BP Plc will bear the costs associated with an oil spill in the Gulf of Mexico that the Obama administration has declared an event of “national significance.” BP is ultimately responsible for funding the cost of response and cleanup operations as required under the 1990 Oil Pollution Act, drafted after the Exxon Valdez incident.
The Oil Pollution Act (101 H.R.1465, P.L. 101-380) was passed by the United States Congress to prevent further oil spills from occurring in the United States. It was written and passed into law after the 1989 Exxon Valdez oil spill.
The law stated that companies must have a “plan to prevent spills that may occur” and have a “detailed containment and cleanup plan” for oil spills. The law also includes a clause that prohibits any vessel that, after March 22, 1989, has caused an oil spill of more than one million U.S. gallons (3,800 m³) in any marine area, from operating in Prince William Sound.
The bill enjoyed widespread support, passing the House 375-5 and the Senate by voice vote before conference, and unanimously in both chambers after conference.
In April 1998, Exxon argued in a legal action against the federal government that the Exxon Valdez should be allowed back into Alaskan waters. Exxon claimed the OPA was effectively a bill of attainder, a regulation that was unfairly directed at Exxon alone. In 2002, the 9th Circuit Court of Appeals ruled against Exxon. As of 2002, OPA had prevented 18 ships from entering Prince William Sound.
The Oil Pollution Act (OPA) was signed into law in August 1990, largely in response to rising public concern following the Exxon Valdez incident. The OPA improved the nation’s ability to prevent and respond to oil spills by establishing provisions that expand the federal government’s ability, and provide the money and resources necessary, to respond to oil spills. The OPA also created the national Oil Spill Liability Trust Fund, which is available to provide up to one billion dollars per spill incident.
In addition, the OPA provided new requirements for contingency planning both by government and industry. The National Oil and Hazardous Substances Pollution Contingency Plan (NCP) has been expanded in a three-tiered approach: the Federal government is required to direct all public and private response efforts for certain types of spill events; Area Committees — composed of federal, state, and local government officials — must develop detailed, location-specific Area Contingency Plans; and owners or operators of vessels and certain facilities that pose a serious threat to the environment must prepare their own Facility Response Plans.
Finally, the OPA increased penalties for regulatory noncompliance, broadened the response and enforcement authorities of the Federal government, and preserved State authority to establish law governing oil spill prevention and response.
Key Provisions of the Oil Pollution Act
§1002(a) Provides that the responsible party for a vessel or facility from which oil is discharged, or which poses a substantial threat of a discharge, is liable for: (1) certain specified damages resulting from the discharged oil; and (2) removal costs incurred in a manner consistent with the National Contingency Plan (NCP).
§1002(c) Exceptions to the Clean Water Act (CWA) liability provisions include: (1) discharges of oil authorized by a permit under Federal, State, or local law; (2) discharges of oil from a public vessel; or (3) discharges of oil from onshore facilities covered by the liability provisions of the Trans-Alaska Pipeline Authorization Act.
§1002(d) Provides that if a responsible party can establish that the removal costs and damages resulting from an incident were caused solely by an act or omission by a third party, the third party will be held liable for such costs and damages.
§1004 The liability for tank vessels larger than 3,000 gross tons is increased to $1,200 per gross ton or $10 million, whichever is greater. Responsible parties at onshore facilities and deepwater ports are liable for up to $350 millon per spill; holders of leases or permits for offshore facilities, except deepwater ports, are liable for up to $75 million per spill, plus removal costs. The Federal government has the authority to adjust, by regulation, the $350 million liability limit established for onshore facilities.
§1016 Offshore facilities are required to maintain evidence of financial responsibility of $150 million and vessels and deepwater ports must provide evidence of financial responsibility up to the maximum applicable liability amount. Claims for removal costs and damages may be asserted directly against the guarantor providing evidence of financial responsibility.
§1018(a) The Clean Water Act does not preempt State Law. States may impose additional liability (including unlimited liability), funding mechanisms, requirements for removal actions, and fines and penalties for responsible parties.
§1019 States have the authority to enforce, on the navigable waters of the State, OPA requirements for evidence of financial responsibility. States are also given access to Federal funds (up to $250,000 per incident) for immediate removal, mitigation, or prevention of a discharge, and may be reimbursed by the Trust fund for removal and monitoring costs incurred during oil spill response and cleanup efforts that are consistent with the National Contingency Plan (NCP).
§4202 Strengthens planning and prevention activities by: (1) providing for the establishment of spill contingency plans for all areas of the U.S. (2) mandating the development of response plans for individual tank vessels and certain facilities for responding to a worst case discharge or a substantial threat of such a discharge; and (3) providing requirements for spill removal equipment and periodic inspections.
§4301(a) and (c) The fine for failing to notify the appropriate Federal agency of a discharge is increased from a maximum of $10,000 to a maximum of $250,000 for an individual or $500,000 for an organization. The maximum prison term is also increased from one year to five years. The penalties for violations have a maximum of $250,000 and 15 years in prison.
§4301(b) Civil penalties are authorized at $25,000 for each day of violation or $1,000 per barrel of oil discharged. Failure to comply with a Federal removal order can result in civil penalties of up to $25,000 for each day of violation.
§9001(a) Amends the Internal Revenue Act of 1986 to consolidate funds established under other statutes and to increase permitted levels of expenditures. Penalties and funds established under several laws are consolidated, and the Trust Fund borrowing limit is increased from $500 million to $1 billion.
Sixteen federal agencies have been mobilized to respond to the spill. The leak, caused by an explosion on a drilling rig last week, is spewing about 5,000 barrels of crude oil a day, five times more than previously estimated. The effort to combat the leak and skim crude from the sea is costing BP and its partners in the well $6 million a day. An Oil Spill Liability Trust Fund, established after the Exxon Valdez crash, could also help cover the spill’s costs. The fund, which garners 8 cents from the industry for every barrel of oil produced or imported, has about $1.6 billion for covering damages to coastal residents and businesses.
BP. It’s the well’s leaseholder and operator, and its shares were down more than 10 percent by midday Friday, from where they stood at the start of last week. The company has lost more than $20 billion in market value since April 20 – a hit that reflects public-relations damage to the firm as well as cleanup costs and other legal damages investors expect it will pay.
Transocean. This is the owner of the Deepwater Horizon rig that BP was using. Transocean shares have fallen 15 percent in the same period.
Halliburton and Cameron International. These two firms are other contractors that did work on the rig. Their share prices have also fallen, but not as sharply as BP’s or Transocean’s. Cameron made the “blowout preventer” that was supposed to seal off the well in an accident.
For all these firms, the biggest one-day drop occurred Thursday, as the magnitude of the environmental impacts became clearer. The stocks all regained a bit of ground by Friday morning, as industry analysts argued that Thursday’s plunge had overplayed the financial and legal costs facing the firms.
Obama sent the secretaries of interior and homeland security and the head of the Environmental Protection Agency to go to the region to oversee the effort to contain and clean up the spill and “determine it’s cause. As you know, Obama doesn’t have the time to address an oil spill larger then the Exxon Valdez.
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