Presented by: James Kovanda Vice President American Chemical Technologies, Inc.

1. New US EPA Regulations:Environmentally Acceptable Lubricants Proposed Vessel General Permit - VGPProposed Small Vessel General Permit – sVGP Presented by: James Kovanda Vice President American Chemical Technologies, Inc.

2. MarineLink.com • House Addresses Great Lakes Dredging Crisis • Great Lakes Maritime Task Force - Monday, April 23, 2012 • The end of the Great Lakes dredging crisis took a step closer to reality last week when the U.S. House of Representatives passed H.R. 4348 and included a provision that could lead to substantially increased Great Lakes dredging funding. The amendment directs that all funding collected in the Harbor Maintenance Trust Fund be spent on dredging each year.

3. A move towards alternative lubricants-WHY? Deepwater Horizon - catastrophe The National Oceanic and Atmospheric Administration (NOAA) estimates that more than 700 million gallons of petroleum enter the environment each year, more than half of which is through irresponsible and illegal disposal. Oil leakage from stern tubes (let alone CPP’s and propulsion systems in general), once considered a part of normal “operational consumption” of oil, has become an issue of concern and is now considered as oil pollution.

4. Spills/Discharges – Some Facts • A 2010 study estimated that of 4,708 ports/harbors worldwide, stern tube leakage amount to 1.2 to 7.5 M gallons per year – from 1.7M port visits (Etkin, 2010) • In addition, 8.5M leaked of oil from other operational discharges • Total – 9.7 to 16.1 Million Gallons into Marine Port Waters Annually • – the equivalent of about one and a half Exxon Valdez-sized spills

5. US EPA – White Paper • EPA contracted an independent lab to conduct a battery of tests with the purpose of drafting a White Paper - Draft • The purpose of this document was to describe the range of environmentally preferable lubricants that may be used as a best management practice (BMP) by operators of vessels covered under the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels (VGP / sVGP) • The document defines what they are calling “Environmentally Acceptable Lubricants” – EAL’s • Differentiating them from “Environmentally Friendly Lubricants” • White Oils now fit into the EFL category

6. US EPA -“Environmentally Acceptable Lubricants” Goal: Provide Reduced Environmental Impact Compared to Conventional Lubricants – 3 Categories Tested Biodegradation Process of chemical breakdown of oil caused by organisms or their enzymes into carbon dioxide and water (Aquatic) Toxicity Concentration in ppm or milligrams per liter that kills a given % of the species being tested Bioaccumulation The build-up of chemicals within the tissues of an organism over time.

7. US EPA –White Paper Test Protocol “Readily” Biodegradable “> 60 % biodegraded on OECD 301 A-F” “Low (Aquatic) Toxicity” OECD 201 – 212 Food chain - Algae / Daphnia / Fish “Non-Bioaccumulative” OECD 107 & 117 Partition Coefficients of Log Kow < 3.0

8. White Paper - Conclusions • Because the majority of a lubricant is composed of the base oil, (3) types that are biodegradable were identified as EAL’s: • Vegetable Oil • Synthetic Ester • Polyalkylene Glycol (PAG)

9. Vegetable Oil PRO’s CON’s Poor Performance at both low and high Temperature Poor Oxidation Stability Hydrolytically Unstable Reacts with water Produces Acid as byproduct Unsaturated molecule Reacts with catalysts to form sludge/varnish as decomposition products Short Life Cycle 12-18 months Produce Sheen • Least Costly EAL • Renewable Content • Compatible with Petroleum base oils • Good Lubricity • High Flash Point • Some are FM Approved

10. Synthetic Ester PRO’s CON’s Highest Price EAL Hydrolytically Unstable Reacts with Water Paint Compatibility Seal Compatibility Produce Sheen • High Viscosity Index • Good Oxidation Stability • Good Lubricity • Compatible with Petroleum base oil • Long Life Cycle

11. Polyalkylene Glycol - PAG PRO’s CON’s Paint Compatibility Seal Compatibility 3-4 times price of conventional petroleum oil • Best High/Low Temperature Properties • Inert to Water • Limits - 1.5% salt 2.5% fresh • Good Lubricity • Chemically incapable of producing varnish • Only Non-Sheening EAL • Heavier than water • Water Soluble • Non-bioaccumulative • Factory Mutual Approved

12. “Sheen” Performance Comparison - 40 CFR 435 Static Sheen Test • “Lastly, any discharge of oil, including oily materials, from any of these oil-to-sea interfaces may not result in a discharge that may be harmful as defined by 40 CFR Part 110 or result in the production of a visible sheen”. • - Proposed 2013 VGP Fact Sheet, Page 136

13. VGP – Language Pertaining to EAL’s • VGP - Vessels 80’ and longer • 2.2.9 Controllable Pitch Propeller and Thruster Hydraulic Fluid and Other Oil-to-Sea Interfaces Including Lubrication Discharges from Paddle Wheel Propulsion, Stern Tubes, Thruster Bearings, Stabilizers, Rudder Bearings, Azimuth Thrusters, Propulsion Pod Lubrication, and Wire Rope and Mechanical Equipment Subject to Immersion • All vessels…… must use an environmentally acceptable lubricant in all oil-to-sea interfaces. “Environmentally acceptable lubricants” means lubricants that are “biodegradable” and “non-toxic” and are not “bioaccumulative” as defined in Appendix A of this permit. • Page 43

14. sVGP – Language Pertaining to EAL’s • Vessels 79’ and shorter • 2.3 ENGINE AND OIL CONTROL • (h) Unless technically infeasible, you must use environmentally acceptable lubricants (as defined in Part 6 of this permit) in all machinery and equipment, including but not limited to stern tubes, wires, and two-stroke engines, where discharges of oil to surrounding waters are likely to occur. • Page 4

15. Applications that put Vessel Operators at risk in the event of leaks • A “vessel is its own containment” • Applications that pose risk • Propulsion Systems • CPP’s, Thrusters, etc. • Deck Machinery • Hydraulically operated • Cranes • Winches • Hatches • Dredges

16. Seal Testing – USACE Wheeler Dredge - CPP Industry standard is change in volume and change in hardness at 1000 hours of less than +/- 12% when exposed to fluids that are ≤ ISO viscosity grade 46 and +/- 10% when exposed to fluids that are ISO viscosity grade > 46. DUROMETER ASTM D 2240-05(10): Shore A Durometer Point 86 Confidence (+/-) 1 FLUID IMMERSION PROPERTIES, ASTM D 471-10 Elastomers immersed @ 65ºC in UCON™ Trident™ AW-68 lot 31095.

17. Time Frames – VGP/sVGP • “All Vessels constructed on or after December 19, 2013 must use an environmentally acceptable lubricant (EAL) in all oil-to-sea interfaces”. • “For all vessels built before December 19, 2013, unless technically infeasible, owner/operators must use an EAL in all oil-to sea interfaces”. • “Technically Infeasible” • Equipment must be “retrofitted” to accept EAL • If EAL significantly degrades performance • NOTE: If deemed Technically Infeasible, owner/operator must document why they cannot use EAL, and must note the use of a non-EAL in the vessel’s Annual Report. • Note: Dispersants, detergents, emulsifiers, chemicals or other substances that remove the appearance of a visible sheen may not be added to the bilge. • sVGP – Section 2.3 ENGINE OIL CONTROL, (j)

18. Do EAL’s Provide Vessel Operators Value? • Do EAL’s = Net Expense? • If selected properly, EAL’s will drive value • Yielding Long Life and Extended Drain Intervals • Lasting up to 4-5 times longer than conventional oil • Added Bonus – In the event of a leak into a sensitive waterway: • EPA and US Coast Guard should be satisfied with your conscious use of EAL lubricants • If PAG is in use, there will be no sheen, and no need for remediation

19. THANK YOU