5

Conclusions and Recommendations

This report was requested by Congress out of concern that ongoing and projected growth in liquefied gas exports will stress the U.S. Coast Guard’s ability to efficiently and effectively verify the safety compliance of the foreign tank ships that load these shipments for transportation overseas. All foreign commercial vessels that call on U.S. ports are subject to periodic Port State Control (PSC) examinations conducted by Coast Guard marine inspectors. Tank ships that transport liquefied gas, including liquefied natural gas (LNG) and liquefied petroleum gas (LPG), are required to undergo PSC exams satisfactorily every year as part of the statutorily required Certificate of Compliance (COC) program.

COC exams are conducted by Coast Guard marine inspectors with specialized qualifications for liquefied gas carriers (LGCs) and include checks of gas cargo containment and safety systems in addition to the other assessments and verifications typically completed during a PSC exam. An LGC that passes the exam is granted a COC that is valid for 2 years, but it must also undergo another exam 1 year (with a 90-day grace period) into the 2-year term to maintain the certificate’s validity. This intermediate exam must also be led by a gas-qualified Coast Guard inspector. Because all LGCs must have a valid COC to engage in cargo operations, vessels that are within the time window (plus or minus 90 days) of the mandated annual exam will want to schedule the exam before taking on cargo in order to maintain the certificate’s validity for return visits.

As liquefied gas exports from U.S. ports have grown, Coast Guard marine inspectors can be pressed to conduct the exams right after foreign LGCs arrive from overseas and in advance of their assigned times for cargo

operations. Gas exporters are concerned that growing arrivals of LGCs will outpace the ability of the Coast Guard’s limited force of gas-qualified inspectors to conduct the required exams in a timely manner, complicating the scheduling of exams and risking disruptions to vessel and terminal operations.

In asking for this study, Congress proposed several options for reforming the COC program and its implementation. Each option was to be assessed for likely impacts on the program’s continued efficiency and effectiveness for safety assurance. Before turning to its review of the proposed options, the committee examined liquefied gas export trends and LGC traffic forecasts, the Coast Guard’s methods for implementing the COC program, and the reasons why an efficient implementation can be critical to the smooth functioning of gas export operations. In addition, the committee sought to understand how the COC program fits within the broader Coast Guard, international, and industry regimes for assessing and verifying the safe condition and operations of foreign cargo vessels generally and LGCs in particular.

Informed by these reviews, the committee concluded that reforms to the COC program as it applies to LGCs are indeed needed, including reforms that will have early positive effects on program efficiency given the fast pace of growth in gas exports. The committee likewise concluded that reforms should be possible without jeopardizing the program’s effectiveness for safety assurance. These conclusions and the committee’s reasoning are presented next. This is followed by a summary of the study findings about the set of reform options in the study’s Statement of Task. In the committee’s view, with the possible exception of the introduction of risk-informed processes, none of these proposed options would have sufficient impact on COC program implementation efficiency to be the centerpiece of a program reform. The committee’s recommendations, which are provided at the end of this chapter, propose reforms that will allow the Coast Guard to implement the COC program in a more efficient manner informed by risk assessments that should also bolster the program’s safety assurance role.

PRESSING NEED FOR REFORMS TO MAINTAIN EFFICIENT IMPLEMENTATION

Conclusion: Certificate of Compliance program reforms are needed that will have large, early impacts on the Coast Guard’s ability to implement the program efficiently.

Reasoning:

Escalating growth in liquefied gas exports and LGC arrivals is likely to increase substantially the demand for gas carrier COC exams over the next 5–10 years and longer.

• Liquefied gas exports are forecasted to grow by more than 53% for LNG and 35% for LPG over the next 5 years. Within a decade, exports are forecasted to grow 65% for LNG and 55% for LPG.
• Accordingly, arrivals of foreign LGCs are expected to grow by more than 30% over the next 5 years and 44% over the next decade. Considered over a longer period, almost twice as many LGCs will be visiting U.S. ports in 2035 than in 2020.
• If roughly one in seven arriving LGCs require COC exams, as is now the case, the number of exams that will need to be scheduled and conducted will grow from fewer than 650 in 2023 to more than 1,000 by 2035.

The chronic shortage of marine inspectors, including inspectors trained for LGCs, looms large as a challenge for the Coast Guard in keeping pace with the fast-increasing demand for gas carrier exams.

• The Coast Guard’s marine inspection workforce of about 808 inspectors is short-staffed by 273 inspectors and has been short-staffed for many years.
• Because the Coast Guard’s marine inspectors inspect and examine almost 9,000 vessels per year (as of 2022), opportunities to prioritize gas carrier exams as demand increases are likely to be limited.
• Not all of the nearly 170 gas-qualified inspectors are located in close proximity to ports with high LGC traffic because of the Coast Guard’s need to have some gas expertise in ports with periodic LGC arrivals, emphasis on rotational assignments for career progression, and expectations that active-duty personnel perform a range of duties.

The requirement for all LGCs to undergo an annual exam to maintain COC validity, coupled with restrictions on cargo operations, adds to the scheduling demands on Coast Guard inspectors already facing growing requests for exams.

• Unlike other PSC exams, COC exams must be conducted on an annual basis, increasing the demand for scheduled exams by arriving LGCs that are intent on ensuring that their certificates do not become invalid before they return for future visits.

• With concerns about a docked vessel’s COC exam being delayed or uncovering deficiencies that are difficult to rectify, terminal operators can be reluctant to allow LGCs to access loading berths in advance of completing the exam. This adds further to demands on the Coast Guard to conduct exams at irregular times and inconvenient offshore locations for LGCs on tight schedules.

IMPERATIVE FOR REFORMS THAT MAINTAIN THE CERTIFICATE OF COMPLIANCE’S SAFETY ROLE

Conclusion: Changes to Certificate of Compliance program requirements, including exam frequencies, should be possible while preserving the program’s safety assurance role.

Reasoning:

A comprehensive, international, and collaborative regime for assuring LGC safety through standards and codes, inspections and certifications, quality vetting and monitoring, and cooperative enforcement has emerged and matured since the advent of the COC program.

• As justification for establishing the COC program during the 1970s, Congress pointed to international standards for tank ships that were incomplete and inconsistently enforced by flag states, creating safety and environmental risks from substandard foreign vessels operating in U.S. waters.
• Since that time, many significant international standards applicable to LGCs have been introduced and regularly updated under the International Convention for the Safety of Life at Sea (SOLAS), including the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk and the International Safety Management (ISM) Code that applies to all merchant vessels in international service.
• The Coast Guard’s quality assurance program, Quality Shipping for the 21st Century (QUALSHIP 21), was created in 2001 to reward and recognize high-quality foreign-flag vessel management and maintenance and incentivize ship managers by making enrolled vessels eligible for less frequent PSC inspections. Nearly 600 enrolled LGCs currently qualify for the QUALSHIP 21 Initiative.
• Port states responsible for the enforcement of international standards have established (through memoranda of understanding) cooperative means for sharing their PSC exam results through regional and international databases of vessel exam performance.

• Confronting its liability, regulatory, and legal risks, the tank vessel industry and its cargo owner and facility customers have collaborated to introduce methods to enhance the safety and environmental performance of their operations. These consist of guidance documents, assessment tools, and inspection and vetting initiatives such as the Ship Inspection Report program, Offshore Vessel Inspection Database, Tanker Management and Self-Assessment program, and Condition Assessment Program.

Unlike the COC’s 2-year validity term and required annual exam, other domestic and international programs for vessel certification have settled on a 5-year term, while the Coast Guard determines when PSC exams should be conducted based on vessel risk indicators.

• Major international cargo vessel safety certificates, including SOLAS and International Convention on Load Line certificates, are on 5-year renewal cycles.
• Directed by Congress to align the durations of Certificates of Inspection (COIs) that apply to U.S.-flag vessels with the durations of international certificates, the Coast Guard extended the COI to 5 years more than two decades ago.
• To prioritize PSC examinations and boardings, the Coast Guard screens foreign vessels prior to arrival by using risk-informed tools to identify vessels that pose higher chances of being substandard and/or pose security risks. Examination frequency corresponds to a vessel’s risk profile rather than a fixed-period interval.

MERITS OF PROPOSED REFORMS TO THE CERTIFICATE OF COMPLIANCE PROGRAM

Taken together, the report’s conclusions and the supporting findings summarized above suggest that any candidate COC program reforms should be evaluated with the following considerations in mind:

• Reforms will need to have near-term (2 to 4 years) positive impacts on the Coast Guard’s ability to maintain the program’s efficient implementation while preserving its effectiveness for safety assurance, and these impacts will need to grow over time to keep pace with escalating LGC traffic.
• Reforms to the marine inspection workforce and its management will need to account for the full array of demands on the workforce and cannot not be at odds with the Coast Guard’s overarching interest in ensuring that personnel develop the knowledge,

• competencies, and leadership skills required for fulfillment of the Service’s multi-mission responsibilities.
• Reforms focused on changing the frequency of COC exams need to account for the program’s requirements for annual exams and not simply the interval between renewal exams.

Box 5-1 summarizes the findings from Chapter 4’s review of the advantages and challenges of the seven reform options proposed in the Statement of Task. Most of the options fall short with respect to these critical considerations. Specifically with regard to those options that focus on the marine inspection workforce, the anticipated high levels of gas exports will almost certainly mean that the Coast Guard will need to explore many workforce-related options to boost the capacity of its gas-qualified marine inspectors to conduct LGC exams. However, workforce options that can be implemented practically in the near term hold the potential for modest capacity gains that are too small to meet the escalating demand for COC exams.

With regard to proposed options that would make COC program requirements more risk-informed, the committee supports this general approach to reform, agreeing that a greater concentration of the workload of gas-qualified inspectors on gas carriers posing the highest risks has the potential to preserve both the efficiency and safety assurance role of the COC program. The introduction of such reforms, however, will require actions by Congress that give the Coast Guard more latitude to determine when

to conduct exams and the resources needed to support determinations that are sound and informed by assessments of risk.

COMMITTEE’S REFORM PROPOSAL

On the basis of the conclusions and supporting findings summarized above, the committee believes that reforms to the COC program are needed and should be introduced for the purpose of having early and lasting positive impacts on the program’s implementation efficiency and safety assurance role. In the committee’s view, the following recommended actions will further these aims.

Recommendation 1: To promote the efficient implementation of the Certificate of Compliance (COC) examination program, while preserving and striving to enhance its effectiveness for safety assurance, Congress should modify the program’s statutory requirements for liquefied gas carriers (LGCs) by

• ending the requirement that all LGCs must undergo an annual exam to maintain the validity of the COC;
• authorizing the Coast Guard to use indicators of risk, including but not limited to a vessel’s enrollment in a quality assurance program, to determine the frequency and scope of Port State Control exams for each LGC as it calls on U.S. ports during the COC term; and
• extending the COC’s validity term to 5 years in alignment with the duration of major international certificates and the duration of the U.S. Certificate of Inspection that applies to domestic vessels, including domestic tank ships.

Recommendation 2: The Coast Guard, with direction and sufficient resources from Congress as needed, should work to enhance its current Port State Control (PSC) risk assessment and vetting capabilities to support determinations about the appropriate scope and frequency of exams for individual gas carriers that require Certificates of Compliance. The enhancements should incorporate the databases used for PSC functions and leverage other sources of information from the Coast Guard, the International Maritime Organization, industry ship vetting programs, other flag states, and PSC regional regimes such as

• Quality Shipping for the 21st Century Initiative enrollment data;
• records of vessel compliance during COC and PSC exams (e.g., data from the Coast Guard’s Marine Information for Safety and Law Enforcement);

• records of vessel compliance during foreign PSC exams (e.g., from regional and global databases such as the Paris and Tokyo memoranda of understanding and the Electronic Quality Shipping Information System);
• reports of vessel incidents and casualties worldwide (e.g., the International Maritime Organization’s Global Integrated Shipping Information System);
• industry vessel inspection reports and vetting programs (e.g., class survey data, Ship Inspection Report program, Tanker Management and Self-Assessment program, and Condition Assessment Program);
• vessel repair and maintenance histories; and
• vessel particulars, including age, type, design, and equipage.

Recommendation 3: The Coast Guard should enlist the unique capabilities and technical expertise of the Liquefied Gas Carrier National Center of Expertise (LGC NCOE) to monitor the risk and safety performance of the U.S.-trading LGC fleet continuously to inform modifications to the Coast Guard’s LGC risk assessment methods for vetting individual vessels and determining examination scope and frequency. To establish and sustain an LGC risk assessment program that is supported by the LGC NCOE, the Coast Guard likely will need to augment the center’s staff, analytic tools, competencies, and data capabilities with sufficient resourcing from Congress.

CONCLUDING COMMENTS

The introduction of a risk-informed approach for guiding the frequency and scope of COC exams for gas carriers could be viewed as an initial step in the Coast Guard’s leveraging of state-of-practice methods for probabilistic risk assessment for its vessel safety assurance programs. In the case of LGCs, the Coast Guard has the advantage of a National Center of Expertise that is already in place to play a key supportive role. The committee’s confidence in its recommendations is bolstered by knowing that the Coast Guard can tap the specialized expertise of the LGC NCOE.

This study’s charge is focused on the COC exam for LGCs, even though other types of tank ships (e.g., chemical and oil tankers) are subject to the requirements of the COC program. The committee believes that any reforms to the COC program for LGCs should not be delayed while deciding on the treatment of other tank ships.

Finally, while concluding that reforms focused on the marine inspection workforce do not have significant potential to boost COC implementation efficiency in the near term (2 to 4 years) to medium term (5 to 9 years),

the committee believes that efforts to enlarge or supplement the workforce will be necessary over the longer term (10 or more years) in part because of the growth in LGC traffic. Conducting COC exams is a small part of the Coast Guard’s overall marine inspection responsibility. Advice on meeting this broader marine inspector workforce imperative, however, is beyond the scope of this study.