Wake up call

Lessons learned from the from the North Cape pollution incident

by Douglas A. Eklof

President, Eklof Marine Corporation

 

The following is the text of a presentation given at Marine Log Tanker & Maritime Legislation conference and published in the November 1998 Marine Log

 

On January 19, 1996, the tug Scandia and barge North Cape grounded off Moonstone Beach on Rhode Island's south coast, spilling approximately 828,000 gallons of home heating oil into Rhode Island's waters. This tragic event seriously impacted the surrounding ecosystem, forced the closure of commercial fishing grounds for four months, and disrupted the local economy.

Over the next several days, in the midst of extremely difficult and dangerous winter conditions, more than three million gallons of cargo were removed from the North Cape. Approximately one week after the casualty occurred, the North Cape was refloated, and any recoverable spilled oil was cleaned up. Plans were made to remove the tug Scandia from the beach as soon as weather conditions permitted.

We knew that many issues remained to be settled, including a multitude of claims, natural resource damage assessments, and civil penalties. What was not anticipated was the ensuing criminal investigation and aggressive prosecution of the company and two of its employees by the U.S. Attorney in Rhode Island working with EPA and FBI as well as the State Attorney General.

[Sheldon Whitehouse, U.S. Attorney for Rhode Island, outlined some of the reasons for bringing the North Cape prosecutions in an address to Marine Log's conference on Maritime Operations: The human element. The text is available by clicking here]

Eklof Marine Corporation is a privately held tug and barge company which specializes in petroleum transportation and is based in Staten Island, New York. We trace our roots back to my great grandfather who in the early part of this century operated a launch service in New York harbor utilizing a row boat. In 1926, grandfather started operating a small self-propelled vessel delivering diesel oil to ships in the harbor. Since 1960, the company grew from a one-vessel operation to a fleet of some sixty vessels in 1996. n addition to providing bunker delivery service in New York harbor, we transport petroleum products along the East Coast, Gulf of Mexico, and the Caribbean. We also transport dry cargoes and edible oils in Central and South America. Our vessels range in size from 1,000 deadweight tons to 20,000 deadweight tons. Over the years, we have enjoyed a reputation as one of the better carriers in our area of operation. We attribute our success to the dedication of our employees and the loyalty of our customers and vendors.

Our reputation, however, suffered in the wake of media coverage of the North Cape oil spill and the subsequent criminal prosecution of our company.

I need to say at this point that I believe we were treated fairly by the Government agencies which investigated the oil spill. Our decision to plead guilty to negligence was driven by the fact that we could not defend against it.

Last spring there was an article in a trade magazine [not Marine Log] which mentioned my company in a way which greatly disturbed me. The article was a well-researched, well-written article regarding criminal liability in the maritime industry. But in a highlighted box within the article, sub-headed "In spite of tougher enforcement, some companies still willfully violate environmental regulations," the author cited our company as a willful violator in the North Cape spill.

I said a moment ago that we could not defend ourselves against a negligence charge. Our negligence was simple negligence, born of the failure of certain elements of our loss control program, and not because of willful or intentional negligence. The characterization in the article as a willful violator prompted me to write a letter to the editor. It said, in part:

If the intent of your article was to alert readers to the potential threat of criminal prosecution in the aftermath of an oil spill, you were correct in doing so. The subject has recently received widespread attention, and the current trend toward criminal prosecution is indeed alarming. However, you have missed the mark, and are doing [your magazine] and its readers a disservice by implying that criminal prosecution typically results from "willful" violation of environmental statutes. Operators who consider themselves to be responsible and prudent will not identify with the term "willful" and may remain complacent about their exposure to prosecution.

The current reality is that even a reputable company's operating and maintenance practices will be the subject of intense scrutiny after a serious spill, and it is very possible that areas of potential criminal negligence will be identified. How far the criminal process goes will, of course, be dependent upon circumstances unique to the event.

At the time of the Rhode Island spill, both the Scandia and North Cape were maintained and equipped in full compliance with existing U.S. Coast Guard regulations and ABS class and loadline requirements.

The response I received from the author of the article leads me to believe he missed my point.

As unpleasant as it is to recount our experience, is I believe it is important for everyone in our industry to understand that spilling oil is a crime. It does not need to be intentional or willful to be a crime. Any error or omission could be grounds for a negligence charge being brought against you or your company.

I said earlier that we had a good reputation in the industry as a quality operator. We earned that reputation by providing safe and efficient transportation services. I want to describe for you our loss control program prior to the North Cape oil spill. I do not want to launch a defense to the negligence charge, but I hope to illustrate that, in spite of a comprehensive program, we were still found negligent. To accurately relate the program, as it existed in January 1996, here is the description I gave in testimony before a Senate Committee hearing in February 1996 investigating the response to the North Cape spill as it related to the response planning portions of OPA 90.

Indeed, safety and training are the very essence of Eklof's approach to shipping and are paramount in our business operations. We accord safety and environmental protection the same level of attention and seriousness as commercial and operational matters, because without safety, commercial and operational success would not be possible. We seek to attract and recruit the very best professionals, and then nurture and maintain that level of excellence, because the quality and motivation of Eklof's people are the key to the company's future.

Therefore, we have assembled a department of five highly qualified individuals to coordinate training for our employees, monitor operations, insure regulatory compliance, prepare contingency plans and develop operational guidelines and procedures.

Eklof Marine trains and drills its crews, including Safety and Survival at sea, drug and alcohol awareness training, tankship dangerous liquid cargo training, benzene training, respirator training and fit testing, OSHA hazardous materials training, and vapor recovery systems training to ensure that all staff are always on the alert and ready to handle any situation. We continuously review our safety standards and work toward improving the safety record throughout the company.

 

INTERNATIONAL SAFETY
RATING SYSTEM

Attention to safety and training has paid off for Eklof Marine. In 1994 we received an overall Standard Level Three rating in the International Safety Rating System, making Eklof part of a select group of companies covering three continents and 20 countries who have earned recognition for their leadership and administration, management training, planned inspections, accident/incident investigation procedures, organization rules, and personal protective equipment.

This rating is issued only after a rigorous audit and inspection process is performed by the International Loss Control Institutes, Inc. a part of Det Norske Veritas, the international independent ship inspection and classification society based in Norway. These audits serve to provide systems to guide the development of an effective safety program, to offer a total systematic approach to safety and health management to identify the majority of exposures to injury, illness, fire and property damage loss, and to objectively measure and quantify work being done to manage the control of loss.

In addition to external audits, Eklof conducts frequent internal audits of staff and management to ensure that each employee is protecting themselves, their colleagues, the vessels and their equipment, and their cargoes.

I should point out that last year we decided to adopt the AWO Responsible Carrier Program as a model for our loss control program since it is designed specifically for our type of operation.

In fact, we had our first external audit of the program three weeks ago, and are one of the first companies to be independently certified in compliance. Aside from the satisfaction derived from achieving recognition from an external audit by either ILCI or an AWO certified auditor, the loss control program has paid off in dollars as well.

From 1991 through 1995, we made only one claim on our hull and machinery policy--the result of an engine problem on a tug which did not result in any other damage. During the same period, we did not have an oil spill large enough to warrant outside contractors to clean it up.

Also in the early 1990s we made a commitment to carry cargoes in double hull vessels well before the OPA 90 phase out of single hulls. By January 1996 we had gone from 100% single hulls to 60% capacity in double hulls.

I think I have said enough about our loss control program. Just let me say that I used to sleep well at night feeling that we were doing everything right.

For the benefit of those of you fortunate enough to never have been involved in an oil spill, I want to give you an overview of our response to the North Cape spill. I should point out that we received praise from Captain Turlo, who was the federal On Scene Coordinator, as well as from Senator Chaffee, who chaired the hearing before which I testified in February 1996.

As the Head of our Emergency Response Team, and the company Q.I., I had participated in several drills over the years. In spite of the drills, however, I felt ill-prepared to deal with the many facets of the North Cape response.

Aside from the obvious task related to clean up, I was required to deal with elements such as insurance issues related to potential personal injury claims from crew members, as well as lightering and salvage efforts including legal and insurance questions regarding Lloyd's open form versus time and material arrangements. Were the vessels constructive total losses and therefore wrecks, or merely stranded vessels? General average or particular average?

I had to deal with media issues. The incident understandably drew intense media interest. There were live press conferences twice a day until the North Cape was refloated eight days after grounding.

I made the decision early on ó that I would not deal directly with the press. We used a professional public relations firm instead to deal with those issues. It turned out to be a good decision because I was able to move about the incident command center freely since the press didn't know who I was.

About 24 hours after the grounding, we were notified that the National Transportation Safety Board was to commence a field hearing on Monday morning. With 24 hours notice we had to make arrangements to get the Scandia crew back to Rhode Island and prepare them for their testimony before the NTSB. The hearing lasted four days.

During the eight days until the North Cape was refloated, I slept an average of three hours a night, and I went a few nights with no sleep. Meals were sporadic and always out of a cardboard container. The experience was extremely taxing both physically and emotionally.

I want to mention that the NTSB investigation was put on hold during the criminal investigation. As a result, its report was not issued until this past summer--some 30 months after the accident, and six months after our sentencing in the criminal case.

The NTSB report cited the company's lack of oversight of crew and vessel operation as the primary cause of the accident. It also cited industry standard and lack of regulation sufficient to prevent this type of accident. While the report touched on the company, it was tougher on the Coast Guard.The report included about twenty specific recommendations--most directed to the Coast Guard, a few to AWO as the industry representative, and three to the company. Fortunately, we had already implemented the changes they recommended to us following our plea agreement.

Now I want to describe the criminal investigation. I first became aware of the U.S. Attorney's interest when I was asked to meet with him just two weeks after the spill. I attended a meeting in his office with a local criminal defense lawyer we had retained. The meeting was attended by an FBI agent, an EPA investigator, and the Assistant U.S. Attorney assigned to the case. The meeting was relatively brief.

Several days later, the tug was removed from the beach and taken to Newport, Rhode Island for inspection prior to being towed back to our yard in Staten Island.

Just as our P&I Club attorneys were preparing to go aboard with the NTSB investigators and a group of insurance surveyors, a motorcade of FBI and AFT agents arrived with a search warrant signed by a federal judge. They declared the tug a crime scene and refused to let anyone-- including the NTSB--go aboard until they had completed their own inspection of the vessel.

Soon after, we received a Grand Jury subpoena for documents--the first of many. We began assembling documents for production and in a fairly short time turned over a couple of boxes full.

Then something happened which changed the attitude of the government investigators. Part of our loss control program involves the vessel captains and chief engineers submitting monthly vessel inspection reports. We call these "discrepancy reports" as they are designed to track problems on board. The reports are received and reviewed by port captains who then forward them to maintenance and repair for appropriate action. Prior to the North Cape spill, we had about a 95% success rate in getting the reports, not because the captains did not submit them, but they would get misplaced in the sea of paper received each day in the office. We felt this was an acceptable rate.

The first batch of documents turned over included a year's worth of discrepancy reports for the tug Scandia. But the November 1995 report was missing. This immediately raised the question in the government's mind, rightfully so, that we were withholding information.

That is when we retained the services of the Venable firm in Washington to act as lead defense counsel for the company in the North Cape matter. Over the next three months, as the subpoenas continued to arrive by the week, we turned over our conference room to a team of Venable lawyers and paralegals, where they examined virtually every piece of paper in our office to determine whether it needed to be produced. Ultimately, we submitted something like 70 boxes of original documents to the Grand Jury. The Venable firm was able to establish a good working relationship with the government investigators and restore their faith in our cooperation.

Now, a Grand Jury is supposed to operate in secrecy. There were no leaks in this case. While I know that several employees, including myself, were interviewed, some more than once, by the investigators, I don't know how many actually testified before the Grand Jury or what they said. We were each represented by separate counsel and were instructed not to discuss the investigation with anyone. It was awkward at times not to be able to talk about specifics of the North Cape incident among ourselves. In fact, we were not able to conduct our own post-accident investigation.

After about eighteen months, the government found enough errors on our part to seek an indictment for negligent discharge of oil. At that point, our attorneys entered into negotiations for a plea agreement.

As you know, OPA 90 amended the Clean Water Act to make violators subject to criminal prosecution for a misdemeanor if the discharge was done negligently, and if the discharge was done knowingly it could result in a prosecution for a felony.

The prosecutors in our case acknowledged that the discharge was negligent--and not knowing, and that became the basis of our plea agreement. In the end, we agreed to plead guilty to negligently discharging a harmful quantity of oil into the navigable waters of the United States in violation of the Oil Pollution Control Act of 1990, discharging oil from a barge into any navigable water without a permit in violation of the refuse act, and killing protected migratory birds in violation of the migratory Bird Treaty Act. We also agreed to plead guilty to discharging oil in violation of the Rhode Island Oil Pollution Control Act, which is a felony.

We agreed to pay a fine of:

$100,000 for the OPA 90 violation,

$400,000 for the Refuse Act violation, and

$3,000,000 for the Migratory Bird Act violation,

$3,500,000 for the Rhode Island OPA violation, and agreed to contribute

$1,500,000 to the Nature Conservancy to be used to purchase and in the environmentally sensitive area around the site of the spill.

We also agreed that we would spend $1,000,000 on safety improvements to our fleet, including the following specific remedial measures:

Install remotely operated fire suppression system on each of our self-propelled vessels and provide crew training for proper use of them.

Equip all vessels with at least two SCBAs and at least two fire fighting suits, and provide crew training for their proper use.

Operate only barges with operable anchor systems including working windlasses.

Cease using single skin, unmanned barges.

Retain services of an independent consultant to oversee the implementation of the remedial measures.

Appoint a corporate officer to ensure compliance with the remedial measures.

We agreed to a three-year probation period. Any violation during the probation period or failure to fully implement the remedial measures will result in at least an additional $1,000,000 fine.

We agreed that we would not attempt to offset any future civil damage claims or NRDA payments against the fines paid in the plea agreement.

The former president pled guilty to negligence for failing to provide fire fighting equipment sufficient to fight the fire and allowing the barge to sail without an operating anchor. He paid a $100,000 fine and was placed on three years' probation.

The captain pled guilty to negligence for ignoring storm warnings and paid $10,000 fine and was placed on two years' probation.

One last result of the guilty plea was that we were automatically debarred from government contracting, and we had to negotiate an administrative agreement with the EPA--the debarring agency for violation of the Clean Water Act ó which effectively places us on probation for five years. In addition to the conditions set in our plea agreement, we must remain certified as an AWO responsible carrier and establish a corporate ethics program and provide ethics training for all our employees and establish a confidential hotline for use by employees to report violations of the ethics code.

We are still negotiating a settlement regarding the NRDA process and are continuing to settle third party claims. I wish I could say when this will all be over. Now, one last topic.

Last spring, I submitted testimony to a Congressional subcommittee which held a hearing regarding criminal liability in pollution cases.

I stated in my testimony that had I known then what I know now, I might not have been as cooperative in the response to the spill and may not have allowed our employees to remain on the scene.

The point of my testimony was this: We accepted responsibility for the spill even before it occurred, while the vessels were drifting toward the beach. We implemented our vessel response plan and mobilized the appropriate resources for spill removal and salvage.

But we went way beyond what the law requires in the response. We diverted a number of our vessels to the scene to lighten the North Cape. We put our equipment and our crews at considerable risk in the adverse conditions existing at the time. Unlike the professional response contractors who responded to the scene, this was not a commercial venture for us. In fact, we gave up a certain number of jobs the vessels would otherwise have been involved in. This extra effort contributed to bringing the continuing threat of pollution to a relatively quick conclusion.

In addition, we had several of our employees working around the clock in the incident command center to coordinate these efforts. We could just have easily used outside contractors for the entire response. But I'm not sure it would have gone off as smoothly as it did without the extra push from us.

I feel that we received little or no consideration for the efforts above and beyond in the criminal process. We were the responsible party not because we wanted to be, but because an accident occurred on one of our vessels.

The entire event was taxing both physically and emotionally not only for me but for all our employees involved in the response. Knowing now what I did not know then, gives me pause as to whether I would subject any of us to the conditions we suffered to give that extra effort. ML

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