June/July 2013

MAC Economic Commentary

Canadian miners busy navigating new maritime pollution rules

By Brendan Marshall

New rules from the International Maritime Organization (IMO) have significantly changed the shipping practices of many mining products. Beyond the logistical hurdles, a confluence of factors has Canadian miners working diligently to ensure compliance in uncharted waters.

IMO is the UN special agency responsible for the safety and security of shipping and the prevention of pollution by ships. On January 1, 2013, extensive amendments to Annex V of its MARPOL convention came into force. The movements of some classifications of nickel, copper, zinc and lead concentrates were affected, and more products are likely to be captured as new rules are phased in on January 1, 2015. The transition in Canada is being further complicated by a lack of preparedness to adapt to the new regulatory model, and inconsistent implementation approaches by different countries.

Miners must now classify and declare all solid bulk cargoes to indicate whether they are harmful to the marine environment (HME) – a new category of “garbage” within Annex V. Specific toxicological criteria have been included in IMO’s 2012 Guidelines for Implementation that determine if a bulk cargo is HME. If so, discharging any amount of that substance into the sea is prohibited.

These amendments signify a paradigm shift in IMO’s approach to managing marine pollution. Previously, Annex V permitted the disposal of garbage at sea with certain exceptions. The new regime does an about face by setting a blanket prohibition on the disposal of garbage at sea, except as otherwise noted in Annex V. Of interest to miners is that the definition of “garbage” includes the “cargo residues” of many non-packaged dry bulk cargoes and, therefore, captures many commodities that miners marine-ship in bulk.

Once a bulk cargo ship is unloaded, the cargo hold is washed down, collecting cargo residues in the wash water that would, under the previous rules, be discharged at sea on that ship’s next voyage. Under the new regime, cargoes classified as HME need adequate port reception facilities (APRF) – or qualified third-party waste managers – at both loading and unloading ports to collect and properly treat the wash water. This presents a significant challenge, as many ports lack the necessary infrastructure to comply with these rules. In fact, a 2013 survey of shipowners in Europe, Japan and South Korea, identified 25 of 53 ports without APRF in place.

More compliance challenges include classifying concentrates, which requires very specific and consistent science, and the methodology for determining whether some concentrates are HME has not yet been developed. This important work is presently being undertaken by commodity associations and takes time.

Another difficulty is the requirement to declare bulk cargo classifications as HME or not. This issue is complicated by the fact that countries are implementing the new provisions on different timelines. The U.S. Coast Guard published an Interim Rule in February advising that parties are expected to already be in compliance. However, MAC understands that Canada will not be implementing these measures for two to three years.

This raises many questions for affected miners. What happens when a ship master receives an unclassified or misclassified product, or when the port of destination does not have APRF? Who does an international shipper declare to in Canada if the new rules are not yet implemented? Might this result in a carrier’s decision not to import or export a mining product due to increased risk of violating international law?

This could present a significant interruption to established trade routes or disruption to the movement of affected mining products, adversely affecting Canadian trade and the international reputation of our industry. Given that mining accounted for 128 million tonnes, or 37 per cent, of Canada’s total international marine tonnage in 2011, these impacts may prove harmful to our economy. If coal is included, in 2015, nearly 56 million tonnes of product moved to and from Canada could be affected, making onerous and costly demands on our marine infrastructure.

Due to this uncertainty and the anticipated impacts, in late May the IMO granted a conditional relaxation of the discharge requirements until December 31, 2015. To ensure preparedness, miners should engage their commodity association about potential implications for their product. A consultation is expected to begin this summer regarding the domestic implementation of the new measures. MAC has been proactively working with a broad group of affected industry stakeholders, and with officials from Transport Canada, to ensure a coordinated, multi-stakeholder approach to implementation gets it right.

Brendan Marshall is director of economic affairs at MAC. He works to advance the mining industry’s interests and understanding of key economic issues such as taxation, transportation, innovation, international trade and investment, and energy and climate change.

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