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Why ECA Matters To You

Why ECA Matters To You
From Cruise Week

Cruise Week asked Stein Kruse, Holland America president/CEO and Seabourn chairman, if the new emission control areas being implemented are the biggest politically-related challenge facing the cruise lines now in North America.

He begins by pointing out that nobody in the cruise industry opposes ECA. “The idea of wanting to improve public health, which is the underlying mission of ECA, I think everyone subscribes to,” he says. “Who doesn’t want to improve kid’s health or reduce the number of people with asthma. We all want to do that.”

Plus, he continues, it’s in the best interest of the cruise business to promote a clean environment: “Pristine beaches, attractive glaciers and so forth are our business. So with ECA, the idea of gradually improving human health through regulations, nobody has a problem with the concept.”

The problem, from the industry perspective, is in the broad implementation. “The very onerous and very limited human health benefits in the vast area of the ECA,which is what resulted when you drew this arbitrary 200-mile line around the United States and Canada, is where we started to have concerns,” says Kruse.

Loopholes began cropping up. For instance, the Great Lakes have been given a exception, even though tens of millions of people live along those shores.

Another exception is the Aleutians. “The ships come from Asia laden with goods from China, they do the Great Circle, go north of the Aleutians, come through Unimak Pass and then they go into the Gulf of Alaska, and down the coast through Prince Rupert, Washington, or California,” explains Kruse. “But they excepted the Unimak Pass in the middle of the Aleutian islands. So the human health benefit, all of a sudden, wasn’t so important.”

Doing the Most Good for the Most People

It’s not just the arbitrariness that is problematic to the industry. “The biggest issue that we as an industry saw early on was the fact that there was a complete lack of willingness to understand the point that we were making,” says Kruse. “Our point is that if our ships are in an area like Seattle or Los Angeles or other major ports, we can reduce emissions virtually down to zero, particularly when we do shore power.

“This is where little or virtually no emissions truly would benefit great population bases. But that wasn’t relevant, because the ECA was designed to also include this notion of ‘environmental justice.’

“That means if there’s a lone fisherman 200 miles out at sea, he or she also needs to be protected. So we said, ‘We get that, but isn’t it much better if three million people in the greater Puget Sound area have a substantially lower percentage of emissions than what we are currently producing or what the ECA is requiring. Then the overall weighted average, which is the concept we introduced, would reduce the amount of emissions we produce everywhere we go. Wouldn’t that be better?'”

They said no.

Kruse continues: “Then we said, ‘What about 50% of the time, when the winds are not [blowing] onshore, they’re [blowing] offshore. It’d be 200 miles out, and the winds are blowing into the Pacific. What then? What human health benefit is it that we’re talking about?”

In summary, execs have tried to explain why a properly structured, properly implemented ECA can lead to a greater human health benefit. “We haven’t been able to get resonance on that argument,” says a frustrated Kruse.

Real Challenge Starts In 2015

The most obvious effect on the industry will be the costs. “We’re burning a very expensive fuel that is going to have substantial negative cost implications on our business,” he says of the changes. “This could result in us leaving ports that we previously went to, because they become uneconomical from our operating paradigm.”

The effects will be seen in 2015. “Late 2012 and early 2013 are when the decisions for the type of deployment we’re going to be doing in 2015 are being considered by the cruise lines,” says Kruse. “That’s why the ports who are supporting us in our request for consideration on how to deal with this are getting increasingly concerned. They know there will be negative implications for many ports within the ECA.”

Kruse points out going to 1% sulfur on August 1, while representing a cost increase, is manageable. “Up here in the Pacific Northwest, for example, where the ships are in Alaska most of the time, the quality of the fuels that we have been burning have been fairly close to that,” he says. “We’ve been, for the most part, burning around 1.5% fuel that we’ve been taking on here in Seattle for years. So the move to 1%, while more expensive, is not that kind of exponential leap that we’re talking about.”

Staggering Cost Implications

The cost implications of fuel with <0.1% sulfur, which must be distilled, within 200 miles of the continental United States and Canada in 2015, are staggering, he explains. “We will have to change our operating structure, we will have to either slow the ships down, call at fewer ports, or do something that addresses this.”

To comply with the law, changes in Alaska are likely. “You look at a seven-day cruise out of Seattle, for example, up to Alaska, the number of ports we have, the duration that we’re in ports, the time we’re inside the ECA versus outside the ECA, that’s where those decisions will start to percolate.”

These are very onerous requirements, he says. “Rational people say, ‘Is that what you really want to do? Was that really what the intention was around ECA? Was it really to stifle economic growth and pull back development and increase costs and reduce employment for what might be very marginal, if at all, human health benefits?”

Note: The above article was part of a Cruise Week news piece from September 5, 2012.

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