The Oil Spill Liability Trust Fund (OSLTF) was originally established under Section 9509 of the Internal Revenue Code of 1986. It was one of several similar Federal trust funds funded by various levies set up to provide for the costs of water pollution. The Oil Pollution Act of 1990 (OPA) generally consolidated the liability and compensation schemes of these prior Federal oil pollution laws and authorized the use of the OSLTF, which consolidated the funds supporting those regimes. Those prior laws included the Federal Water Pollution Control Act; Trans-Alaska Pipeline Authorization Act; Deepwater Port Act; and Outer Continental Shelf Lands Act. The OSLTF can provide up to $1 billion per incident for uncompensated cleanup costs and can compensate oil-spill victims when liability limits have been reached or if the spiller and an injured party cannot reach an agreement on a settlement. The OSLTF receives funds from four primary sources: (1) an oil tax (five cents a barrel on domestically produced or imported oil collected from the oil industry; this is suspended when the fund reaches $1 billion but may be reinstated if the fund falls below this amount); (2) interest on fund principal; (3) cost recovery from responsible parties (The parties responsible for oil spills are liable for costs and damages. All monies recovered go either back to replenish the Fund or to the U.S. Treasury); and (4) penalties (to include civil penalties assessed to the responsible parties).

The OPA allows for claims for uncompensated removal costs consistent with the NCP and damages resulting from an oil pollution incident to include the following: uncompensated removal costs; natural resource damages; real or personal property damages; loss of subsistence use of natural resources; net loss of government revenues; loss of profits or impairment of earning capacity; and net costs of providing increased or additional public services.

To better address funding needs, the OSLTF has been subdivided into an Emergency Fund and a Main Fund. The Emergency Fund ensures rapid and effective response to oil spills without requiring further Congressional appropriations. Through this portion of the OSLTF, up to $50,000,000 is provided each year to fund removal activities and to initiate natural resource damage assessments. Money available in the Emergency Fund also includes a carryover from prior years. This portion of the OSLTF (the Emergency Fund) may be used for the following removal actions and costs/services:

Removal Actions
- containing and removing oil from water and shorelines;
- preventing or minimizing oil pollution where there is a substantial threat of discharge; and
- taking other actions related to minimizing the damage to public health and welfare.

Removal Costs/Services
- contract services (e.g., cleanup contractors and administrative support to document removal actions);
- salaries for government personnel not normally available for oil-spill responses and for temporary government employees hired for the duration of the spill response;
- equipment used in removals;
- chemical testing required to identify the type and source of oil; and
- proper disposal of recovered oil and oily debris.

The Main Fund (exclusive of the Emergency Fund) can be used to pay claims without further appropriation and may be used for other actions when Congress appropriates the funds. Such additional actions may include Federal administrative, operational, and personnel costs; natural resource damage assessments and restoration; and research and development.
On February 20, 1991, the National Pollution Funds Center (NPFC) was commissioned to serve as fiduciary agent for the OSLTF. Since the Federal On-Scene Coordinators need funds immediately to respond directly to a spill or to monitor responsible parties' actions, the NPFC established a system to provide funds 24-hours a day. In addition to dispersing funds for removal actions, the NPFC also administers the OSLTF by monitoring the use of funds, by processing third-party claims submitted to the OSLTF, and by pursuing cost recovery from responsible parties for removal costs and damages paid by the OSLTF. Generally the owner or operator of the vessel or facility that is the source of a discharge or substantial threat of a discharge will be liable for removal costs and damages resulting from an oil-spill incident. Therefore, claimants must first seek reimbursement from the responsible party or guarantor. If a claimant is dissatisfied with the actions of the responsible party/guarantor with respect to the claim, the claimant may elect to litigate against the responsible party or submit the claim to the OSLTF. Claims against the OSLTF for removal costs must be submitted within 6 years after the date of completion of all removal actions for the incident. Claims for damages must be made within 3 years after the date on which the injury and its connection with the incident were reasonably discoverable; or in the case of natural resource damages under Section 1002(b)(2)(A) of OPA (33 U.S.C. 2702(b)(2)(A)), the same timeframe as above or within 3 years from the date of completion of the natural resource damage assessment, whichever is later. The controlling legal authority for OSLTF claims can be found in OPA (33 U.S.C. 2701 et seq.) and that statute's implementing regulations at 33 CFR 136.