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THE OIL POLLUTION ACT OF 1990
May 6, 2010

Posted by David Lungren David_Lungren@epw.senate.gov

EPW POLICY BRIEF: THE OIL POLLUTION ACT OF 1990

As emergency response efforts continue in the Gulf, EPW Policy Brief presents a new Gulf oil spill policy series to help interested parties understand the ins and outs of federal policies, regulations, and key issues that apply to the tragic Gulf spill.  

In our first installment, we provide an overview of the Oil Pollution Act (OPA) of 1990, passed in response to the Exxon-Valdez oil spill in 1989.  The OPA is the overarching federal statute that delineates the roles and functions of federal agencies involved in responding to a spill in coastal waters. 

We think the Congressional Research Service (CRS) provides an excellent overview of the OPA.  Released on April 30, the report, titled "Oil Spills in U.S. Coastal Waters: Background, Governance, and Issues for Congress," updates CRS's earlier work on the subject.   CRS provides the historical context behind the OPA to help readers understand why it was passed and delves into details of the act's key provisions and the evolution of the act's implementing regulations. 

What follows are excerpts from the report that highlight the essential features of the OPA and the provisions of the law that have the most relevance to the Gulf spill:

Background

"When the Exxon Valdez ran aground in March 1989, there were multiple federal statutes, state statutes, and international conventions that dealt with oil discharges. The governing framework for oil spills in the United States remains a combination of federal, state, and international authorities. Within this framework, several federal agencies have the authority to implement oil spill regulations. The framework and primary federal funding process (the Oil Spill Liability Trust Fund) used to respond to oil spills is described below."

"With the enactment of OPA on August 18, 1990, Congress consolidated the existing federal oil spill laws under one program. The 1990 law expanded the existing liability provisions within the CWA and created new free-standing requirements regarding oil spill prevention and response. Key OPA provisions are discussed below."

Oil Pollution Act of 1990

Spill Response Authority: "Oil spill response authority is determined by the location of the spill: the USCG has response authority in coastal waters, and the EPA covers inland oil spills.

 - "As the primary response authority in coastal waters, the USCG has the ultimate authority to ensure that an oil spill is effectively removed and actions are taken to prevent further discharge from the source. During response operations, the USCG coordinates the efforts of federal, state, and private parties.

 -  "Coast Guard response efforts are supported by NOAA's Office of Response and Restoration. NOAA provides scientific analysis and consultation during oil spill response activities. "Assistance can include oil spill tracking, cleanup alternatives, and knowledge of at-risk natural resources. Moreover, NOAA experts begin to collect data to assess natural resource damages during response operations."

National Contingency Plan: "OPA expanded the role and breadth of the NCP. The 1990 law established a multi-layered planning and response system to improve preparedness and response to spills in marine environments.  Among other things, the act also required the President to establish procedures and standards (as part of the NCP) for responding to worst-case oil spill scenarios."

Tank Vessel and Facility Response Plans: "As a component of the enhanced NCP, OPA amended the [Clean Water Act] to require that U.S. tank vessels, offshore facilities, and certain onshore facilities prepare and submit oil spill response plans to the relevant federal agency. In general, vessels and facilities are prohibited from handling, storing, or transporting oil if they do not have a plan approved by (or submitted to) the appropriate agency."

Liability Issues: "OPA unified the liability provisions of existing oil spill law, creating a freestanding liability regime. Section 1002 states that responsible parties are liable for any discharge of oil (or threat of discharge) from a vessel or facility to navigable waters, adjoining shorelines, or the exclusive economic zone of the United States (i.e., 200 miles beyond the shore)."

"OPA broadened the scope of damages (i.e., costs) for which an oil spiller would be liable. Under OPA, a responsible party is liable for all cleanup costs incurred, not only by a government entity, but also by a private party. In addition to cleanup costs, OPA significantly increased the range of liable damages to include the following:

 - injury to natural resources,

 - loss of personal property (and resultant economic losses),

 - loss of subsistence use of natural resources,

 - lost revenues resulting from destruction of property or natural resource injury,

 - lost profits resulting from property loss or natural resource injury, and

 - costs of providing extra public services during or after spill response.

"Mobile offshore drilling units (MODUs), like the Deepwater Horizon unit involved in the April 2010 incident in the Gulf of Mexico, are first treated as tank vessels for their liability caps. If removal and damage costs exceed this liability cap, a MODU is deemed to be an offshore facility for the excess amount.

"Offshore facility liability is capped at ‘all removal costs plus $75 million'; onshore facilities and deepwater port liability is limited to $350 million. Although these limits are much higher than under the pre-OPA liability structure, Congress did not alter the limits with the tank vessel increases."

The Oil Spill Liability Trust Fund: "Prior to OPA, federal funding for oil spill response was generally considered inadequate, and damage recovery was difficult for private parties. To help address these issues, Congress established the Oil Spill Liability Trust Fund (OSLTF).

Pursuant to Executive Order (EO) 12777, the USCG created the National Pollution Funds Center (NPFC) to manage the trust fund in 1991. The fund may be used for several purposes:

 - prompt payment of costs for responding to and removing oil spills;

 - payment of the costs incurred by the federal and state trustees of natural resources for assessing the injuries to natural resources caused by an oil spill, and developing and implementing the plans to restore or replace the injured natural resources;

 - payment of parties' claims for uncompensated removal costs, and for uncompensated damages (e.g., financial losses of fishermen, hotels, and beachfront businesses);

 - payment for the net loss of government revenue, and for increased public services by a state or its political subdivisions; and

 - payment of federal administrative and operational costs, including research and development, and $25 million per year for the Coast Guard's operating expenses.

"In 2005, Congress reinstated the 5-cent-per-barrel tax on oil, thus providing a dedicated source of revenue for the trust fund.  In 2006, Congress raised the vessel liability limits, thus requiring the responsible party to pay a greater proportion of the oil spill costs. In 2008, the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343) increased the tax rate to 8 cents per barrel through 2016; in 2017, the rate is scheduled to increase to 9 cents per barrel. The tax terminates at the end of 2017.

"In addition to increasing the tax rate, EESA repealed the requirement that the tax be suspended if the unobligated balance of the fund exceeded $2.7 billion. Under the original tax legislation (the Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239), the per-barrel tax would be suspended in any calendar quarter if the fund balance reached $1 billion, restarting again if it dipped below that number. With the Energy Policy Act of 2005 (P.L. 109-58), Congress raised this threshold from $1 billion to $2.7 billion.

"[T]he fund is currently projected to crest $3.5 billion by 2016. Policymakers may question whether it is necessary to have the trust fund reach this level. Others have suggested increasing the amount of trust fund monies that can be used to support oil spill research and development programs."

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