide tools for addressing smaller disputes were rarely used by shippers.
The STB’s Final Offer rule is designed as a backup in the case of the failure of a companion STB rule that provides for speedy voluntary, affordable arbitration to resolve rate challenges by stakeholders of any size where the dispute is less than $4M within a two year period—if all Class I railroads agree to use it.
Final Offer theory, developed in the 1940s in the United States, has notably been used by Major League Baseball to resolve disputes as well as state and local governments dealing with unions that are not legally permitted to strike.
In a Final Offer situation, stakeholders do not know what maximum reasonable rate the other side will propose and are thus incentivized to submit proposals that are more rather than less reasonable, and, thus, more likely to be chosen by the arbitration entity. This is markedly different from traditional reasonableness disputes, in which arbitrators would typically split the difference between rate proposals, encouraging participants in the dispute—who knew how the system worked—not only not to be reasonable from the git-go, but specifically to start by proposing unreasonable rates, figuring that whatever they proposed—reasonable or not—was likely to be averaged away.
If—and only if—all seven Class One railroads agree to STB-specified voluntary arbitration proposed in the new rules, the STB’s voluntary arbitration rule will be implemented and the railroads will be exempt from the Final Offer Rate Resolution (FORR) rule for five years.
The FORR rule has been in the works since 2019, when the STB issued a notice of proposed FORR rulemaking and solicited public comment. Five of the Class One railroads filed a petition promising to submit to binding arbitration—a methodology they had refused to participate in for many years—in return for exemption from Final Offer procedures. In response, the STB explored the viability of voluntary arbitration as a practical alternative for smaller rate disputes, and in November 2021 advanced rulemakings for both FORR and voluntary arbitrations, and issued the rules in December 2022 for implementation in early 2023.
Under the voluntary arbitration rule procedure, Class I rail carriers must all commit to five years of arbitration under an expedited schedule. Under the FORR rule procedure, if the STB finds a rate being challenged is unreasonable, both sides submit their case in an “expedited procedural schedule that adheres to firm deadlines.” The voluntary arbitration rule becomes effective 30 days after being published in the Federal Register, the FORR rule after 60 days.
According to STB Chair Martin Oberman, most of the shipper community has expressed a preference for FORR and most of the railroads for voluntary arbitration, but, according to Oberman, both have much in common, including timeframes, flexibility, and monetary limits, and provide shippers with access to more meaningful rate relief than was previously available to them.
“I am optimistic,” Oberman states, “that this time the Board’s efforts will achieve this long-desired goal. I encourage the Class I railroads to accept the opportunity afforded by the new rule and sign up for the arbitration program they clearly prefer. However, if they do not, in my view, FORR also provides a strong rate relief mechanism, and its availability would also streamline rate review processes in small rate cases. To be clear, regardless of some differences of opinion about the most preferable way forward, all Board Members are committed to ensuring review of rate challenges are practical and affordable.”
A critique of the International Maritime Organization (IMO)’s new Carbon Intensity Indicator (CII) which comes into effect January 1, 2023.
The CII assigns a rating to ships based on their carbon efficiency. It takes into account their actual trips rather than just design. It also can change over time, as the ship encounters actual use and those measures are reported back.
For ships sailed by owners this is not so bad. But for chartered ships, the charter agreement could place the owner at a disadvantage, since the charter operator may use the vessel on routes or with sailing practices that reduce the measurements for the ship’s CII.
The article is interesting and quotes several commentators who think the problems will result in less sustainable shipping instead of more.