Background
Saving the Oil Spill Liability Trust Fund (OSLTF), as Senator Steven's bill will do, is an important Alaska issue for several reasons. First, the OSLTF, which was born from the Exxon Valdez spill and is now resurrected by the Selendang spill, is the nation's main fiscal mechanism of dealing with any / all oil spills. Thus, once again, an Alaska tragedy is fixing the nation's problems. As well, it is where $ for the Denali Commission and the Oil Spill Recovery Institute (Cordova) comes from - thus, extremely important to Alaska. Raising the cap on the OSLTF to from $2 billion - $3 billion (from its old cap of $1 billion) is an absolutely essential step in providing adequate fund to deal with spills and other expenses, the costs of which are growing rapidly.
The Oil Pollution Act of 1990 (OPA 90) -- a response to Exxon Valdez - established the Oil Spill Liability Trust Fund (OSLTF) which is the principal federal fund to address oil spill issues throughout the nation. [The OPA 90 also set new requirements for double hull tankers, crew licensing and manning, spill contingency planning, broadened enforcement authority, increased liability and penalties, and created new oil spill research and development programs.]
The OSLTF is managed by the National Pollution Funds Center at U.S. Coast Guard headquarters in Washington, DC. The Fund is derived primarily from a 5 cent / barrel fee on oil produced or imported into the U.S., and capped at $1 billion (USD). As the Fund is used and its balance falls below the $1 billion cap, it was structured to trigger to collection of the 5 cent / barrel fee until the cap is reached once again. In this manner, all oil producers and shippers share the cost of federal oversight, prevention, response, damage assessment, and restoration from oil spills, above those not covered by the Responsible Party. The OSLTF pays for any and all costs associated with oil spills above and beyond those from the spiller as they meet their liability limit. The idea is that when we have a large spill to deal with, the last thing we need to be doing is arguing about who will pay what. The OSLTF will pay for costs, and then seek reimbursement from the spiller later. In the Selendang Ayu, their OPA 90 liability limit (unless gross negligence can be demonstrated whereby they will not be entitled to limit their financial liability) is only about $25 million, and as the owner (IMC Shipping) has already paid some $50 million, they are already submitting claims to the OSLTF for reimbursement. If the OSLTF runs out of $, then the nation's spill liability structure will with certainty unravel, leading to great uncertainty and even 'commercial chaos.'
Uses of the OSLTF include:
- Oil spill removal (cleanup) costs incurred by the U.S. government (e.g. cleanup contractors, equipment, chemical testing, disposal of oiled debris, personnel costs, etc.)
- To conduct Natural Resource Damage Assessments (NRDAs) and Restoration (pre-assessments, data collection, assess damage, identify feasible restoration measures, etc.)
- Payment of claims for uncompensated removal costs and damages (anything from environmental damage, property damage, loss of profit, loss of government revenues, costs of increased public services, etc.). The Fund will pay for costs above and beyond a spiller's liability limit (as specified by OPA 90), or if a Responsible Party cannot be identified (e.g. "mystery spills"); and
- Administrative costs for implementing and enforcing OPA 90
There are five sources of revenue into the OSLTF:
- the 5 cent / barrel tax on all oil produced in or imported into the U.S. (OPA 90 mandated that the tax expire on December 31, 1994, and as the Fund is now projected to be empty by 2008, there is currently a broad-based effort in the U.S. Congress to turn the tax back on, and re-fill the Fund);
- transfers from other existing oil spill funds, thus consolidating federal spill funding (all such funds have now been transferred, and no more are expected);
- interest on the Fund principal;
- cost recoveries from Responsible Parties (spillers). Those responsible for spills are liable for costs and damages, up to limits imposed by OPA 90; and
- penalties paid for pollution events are deposited into the OSLTF. In this manner, there is always money available to the U.S. government to adequately respond to any oil spill in U.S. waters.
The Fund is projected to run dry by FY 2008 if the 5 cent / barrel tax, which Congress allowed to 'sunset' on Dec. 31, 1994, is not turned back on. Note: this 5 c/barrel is only 0.1% of the cost of a $50 barrel of oil, thus even if all this cost were passed on to the consumer, it would represent only about 0.2 cents / gallon of gasoline at today's prices.
The current effort in the U.S. Congress to reinstate the 5 cent / barrel tax has raised other issues that are in consideration as well - our Shipping Safety Partnership is recommending that a new cargo shipping account be established in the Fund to cover pollution risk from cargo vessels by assessing a nominal fee on all cargo shipped across U.S. ports; that spill liability limits established by OPA 90 be raised; and that the process for appropriating monies from the Fund be streamlined so that all necessary prevention and response assets can be purchased and positioned along all waterways. This last issue is critical - the Coast Guard needs to be able to use this Fund with greater effectiveness and ease, in buying and pre-positioning necessary prevention and response equipment around our coasts - rescue tugs, vessel tracking systems, aids to navigation, etc.
We see the replenishment of this Fund as a key first step to pre-staging effective spill prevention assets in the Aleutians and elsewhere along our nations seas and coasts. A good comparison is that in Prince William Sound, where we have one tanker a day transiting, we now have 10 large standby tugs to attend to it - very appropriately. In the Aleutians, where we have some 10 large vessels / day transiting on "innocent passage" between Asia and N. America, we have no adequate tugs on standby! This needs to be rectified, and the OSLTF should provide the $ necessary to buy and operate a couple of new rescue tugs along the Great Circle Route through Alaska waters.
Letter to Senator Stevens
Download the Letter to Senator Stevens responding to recent S.1222, and requesting additional language in OPA 90 amendments.
OSLTF in the News
June 11, 2005
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