[Federal Register Volume 80, Number 77 (Wednesday, April 22, 2015)]
[Rules and Regulations]
[Pages 22421-22422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09385]
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DEPARTMENT OF TRANSPORTATION
Maritime Administration
46 CFR Part 298
[Docket Number MARAD-2014-0011]
Final Action Regarding ``Other Relevant Criteria'' for
Consideration When Evaluating the Economic Soundness of Title XI
Maritime Loan Guarantee Program Applications
AGENCY: Maritime Administration, Department of Transportation.
ACTION: Final policy.
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SUMMARY: This document serves to inform interested parties and the
public of the Maritime Administration's (MARAD) final policy regarding
the factors MARAD will consider as ``Other Relevant Criteria'' in its
review of the economic soundness of applications under the Title XI
Loan Guarantee Program [also known as ``Title XI'' or the Federal Ship
Financing Program (FSFP)]. On February 24, 2014, MARAD published a
Notice of Proposed Policy (NPP) and sought comments relating to the
agency's evaluation of Title XI Maritime Loan Guarantee applications.
In this document MARAD: Responds to comments received during the public
notice; clarifies and reinforces that applicants with projects to
construct or reconstruct vessels to use alternative energies, or to
meet current or future U.S. or international environmental and safety
standards, are eligible and encouraged to apply for FSFP loan
guarantees; and implements the final policy.
DATES: This policy is effective April 22, 2015.
FOR FURTHER INFORMATION CONTACT: Owen Doherty, Associate Administrator
for Business and Finance Development, Maritime Administration,
Telephone: 202-366-1883; Email: [email protected]; Mail: MARAD, 1200
New Jersey Avenue SE., Washington, DC 20590.
SUPPLEMENTARY INFORMATION:
A. Introduction
In order to be eligible for a FSFP loan guarantee an obligation
must, among other things, aid the financing of the ``construction,
reconstruction, or reconditioning of a vessel.''
46 U.S.C. 53706. The terms construction, reconstruction and
reconditioning are broadly defined to include ``designing, inspecting,
outfitting, and equipping.'' 46 U.S.C. 53701(3).
Chapter 537 of Title 46 of the United States Code, as implemented
by part 298 of title 46 of the Code of Federal Regulations (CFR),
details the factors MARAD must consider in processing FSFP loan
guarantee applications. The factors include economic soundness, project
feasibility and specifically enumerated priorities. For the economic
soundness determination, 46 U.S.C. 53708(a) provides six mandatory
factors MARAD must consider, but allows consideration of ``other
relevant criteria'' as well. The accompanying regulation, 46 CFR
298.14(b), also provides that MARAD may take into account ``other
relevant criteria.'' Sections 53708(a) and (b) explicitly provide ``the
need for technical improvements, including increased fuel efficiency or
improved safety'' as matters the Administrator and Secretary must
consider with regard to applications for vessels intended for use on
inland waterways and for fishing vessels, respectively.
On February 24, 2014, MARAD published a Notice of Proposed Policy
(79 FR 10075) in which it proposed to consider ``various environmental
initiatives that are likely to increase efficiency and lead to future
cost savings as `other relevant criteria' in evaluation of [the
economic soundness of] Title XI loan guarantee applications.'' A non-
exclusive list of such initiatives are alternative fuel systems
designs, fuel cells, hybrid propulsion systems, air emissions reduction
technologies and ballast water treatment technologies.
The policy provides that, ``demand for environmentally friendly
designs, fuel and technologies is growing rapidly throughout the
maritime industry because, among other things, they meet new air
emissions and other discharge standards, and present the potential for
greater efficiency and cost savings.'' The proposed policy also stated,
``. . . that many of the economic benefits of environmentally friendly
designs, fuels and technologies take the form of public benefits.''
Many of these public benefits cannot be captured by vessel owners and
operators using traditional economic metrics, but are valuable
nonetheless, because they contribute to environmental sustainability
and human health. MARAD sought public comment on the NPP.
In this final policy, MARAD is responding to the comments received,
announcing that it intends to clarify and implement the policy as
proposed in the prior notice, and clarifying that applicants with
projects to construct or reconstruct vessels to be powered by
alternative energies, or to meet U.S. or international environmental
standards as required for continued operations, are eligible and
encouraged to apply for FSFP loan guarantees.
The comments received varied in the degree to which they directly
addressed the substantive provisions in the policy. Some commenters
expressed agreement with the general principle of considering
environmental factors in the review of applications for FSFP loan
guarantees. The majority disagreed with the proposal to include
environmental considerations as a factor used to determine the economic
soundness of projects.
B. Comments
MARAD received a total of 11 comments in response to the policy.
Nine commenters disagreed with the proposal to include environmental
considerations as ``other relevant criteria'' in the economic soundness
analysis. MARAD received three comments indicating general support for
including environmental considerations when evaluating FSFP
applications. One commenter suggested that doing so could help
accelerate replacement of an aging U.S.-flag fleet. Another stated that
FSFP guarantees should be granted in order to make the new ships as
environmentally friendly as possible. However, these commentators did
not provide input on specific actions MARAD could take to further those
interests. The comments, as submitted to the docket for the policy
(Docket No. MARAD-2014-0011-0001) may be accessed via http://www.regulations.gov.
While many of the other comments included general support for
considering environmental factors at some point when evaluating
applications that are otherwise economically sound, none of those
commenters supported including such factors in the ``economic
soundness'' analysis required under 46 U.S.C. 53703(b). Many commenters
focused on the reference to ``public benefits'' in the original
document. They expressed concern that it would be difficult and
expensive for applicants and MARAD to incorporate the public benefits
(e.g., human health and lower air emissions) of environmentally
friendly technologies into a review of economic soundness, which is
based on traditionally quantifiable financial factors. Commenters
stated that attempting to address public benefits in the economic
soundness analysis would result in additional time and expense, which
would be inconsistent with MARAD's stated desire to streamline the
application review process. Other commenters noted that cost savings
from increased efficiency resulting from
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the use of alternative fuels are already captured in the current
economic soundness factors.
MARAD received two comments that suggested that the policy might be
interpreted to mean that MARAD does not consider projects to
reconstruct or reconstruct vessels to use alternative energies (e.g.,
from a diesel propulsion system to a liquefied natural gas (LNG)
propulsion or a hybrid diesel/LNG propulsion system) to be eligible for
FSFP loan guarantees.
Several commenters noted that MARAD is already authorized, under 46
U.S.C. 53706(c), implemented by 46 CFR 298.3(k), to prioritize
applications for certain vessels, and that a formal rulemaking to add
environmental considerations to that section would be more appropriate
than adding such considerations to the economic soundness analysis.
MARAD received three comments that referenced issues beyond the
scope of the proposed policy.
C. MARAD Response to Comments
MARAD understands the concerns commenters expressed about potential
ramifications of implementing this policy. In response to these
concerns, MARAD clarifies the policy as described below. The Department
of Transportation and MARAD are committed to supporting the development
and implementation of technologies that help the U.S.-flag fleet meet
or exceed national and international environmental standards and result
in environmental improvements. MARAD is also determined to reduce FSFP
application processing times and administrative burdens that potential
applicants face.
D. Final Policy
By this document, MARAD announces that it will implement the core
of the proposed policy. Under this final policy, in addition to the
factors listed in 46 U.S.C. 53708(a)(1)-(4) and (6), MARAD will
consider whether such projects include environmental initiatives that
are likely to increase efficiency and lead to future cost savings. As
noted by several commenters, cost savings resulting from increased fuel
efficiency are captured in the current economic soundness analysis
factors--most notably projected revenues and expenses of the vessel(s).
This final policy merely states explicitly what MARAD is authorized to
do under current law and regulations.
MARAD clarifies that it will not require applicants to quantify the
potential public benefits of environmentally friendly designs, fuels
and technologies. MARAD encourages applicants to emphasize any public
benefits or costs of greenhouse gas or criteria pollutant emissions
caused or reduced by vessel(s) to be constructed or reconstructed.
MARAD encourages applicants to quantify such public benefits to the
extent practicable. Consult the following authorities for guidance for
undertaking such calculations: (1) White House Office of Management and
Budget, Circular A-94, Circular A-94 Guidelines and Discount Rates for
Benefit-Cost Analysis of Federal Programs (October 29, 1992) (https://www.whitehouse.gov/sites/default/files/omb/assets/a94/a094.pdf);
Interagency Working group on Social Cost of Carbon, United States
Government, Technical Support Document: Technical Update of the Social
Cost of Carbon for Regulatory Impact Analysis Under Executive Order
12866 (May 2013; revised November 2013) (https://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
In addition, MARAD considers as part of economic soundness the
degree to which applications include the use of such designs, fuels or
technologies for: (1) Reconstruction of vessels to ensure compliance
with current or future environmental and safety operating standards, or
(2) construction of new vessels to replace vessels that would not meet
such standards. MARAD encourages applicants to include information in
their applicants regarding the degree to which the vessel(s) to be
constructed or reconstructed meets these components of economic
soundness analysis.
Consideration of the impact of environmental and safety standards
on the economic soundness of an application is consistent with the
factors MARAD is required to review. See, 46 U.S.C. 53708(a)(1)-(3).
For example, pursuant to new global standards promulgated by the
International Maritime Organization, and enforced in the U.S. by the
Environmental Protection Agency, NOx emissions from large ``Category
3'' vessel engines are required to be substantially reduced by 2020.
Implementation of these standards will result in many vessels currently
in operation being taken out of service, unless they are converted to
reduce emissions. These environmental factors directly impact the need
for, and market potential and projected revenues and expenses of, any
proposed construction or reconstruction.
Further, MARAD clarifies that projects to reconstruct existing
vessels are eligible for Title XI loan guarantees. Reconstruction
includes conversion of vessels to LNG or dual-fuel power.
Authority: 46 U.S.C. 53708.
Dated: April 17, 2015.
By Order of the Maritime Administrator.
Thomas M. Hudson, Jr.,
Acting Secretary, Maritime Administration.
[FR Doc. 2015-09385 Filed 4-21-15; 8:45 am]
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