From New Rules & Decisions week of November 26, 2012.
Notice of proposed rule making.
Recent LNG & LHG Risk Management from Two Directions
DIRECTION #1: Risk management of LNG and LHG water transport by various public agencies:
By this week’s final rule reported in “New Rules & Decisions” the U.S. Coast Guard places new burdens on owners and operators of waterfront facilities that handle LNG or LHG. They have to disclose specified information about their future intent to the Captain of the Port at which they operate. The Captain of the Port uses this to issue a letter of recommendation to federal, state and local agencies “having jurisdiction for siting, construction, and operation of the facility” to be involved in transport of LNG or LHG at or near the port.
Here the onus is on government to manage the risk. The private entity simply provides information.
DIRECTION #2: Risk management of LNG and LHG water transport by private firms:
Private firms face liability for harm from LNG or LHG accidents. That liability is exacerbated by a 150-year-old law called the “Limitation of Vessel Owner’s Liability Act. 46 U.S.C. §§ 181 et seq.
As Monica Hwang, Esq. of King & Spaulding LLP explains:
“This statute limits a vessel owner’s liability in a marine event to the value of his vessel and cargo determined upon termination of the voyage on which the casualty occurred. Thus, the extent of the vessel owner’s liability depends on the extent of the damage suffered. In a truly disastrous situation, the Act can give rise to perverse outcomes. For instance, if a vessel and its cargo are totally destroyed in a situation that causes large damages to third parties, the vessel owner may be able to limit his liability to zero. On the other hand, if the vessel suffered minimal damage (i.e., the vessel and/or cargo still has significant value), the vessel owner’s liability would be significantly higher.”
Ms. Hwang’s write-up concisely outlines the drafting and implementation considerations relating to these agreements. Her observations provide a helpful introduction to the risk management issues facing both terminal owners and operators – and the vessel owners and other third parties who may be liable for harms caused by LNG or LHG accidents.