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Cleanup liability and funding
  • When an oil spill occurs, the EPA has the authority to require a responsible party to pay for the cleanup and to compensate for lost or damaged natural resources.

The Clean Water Act (CWA) liability provisions, as amended by the Oil Pollution Act (OPA), provide the Environmental Protection Agency (EPA) the authority to require a responsible party (RP) to pay for cleanup and compensate for lost or damaged natural resources. Since EPA has limited funding for the cleanup of oil, it is important that EPA receive compensation and recovery of funds they use when responding to oil discharge events.

OPA section 1002 specifically outlines the costs for which an RP can be held liable, including removal costs and the costs of other actions taken to mitigate damage to public health and welfare. Additionally, an RP can be held liable for damages such as real or personal property damages, the costs of assessing natural resource damages, loss of profits or earning capacity, and the net cost of additional public services provided during or after removal actions.

Similar to liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), OPA liability is judicially interpreted as both strict and joint and several. Strict liability is the assessment of legal responsibility without regard to fault or diligence. Joint and several liability means that any entity considered an RP can be held liable for the entire cleanup, regardless of his or her contribution to the discharge.

Financial responsibility

In preparation for an oil spill, section 2716 of the Oil Pollution Act (OPA) specifies financial responsibility requirements for offshore facilities. Financial responsibility is the ability to pay for cleanup or third-party liability compensation that results from an oil discharge. Financial responsibility ensures the timely completion of corrective action and third-party compensation and thus reduces the risk to human health and the environment posed by oil discharges. It also may provide an incentive for operating practices that can prevent leaks, overfills, and spills.

Under OPA, the owner or operator of a facility from which oil is discharged (responsible party) is liable for the costs associated with the:

  • Containment,
  • Cleanup, and
  • Damages resulting from the spill.

Oil Spill Liability Trust Fund

In the event of an oil discharge, EPA prefers to have RPs finance the cleanup of their own oil discharges. When the RP is unknown or refuses to pay, the Oil Spill Liability Trust Fund (the Fund) can cover removal costs and/or damages that are not recovered from that RP. The emergency response portion of the Fund is administered by the U.S. Coast Guard's National Pollution Funds Center (NPFC).

The Fund can provide up to $1 billion for any one oil pollution incident, including up to $500 million for the initiation of natural resource damage assessments and claims in connection with any single incident (Internal Revenue Code, as amended by the OPA; 26 USC 9509). OPA section 1012 delineates the allowable uses of the Fund, including:

  • Payment of costs assumed by states for removal actions conducted in a manner consistent with the National Contingency Plan (NCP);
  • Payments to federal, state and Native American tribe trustees to carry out natural resource damage assessments and restorations in a manner consistent with the NCP;
  • Payment of claims for uncompensated removal costs and damages; and
  • Research and development and other specific appropriations.

The primary source of revenue for the Fund was a five-cents-per-barrel tax on imported and domestic oil. This tax expired on December 31, 1994. Several new laws since then have reinstated the tax and/or raised the tax to eight cents per barrel, but these taxes have since expired also. Current revenue sources for the Fund include interest on the Fund, cost recovery from the parties responsible for discharges, and fines or civil penalties collected from RPs.