<DOC> [105 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:53119.wais] S. Hrg. 105-943 OVERSIGHT OF THE OIL SPILL LIABILITY TRUST FUND ======================================================================= HEARING BEFORE THE COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS UNITED STATES SENATE ONE HUNDRED FIFTH CONGRESS SECOND SESSION __________ DECEMBER 10, 1998--NARRAGANSETT, RHODE ISLAND __________ Printed for the use of the Committee on Environment and Public Works <snowflake> U.S. GOVERNMENT PRINTING OFFICE 53-119cc WASHINGTON : 1999 ------------------------------------------------------------------------------ For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS one hundred fifth congress JOHN H. CHAFEE, Rhode Island, Chairman JOHN W. WARNER, Virginia MAX BAUCUS, Montana ROBERT SMITH, New Hampshire DANIEL PATRICK MOYNIHAN, New York DIRK KEMPTHORNE, Idaho FRANK R. LAUTENBERG, New Jersey JAMES M. INHOFE, Oklahoma HARRY REID, Nevada CRAIG THOMAS, Wyoming BOB GRAHAM, Florida CHRISTOPHER S. BOND, Missouri JOSEPH I. LIEBERMAN, Connecticut TIM HUTCHINSON, Arkansas BARBARA BOXER, California WAYNE ALLARD, Colorado RON WYDEN, Oregon JEFF SESSIONS, Alabama Jimmie Powell, Staff Director J. Thomas Sliter, Minority Staff Director (ii) C O N T E N T S ---------- Page DECEMBER 10, 1998--NARRAGANSETT, RHODE ISLAND OPENING STATEMENT Chafee, Hon. John H., U.S. Senator from the State of Rhode Island 1 WITNESSES Christopher, Albert B., West Kingston, RI........................ 19 Prepared statement........................................... 48 Morin, Stephen, Assistant to the Director, Rhode Island Department of Environmental Management......................... 7 Prepared statement........................................... 46 O'Connor, Craig, Deputy General Counsel, National Oceanic and Atmospheric Administration..................................... 6 Prepared statement........................................... 43 Sheehan, Daniel, Director, National Pollution Funds Center, U.S. Coast Guard, Department of Transportation...................... 4 Prepared statement........................................... 36 Response to additional questions from Senator Chafee......... 40-43 Sorlein, John, President, Rhode Island Lobstermen's Association.. 21 Prepared statement........................................... 51 ADDITIONAL MATERIAL Articles: Block Island Fishing Areas Remain Shut....................... 57 Fishing Ban Based in Area Polluted by Oil Spill Between Pt. Judith and Block Island.................................... 60 Fishing Ban Tangled in Bureaucracy........................... 57 Fishing Industry Slammed by Spill............................ 54 Plan Drafted for Reopening Contaminated Fishing Areas........ 55 Claims forms....................................................93, 164 Claims documents.......................................113-120, 123-132 Claims summary documents, NPFC...............................94, 98-110 Letters: Department of Environmental Management, Rhode Island......... 112 Hull and Cargo Surveyors, Inc................................ 84-92 John P. Kelly & Associates 148, 154, 161, 162, 166, 174-176, 178, 179 K70, 80, 83-88, 90, 91, 111, 121, 133, 155, 159, 161, 162, 172, 177 National Pollution Funds Center, Coast Guard 41, 80, 82, 96, 144, 160 RGL Gallagher, LLP.........................................150, 168 Turnaboat Services, Ltd...................................... 158 Press release, North Cape Claims, National Pollution Funds Center 64 Statements: Blount, Frank, for Gail Frances, Inc......................... 61 Harsch, William W., Esq...................................... 62 Hartman, Barry M., Kirkpatrick & Patrick, LLP................ 68 Kopf, Bruce F................................................ 52 Nally, Raymond............................................... 63 National Pollution Fund Center............................... 65 OVERSIGHT OF THE OIL SPILL LIABILITY TRUST FUND ---------- THURSDAY, DECEMBER 10, 1998 U.S. Senate, Committee on Environment and Public Works, Narragansett, Rhode Island. The committee met, pursuant to notice, at 4 p.m. at the University of Rhode Island Graduate School of Oceanography, Narragansett Bay Campus, Coastal Institute Auditorium, Ferry Road, Narragansett, Rhode Island, Hon. John H. Chafee (chairman of the committee) presiding. Present: Senator Chafee. OPENING STATEMENT OF HON. JOHN H. CHAFEE, U.S. SENATOR FROM THE STATE OF RHODE ISLAND Senator Chafee. Our first panel consists of Mr. Daniel Sheehan, Director of the National Pollution Fund Center, US Coast Guard, is our key witness. Mr. Craig O'Connor, Deputy General Counsel, National Oceanic and Atmospheric Administration; Mr. Steve Morin, assistant to the Director of the Rhode Island Department of DEM. First, I want to thank everybody for coming this afternoon, and especially I want to thank our Washington-based witnesses from NOAA and the Coast Guard who have taken the trouble to be with us. Now, the purpose of this hearing is to examine how well the Oil Pollution Act claims process is working. The focus of the hearing is on those claims that are presented to the Government for payment. The Oil Pollution Act provides that a private party or a Federal, State or tribal natural resource trustee may present its claim to the Government for payments if negotiations with the party that caused the RP, the responsible party, caused--if the negotiations with the responsible party failed, in other words, if you're not getting satisfaction from the responsible party, then under the Oil Pollution Act the private party can present its claim to the Federal Government. Today we'll hear from two panels regarding two different types of claims against the Oil Spill Liabilities Trust Fund. The first panel will address claims by natural resource trustees against the fund. Until recently, the opinion of the Comptroller General was that the managers of the Fund, the Coast Guard's National Pollution Fund Center, could not pay, now this is very important, could not pay any claims for natural resource damage without Congress's approval. The Justice Department reversed that and so the National Pollution Funds Center is staffing a new office to process these claims. Now, how the National Pollution Funds Center will dispose of natural resource claims is extremely important here. Craig O'Connor, Mr. O'Connor, Deputy General Counsel of NOAA, will testify that the State and Federal trustees at NOAA and the Department of Interior recently completed the very first natural resource damage assessment and restoration plan under the new 1996 regulations required by the Oil Pollution Act, so we're working under some relatively new regulations here. Though this restoration plan is still open for public comment for a few days, it may become the first joint Federal/State natural resource damage claim presented to the claims fund for payment that complies with NOAA regulations. In other words, this may--the plan they've got here, this State may be the first one. Unlike some 1,800 other State trustee claims pending before the Pollution Control Fund, the Rhode Island claim will enjoy deference because of a so-called rebuttable presumption that Congress provided in the Oil Pollution Act for claims prepared in accordance with NOAA regulations. Mr. Dan Sheehan is of the Coast Guard's National Pollution Fund Center, this is really a tongue twister, they call it NPFC, but for short I'll call it the Pollution Fund Center. That saves one word, apparently. He's going to explain how his organization plans to handle these trustee funds. Does everybody understand that the trustee funds are funds not presented on behalf of an individual fisherman, for example, they're presented on behalf of, in this case it will be the State, and for damage done to natural resources. Trustees' claims raised some novel legal issues, and the Pollution Fund Center, along with the Justice Department, the Federal trustees are working how to resolve these. Mr. Sheehan will testify about recently completed guidance documents that spells out the claims process. I'm glad the Federal agencies were able to move forward with this, though the State trustees are only now receiving the document. I understand the pollution fund will consider revising the document in response to the feedback they got from this and other hearings. Mr. Steve Morin, Assistant to the Director of the Department of DEM, will provide the prospective of the State Natural Resource Trustee. OK, so the first panel deals with the recoveries for injuries to public resources. The second panel will address the very real economic losses suffered by individuals, so there's two separate things. In the two-and-a-half years since the North Cape spill, nearly 3 years, parties injured by the spill sought compensation from the responsible party and its insurer, from the trust fund, by making claims to the pollution fund. It's fair to say that many Rhode Islanders who suffered economic damages due to the spill are frustrated with the claims process, and I think that will probably come out pretty clearly. Parties injured by the spill, particularly commercial fishermen, have voiced serious concerns about the speed with which their claims are processed and the adequacy of the settlements offered by the pollution fund. Individual fishermen and the Rhode Island Lobstermen's Association feel the Funds Center is seeking unreasonable and unavailable evidence to prove the losses they claim they've suffered. On the other hand, the Funds Center claims it's attempted to pay proven losses as quickly as it can, while at the same time discharging its fiduciary duty to protect the Fund against poorly documented losses, and, obviously, they do have a responsibility. Mr. Sheehan will explain the claims process and review the Fund's experience with the North Cape claims. Mr. Sheehan will also discuss a new approach that may help resolve the claims for lost profits suffered by the lobstermen. We'll hear from the Rhode Island Lobstermen's Association, individual fishermen, seafood processor and charter boat operator about their experience and concerns. As I say, there's two witness panels this afternoon. After we hear from the second, there will be an opportunity for members in the audience, if somebody wants to offer some remarks, we'll give that person a chance, it will be for 2 minutes, but, nonetheless, we want to hear what you've got to say. Anyone desiring to make remarks should sign up with John Goodman. Where is John. That will help us get some idea on the time that we want to allot for this, and they can be on, of course, we want it to be pertinent to what the hearing's all about; namely, claims for cost, damages and the time it's taken and so forth. I look forward to hearing from our witnesses and we'll start with Mr. Sheehan. Mr. Sheehan, as I mentioned, is the Director of the National Pollution Funds Center, U.S. Coast Guard and based in Washington. So, Mr. Sheehan, if you'd proceed, we would be grateful. Thank you. [The prepared statement of Senator Chafee follows:] Statement of Hon. John H. Chafee, U.S. Senator from the State of Rhode Island Good evening, and thank you all for attending. In addition to our Rhode Island witnesses, I wish to thank our Washington-based witnesses from the Coast Guard and National Oceanographic and Atmospheric Administration for traveling to Rhode Island. The purpose of this hearing is to examine how well the Oil Pollution Act claims process is working. The focus of the hearing is on those claims that are presented to the Government for payment. The Oil Pollution Act provides that a private party or a Federal, State or tribal natural resource trustee may present its claim to the Government for payment if negotiations with the party that caused the oil spill fail. Tonight, we will hear from two witness panels regarding two different types of claims against the Oil Spill Liability Trust Fund. The first panel will address claims by natural resource trustees against the Fund. Until recently, the opinion of the Comptroller General was that the managers of the Fund, the Coast Guard's National Pollution Funds Center (``NPFC''), could not pay any claims for natural resource damages without a Congressional appropriation. The Justice Department has reversed that position, and the NPFC is now staffing a new office to process those claims. How the NPFC will dispose of natural resource damages claims is extremely important to Rhode Island. Craig O'Connor, Deputy General Counsel of NOAA, will testify that the State and Federal trustees at NOAA and the Department of Interior recently completed the very first natural resource damage assessment and restoration plan under the new 1996 regulations required by the Oil Pollution Act. Though this restoration plan is still open for public comment for a few days, it may become the very first joint Federal-State natural resource damage claim presented to NPFC for payment that complies with NOAA regulation. Unlike some 1,800 other State trustee claims pending at NPFC, the Rhode Island claim would enjoy deference because of the so-called ``rebuttable presumption'' that Congress provided in the Oil Pollution Act for claims prepared in accordance with the NOAA regulations. Mr. Dan Sheehan of Coast Guard's National Pollution Funds Center will testify about how his organization plans to handle trustee claims. Trustee claims raise some novel legal issues, and the NPFC along with the Justice Department and the Federal trustees have been working to resolve many of these issues. Mr. Sheehan will testify about a recently completed guidance document that spells out the claims process. I am glad that the Federal agencies were able to move forward on this, though the State trustees are only now reviewing the document. I understand that NPFC will consider revising the document in response to the feedback they will receive from Rhode Island and other State and tribal trustees. Mr. Andrew McLeod, Director of Rhode Island's Department of Environmental Management, and Mr. Stephen Morin, Assistant to the Director, will provide the perspective of a State natural resource trustee on the claims process. While the first panel deals with recovery for injuries to public resources, the second panel will address the very real economic losses suffered by individuals. In the nearly 3 years since the January 1996, North Cape spill, parties injured by the spill have sought compensation from the responsible party and its insurer, and from the Trust Fund by making claims to the NPFC. It is fair to say that many Rhode Islanders who suffered economic damages due to the spill are very frustrated with the claims process. Parties injured by the spill, particularly commercial fishermen, have voiced serious concerns about the speed with which their claims are processed and the adequacy of the settlements offered by the NPFC. Individual fishermen, and the Rhode Island Lobstermen's Association, feel that the Funds Center is seeking unreasonable or unavailable evidence to prove the losses they claim to have suffered due to the spill. For its part, the Funds Center claims it has attempted to pay proven losses as quickly as it can, while at the same time discharging its fiduciary duty to protect the Trust Fund against poorly documented losses. Mr. Sheehan of the NPFC will explain the claims process and review NPFC's experience with the North Cape claims. Mr. Sheehan will also discuss a new approach that may help to resolve the claims for lost profits suffered by the lobstermen. We will also hear from the Rhode Island Lobstermen's Association, individual fishermen, a seafood processor, and a charter boat operator about their experience and concerns. After we hear from the second witness panel, there will be an opportunity for members of the audience to offer remarks for 2 minutes. Anyone desiring to make remarks should sign up with John Goodman of my staff--lohn, would you please identify yourself? I also ask that remarks be limited to the subject matter of this hearing--claims for costs or damages that are made to the National Pollution Funds Center. I look forward to hearing from our witnesses. We will start with (Director McLeod, if attending) then Mr. Sheehan, Mr. O'Connor and Mr. Morin. STATEMENT OF DANIEL SHEEHAN, DIRECTOR, NATIONAL POLLUTION FUNDS CENTER, U.S. COAST GUARD, DEPARTMENT OF TRANSPORTATION Mr. Sheehan. Thank you, Mr. Chairman. I truly appreciate the opportunity to appear before you today. To my mind, the communication, the open dialog in a forum like this, where we get to hear and we get to be heard in terms of our processes, both for the natural resource damage claims as well as the third-party claims, are the ones which are very, very important to us. As you noted, I do have the privilege of running the Coast Guard's National Pollution Funds Center and our assistance was a direct result of another catastrophic oil spill, the Exxon Valdez, which resulted in the Oil Pollution Act of 1990. One of the major provisions of that Act---- Senator Chafee. Maybe you can pull that microphone a little bit closer, would you, Mr. Sheehan. Mr. Sheehan. I would be glad to. One of the provisions of the Oil Pollution Act of 1990 is to provide the parties damaged by an oil spill will be compensated either by the responsible party or from the Oil Spill Liability Trust Fund. Since I'm also on the second panel today, which concerns compensation of claims in general, in this first panel I'm going to limit my remarks to a more specialized type of claim, that of natural resource damage claims. Senator Chafee. That's right, then we'll do the individuals in the second round. Mr. Sheehan. An unfortunate consequence of many oil spills is the damage that occurs to natural resources impacted by the spill. OPA-90 specified that there were four categories of natural resource trustees, there were Federal trustees, State trustees, Indian tribe trustees, and in some rare instances foreign trustees, and in some cases, in its first three, there are some overlapping jurisdictional issues, but these trustees are permitted by law to submit claims to the Oil Spill Liability Trust Fund for not only the cost of implementing a restoration plan, but also for the cost of assessing the damage. As Senator Chafee pointed out, up until October of last year my organization was prevented from paying these claims because of a ruling by the Comptroller General. The Department of Justice's Office of Legal Counsel basically ruled in a different manner and gave us an interpretation which now permits us to entertain that type of claim. After the decision was made we took very quick action to convene a group, an informal group of Federal trustees to assist the Funds Center in understanding the natural resource damage assessment methods, certainly including the NOAA assessment regulations, which my colleague, Craig O'Connor, is going to describe today, as well as to help us scope out and define our resource needs to be able to adjudicate this type of claim. Mr. Chairman, we anticipate being able to begin adjudication of these claims in the late spring of next year. We currently have over 2,000 claims in State trustees. Now, while most of these claims are relatively small, they are still large in number. To assist all of the trustees, the three categories that we mentioned, in submitting claims, we've prepared a Natural Resource Damage Claimant's Information Guide. We have copies of that guide which we have provided outside, we announced on the 23 November that it was available on our Web site, we are making it available by letter and in hard copy to all of the State trustees. Just a few moments ago I gave to Mr. Steve Morin the very first letter to the State trustees, giving him a copy of that guide. In my written statement I've provided a brief overview of how we would generally handle this type of claim, and while we have attempted to anticipate many questions, if my experience is any teacher, as the process matures, we're going to have to make changes to this guide based on input, not only in hearings such as this, but from direct input from the State trustees and other trustees as well. It is of great assistance and will be of great assistance to us to have as much input as possible and we encourage that. With that, Mr. Chairman, I will conclude my remarks and will be pleased to answer your questions to the best of my ability. Senator Chafee. OK. What I thought I'd do is listen to the three witnesses and then ask the panel some questions. Next is Mr. Craig O'Connor, Deputy General Counsel of NOAA. STATEMENT OF CRAIG O'CONNOR, DEPUTY GENERAL COUNSEL, NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION Mr. O'Connor. Thank you, Mr. Chairman. Thank you for the opportunity to appear here today. I'm appearing on behalf of not only NOAA, but the Department of Commerce, but also the Department of the Interior. I'm really quite happy with the opportunity to sit and talk to you about a process that was brought to the public through the Oil Pollution Act, the opportunity for us to have the full restoration of the natural resources that may be damaged by an oil spill and the opportunity to assure that that restoration occurs, notwithstanding the fact that those parties responsible for the oil spill may not choose to provide the compensation or be unable to provide that compensation. The oil spill liability trust fund is that indemnification on behalf of the people of the United States and the people of Rhode Island with regard to the North Cape oil spill to assure that your resources are fully restored. The issue of how those claims are presented and processed by the National Pollution Funds Center is the subject of our discussion today, and I would like to state, on behalf of both NOAA and the Department of Interior, that we are very appreciative of the opportunity to work closely with Dan Sheehan and his folks in the development of the guidance and the claims process. We feel comfortable that we have, as the Federal Government, been successful in merging the considerations that the natural resource trustees undertake in the development of a restoration plan as spelled out in our regulations with the claims process. We have worked closely with Dan and his folks, and although along the way we had some bumps and grinds that you usually have if you're trying to merge different statutory authorities and programs, at this point we feel comfortable. I also feel very comfortable that if it becomes necessary to submit to the Funds Center the claim that is presented by the restoration plan developed with regards to the North Cape oil spill, that that plan and the claim will be expeditiously processed and that we will be paid in full, Dan, for that claim. I feel very comfortable, because what we have been able to do, working with the State of Rhode Island and the Department of Interior, is to develop what I feel to be a very good and very solid natural resource restoration plan. We presented that plan to the public in September of this year, and it addresses fully, in our opinion, the natural resources that were injured as a result of the North Cape spill. Those resources included, as many of you know, lobsters, quahog claims, many shellfish, sea birds, including eiders and loons, damage to the salt ponds, damage to the fish and wildlife reserve. We have been able to capture through the work with Rhode Island, with the Department of Interior, with the academic community right here at the University of Rhode Island, what I feel to be a comprehensive, very fair, very reasonable and a technically adequate and well- supported restoration plan. The claims process is designed to entertain such a claim. We did it in accordance with the regulations that we promulgated in 1996, we tracked those regulations, scripture and verse, we had the full participation of the responsible parties and the public in the development of that plan, and at this point, although I don't anticipate that we're going to be able to settle that claim with the responsible parties, I do anticipate that if that claim is presented to the Funds Center, it has been prepared fully in accord with their expectations and there will be no difficulty in having that claim processed and no difficulty in us moving forward in the spring with the restoration of those resources in accordance with that restoration plan. So it's with comfort that I sit here today and provide testimony on behalf of the Federal trustees and say that we are satisfied with the concerns that we have expressed to the Funds Center, we are satisfied that they have exercised their responsibilities in a judicious way and that we will be well accorded at such time as the plan is presented to them for compensation. Senator Chafee. OK. Now, Mr. Morin, Assistant to the Director of Rhode Island DEM. STATEMENT OF STEPHEN MORIN, ASSISTANT TO THE DIRECTOR, RHODE ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT Mr. Morin. Thank you, Mr. Chairman. I would like to offer Director McLeod's apologies, he couldn't make it here this afternoon, but he did send his greetings and indicate that however he can be of assistance, he would be happy to render that assistance to yourself and the committee. I have been the State of Rhode Island's trustee representative for the North Cape oil spill damage assessment and restoration plan since the unfortunate incident in January 1996, and over that nearly 3 year period of time I've worked with NOAA and the Department of Interior, scores of scientists and able assistants to put together a, probably a five-foot long administrative record which the trustee's counsel will overview one more time after the close of the public comment period in a few days, and at that point we will put forward the restoration plan, the final restoration plan based on the public comment that we received and the overview of that administrative record. We've been extraordinarily careful, as Craig as mentioned, to follow all of the dictates of the NOAA NRDA regulations, for a number of reasons. The primary one I think is that when we looked at the Oil Pollution Act statute and the billion dollar trust fund that was there, we recognized that, unlike many Superfund cases, which may drag on for 10 or 15 years before a resolution, that a billion dollar trust fund that Congress had instituted was designed to speed that process along. I think that, although 3 years seems a long time compared to other natural resource restoration plans, I think that trustees for the North Cape have done a remarkable speedy job. The next place to go is to the responsible parties, and really we're not the going to the responsible parties themselves, we're going to the responsible parties' insurance company, and, absent the fund, if we did not have the billion dollar trust fund behind us, our only recourse would be litigation, which could take two, five, seven, 10 years through the appellate process before any restoration of the natural resources, the public trust resources was undertaken. With the billion dollar trust fund, it's like having our own insurance company. If the other guy hits my car and he's not willing to pay for the repairs, I can go to my insurance company and my insurance company will make me whole, that's how we've been viewing the National Pollution Funds Center, and so we've, as I said, we've spent a great deal of time, we've been extraordinarily careful to follow all of the NOAA guidelines, and for most of what the National Pollution Funds Center guidance document says, I have very little disagreement. We intend to undertake the restorations as recommended in the guidance, we're going to take any money that we get, put them in revolving funds, ensure that we properly document how that's been spent so that the resources that were injured can be restored. The one concern that I have, and in looking through the guidance document, is the, I think the way the fund seems to look at trustees, as if they were another claimant, and that the trustees, although they're following federally adopted and judicially vetted regulations, they are, in the case of the North Cape at least, two of the trustees are Federal agencies, we are following the Federal Administrative Procedures Act and the National Environmental Policy Act, at the end of the day we will have our administrative record, we will close that and we will issue our final report, and we view that, at least the State of Rhode Island views that, as the final executive decision regarding the restoration, the trust of the those natural resources. It's more than I think just a presumption of correctness, it is, we think, we think it should be viewed as the final decision in this matter, and that absent a finding of arbitrary or capricious on behalf of the trustees, that the Funds Center should be writing the check to the trustees for those restorations so that we can begin expeditiously putting back the trust resources that were lost to the public, and so our concern is, as I said, the issue of the finality that the guidance document, the Coast Guard's guidance document seems to indicate, that if they choose, they could deny, in whole or in part, the claim of a natural resource trustee for restorations. Now, I can understand that the 2,000 or so claims that may be pending that were made prior to the adoption of the NOAA regulations, I can understand their concerns relative to those, but I think that there needs to be a distinction drawn between those claims which were made under NRDA regulations that were adopted and those that were made another mechanism, and that, the review of the records that the claims center undertakes is a very basic review, have we checked off the boxes that were necessary in the regulations, and, if we have, then a check issues. Beyond that, I don't think they need to review it, because the trustees were the ones given that responsibility by Congress, and if we have done our job, if we followed the regulations, then our decisions need to be presumed correct. Senator Chafee. Let me ask you a question here. As I understand it, you first, as a trustee, and you represent the State of Rhode Island, as a trustee, you came up with your claim and you tried to conform to the regs that NOAA, I guess as NOAA puts them out, didn't they? Mr. Morin. Yes. Senator Chafee. But I was a little surprised, you haven't been to the responsible parties yet, is that right? Mr. Morin. We have not been formally to the responsible parties. The responsible party has been, as the regulations require, a participant in the damage assessment, that is they sat in on all of the work that we did in assessing the damage. In the construction of the restoration plan, however, that's left to the trustees alone, and the formal presentation of the claim to the responsible parties will take place after the closure of the public comment period; however, as in all litigations, we are generally in some kind of negotiations with the responsible parties' attorneys and insurance company right from the beginning, so there's been a very, very strong back and forth between the trustees and the responsible party regarding an attempt to settle the case. Senator Chafee. But NOAA or the Fund isn't going to pay anything until they know that the responsible party has declined, you fail, you struck out with the responsible party, is that right? Mr. Morin. Yes, Mr. Chairman. Ninety days later, 90 days after we make the demand on the responsible parties, if they have not paid, we would make the claim. Senator Chafee. OK. So there's a time limit, that's very important, otherwise this thing could drag on forever. Mr. Morin. That's correct, Mr. Chairman. Senator Chafee. So, obviously, you're dealing with the insurance company, but we'll call it the responsible party. Now, so here we are, 3 years after the, 3 years next month after the accident, and so you're getting together your claim, you're following the dictates of, the guidelines from NOAA, and this thing is three feet long, or what did you say? Mr. Morin. About five feet. Senator Chafee. Five feet, OK. So now you're going to lug it down to go before the responsible party and then they have 90 days? Mr. Morin. That's correct. Senator Chafee. When does the clock start running, when you deliver it there? Mr. Morin. When we deliver the final demand, and we're not giving them the whole five feet, Mr. Chairman, we'll give them a summation of that document there. They're aware of most of the documents in the file. Senator Chafee. Because they've sat in, as I understood it, an awful lot. I mean, when a million lobsters were lost, or whatever it was, baby lobsters, you sit down with them, you try to figure, now what's the potential loss of these baby lobsters and what's it going to mean in 5 years and so forth and so on, you can figure that all out? Mr. Morin. That's exactly what we did, Mr. Chairman. We had University of Rhode Island scientists, in the case of lobsters, University of Rhode Island scientists go out and sample the area of the oil spill and the areas adjacent to the oil spill and do a field study to say how many lobsters were out there, how many lobsters should have been out there, and you subtract one from the other, and, in fact, our estimation is that now there were nine million lobsters of all sizes, mostly little ones, that were killed, and that over time they would yield some two-and-a-half million or two million adult lobsters to the commercial shellfishermen, the lobstermen after they all grew out, so that those nine million little guys need to be replaced so that in time we have the adults, plus we have all of the environmental services that those small lobsters who don't make it to adult size, food for cod, for example, and all the ecological services they provide are put back into the process. The responsible parties sat with us in the construction of those studies, and the outcome, although not every single study is agreed to, the outcome is agreed to, at least the responsible parties understand how the studies were done and they understand the system that was going on, many of the studies are the responsible parties' studies. A great deal of what's in the administrative record will be back and forth between the trustees and the responsible parties' investigators on interpretations of what science might be this way or that way. Senator Chafee. It seems to me the attitude of the responsible parties would be, well, why the heck should we pay this, all they've got to do is wait 90 days and then you go collect from the Federal Government. Now, I suppose that the downside of that is that once you collect from the Federal Government, the Federal Government is segregated, would come on in and sue the responsible party, or could, is that--what's the encouragement for the responsible party to settle? Mr. Morin. See, I think that is the encouragement, Mr. Chairman. The claim is subrogated to the Fund, the Fund then sues the responsible parties to get back its money that its paid to the trustees to do the restoration, and the incentive then is that not only, and I don't want to speak for the Fund, but, as I understand it, not only do they have to pay the cost of the restoration, but they'll have to pay the administrative cost to the Fund on top of that, and so you're going to---- Senator Chafee. I presume they don't want the Federal Government suing them particularly? Mr. Sheehan. People generally don't like that. Senator Chafee. It must be extremely difficult to quantify the cost in something like this. I mean, I can see in the next panel we're going to have the individuals, and an individual with some definite, knows what he made last year and what's happened, what he's making this year and the losses and so forth, but with these, in effect, natural resource damages, it's--I don't know how you quantify it. Mr. Morin. What we did, and that's the, I think this is the difference between how natural resource damage claims were done before OPA-90 and done after OPA-90. Before, a monetary figure was arrived at, money changed hands and then trustees tried to do something that was generally associated with what the damage was, but in many cases we did not have that case, and in the World Prodigy is a perfect example. There is an ongoing--in fact, yesterday they opened up shellfish grounds that were transplanted, that was paid for by the World Prodigy damage assessment, but there were no clams killed during the World Prodigy oil spill. Now what we do is restore the resources which were injured, and we don't look at the cost of doing that until right at the end, what we find are technologically available mechanisms for restoring the natural resource, we scale out that to ensure that the amount that was killed is going to be restored on this hand, and at that point we say, OK, well, how much will it cost to do this. Senator Chafee. Well, take your nine million lobsters, now, OK, you're going to restore that, how do you restore nine million lobsters? Mr. Morin. What we've determined is that the lobsters--we have some fairly sophisticated biological models, and some very, very good biologists, including Tom Gibson of our staff, who broke down the lobsters into how many eggs would have made nine million lobsters and how many eggs would have flowed from those nine million lobsters, so that when it all grows out, you get the two-and-a-half or two million adult lobsters. We then say, OK, well, how do you increase egg production, and there's a fairly old method which has never been used in Rhode Island, but it's big in Maine, called V notching, where you take an adult female lobster, you mark their tails, after they become legal size, you mark their tails and you put them back in, then you prohibit the landing of a marked lobster, that marked lobster stays in the water as a legal size lobster but no longer able to be caught for about two more malts, which would be 2 or 3 years, essentially, and in that time period she will produce another large clutch of eggs and those eggs will replace the lobsters lost, and that's how we do it, and then you go and count up the number of lobsters you need to do that and how much that costs in the marketplace, how much it costs to administer the program, and it works out in this case to be about $10 million to do the restoration of the lobsters, and so we didn't--but we didn't get to the money part until we've gotten to all the rest of that. Had we found a way of restoring the lobsters less expensive than ten million, which would have had the same effect, we would have, by the regulations, would have been obliged to use that, but at this point we found what is the most economically viable mechanism for doing that and we think that's going to work. Senator Chafee. Mr. O'Connor, suppose the trustee went against the responsible parties and had six different categories of injuries and the responsible party is willing to settle on three of those but won't negotiate in the other three, now if the trustee takes a settlement of the first three, can he still come after you for the remaining three or does he have to go way back and, if he accepts anything from the--is he inhibited from moving forward if he's accepted a settlement of a partial part of his claim? Mr. O'Connor. My anticipation is that if we are to enter into a partial settlement with the responsible parties, that if we have any expectation of going to the Fund for the balance of the funding for that restoration plan, that we had better carefully structure that settlement to assure that we are preserving the remaining claims against the responsible party. The concern that the Funds Center has evidenced in its guidance is that, that the trustees in effecting a settlement not jeopardize the position of the Funds Center in collecting whatever moneys that they ultimately might pay for the trustees for the balance of the claim. I have would see no reason, and the guidance does not indicate that there would be a prohibition from effecting a partial settlement, preserving other portions for submission to the Funds Center, but, once again, it would be with that proviso, that we not jeopardize the interest of the Funds Center and collect from that. Senator Chafee. It seems to me that it's terribly important that the trustee, the tribe or the State or, I guess you mentioned you have a foreign trustee, but I suppose in most instances it would be, the State would be the trustee, wouldn't it? Mr. O'Connor. In most instances. The State is at least a significant trustee. Senator Chafee. So it seems to me it would be terribly important that the trustee work extremely closely with you? Mr. O'Connor. Yes, sir. Senator Chafee. And so now, and then in preparation of this--you're familiar with what they're doing, what the State's doing? Mr. O'Connor. We've been working hand in hand. I mean, there's been a full partnership. It's the position of the Federal Government that this restoration plan is a package, it is not a bits and pieces kind of thing, and we are going to maintain the partnership that we have with Rhode Island in prosecuting this claim, and if we can't get it fully compensated by the responsible parties, then our anticipation is that we will go as partners to the Funds Center and have the fund then provide that compensation. Senator Chafee. You'll go to Mr. Sheehan then? Mr. O'Connor. That's correct. Senator Chafee. What it does, I mean, I'm all for speed and admire speed, I must say 90 days is a short turnaround time for the responsible parties to makeup its mind. Is the theory that they've been in on it, they're in on it, too, judging from what Mr. Morin said, that to a considerable extent in calculating these costs? But 90 days, is that adequate time? Mr. O'Connor. Oh, I think it's more than adequate time. If the claim had been presented, prepared in isolation, without the responsible parties being part of the process, then I think that there would be an argument in favor of their having had an opportunity for further review and evaluation of the claim, but they have, in accordance with our regulations, been part of the process, they fully understand it, there is nothing that is going to be a surprise to them, and they had had more than adequate opportunity to evaluate that claim. Senator Chafee. I mean, for instance, they'd be in on-- suppose you lost some eelgrass or the lobster situation described, they have their own calculations in all that, I presume, they've been in on it? Mr. O'Connor. I would suspect--well, they have presented their own evaluations, their own calculations and their own conclusion based on the studies that were done, but they participated in the development and the implementation of those studies, so nothing should be of surprise to them. Senator Chafee. All right. Well, it sounds like, although this has taken 3 years, in all fairness, there was a roadblock there to start with, it seems like this damndest roadblock that the, not the Justice Department, who was it originally said you couldn't pay any claims out, what was the Fund for? Mr. O'Connor. Well, that was an interesting question. I mean, the Comptroller General had issued an opinion that the Fund was not---- Senator Chafee. Well, that's really protecting a turf, isn't it? We setup a billion dollar fund and the Comptroller said nobody can be paid from it. Mr. Sheehan. Well, if I can respond to that. The Comptroller General, in his opinion---- Senator Chafee. Well, don't be too sturdy in his defense. Mr. Sheehan. [continuing] . . . said the process that was to be followed was to obtain funds for payment, you had to go through the appropriations process. That, however, did not bar the process that was made with respect to the assessment of the natural resource damages, that proceeded independently. Senator Chafee. Because of the theory that you might have gone to Congress to get an appropriation? Mr. Sheehan. Yes, sir. Mr. O'Connor. We have prosecuted a number of oil spill cases since OPA was passed in 1990 and have moved forward and actually have settled almost all of those cases with the responsible parties. It wasn't until 1997 when we found out, that, in fact, the Fund will be there to indemnify us if we weren't able to settle it on our own and to indemnify us without the necessity of appropriation, going through the appropriation process. We felt comfortable, much more comfortable in prosecuting our claims. Senator Chafee. Do you think the presence of the Fund discourages the responsible party from settling? Mr. O'Connor. Well, I would echo what Steve said on that point. I think the fact that the Fund is there, the fact that the trustees are going to be able to get the money necessary to do the restoration and the fact that the Fund is going to ultimately sue to collect that money, it's just putting off the inevitable. I would think that, if I were a responsible party, I would be more inclined to try to settle my case with the trustees than to have to defend against the claim being filed by the Funds Center because the standard of review may be different and it may be an easier of standard of review collecting the money on behalf of the Funds Center than it would be if the trustees sued individually. Senator Chafee. Plus, the whole weight of the Federal Government on your back. Mr. O'Connor. Yes, sir. Senator Chafee. Do you have anything? Mr. Gibson. I do, Senator. Mr. Sheehan, could you talk a little bit about the staffing plans you have for this new function of evaluating natural resource claims, you were not previously staffed to perform that mission, when you'll be ready to accomplish it and how you're going to clear the backlog of 1,800 claims that have been presented to date? Mr. Sheehan. Thank you. I will be glad to do that. We basically have laid out, in consultation with the Federal trustees, a game plan for putting together---- Senator Chafee. Steve, do you want to pull that a little bit closer. Mr. Sheehan. [continuing] . . . for putting together a natural resource damage claim division. There will be approximately, to begin with, seven folks in that, we will have a division chief, we will have some economists and biologists as well. We anticipate that we will be staffed up by late spring and at that point in time we will be able to start adjudicating these claims. The 2,000 claims that I mentioned earlier, a great majority of those are from the State of Florida, and we've already begun work with the State of Florida to get them to group these claims so that they can come up with a restoration plan, which is a necessary condition and necessary part for consideration of payment of a claim, but we should be ready by the time my colleagues to the left have gone through their process with the responsible parties and then to us. Mr. Gibson. Let's say that the North Cape claim proceeds to the process, is not settled, and was presented to you sometime in mid-spring; what is the estimation of NOAA and NPFC on how quickly that claim might be adjudicated? The statutory requirement is 90 days, is that deadline reasonable? Mr. Sheehan. Actually, there isn't a statutory requirement for 90 days for us, but we would look at the administrative record, we would be ready to review that claim when it came in, we would be working with the trustees to see, if we needed supplementary information for the administrative record, it is difficult for us to say how long it will take since we've never adjudicated one and it's difficult for them because they never submitted one, but I can assure you that we're going to do this as quickly as possible. One of the differences between this type of claim and third-party claims is that this goes through a stylized process, according to a set of regulations, in anticipation of submitting a claim, unfortunately, some third parties' claims you don't anticipate you're going to have a loss, so you don't necessarily have the records there all the time to bolster that, so there is a difference between the time factor. Mr. Gibson. Thank you. Senator Chafee. Just running over the time schedule again, and I appreciate that things can go wrong, but the anticipation now is that, Mr. Morin, as the trustee, you believe you have your claim in shape and ready to file, did I hear you say by January? Mr. Morin. Yes, Mr. Chairman, I think that that's, I was saying early January, and the Federal trustees cautioned me not to be overly optimistic, but in the month of January I think we will have finished review of the public comments and our final review, our final work on the plan, we will file a final plan sometime in the month of January and it will immediately be sent to the responsible parties for---- Senator Chafee. Start of the 90 days? Mr. Morin. For the 90 day start, and at that point we would then be prepared to, if no settlement or partial settlement is reached, we would take the full claim, or the partial claim, to the Funds Center sometime in late spring, and we are concerned about the timing of the review process, and that was, the reason why I kept mentioning the adjudication process that we have gone through in following the NOAA regulations and over- viewing this large administrative record, because I hear Mr. Sheehan, and I see in the guidance the fact that the Funds Center may want to review the administrative record and review, and either augment the record or ask for additional information, and our concern is that, in finally, in making a final agency determination as to what is the damages, we think that we sit in the place of the Government for that point, because we are partners with the Federal Government right now, NOAA and DOI are also co-trustees, so we will file that trustee claim as both the State of Rhode Island and the Federal Government, so it's the Federal Government, essentially, and one of the States. Senator Chafee. How did the Federal Government get in on the claim? Mr. Morin. They are co-trustees, Mr. Chairman. Senator Chafee. Because some of their lands have been effected? Mr. Morin. Because, that's correct, Mr. Chairman, greater than three miles from shore, NOAA's got trust interest as well as, migrating fish and so forth that may go between State waters and Federal waters and the bird issues or the land issues for the Fish & Wildlife Service, U.S. Fish & Wildlife Service, they're the trustees' migratory birds. Senator Chafee. And the wildlife refuge? Mr. Morin. And the wildlife refuge as well. And so we are three trustees together filing a single claim rather than simply the State of Rhode Island or simply the Federal Government filing bits and pieces of a claim. Senator Chafee. So you have the situation of the Federal Government being in on a claim against the Federal Government? Mr. Morin. That's correct, Mr. Chairman, and using Federal regulations, and that's why I'm concerned about the notion that biologists or economists might be reviewing the administrative record and not having gone through the 3 years of back and fourth and agony and so on and so forth, but at the end of the process substituting, somehow substituting their judgment for the judgment of the trustees. Well, the trustees by law, by OPA-90, were the ones who were supposed to make the determination on what is a restoration, what damage was done and what restoration is necessary. I think that their job should be very ministerial, and rather than biologists and economists, I think there needs to be a clerk typist with a checkbook at the end of the process for the, at least for the Government claims, doing that work. Senator Chafee. I'm anxious to get this thing settled and Rhode Island get as much money, but, gee whiz, I have a little trouble in thinking that you just submit a bill and they've got to pay it? Mr. Morin. And if it were, you know, out of the blue, I would agree with you, Mr. Chairman, but because we are in the place that we are, that is because we are together with the Federal Government, we followed the rules that they've done, we've followed the Federal Administrative Procedures Act and the Federal National Environmental Policies Act as well as the State law is involved, to make sure that we've touched all the bases, at the end of the process we are left with an administrative record, and it's interesting that the guidance documents that the Coast Guard puts out indicates that its findings, that its findings are final, they cannot be sued except on the arbitrary and capricious standard of their administrative record, and, yet, we have the same process, we file it all under the same rules, the Federal EPA, the Federal Environmental Protection Act, the National Environmental Policy Act and the NOAA rules, and at the end of our record the indication from the Fund is that they may be in there messing around with how it was that we did that and did we count the lobsters right, and we think that's a very dangerous sort of precedent, because at the end of the process what gets litigated is, I think, if the trustees have done their work, should be held to that same standard of arbitrary and capricious that the Coast Guard thinks it should be held. Senator Chafee. You put up a good argument. What do you say about that, Mr. Sheehan, you sit up there with a clerk typist to type out the check and just send it along? Mr. Sheehan. We're not going to do it, Mr. Chairman. Our authorities and responsibility stem from OPA-90. There is certainly deference which is given to the claimants that follow the NOAA rules, we've stated that, we're going to do that. We certainly need economists and biologists because we're going to be dealing with all sorts of different claims, not only from the Federal sector and ones that have gone through the NOAA process, but ones that are done by States, not done in accordance with that process. We are anticipating that we're basically going to be looking at the administrative record, looking at the rules which we have every confidence that that you have followed very closely, going through that, if we have questions about that, we'll go through the trustees. We expect to do it in an expeditious manner. We want to see the natural resources restored quickly and in a timely manner, and that's my commitment, to do that, sir. Senator Chafee. Well, also, we've had testimony here from Mr. O'Connor that Mr. Morin and he have worked very, very closely together. How much have you been in on all this, your organization? Mr. Sheehan. My organization has not been in on the plan itself. Senator Chafee. The claim. Mr. Sheehan. We have not participated in that particular process, basically because we do have a fiduciary responsibility and an adjudicatory responsibility with respect to the law itself, so we have not participated in the process. We have been following it as much---- Senator Chafee. But, obviously, as you say, when the claim comes in and you've got questions, you've got, I don't know whether you've got biologists, but you've got people you've turned to, you say to them how did you get this count, presumably, won't you, quite likely, and ask them, and if they are convincing, you take it? Mr. Sheehan. Our primary role in that type of claim will be to look and see that they have followed their own regulations, and, other than that, having not seen a claim and having not gone through that process at this point, I'm not sure of the level of actual review that it's going to get, but we're going to be basically going through and looking at it. Senator Chafee. Now, he thought, Mr. Morin thought that by late spring they'd come to the Federal fund, so that gets us up to the Spring of 1999, late spring, how, you know, I'm not-- it's tough to figure these things, but you'll get to it, and when do you think you might come to a conclusion? Mr. Sheehan. I would say that it's going to depend on a number of factors, one, whether they come to us with a whole or whether they've settled it in part. Senator Chafee. If they settle it in part, presumably that would make it easier, wouldn't it? Mr. Sheehan. Presumably that would make it easier. Well, as soon as it arrives, we will start the process. We're not going to sit on it. Senator Chafee. OK, that's all. I'd like assurances from you that you will go right to this thing. Mr. Sheehan. Yes, sir, you have those. Senator Chafee. This is 3 years already, and late spring always seems to be later than early spring, heavy words for the day, but. So, in any event, I urge you on. Do you have some questions, Tom? Mr. Gibson. I did have one more question. In the North Cape claims situation, right now we have the Federal trustees and the State trustees working together, and, hopefully, going to go to the end of the process together, but what would happen if the Federal trustee decided to settle a claim for a resource that it shared trusteeship with the State, where would that leave the United States, where would that leave the State if litigation ensued? Mr. Sheehan. I'll be honest with you, we've looked at that and we would hope that we would be able to forge them back into a consensus to come with a single claim, because it would be very difficult from a precedential standpoint for this to occur. We think that the partnership, which has, obviously, been effected so far, is a good one, we would urge them to go back to the negotiating table between themselves to come to us with a unified claim. Mr. Gibson. Mr. O'Connor. Mr. O'Connor. I have no intention of terminating the partnership. Mr. Gibson. Well, let's talk about a hypothetical State, that is Rhode Island, where a claim has been presented where you did have a Federal trustee and a State trustee taking adverse positions and one settling and one not and the other seeking compensation from the fund, have you thought about that situation? Mr. O'Connor. Yes, we have thought about that situation, and what that creates is the necessity to define the scope and extent of the respective trusteeships between the State and Federal Government, and as difficult as it is to count lobsters, it is even more difficult to determine the line between that trusteeship, particularly, as Steve mentioned, with migratory species and so on, it would become a retractable situation, it would be a situation, if we were not able to negotiate it out with the Funds Center and reach some amicable resolution with the Division of Trusteeship, it ultimately might be an issue that we would have to litigate. Mr. Gibson. So the prohibition under the statute for double recovery means that one or the other trustee, the trustee that is left in the lurch after the settlement is very much at risk, at not being able to actually get its claim compensated because it would have to prove at what its part had not been covered by the settlement, it would be a difficult situation, it's a very strong discouragement for trustees to split up, and we would not, the Federal Government has no intent to do that. Mr. Morin. Mr. Morin. I would hope that we would not be in a position of having to split up the team this late in the date, because I agree with Craig, that we are--it is so difficult to decide whose got which parts of the resource, you could do it geographically, and for some resources that are less mobile, that might be all right, but for the mobile resources, particularly birds, we've got migratory birds that spend the winter in Rhode Island and they spend the summer elsewhere, in northern New England, and the Federal Fish & Wildlife Service has been acting as trustee in that regard. That's why we've, I think we've been very, very careful to try and work this thing together. I would hope that if we could not, that if for some reason someone wanted to settle this in a way that was not protective of the whole trust resource, that is that the entire public good was not taken into account, that one or the other would either come to their senses or sue the other one to keep them from doing that. One of the things, Mr. Chairman, that you should know is that in addition to, my Attorney Claude Cote is up there in the audience and he reminded me that not only do all the trustees have their own attorney, but we have a Justice Department attorney who sits in to make sure that we are following all of the Federal rules, and that that makes for an interesting discussion between the trustees and the center, if there's a disagreement on the compensation, because who defends, who defends the center if the trustees are angry at it if the Justice Department is part of the trustee council. Senator Chafee. Well, the Justice Department, both sides, huh? Mr. Morin. The Justice Department, at least in this instance, the Justice Department is on our side so far, but they represent the whole Federal Government. It's an interesting argument, that what happens if there's a disagreement between some parts of the Federal Government and the other part's egged on by the State. Senator Chafee. All right. Well, first, I want to thank you. I'll be following this very closely because, one, I'm glad you're cooperating so well, and you've indicated, you've given us some kind of a time schedule here, and I'm deeply interested in how all this comes along, so I will be following it with great interest and urge you to keep going, and I commend the close working relationship you and Mr. O'Connor formed, and now get on with the submission, get the answer from the insurance, from the responsible party and just move on. Thank you very much. OK. I think that Mr. Sheehan, you're staying, aren't you? Mr. Sheehan. Yes, sir. Senator Chafee. Now, the next panel, Mr. Brown is from Peacedale. Mr. Christopher. OK. Now, in this panel we have Mr. Christopher, owner of ABC Lobster Company in West Kingston. Mr. Bruce Kopf, commercial fisherman in Narragansett. Bruce, is he here? Mr. Hartman. No, he's not. Somebody will be reading something into the record for him, Mr. Chairman. Senator Chafee. OK. John Sorlein, president of the Rhode Island Lobstermen's Association. And do we have Mr. Nally here? Mr. Hartman. No. We have his testimony, Your Honor. He, unfortunately, was working and he couldn't get here. Senator Chafee. Now let's get straightened out who we do have. We've got Mr. Sheehan, Mr. Christopher, Mr. Sorlein. Mr. Sorlein. Yes, sir. Senator Chafee. Does that do it? Mr. Hartman. Mr. Chairman, Mr. Blount is not here and Mr. Nally couldn't be here because of work, but I did bring their testimony with us. Senator Chafee. And you are? Mr. Hartman. I'm Barry Hartman, I'm their attorney. Senator Chafee. So Mr. Kopf isn't here. OK. Now, why don't we start with Mr. Christopher. STATEMENT OF AL CHRISTOPHER, WEST KINGSTON, RHODE ISLAND Mr. Christopher. Mr. Chairman, my name is Al Christopher and I appreciate the opportunity to briefly address you today. My testimony is presented as the former owner of ABC Lobster, Inc., a seafood dealership that was located a 296 Great Island Road in Narragansett, Rhode Island. ABC operated by purchasing lobsters from inshore fishermen and then selling those lobsters on the wholesale market to large exporters. ABC also sold some fish and lobsters on the retail market to its walk-in customers. ABC did not purchase fish or lobsters from offshore fishermen because it was not profitable for it to sell such fish and lobsters. After ABC Lobsters started doing business in 1993, they subsequently increased sales every year. In 1993, ABC had gross sales in the amount of approximately one million dollars. In 1994, when ABC began selling lobsters on the wholesale market, it purchased all new refrigerated lobster tanks and grossed approximately one-and-a-half million dollars in sales. In 1995, sales continued to increase, and by the year end, ABC had grossed 2.1, approximately 2.1 million dollars. 1995 was a good year for lobstering, especially in the spring. Many fishermen who typically did not fish in the winter and spring were planning to gear up and fish hard during the Winter and Spring of 1996. Accordingly, I expected our lobster purchases and sales to increase and we bought four new lobster tanks, which increased ABC's holding capacity dramatically. Unfortunately, that increased demand for holding capacity never happened because on January 19, 1996 the North Cape Barge ran aground off Moonstone Beach and spilled over 800,000 gallons of heating oil into Block Island sound. In 1996, ABC gross sales were dramatically reduced as a result of the spill. For example, from June 25, 1996 until December 31st, 1996, ABC purchased only, approximately 300,000 pounds of lobsters. During this same period, in 1995, ABC had purchased 465,000 pounds, in other words, my gross purchases declined by about 36 percent during this same period. The profitability of ABC declined accordingly. During this same time period, ABC's retail sales by almost 34 percent. My claim was first filed with Turnabout on May 31st, 1996 and was later amended to include the entire year of 1996 and a filing date May 14, 1997. Since that amended filing, about 18 months have elapsed. That is way too long. While waiting to be paid for my damages, business losses have continued to mount, as the lobstermen delivering to ABC continued to experience lower and lower catches due to the decimation of the lobster stocks. In the face of these continued losses with no end in sight, I sold my business in 1997 at a price considerably below its former market value. My business is gone and my losses remain. Having failed to get a reasonable offer from damages from Turnabout, I filed my claim with the fund on September 16, 1997. Instead of obtaining a quick resolution of my claim, I was forced to go through the process of delay and documentation all over again. If you look at the correspondence file today, you will see that first the Fund asked for information, then after assigning my claim to Hull & Cargo in January 1998, Hull & Cargo requested different information and then its accounting subcontractor required even further layers of detail. When the Fund finally came up with a settlement offer on June 18, 1998, 9 months had elapsed since the Fund had started its review. Once again, this is way too long. Since the Fund settlement offer was unreasonably low for the first half of my claim and denied entirely the second half of my claim, I submitted a request for reconsideration on August 14, 1998. In this request for reconsideration I provided voluminous documentation to support my claim, in particular the second half of my claim which had been denied outright by the Fund. This documentation included the complete claims of five of my largest suppliers which were pending before Turnabout. These underlying claims of my suppliers unequivocally bolster, improve my claim for damages. In any event, despite the fact that the Fund should have proposed their final offer of settlement within 90 days of this final submittal, that deadline lapsed without explanation. I have been told that I can take this inaction as a denial of my request and then file suit. That makes no sense at all. I could have filed suit anyway without wasting time and resources by filing with the Fund. The fund has failed. I finally received a letter dated November 20, 1998 from the Fund. Instead of providing me with an offer on my claim, the letter stated that the Fund had waited until October 26, 1998 before authorizing action by Hull & Cargo on my request for reconsideration. In other words, they waited 90 days after receiving my request for reconsideration before doing anything at all. It is no wonder that I didn't receive their final offer of settlement within the 90 day timeframe. Even more disturbing in this letter was their statement that they still could not tie my losses in the last half of 1996 to the oil spill. Why is this so difficult? Don't they even read the reports of the consultants who have documented the lobster losses for the natural resource damage assessment. And, guess what, they asked for more information to justify the losses of the lobstermen who supplied me. The Fund is adversarial claimants. If you will look at the Fund settlement proposal of June 18, 1998, alongside the request for reconsideration for ABC dated August 14, 1998, certain facts are clear. The Fund does not recognize that the North Cape oil spill produce any harmful effects other than to force closures of certain areas for fishing up until the end of June, 1996. Using their analysis, the effects of the spill stopped by the end of July, 1996. They interpret an unexpected increase in the lobster catch in August as being equivalent to a full and complete recovery from the spill. That's absurd. They just don't get the fact that the spill resulted in enormous damage to the lobster population off the coast of Rhode Island. Why doesn't the fund make any attempt to consult the scientists involved with the natural resource damage assessment studies, in effect, to understand the significance of the spill. They would see that not only has there been great damage, but that the effects of the spill will be felt in even greater degrees over the next few years. The Fund's analysis are designed to minimize damages. Great pains were taken by Hull & Cargo to reduce my potential award by selectively applying data, such as weather or the relocation of fishermen from one shore facility to another, as factors to lower my award. The Fund fails to understand that everything changed after the spill, business plans were revised and the factors that led to growth over previously years no longer had relevance. The Fund and its adjusters used a standard of proof consistent with insurance adjusting. Claimants are treated as potential scam artists seeking to capitalize on an accident and that is simply not the case. We did not ask for this spill and we only want to be made whole. I thank you for this opportunity to speak. Senator Chafee. Thank you, Mr. Christopher, very much. And now, Mr. Sorlein. STATEMENT OF JOHN SORLEIN, PRESIDENT, RHODE ISLAND LOBSTERMEN'S ASSOCIATION Mr. Sorlein. Thank you, Mr. Chairman, and I appreciate the support that you are showing for our industry by coming to this community at this time to help us address this serious problem. My name is John Sorlein and I'm the president of the Rhode Island Lobstermen's Association. We are a nonprofit association of individuals who are engaged primarily in the business of fishing for lobsters. Several of our members also have onshore businesses or related businesses that rely in large part on lobstering for their livelihood. These businesses represent a large portion of the lobstering industry off Point Judith, Rhode Island, and the Rhode Island Lobstermen's Association has put together a group of over 100 businesses that have developed and continue to develop and document damage claims. The fishing industry has contributed greatly to the local and statewide economy. Millions of dollars have been pumped back into the economy by way of direct and indirect business resulting from the successful harvesting of Rhode Island's pristine seafood beds. Many lobstermen have been fishing in this area for years and the Lobster Association represents a large portion of that total. Lobstering is mostly a small business, each lobsterman owns a boat or two and each hires his or her own crewmen to help. We love what we do. We are independent and self-sufficient and we are successful because of our willingness to put in an honest day's work. Point Judith is also one of the largest fishing ports on the East Coast. Until January 1996, the lobsters caught in Point Judith were world renown for the quality, and, in fact, we absolutely think that they are the best lobsters caught, and the range of the lobsters far better than Maine lobsters. However, on January 19, 1996, the unthinkable happened, and a barge, the North Cape, spilled over 800,000 gallons of highly toxic Number 2 heating oil after running aground off of Moonstone. We say this is unthinkable since no one had expected this to ever happen. We had had an oil spill in 1989 with the World Prodigy, and to think that this could happen again, it was just unthinkable, but it did. The immediate impact of the spill was disastrous, and the only significance of dead lobsters, over 60,000 were measured by weight from the sample areas located on the beach, and over 18,000 of these lobsters were studied to determine their sex, size and reproductive status. That information was used to project the loss of over 2.9 million lobsters, nearly three million lobsters that washed up on the beaches as a result of this spill, and this was only a small portion of the number of dead lobsters that remained beneath the surface of the ocean. When the spill happened, we were at a loss about what to do. Few of us had ever had to make a claim for lost profits and we didn't know how to do it. We immediately thought that we had to file a lawsuit. We soon found out, however, that a new procedure existed under the Oil Pollution Act of 1990, and under that procedure we would be able to file individual claims for losses without going to court and with a reasonable amount of evidence we would be able to recover in a quick period of time. That has not happened. Many of our members and others have filed claims and submitted literally thousands of pages of documents to establish our losses, but few of us have been paid. We provide information and we are asked for more. We provide more and are asked for still more. We prove a loss under one standard and the responsible party or the fund changes the rules. We simply don't understand why this is so difficult. The barge owner was convicted of criminal offenses that caused this spill, but rather than compensate us, the Nature Conservancy was given over one million dollars. Rather than compensate us, hundreds of thousands of dollars are going to be spent to buy habitat preservation land in Maine. Why haven't our claims been paid or even fairly considered? Why is it that to despite our efforts, instead of the claims being decided in 6 months by the responsible party or in 90 days by the Fund, now almost three full years later few have been fully decided? Why is it that the responsible party and the Fund are only paying one dollar for every four dollars that have been proven to have been lost? Why is it that the responsible party has decided that no one that fished next to the closed area could not possibly have lost more than 3 percent of his catch? Many people that fished in the closed are had moved to other areas so that there were more fishermen looking for few lobsters, in other words, we were competing with ourselves for a diminished resource. No one seems to understand that lobsters don't standstill, they migrate. Yet, the claims adjusters are assuming that no lobsters moved into or outside of the closed area and they assume that fishermen don't move either. They think that if you fished outside the closed area, you can't be effected, but the fact is we are. It is no mystery when someone has consistent catches every year for 5 years or more, or even better still, increase catches for the 5 years previous to the oil spill, and then suddenly, after January 19, 1996, the catch is dramatically less. We don't fish anymore, we mitigate our losses. It's a longstanding joke in my family. I have a 9-year- old daughter who says ``daddy doesn't go fishing anymore, he mitigates''. We travel further, we spend more money, we work longer hours and catch few lobsters. The fun is gone and there's no mystery here. How can it be that the fancy study that was performed that says there were 200,000 adult lobsters lost in 1996 and 1997, but several of us alone caught over 400,000 less lobsters during those years than before. The responsible party and the Fund concocted theories of lost lobsters based on conjecture and guess. We have shown actual losses, but those losses are ignored. At this point, many of us are fed up with this administrative process. We are ready, we are willing and we are able to go to court and sue these criminals for our actual losses. Clearly, we cannot get a fair shake by the responsible party or by the Fund, we are being forced to go to court, that means the oil pollution process has failed us. We sincerely hope that you can fix this for the next set of victims, wherever they are. Thank you. Senator Chafee. Thank you very much, John. Now, is somebody making a presentation on behalf of--did you want to say something? Mr. Hartman. Mr. Chairman, there are two other witnesses who are clients that have filed claims that couldn't be here today. Senator Chafee Do you to want to give a summation of what they were going to say? Mr. Hartman. Very briefly. One was for the Gail Frances. The Gail Frances is a charter fishing boat business and they have a tale to tell. They're now before the Fund, they've been denied their claims, and to make a very long story short, it comes down to this. The Fund, after somebody submits a claim for hundreds of thousands of dollars, says, well, let's look at the weather on that day that you say you would have gone out but didn't, and if there were winds in greater than 25 miles an hour, we're going to assume you wouldn't have gone out, even though they went out on those days, and do you know what they looked at, they looked at the wind speeds at midnight, and based on the wind speed at midnight, they said you wouldn't have gone out that day. It's nonsense. These people have provided thousands of pages of documentation to the Fund to show their losses. They had letters from customers saying, dear Gail Frances, we're canceling because of the oil spill, and what did the Fund do, they said, we want the phone numbers of those people, you get them for us and give them to us, the letter's not enough. We provided the tax returns that went to the IRS, and what did they say, that copy of the tax return that went to the IRS isn't good enough, we want you to take it back and re-sign it in ink and then send it to us again. That's nonsense, Mr. Chairman. We did it and they've backed off, they don't require that anymore. The bottom line is, after almost 3 years the Gail Frances has yet to be paid for any lost income that they demonstrated. The other individual that couldn't be here is Bruce Kopf. Now, Bruce has a different situation. He's not in business anymore. His bottom line was this, the area was shutdown, he couldn't get out to fish, period, he couldn't get out to fish and they said he didn't prove his losses. There's nothing else that needs to be said. He provided his tax returns. That was his only business. He provided his revenues, he provided his cost, he provided his fuel, he provided the names of his crew, he provided his salary. He couldn't go out that day, he was prevented, and that's not good enough for the Fund. One last thing, if I may. Well, that's all we'll say with these particular claimants. Now, Mr. Chairman, I must say we appreciate your support, you're one of the few that have stood up for our clients, to try to make this system work out, as has Mr. Gibson, and try to see if OPA works, and I must say that I'm disappointed with how OPA's worked. I don't hold this against Mr. Sheehan, he's the safety net. I hold this against the responsible party, it's their fault and their responsibility, but now we need the safety net and that's all we need. Thank you. Senator Chafee. Well, thank you. Now, Mr. Sheehan, you'll get a chance to rebut. Let me just say this, Mr. Sheehan, it keeps coming up in here that, and I think you contradicted this, but there seems to be some confusion about 90 days before you, if I understood the testimony correctly here, I think that Mr. Sorlein and maybe Mr. Christopher indicated that, I think they had a little longer period before the insurance company, they suggested. Mr. Christopher, how long do you say you had before? Mr. Sheehan. Would you like me to layout the time for that? Senator Chafee. Yes, why don't you lay out the times for us. We know the 90 days before the responsible party. Mr. Sheehan. The claimant first has to go to the responsible party, if there is a responsible party. The responsible party has 90 days to respond to that claim. If the responsible party doesn't reply or gives an offer which isn't satisfactory after those 90 days, or if they deny it in 30 days, they can come immediately to the Fund. There is no set timeframe for the Fund to adjudicate a claim, but let's say that we adjudicated Mr. Christopher's claim, and use his process that he described, made him an offer, he asked for a reconsideration, the reconsideration, by our regulations, we have to respond to the reconsideration within 90 days or you then have the option to then file suit, which is not the purpose of OPA-90, OPA-90 does not want you to have to go court, but you would have had that option at the end of 90 days. Senator Chafee. Wait. I've got to get this clear in my mind. You go before the responsible party with a claim, Mr. Christopher would, that's a preliminary step that has to take place before they go before you? Mr. Sheehan. Before they come to us, yes, sir. Senator Chafee. OK. And the responsible party has 90 days to---- Mr. Sheehan. To either act on it, deny it, or if there is no action in 90 days, they can then come to us. Mr. Hartman. It's 90 days from when they consider the claim to be complete. Mr. Sorlein. That's a big problem. Mr. Hartman. When they consider the claim to be complete. Senator Chafee. When the responsible party considers? Mr. Hartman. Yes, yes. Senator Chafee. Then I suppose---- Mr. Sheehan. The responsible party is doing it wrong then, because the responsible party, when you file your claim, that starts the clock running, the 90 days. Mr. Hartman. They don't take that position. I couldn't agree with you more. Tell them. Senator Chafee. And they keep asking you for more and more information, we want a signed copy of the income tax and so on and so forth. Mr. Christopher. Yes. Senator Chafee. All right. That is a big difference, because whoever controls that can just delay forever. Mr. Christopher. Mr. Chairman, that's exactly what they did to us, and it was just constant, every time they asked for something, we would give it to them and then they would ask for something else and then it would just go on and on and on. Senator Chafee. This is adjusters, Hull & Cargo? Mr. Sheehan. Turnabout. Senator Chafee. Turnabout. Mr. Hartman. Now, let me tell you what happened, was that they would say if you want us to consider this claim to be complete, we will and we will adjudicate it but we think you should give us more information. When I talked to people at the Fund, they said to me, you'd better give whatever you want to give to the responsible party first because we won't consider new information, now that's what I was told, so we're betwixt and between, either the 90 days doesn't start so we have to get everything in to the responsible party, if we say forget it, responsible party, make your decision based on what we have, we don't like it and go to the Fund, the Fund tells me, well, you didn't present that information to the responsible party. Mr. Sheehan. Let me set the record straight. You file a claim, 90 days, if you haven't gotten an answer or they haven't responded to you, you can come to us. One of the things that, if we adjudicate that claim and we have a request for additional information, we require that that additional information also be sent to the responsible party. That is different than the process which you described. Mr. Hartman. Well, with due respect, Mr. Sheehan, I'll get you the name of the person that told me don't come to me with new information if you didn't give it to the responsible party first, that's what we were told. Senator Chafee. Well, there's a big difference here. Now there's a big difference, because under what Mr. Christopher is saying and the attorney saying here is, if you don't get what the responsible party asks for, you can't present it to Mr. Sheehan, whereas, Mr. Sheehan is saying not at all. Mr. Sheehan. That's not true. Senator Chafee. It's 90 days from when you submit your claim to the insurance company and to the responsible party, and if I, Mr. Sheehan, want more information when you come to me, then all we're saying is you send that to the responsible party. Mr. Sheehan. The responsible party as well. Senator Chafee. OK. So that's a whale of a difference. But, Mr. Sheehan, let's, OK, let's agree on that, so now they're before you, but they indicate, and, you know, it's pretty convincing testimony from Mr. Sorlein and Mr. Christopher, that they just can't satisfy you people, you want more and more, and I understand adjusters, and you've got fiduciary duty, but this thing seems to, they're very valid complaints that they got here. Mr. Sheehan. I think that they are legitimate issues which we are glad to hear. I think, sir, that one of the things, as you indicated, Mr. Sorlein, is the first time you've ever done a lost profit claim. Lost profit claims and business interruption claims, which basically these are, are easily the most complex claims to adjudicate that the entire insurance industry has, and they're particularly difficult to adjudicate in a fishing industry and a lobster industry. Senator Chafee. But, you know, Mr. Sheehan, you've got to take some people on faith. I mean, you're not dealing with General Motors, trying to make their regulations, you're dealing with John Sorlein, who knows what he did last year, who knows what happened when January, 1996 came, knows the effects of that, and can he rip you off, I suppose if he works hard at it he can rip you off, but what's in it for him? Mr. Sheehan. Sir, it's not my intention to even suggest that the folks who come to us, that we look at them in that manner. We do not. We have spent a, to put it in a bit of perspective, we received out of the North Cape spill 33 claims. Now, there have been many hundreds which have been settled by the responsible party. We have 33 claims. We've settled two, we've got, I think three were denied, we've got three offers out, we've got seven which are currently being measured, which are being looked at with the information that we've got, we've got sufficient information to measure them, and we've got 18 which information has been requested, and sometimes as long ago as May and we were told in July we were going to get all of this information, we haven't heard anything from them. So part of it is, part of it's in the claimant's court, part of it is our fault, and in my statement, and I will say this publicly today, that there have been delays in this whole thing, and I apologize for those delays, some of it's due to our contracting, I've instituted a new process whereby we can get assistance faster for some of this, some of this has been to put together an honest model of the lobster industry so that we can adjudicate all of these claims. I've got that here today, which we're going to pass-out and make available to all of the potential claimants. If I may, I've got a couple of other points to deal with this. Senator Chafee. Go right ahead. Mr. Sheehan. One of the things that have been a concern to us has been the issue of the statute of limitations. OPA-90 has a 3-year statute of limitations from the time damages have occurred or easily discoverable. One of the things that the responsible party has, evidently, published and sent to the Lobstermen's Association and to a series of other interested parties is that they are going to be considering claims beyond the 3-year statute of limitations, they're specified in OPA-90. I have put together some information about that issue because it is of concern to us, that if you have filed a claim past the 3-year statute of limitations with the responsible party and you don't get satisfaction, we are prohibited by law for you to come back to us. For example, let's say that you had a boat which was oiled by the spill and that occurred a week after the spill, which was in January 1996, and you had it cleaned, for whatever reason you decided that you were going to wait, go to the responsible party, and you went to the responsible party in the middle of February, you didn't get satisfaction from him, you're barred from coming to us because you've gone past that, you knew when that damage occurred. What we've put together, Mr. Chairman, is a document dealing with the statute of limitations issue, because I really want to make sure that nobody gets surprised by that and by the impact of that. Senator Chafee. Could you do that illustration of the oil again. I didn't get that. There's a 3-year statute of limitations? Mr. Sheehan. Yes, sir. Senator Chafee. Give us the time. Mr. Sheehan. It would have--the statute of limitations would run out, let's say---- Senator Chafee. Take this spill, January 19. Mr. Sheehan. January 19th. A week later you had a boat which was oiled, you had it cleaned, that's a legitimate cost for recovery. Senator Chafee. Right. Mr. Sheehan. For whatever reason you didn't file that with the responsible party, but you waited until February 1999 to file that with the responsible party, because the responsible party has a letter out that says, I'm going to consider claims after the statute of limitations. If the responsible party then doesn't settle with you, you don't have recourse to come back to me because the 3 years has gone by, no matter what the responsible party has said. So we looked at this, we've written a letter to the responsible party, telling them to include that information to potential claimants, I've put together a press release which went out today to the Providence Journal, to a series of papers around here addressing that issue because we're concerned about the fact that folks might get caught. Senator Chafee. Because the 3 years is coming up. Mr. Sheehan. Because the 3 years is coming up for at least those things which are discoverable in the immediate aftermath of a spill. Now, that doesn't say, for example, that potential future losses on the lobster industry which aren't discoverable until a time in the future. Senator Chafee. I found Mr. Christopher's testimony very convincing, and particularly, it seems to me, that you can trace through his profits his gross sales year after year as he documents it there, and then, obviously, things stop, and I just have great trouble why he's had such a tough time trying to get compensated. Now, I assume that the responsible party, what, brushed you off in a lot of those, gave you some settlement figures but nothing specific? Mr. Christopher. Not at all, and then when we went to the Fund. I mean, the second, they split it up into two parts, from when the waters were reopened again until, as one part, and then from there until the end of the year, and they denied the second half completely, the Fund did, and that's why I said, they just figured as though it was over, the spill didn't have any effect after that, after they opened up the waters, that was the end the spill. And, I mean, we sent in lobster slips from the boats that were pending that and the whole works and they can see comparing from 1 year to the next how the catches were down and they just said, no, it doesn't effect it. Mr. Hartman. If I may, I promised when Tom and I talked about this we weren't going to try to make you the judge on claims, because that's not fair, and we're not really trying to do that, but I will say this---- Senator Chafee. No, but Mr. Christopher presented, I think, a very interesting case, and one that seems to me to be quite well documented. I mean, you know, you can't assume that suddenly he's sitting at home on the sofa watching daytime shows, he's trying to pursue his business, and you can see, his document shows what his gross was and then it tails off. It wasn't that he just sat at home. He's not going lobstering. Mr. Christopher. He certainly didn't. Senator Chafee. Go ahead. Mr. Hartman. What I was going to say was, and I appreciate Mr. Sheehan saying there's now a model out of some sort, which is news to us, but I appreciate knowing that. The danger is this, the reason why Mr. Christopher's claim has been denied and the reason why we're having other difficulties is because the Fund, I'm sure, acting in good faith, is making assumptions about losses and saying to the individuals, we are making this assumption, it applies to you and we don't care about your facts, and the danger of any model and any rule, like the 3 percent rule I told you about once before that the responsible party filed and you can only get 3 percent of your losses if you fished outside the closed area, we don't care what your real losses are, is that it ignores the facts, so all we're asking is look at the two banker boxes of documents he submitted, we know there was a loss out there, everybody knows lobsters died, everybody knows it was shutdown, look at the two boxes of financial documents he's provided, and based on the language of the regulations that talk about reasonable documentation and the legislative history that talk about let's not make everybody go to court, make a reasonable decision here, that's all we ask. That's all we ask. I have never, and I've litigated these cases in court, I've litigated lost profit cases, defending a lot more than I've been a plaintiff's lawyer for, Mr. Sheehan, I've never seen anybody require the level of documentation that's required here by any court, and that's all we ask, just look at reasonable documentation. If you think somebody is lying, say so; if you don't, assume they're honest business people and make a decision, that's all we ask. Senator Chafee. Mr. Sorlein, did you have a comment? Mr. Sorlein. Yes. You made a comment about a basic level of trust, Mr. Chairman, and at some point you have to have faith in an individual, that he's not out to cheat and get something that he doesn't deserve, and I talked earlier about mitigation, and it's interesting, when I think of the possibilities of people making an assumption, the Fund or the responsible party making an assumption that I'm out to cheat them, when I actually think about what I've done in the last 3 years to mitigate my damages, which is required by law, I believe, that I must do what is within reason, within reason of what I can possibly do to mitigate my losses, in other words, I can't sit around and watch soap operas and just pileup the losses, and, in fact, what I have done is I've burned more fuel on my lobster boat, spent more hours on, taken my pots further to try to get away from, not only the impact area where the lobsters were wiped out, but also to move further away from the areas adjoining the so-called impact area where lobstermen have migrated out with their own traps, in essence, helping me to catch my lobsters in some other location and going beyond that, to the point now where I am 60 miles offshore in an inshore lobster boat, which is not a good place to go in the interim time, because that's the only way I'm going to put food on my table and pay my bills. What I've done by doing that is I've removed my traps from this so-called closed area, this impact area they like to talk about, and by doing that and following through with the responsible party's philosophy of 3 percent outside a certain line, I have destroyed my chances of a claim, so it's a catch 22. I've worked to mitigate my damages. By mitigating my damages, I've eliminated myself from the claims process. Senator Chafee. Why have you eliminated yourself from the, because, when you use the word you've mitigated your damages, you mean you've now moved your gross up to where it was before? Mr. Sorlein. No. When I say mitigating my damages, I'm working to my fullest capability, operating my business to make as much money as I can, in other words, to find lobsters other places. Senator Chafee. Yes. Mr. Sorlein. And by doing that and by removing my pots from this impact area, the so-called impact area, where they draw lines on a chart which are very arbitrary and they say inside of here is where the oil spill killed the lobsters, but right on the other side of that line nothing happened, so if you put your pots over there, you have no claim. Senator Chafee. Yes, I see. Instead of staying local, you're going 60 miles out and taking more fuel and greater expenses, greater danger, too. Well, Mr. Sheehan, you're sort of on the hot spot here. You know, right from the beginning I said I wasn't asking you to be in a situation where you have to become clerk typist and just type up a check for every claim that comes up, we're not asking that, but we're also asking that, these are very legitimate complaints, and I think you've got to take some people on faith, and you yourself said that it isn't part of your standard to figure that everybody's trying to cheat your organization that submits a claim, and I certainly don't think these gentlemen are trying to do that. I think they present very good cases. One of the problems, apparently, that's come up, is working with your evaluation contractors, and I think you yourself said you've revised that, have you? Mr. Sheehan. Well, one of the problems, Mr. Chairman, has been the timeliness of getting our claims, commercial claims adjudicators to respond to some of the claimants, like yours, for example, and that was a contracting problem that we had internally in the Coast Guard, we have fixed that, we can get those folks to respond quicker at this point in time to the claims as they come forward. The commercial claims adjudicators that we've hired in this particular instance, Hull & Cargo, have a long history of adjudicating maritime type of claims, they are one of the best in the country, they basically follow our guidance with respect to what type of information is needed, they also use industry standards. One of the things which we make absolutely clear to them is that we want them to fairly adjudicate that claim because we end up finally signing off on it, they get no credit from us for coming in with a low ball offer, I think I made that statement in one of the interviews I had, that is not part of the process at all. We are not out to protect the Fund from future use. We're out to pay claimants, but we do have a requirement that there are certain standards of information that we need to pay folks. Now, there have been a couple of cases where we have settled, where we basically went in and worked with the claimants to help reconstruct their books. We spent money for our accountants to go in and help them do that because we recognized--we don't want to have a requirement where you have to custom tailor information to come to us. We are more than happy to have our folks go out and help work with the claimants to provide some of this information, and we're committed to doing that. I think one of the problems has been that there have been somewhat of a lack of communication back and forth. In the press release I put some information about the information that we needed and why we need it, because I think that that's a legitimate concern. Lots of times you get asked for information, if you're not told what it's for and why you want it and how it plays into the adjudicational process, you say, why do I need to do that, and I understand that, and that's one of the things that we put in this document to help with future claimants and to help with those that we've currently got on our plates. Senator Chafee. Well, I'd like to see some results here, and I'm not just, and I'm not just speaking on behalf of these two gentlemen here who I think have presented a very convincing case, but there are others, too. Mr. Sheehan. Yes, sir. Senator Chafee. And I'll follow this and I'll just, have your people take a look at these particular cases and the cases that the attorneys have here and let's just get this thing done. As Mr. Sorlein and Mr. Christopher said, you're going to end up with--somebody is going to have to make a decision, it's not going to be--the situation has got to be absolutely crystal clear, but usually in these cases these people want a decision. So I'll be staying in touch with you, Mr. Sheehan, on these, and I will get the rest of the cases, that, obviously, I'm intensely interested in the Rhode Islanders, but this is a national problem, too, and I'm representing the claimants nationally, likewise. Do you have any other questions? Mr. Gibson. No, sir. Senator Chafee. Let's see what we can do on all this. And, now, you gentlemen have got to respond quickly if he wants something more. Mr. Hartman. Absolutely. And, Your Honor, with all due respect to Mr. Sheehan, I don't know who he's talking about, but I can show you the list of documentation, believe me, there's no moss growing under this stone when we respond. It goes quickly, very, very quickly. Mr. Sheehan. I would like to say this, that I have letters from, we have requests out to 18 claimants, many of which are represented by my colleague over here, Mr. Hartman, from May and July who we have not received the documentation, so if that's not moss, I mean, I'm sorry. Mr. Hartman. That's simply not true. Senator Chafee. Let's not get back and forth. I think, you know, some people just for wariness or despair give up and don't respond, but I don't think we want it to be an endurance course either on these folks. Mr. Sheehan. We don't either. Please, accept my assurance of that. Senator Chafee. Sometimes, it seems inappropriate to say that you've got to fish or cut bait here, but on these things a decision has to be made and you're dealing with, these aren't shysters, these aren't guys out to shaft you, these are people who can, I think the income tax, it seems to me pretty that not many people are going to take a chance of cheating on their income tax to collect some more, and when they submit their income tax, as Mr. Christopher, you can see the level of his business going up, things going great and making purchases and then down she goes. So, in any event, so I'll stay closely in touch with you, Mr. Sheehan, and now you've got to do your part. Mr. Christopher. Absolutely. Senator Chafee. And the others who aren't represented here, likewise, I don't know whether the ones you represent and members of your organization, Mr. Sorlein. Mr. Sorlein. Certainly, certainly, sir, yes. Senator Chafee. So we'll follow them along. Did anybody else want to say anything? We have a chance for somebody to say a couple of minutes. Mr. Trager. I'm Bob Trager. I own a small lobster wholesale business in Jerusalem. I'd like to ditto what Mr. Christopher said because his business was similarly sized to mine, and Barry's representing our business, but what I'm hearing is not as encouraging as I'd like it to be because I don't know where we stand right now, I'm going to have to talk to Barry afterwards, because we haven't submitted this year's tax returns, but all of the things that Al said about how the insurance company has dealt with us when we put our short-term claim in, stacks of papers like this. My wife--I don't know if you know Skip's, I think you've been down to Skip's dock, Senator? Senator Chafee. Yes. Mr. Trager. Well, anyway, we're the oldest continuous running lobster wholesale business in the whole port, but we're probably the smallest, too, but we're also one of the oldest retail markets in the State of Rhode Island and it's in jeopardy of surviving right now because of the way this whole thing is transpiring. Right now my sons are down there, two of them, that are running that business, unloading lobster boats. I looked around here and I see what I think are a lot of lawyers and a few fishermen, and that's from guessing, but one of the reasons there aren't more fishermen here, and Mr. Sorlein didn't mention it, is today, and he probably shouldn't be here, because today is a calm day and practically everybody went out fishing today because there's so few calm days, if the wind is blowing, they won't fish, but they fish when they can, so I think this place would be packed with people if it wasn't a fishing day and the lobstermen could have been here. I've seen a decline in our business very similar to what he said. This year has been one of the slowest that I can remember, and, like I said, there are many people that have been in the business longer than me that are in Galilee, but we're the oldest ones there, and in the last 12 or 13 years, and I think with the 17 to 20 boats that sell to us, we've got a pretty good feel of what's going on with lobsters in the area, and, believe me, what's going on right now is not a healthy situation, and not only that, but we also have to contend with the regulations that are coming down with lobstermen now, that some of them are so far out in left field that the Government's playing around with that, that's a scary issue, too. So the lobster, we got that, and this, and this claims process, I wish I could describe my wife Ingrid to you a little bit, but nobody, she is so honest that it's scary sometimes, and, yet, we still couldn't get anywhere. It took us forever to get what I didn't even think was a fair settlement for that short-term claim. One of the things they would do, a slip was missing, but one slip out of 5,000 slips. Well, believe it or not, we ended up finding it, it was one that we canceled out, you know, that's the kind of thing they would do over and over again. We haven't even gotten the long claim. I don't know what's going on with the long claim process, but I know one thing, what's going on with my business and my two sons that decided that this is what they're going to be doing with their living for the rest of their lives, one of them has two children, my other son is probably starting along those lines pretty soon, and we don't fish. A lot of people, like they were saying, there's some people that have fishing boats and they have these businesses, all we do is serve the lobstermen and we run a retail market and we run a wholesale lobster business, we're on the other end of it, but whatever happens to the lobstermen, we are damaged, our damages are proportionate to whatever happens to them, and what's happening to them is not good right now. I think that---- Senator Chafee. I think that---- Mr. Trager. I'm just afraid that, even though I heard all this and I'm glad I came, I don't have a good feeling of comfort when I hear about statute of limitations that's going to come up in a few weeks, because my wife and I haven't done some kind of manipulation of our books and whatever. We're working down there, like Al's out of it, it's a good thing that he is, but right now we're still doing it, we've been doing it for a long time and we want to keep doing it. It's a hard job, and it---- Senator Chafee. I also wonder whether the full effect hasn't really been felt yet. Mr. Sorlein. No, it has not. Senator Chafee. If you take the 3 years--when did they reach maturity, after about 3 or 4 years? Mr. Sorlein. Seven. Mr. Hartman. According to the draft assessment, the worst years are going to be 1999, 2000, 2001. Senator Chafee. Yes, that's what worries me, is that the full hit will come then. And then I think, I thought it was very interesting that the testimony was given about the others that are all part of the food chain, that looks very--it's very interesting. Mr. Sorlein. Senator, I have one more thing. With respect to some comments I believe that Mr. Sheehan was directing toward the documentation still outstanding and possibly, and he didn't say this, but possibly claimants that have not moved into the Fund process yet, I can speak for myself in saying that I have held back from asking my attorneys who represent me to move my claim from the responsible party to the Fund for the simple reason, and I call this the chicken and barbecue theory, that how many pieces of chicken do you throw onto the grill before you figure out that the coals aren't burning, and while lobstermen are different in a lot of respects, but we're also very similar, and when I see some of my colleagues with claims going that are involved in the Fund and getting nowhere, and I know that my claim is quite similar---- Senator Chafee. With the Fund, John, or with the---- Mr. Sorlein. With the Fund, sir. Senator Chafee. In other words, they've gone through the responsible party, the 90 days? Mr. Sorlein. Right. And now you're saying that there's no sense in my going, moving, going through the process of being in the Fund, when I can look at five or six of my colleagues who have claims that are identical to mine in all respects except for the name at the top of the tax return and the individual figures and the other supporting documentation, but we are, essentially, identical, and we're getting nowhere, so that it just makes little sense. Senator Chafee. Before the responsible party? Mr. Sorlein. Both the responsible party and the Fund. Senator Chafee. The ground rules are that you got to go first, you have to go through the responsible party? Mr. Sorlein. Absolutely. I understand that, sir. Senator Chafee. And I'm not quite sure that, you're saying they've done that, then you see them go before the Fund and they go nowhere and that discourages you, is that what you're saying? Mr. Sorlein. Exactly. What I'm trying to relate to you, sir, is that from a personal standpoint, my own claim, I have not pressed my claim to go forward into the Fund because I see no reason to be there. I'm just trying to describe to you the dismay that we have with the process that the Fund seems to be presenting to us because of the inaction on the claims that are similar to mine, and I see no sense in throwing yet another piece of chicken on the grill when I can tell that there's no fire there, so that's where I am. Senator Chafee. Well, Mr. Sheehan said he'd look into these and press these people along and get these things settled, is that a fair statement, Mr. Sheehan? Mr. Sheehan. Yes, sir, and I would like to make an offer, that we would be pleased to come up and meet with the Lobstermen's Association and sit down and go through this in their setting, just to go through and layout and describe whatever else you need. We will go through this process. Senator Chafee. I would say not only describe it, but arrive at some conclusions, in other words---- Mr. Sheehan. I think there's a communication problem that needs to be addressed. Mr. Sorlein. If Mr. Sheehan was going to bring that clerk typist with him, we'd be more than happy to accommodate him. Senator Chafee. OK. Do you understand that offer, John? I should get your name. Mr. Hartman. It's Barry Hartman. We had asked from March 5th, 1996, I sent the Freedom of Information Act request to Mr. Sheehan, saying tell me all the criteria you need and want to file these claims, and he said there were none. Give it to me, I will pass it on, I will make sure that all our claims meet, I will guaranty you that our claims meet every documentation requirement that you have there and then some, I will guaranty you that. I mean---- Senator Chafee. Let's not replay it. Mr. Sheehan made this offer, I think it's a fine offer, that he or his people will meet you and---- Mr. Hartman. Say the time and place. Senator Chafee. Let's get this doggone thing settled. Mr. Sheehan. If I can only make one other point, and that's, again, I would urge you to take a look at that document that we put together on the statute of limitations, it's out on the table out there, and I don't mean to scare you, but it has some implications. Mr. Trager. You scared me, and I'm going to go look at it. Mr. Hartman. We're quite familiar with that. Senator Chafee. That's enough to scare anybody, the statute of limitations. What was the date, the 19th? Mr. Hartman. The 19th of January. Senator Chafee. So that's enough to scare anybody. So time is of the essence here. Mr. Sheehan. For most folks that doesn't apply, but there are some that it might, and I want to make sure that everyone who has a loss has the opportunity to come to the Fund site. Senator Chafee. All right. Now, the ball's in your court over here, gentlemen, to work it out with Mr. Sheehan and---- Mr. Hartman. Give me a date and time and I'll be in your office. I'll save you a trip to Rhode Island. Senator Chafee. And I personally will follow this thing and stay in touch with Mr. Sheehan as to how we're doing here in getting these things done. Mr. Hartman. I have to say something, Mr. Chairman, a comment was made by the counsel of Mr. Sheehan saying they've been asking to meet with claimants. That's simply not true. I am willing to meet on behalf of 122 claimants, to take all the information back to our claimants to put it together. These people can't afford to meet with bureaucrats all the time, that's what I'm there for. I'll give them the information. Tell me when to be in your office. Let's cut through this. To say that you want to meet with our claimants for the fifth time, tell me when to be in your office and I will be in your office, I'll do it. Mr. Sheehan. I don't want to replay this, but I think our dialog today has been very useful. Mr. Hartman. Absolutely. Senator Chafee. Well, I can understand, and I take it that what we're saying is that, yes, they're glad to meet with the lawyer, but what are you suggesting? You're the attorney for Mr. Sheehan? Mr. Sheehan. She's my deputy. Senator Chafee. Deputy. And what are you saying, you want to meet these fishermen face to face? Ms. Lane. We frequently have questions that we need to pose directly to the claimants. We deal with claimants on a day-to- day basis. Senator Chafee. Well, would you do that up here? Mr. Sheehan. We will be glad to come up at your convenience, not at our convenience. Mr. Sorlein. Why can't those questions be posed to our attorneys who are handling our cases? This is a very complex process, Senator, and---- Mr. Hartman. If you put a hundred people in a room, you're going to say, Mr. Smith, tell me about your claim. Ms. Lane. You don't have to meet with everybody at the same time, and sometimes questions can be answered in 2 seconds, whereas, sometimes when you go through attorneys it takes 2 months to get. Mr. Hartman. That is just simply not true. That's not true. That has not been true. Senator Chafee. I think there's considerable merit, and if they're willing to come up here, and if the deputy or whoever is going to interview these individuals and it's going to, if they think it's going to move things along faster, I think there's some merit in that. Mr. Hartman. They're welcome to do it. I'm just trying to be practical and move it as quickly as we can, because our folks can't all be there. Senator Chafee. Oh, obviously. I don't think you're suggesting 120 call you. Ms. Lane. No, even over the phone sometimes we can get questions answered. Mr. Hartman. Oh, we've offered that with the clients, absolutely. Senator Chafee. Now, is this thing settled now, is it understood you're going to meet at a certain time up here? Mr. Sheehan. We'll work it out with them, Mr. Chairman. We will probably end up doing both and that will be fine with us. Mr. Hartman. That's fine. Senator Chafee. Now, just a concluding statement here. Mr. Allen. My name is Dick Allen. Senator Chafee. Dick, come on up front. Mr. Allen. I just wanted to comment on one thing, you kind of alluded to it, the frustration and making it an endurance contest, and one thing that I've realized, that this is a pretty heavy cost in pursuing your claim, not in just the defense fees that the lawyers are going to get or things like that, but, as someone mentioned, there are a lot of people who aren't here because they have to be out fishing. If they had given up the day, that's an additional loss. We put in a tremendous amount of time gathering this information, putting it in, and, as I understand the law, those kinds of things are not compensable, you can't put in a claim for what you put in, and so these continuing requests, people get to the point where they say, you know, I'm just adding to my losses by continuing to respond to these things, so I think it's a completely valid argument that we can't just keep saying they want to talk to you, they want to meet with you here, they want to meet with you there, how many days can you give up, how many times can you put in before you just say, hey, I'm starting to go backward now, forget the whole thing, you know, take your losses and you can go away. Senator Chafee. OK. Well, I think you're right, you're not going to be able to collect for the time you spent tabulating your losses, but, well, I think we made some headway here, and I'm very, very interested in this situation, so everybody put their shoulder to the wheel now and try and reach settlements on this, and, as I say, I'm going to make it my business to see how these things all come along, but it's up to you folks now to get together and work it out, and Mr. Sheehan has offered to come up here, his people, there's one, if you want to take, and when he comes, I'll get some conclusion. All right. That settles that, folks, and that concludes our hearing. I want to thank everybody for coming. You've all been very helpful. [Whereupon, at 6 p.m., the committee was adjourned, to reconvene at the call of the Chair.] [Additional statements submitted for the record follow:] Statement of Daniel F. Sheehan, Director, National Pollution Funds Center, U.S. Coast Guard, Department of Transportation Good afternoon, Mr. Chairman and distinguished members of the committee. I am Dan Sheehan, the Director of the National Pollution Funds Center, responsible for the management of the Oil Spill Liability Trust Fund. I want to thank you for giving me the opportunity to testify concerning the claims process that resulted from implementation of the Oil Pollution Act of 1990 (OPA-90). A primary objective of OPA- 90 is to provide compensation, subject to certain statutory limitations, to those damaged by oil spills or threats to our navigable waters. Polluters are strictly liable for a broad range of damages and, if the polluter does not pay, the Oil Spill Liability Trust Fund (OSLTF) is available to ensure appropriate compensation. The National Pollution Funds Center (NPFC) is charged by Executive Order and internal agency delegations to implement and administer procedures for the payment of claims from the OSLTF for compensation of damages discussed in OPA-90. OPA-90 significantly broadened the scope of removal costs and damages claimants can recover, specifically eliminating the traditional admiralty ship owner's protection. If a responsible party does not pay a claim for damages or removal costs, or if the responsible party (RP) cannot be identified because the source of the spill is not known, a claim may be submitted to the NPFC for consideration of payment for the following categories: Uncompensated removal costs; Damages to real or personal property; Loss of subsistence use of natural resources; Net loss of certain government revenues by Federal or State governments or political subdivisions thereof; Loss of profit and earning capacity due to loss or injury to real or personal property or natural resources; Net costs for increased or additional public services during or after removal activities by a State or a political subdivision of a State; and Natural resource damages and the cost of assessing those damages. Prior to OPA-90 the only mechanism available for most non-Federal claimants was to seek redress for damages directly from a negligent responsible party. The scope and type of damages that were compensable were narrowly defined and the existing case law basically stated that in order to claim damage, individuals or their property had to be physically impacted or touched by the oil. This did not account for the myriad of real damages caused by oil spills. OPA-90 also provides a two-step process whereby a claimant may seek compensation directly from a strictly liable RP or a guarantor if a guarantor was required by OPA- 90. If the RP doesn't settle a claim within 90 days, the claimant can either seek compensation through litigation against liable parties (the RPs) or submit the claim to the NPFC for adjudication and payment from the OSLTF. In the latter event, when the NPFC pays a claim, it becomes subrogated to the rights the claimant had against the RP. OPA-90 sought to provide a mechanism that prevented a claimant from having to engage in potentially costly and lengthy litigation. Where an RP is known, the two-step process does in fact facilitate that goal. The North Cape spill serves to illustrate the achievement of the broader goal of having the RP respond first and take care of the claims, but also of giving claimants a second venue if they feel the RP did not adjudicate claims properly. By way of background, I would like to provide an overview of the NPFC's role with respect to the North Cape spill. The NPFC has served two roles in the aftermath of the North Cape incident. First was in support of the response effort. During the operational response to the North Cape incident, the NPFC served as ``banker'' for the government costs. We provided the funding source to the Federal On Scene Coordinator so that Federal response efforts could be initiated immediately. The government spent $1,886,034.92 during the clean-up phase of the incident. The NPFC also drafted the Notice of Designation that was delivered to the RP. This Notice advised the RP of its liabilities under OPA-90 and set out the requirements for advertising for claims, including informing claimants of their rights to submit claims to the OSLTF if unable to reach settlement with the RP. It is our opinion and general observation that the implementation of OPA-90 and the requirement to inform claimants of the Fund's availability has provided significant incentive to RPs to act responsibly toward claimants. The second NPFC role was in support of third party claims. During the incident, an NPFC claims representative traveled to the site and provided information to various public officials and others. We made copies of the ``NPFC Claimant's Information Guide'' available during the incident and have mailed others to claimants since. In the immediate aftermath of the incident, we worked closely with representatives of the congressional delegation of Rhode Island, the Governor's Office, and the guarantor of the RP to implement a partial payment and settlement process for claimants. This partial payment policy had been in place for claims adjudicated at NPFC, but had not been adopted universally by the marine insurance industry. Through a cooperative and collaborative effort with that industry, and in particular the Water Quality Insurance Syndicate, the partial payment option was made available to claimants from the North Cape spill to tide them over until final adjudication was completed. In the aftermath of the incident you introduced legislation to make this a permanent feature of OPA-90, another positive step in refining the claims adjudication process. Based on information provided by the North Cape representatives, the RP received 1,460 claim inquiries from 1,180 claimants. Of these 1,460 claim inquiries, 579 are still outstanding; most of these are phone inquiries following which the claimant has not pursued a written claim. Of the remaining 881 claims, 125 have been withdrawn by the claimants, and the RP has made partial settlements on 275 claims and full settlements on 481 claims. To date, the NPFC has received 33 claims arising from the North Cape incident. All claims at the NPFC fall within the categories of property damage or lost profits and earning potential. These are claims for which either payment has been denied by the RP or the claimant did not feel the offer made by the RP was acceptable. As might be expected in the situation where claims have been denied by the RP, there is generally a lack of evidence to support the claims. In addition to this lack of documentation, there are two factors that have impacted our ability to adjudicate these claims expeditiously: claim complexity and delays resulting from government contracting requirements. The North Cape oil spill incident has presented the NPFC with some of the most complex claims received to date, in particular those claims of fishermen for loss of profits or earning capacity. We have hired experts to assist us in adjudicating these claims. We have received widely varying technical and scientific data and opinions on the impact of the spill on fisheries resources. We have had to acquire catch data and have spent a substantial amount of time helping claimants properly document their damages. All of these factors have contributed to delays in the processing of many of these claims. Many claimants submit their own claims. Others choose to use legal counsel. In some instances, claimant's counsel has been reluctant to provide information or to arrange for the NPFC's representatives to deal directly with the claimant, thereby also contributing to processing delays. I would again point out that the claims we have received are not all claims arising from this incident, but only those that were not settled by the RP or its guarantor. Arguably, we have received the claims that are more difficult to compensate because of a lack of supporting documentation. Some of the delays are our fault and I take responsibility for those. We believe in continuously improving the process and in making it more customer friendly. I have initiated a new technical support contract mechanism which I believe will assist us in being more timely. Additionally, I am reviewing the Claimant's Guide and our standard supplemental information request documents to see if they can be improved. We can speed up processing time if we can reduce the number of times we have to go back to the claimant for additional information. In support of that goal we have prepared a handout for the lobster industry, available at the hearing today, which provides a list of the specific documentation required, how we use the documentation, and the methodology which will be used to measure their claim. We are hopeful that this document and other supplemental guidance will clear up some of the confusion about the NPFC's adjudication process. I understand the frustration of individuals that believe they have not been adequately compensated as a result of an oil pollution incident through the claims regime established by OPA-90. And there is nothing we would like better than to be able to compensate every claimant to his or her complete satisfaction. However, our authority and ability to provide relief is not unfettered. First, there are statutory constraints, which limit any relief to those seven categories of costs and damages mentioned previously, and their respective classes of allowable claimants. The statute also requires that, generally, claims must be presented first to the RP and that the RP is allowed up to 90 days to settle the claim before the claimant may come to the NPFC. Clearly the RP does need time to consider claims, but I can understand the problem of an individual facing financial responsibilities whose livelihood has been taken away by a spill. In the aftermath of the North Cape spill, I wrote to every guarantor and gave a speech at a maritime conference stressing the absolute importance of timely claims adjudication to put money on the table for just such individuals. Second, as stewards of the public's money, we have a fiduciary responsibility to ensure that where funds payments are made that it is done equitably and that any payments from the OSLTF are based on supporting documentation. We are subject to congressional oversight and annual Inspector General financial audits. We are clearly, and appropriately, accountable for the funds expended. Lastly, one of our functions in administering the OSLTF is to pursue cost recovery vigorously from RPs. These costs include expenditures from the Fund for third party claims. We need to ensure that we have adequate documentation to support claims payments that are later billed back to the RP. That documentation is utilized in our litigation proceedings. I would now like to take the opportunity to give you a better understanding of our claims process--what we do with the claim when we receive it. Our basic approach is to first determine if the claim is compensable under OPA, and then to measure the amount of compensation. After we have determined the compensable amount, we offer 100 percent of that amount. This point is also emphasized to any contractor we hire in the adjudication process. Our contractors receive no bonus for ``saving money'' for the Fund. The NPFC also insists that all claims be handled consistently. The methods used by the NPFC to measure these damages are the standard methods, where standard methods exist, that are used in the insurance industry. All claimants are held to the same general requirements: they must submit evidence to support their claim. 33 CFR 135.105. Claimants requesting compensation for lost profits or earning capacity must establish that property or natural resources were injured or lost as a result of an oil spill and that the claimant lost income as a result. The amount of the loss is established by income tax returns, financial statements and similar documents. Saved expenses, mitigation, and alternative employment or business factors are also relevant. 33 CFR 136.233. To assist us with various aspects of the adjudication process, the NPFC sometimes hires contractors with specialized expertise. Contractors can provide technical expertise or surge capacity and also ensure consistency for those incidents where we anticipate a high volume of claims. For example, in handling the claims arising from the North Cape, the NPFC hired a contractor to prepare a report on the fishing bans imposed in the area, when and where the bans were imposed, when they were lifted in the various areas impacted by the spill, and how these bans generally impacted the seafood industry in that area. We also required the claims adjudication contractor to hire an accounting firm familiar with the New England lobster industry to assist with the lost profits claims, and an expert on lobster population dynamics and movements in southern New England. Although this has generally worked well, it has not always resulted in as timely an adjudication as might otherwise occur. As mentioned previously, I am implementing a new contracting process to allow us to hire the specialized expertise we require in a more timely and responsive manner. Regardless of which vehicle is used to obtain contracting services, the recommendation made by the contractor is closely scrutinized by appropriate personnel at Coast Guard Headquarters and the NPFC. Any claims adjudication recommendation is reviewed by two NPFC claims professionals, who make the final decision on disposition of the claim. As of November 10, 1998, the status of the 33 claims submitted to the NPFC are as follows: 2 have been settled; 3 have offers pending; 3 have been denied; 18 await information from the claimants; and 7 are in the measurement process by our contractor. With respect to natural resource damage (NRD) claims, it is clear to anyone familiar with the North Cape oil spill that natural resources were damaged as a result of the spill. Even though the NPFC has not received an NRD claim from the various Natural Resource Trustees, I'd like to take this opportunity to discuss the current status of these claims in general at the NPFC. While the NPFC has provided (and will continue to provide) limited funding to Trustees to initiate NRD assessments, it has not previously paid NRD claims, relying on a Comptroller General opinion, issued in late 1995, that OPA-90 provides for payment of NRD from the OSLTF only by appropriation; OPA-90 allows the NPFC to pay other damage and removal cost claims direct from the OSLTF without appropriation. In late 1997, the Department of Justice (DOJ), Office of Legal Counsel, interpreted OPA-90 to permit payment of NRD from the OSLTF without further appropriation, like other damages and removal costs. Following the DOJ interpretation, the NPFC formed a Program Implementation Team with members from the Coast Guard, National Oceanic and Atmospheric Administration (NOAA), and Department of the Interior, and with advice and assistance from the DOJ and other agencies as needed. The NPFC had no experience with the science and economics of NRD. The Program Implementation Team provided technical assistance to the NPFC in determining the resources needed to carry out this program, especially the qualifications of the personnel necessary to evaluate these often complex claims. The Coast Guard is in the process of approving additional personnel resources for the NPFC that will be devoted to NRD claims processing. As soon as qualified staff is hired, the NPFC will begin adjudicating NRD claims. We are hopeful that the new staff will be in place by next spring. The NPFC has developed an outreach document, a Trustee claimant guide, that explains the process and general requirements for adjudication of NRD claims by the NPFC. Essentially, the guide summarizes certain OPA-90 provisions relevant to NRD, the general claims regulations already in place, and certain aspects of the NOAA damage assessment regulations. The guide is now available for the information of all Trustees on the NPFC's Web Site (http:// www.uscg.mil/hq/npfc/npic.htm). I plan to send a letter notifying State Governors, congressional delegations, and all Trustees (Federal, State, and Indian Tribes) about the availability of the Guide. I will also invite any comments they may have on the utility of the guide as an information source. Let me highlight a few OPA-90 NRD fundamentals that underlie the Guide. All Trustees have the same standing as claimants from the OSLTF. There are no preferences or differing procedures or standards for any particular Trustee or class of Trustees. The interests of Trustees may often overlap, so the Trustees are encouraged to coordinate their claims. NPFC cannot pay twice from the OSLTF for the same damage. A claim must be based on the cost of a plan to restore, rehabilitate, replace or acquire the equivalent of the damaged natural resources, the diminution in the value of those resources pending restoration, and the reasonable cost of assessing damages. Assessment or restoration plans must be made available to the public for comment before they are finalized. Any NRD claim must first be submitted to the responsible party. If the responsible party does not settle within 90 days, the Trustee may submit the claim to the NPFC. The Trustee has the burden to support its claim. However, the claims process comparable to an insurance adjustment process. It is not intended to be a proceeding with opposing parties arguing alternative evidence or law. Congress clearly intended that claims to the OSLTF be an alternative to litigation, not litigation in another form. Trustees may follow the NOAA damage assessment regulations in preparing their claim, but are not required to do so. Determinations or assessments made in accordance with the NOAA damage assessment regulations are presumed to be correct. Any presumption is subject to rebuttal. If the NPFC determines the rebuttal evidence is of sufficient weight, a claimant may need to supplement its record or claim with additional information. Ultimately, the NPFC may pay a claim in full, but it also may deny a claim in whole or part if it is not adequately supported. Any amounts paid to Trustees from the OSLTF must be retained in a revolving trust account and used only to reimburse and pay costs of assessment and restoration of the damaged natural resources. Regarding the North Cape incident, I understand that the Trustees have released a draft restoration plan for public comment. Under OPA- 90, they must conduct public hearings prior to finalizing the plan and then submit a claim for the cost of the final plan to the RP before they may submit the same claim to the NPFC. If the RP does not settle the claim, the Trustee claimants will determine whether and when to submit a claim to the NPFC or litigate their claim against the RP. In summary, Mr. Chairman, I would like to again thank you for the opportunity to appear before you today; to provide insight into our claims process; to let you know what steps we are taking to streamline our process; and to reassure you and your constituents that we share the goal of assuring that claimants are appropriately compensated for damages caused by oil spills, and that the natural resources damaged will be restored in a timely manner. I will be happy to answer any questions you might have. ______ Responses of Daniel Sheehan to Additional Questions from Senator Chafee time frames for handling claims Question 1. There appears to be some confusion on the time frames in which the responsible party (RP) and the National Pollution Funds Center (NPFC) must act with respect to a claim. Can you clarify how long the RP has to handle a claim, when the claimant may go to the NPFC, and how long the NPFC then has to handle the claim? Response. A claimant is required by law to first present the claim to the RP. The RP has up to 90 days from presentment of claim to take action concerning that claim before it can be submitted to the NPFC. If the RP denies liability for the claim or the claim is not settled within 90 days of the date it was presented, the Oil Pollution Act of 1990 provides that the claim may then be presented to the NPFC for payment from the Oil Spill Liability Trust Fund. With respect to how long NPFC has to handle the claim, there are no statutory or regulatory requirements, however, we strive to adjudicate all claims as quickly and efficiently as possible. All claims are not equal in their complexity or documentation requirements and as a result, the time needed for adjudication will vary from claim to claim. NPFC relies heavily on contract support for the analysis of claims injuries and has implemented improvements to make this process more timely. statute of limitations for filing claims Question 2. An announcement was made at the hearings concerning the Statute of Limitations for the filing of claims under OPA. Could you clarify this issue and its impact on the claimants in Rhode Island? Response. The Oil Pollution Act of 1990 (OPA-90) has a 6-year statute of limitations (SOL) for claiming removal costs, and a 3-year SOL for other compensable OPA-90 oil spill damages. The question was raised about when the 3-year clock starts. While the circumstances of each claim will determine when the clock starts, the rule is that the claimant must submit an OPA oil spill damage claim to the National Pollution Funds Center (NPFC) within 3 years after: 1) the injury, and 2) its connection with the spill, were reasonably discoverable with the exercise of due care. Loss-of-profit injuries, and their subsequent claims, are often complex. As general guidance, NPFC believes that a loss-of-profit injury is reasonably discoverable no later than when, in the course of its normal business accounting practices, or otherwise as required by law, the claimant determines, or is required to determine, business loss for a given period. But if a business in fact discovers it suffered a loss at an earlier date, that date will control. In the absence of other information as to when a loss of profit was in fact discovered, the NPFC may rely on the date of relevant income tax filings to establish the date loss was reasonably discoverable. When is the connection between the injury and the discharge reasonably discoverable? Again, the circumstances of the claim will determine when the connection was reasonably discoverable. In general, the connection may be reasonably discoverable when the injury is discovered or discoverable. In some circumstances the connection with the discharge may be reasonably discoverable only at a later time because, for example, information on the spill or its impact was not available until a later time. This focus on ``reasonably discoverable with the exercise of due care'' is a recognition that some damages may not be apparent until some time after an oil spill incident. Rather than start the clock for all claims at the time of the incident, OPA provides a degree of flexibility depending upon the circumstances. Although the circumstances of each claim will vary in determining when the 3-year period starts for that claim, some examples may be helpful to claimants. Example 1: Fisherman ``X'' observes an unexplained reduction in catch for several months beginning in February 1994. X notes a resulting loss of profits for those months when preparing quarterly tax records. On January 15, 1996, State and Federal authorities announce, and X learns, for the first time, that catchable fish stocks in the area fished by X had been severely impacted by an oil spill in February 1994. The 3-year period for X's loss-of-profit claim would arguably begin on January 15, 1996, which is the date the connection between the loss of profits and the oil spill was reasonably discoverable. Example 2: A charter fishing boat owner ``Y'' loses business for the month of January 1995 because charterers cancel as a result of a massive oil spill in the area. But business revives quickly after the spill and Y does not bother to pursue a claim. In February 1998 the responsible party for the spill places an ad in the local paper offering to continue to consider and pay damage claims from the spill even though the 3-year period may have passed. Y reconsiders and decides to present a claim. The responsible party denies the claim. Y then decides to present the claim to the NPFC for payment. The NPFC cannot pay the claim despite its merits because it cannot, unlike the responsible party, waive the 3-year period. The purpose of raising this issue at the hearing was to highlight our concerns with respect to potential claimants that have heretofore not submitted claims. As indicated in the hearing, the RP notified potential claimants that they would still consider claims even though they were beyond the SOL. By law, the NPFC cannot waive the 3-year limit for claims to the NPFC for payment from the Oil Spill Liability Trust Fund. Because the circumstances of each claim will determine when the 3-year period starts for that claim, the NPFC cannot provide a single date to begin the 3-year period that will apply to any class of claims. The only certainty is that the period begins no sooner than the initial date of the spill; any claim submitted within 3 years after the initial date of the spill will certainly be timely. Beyond that, the best guidance NPFC can offer claimants is not to delay submitting a claim for a period of years. Such delays will only increase the risk an otherwise valid claim may be denied in whole or part solely because it is submitted late. NPFC has taken steps with respect to the RP's public notice concerning their acceptance of claims beyond the SOL. A copy of NPFC's letter follows: ______ Department of Transportation, U.S. Coast Guard, September 21, 1998. Mr. Barry Hartman, Kirkpatrick & Lockhart, LLP 1800 Massachusetts Avenue, NW, Second Floor, Washington, DC 20036-1800 Dear Mr. Hartman: The Director of the National Pollution Funds Center asked that I respond to your 1 July 1998 letter. I have read it very carefully, and would like to address your concerns. Because the National Pollution Funds Center's (NPFC) mission requires that we deal with oil spills on a daily basis, through our claims process in particular, we are keenly aware of the consequences of oil pollution incidents. I think our goal is the same. We both want to see that those who hare been damaged as a result of incidents are made whole. Accordingly, we can appreciate the frustration which your clients feel. Our contractors began working on these claims in April 1998, and requested additional information from your clients on May 15, 1998. I was pleased to see the recent letter of July 24, 1998 from Mr. McIsaac of your firm which appears to indicate that we have now overcome your firm's initial unwillingness to our contractor's request for information and personal meetings with individual claimants. In preparation for those meetings, our contractors asked for contemporaneous documentation that provides the number, location, and monthly placement of traps as well as a monthly summary of catch pounds and dollars for these locations for 1994 through 1996. This will allow us to document each fisherman's efforts (measured by the number of traps and pounds caught) before the spill, and then after the spill. This is important as the latest inshore landing report for the Area 539 provided by Mr. Tom Angell of the Rhode Island DEM is very different from the Table B you provided. (See enclosed schedule completed by our contractor based upon the handwritten information provided by Mr. Angell). After our contractor reviews the information, they have requested meetings with you and your clients to review any questions and issues, and to confirm a working understanding of each claimant's particular business operation. Your characterization of NPFC's approach to handling your clients claims is inaccurate. First, you assert that NPFC is holding your clients to the heightened standard of ``beyond a reasonable doubt.'' This is simply not true. The methods used by the NPFC to measure these damages are the standard methods used in the insurance industry. All claimants are held to the same standard of proof--they must submit evidence to support their claim, 33 CFR 135.105(e)(6), and they must submit proof that their income was reduced by damages stemming from the oil spill, 33 CFR 136.233. Second, your description of the NPFC Approach is not on point. You are of course correct in stating that the one claim for which we have submitted an offer does refer to the National Marine Fisheries Service (NMFS) total landings at Point Judith for the claim period of August 1 through December 31, 1996 which indicates an increase in lobster landings over 1995. However the inference is that the claimant is a lobsterman. In facts the claimant is a lobster wholesaler. Accordingly, using total Port Judith landings is the proper threshold to examine the supply availability of lobster in Port Judith. Our contractor clearly stated in the Claim Summary for this claim that they would need to evaluate the individual claims of fishermen who supplied this lobster wholesaler. I understand you represent these fishermen and this information should be readily available. As far as actual lobstermen are concerned, I agree that total landings is not the proper measure. This is precisely why we have been requesting individual catch/landing records for each lobsterman. Ours too is a straightforward approach. We project what the individual income would have been based on effort and adjust for saved expenses, actual income, mitigation or extra expense. Your methodology of merely comparing income falls short. Although proof of loss of revenue is an important threshold issue, loss of revenue alone is not proof of a compensable claim. A claimant must also demonstrate that the loss of revenue resulted from the incident, and that the claimant attempted to mitigate damages to the extent that it was reasonable to do so; Thus, our contractor has requested individual catch/landing records to support your clients claim. You also state that landings of lobster in Area 539 have decreased drastically since the North Cape spill and cite Thomas E. Angell's studies as authority. First, let me point out that the chart which you attached to your letter as Exhibit A indicates that the total lobster landings at Point Judith increased from 3.3 million pounds in 1995 (before the spill) to 3.9 million in 1996 (after the spill). Second, Angell's data contains a tremendous margin of error. As I noted before, Mr. Angell has revised his estimates since producing the chart you are using. Attached you will find a schedule, based upon information provided to Hull and Cargo by Mr. Angell, summarizing lobster landing data for Area 539. This schedule shows the total landing for 1995 to be somewhere between 2.6 million and 3.2 million pounds in 1993 and between 2.1 million and 2.9 million pounds in 1996. The margin of error between the high and low figures for 1996 is almost a million pounds. The point to be taken from this is that the data does not clearly support your assertion that Area 539 findings hare decreased dramatically since the spill. Finally, much of your letter deals with your frustration with the responsible party (RP) and its claims adjusting representatives. Please understand that I have no authority to regulate how the RP processes claims. All I can do is to receive claims which have gone unresolved by the RP and then to adjudicate those claims in accordance with our regulations. I want to assure you we arc committed to the efficient adjudication of these claims, but we are also mindful of our fiduciary duty to ensure that all claims paid are meritorious and properly measured. I hope we can work together to achieve this mutual goal. Sincerely, Linda F. Burdette, Chief of Claims, National Pollution Funds Center. DEM Low Range Comparison ---------------------------------------------------------------------------------------------------------------- 1996 to Month 1995 1996 1995 Subtotals ---------------------------------------------------------------------------------------------------------------- January..................................................... 71,519 30,228 -41,291 ........... February.................................................... 27,352 8,155 -19,197 ........... March....................................................... 31,635 7,653 -23,932 ........... April....................................................... 83,770 33,037 -30,733 ........... May......................................................... 80,099 77,036 16,937 ........... June........................................................ 289,714 100,758 -188,956 ........... July........................................................ 885,788 421,837 -244,079 -531,301 August...................................................... 530,283 511,817 -18,486 ........... September................................................... 262,838 327,114 84,276 ........... October..................................................... 305,994 235,569 -70,425 ........... November.................................................... 256,470 194,375 -62,005 ........... December.................................................... 125,689 157,163 31,474 -55,238 TOTAL................................................... 2,693,124 2,106,588 -588,537 -586,537 ---------------------------------------------------------------------------------------------------------------- DEM High Range Comparison ---------------------------------------------------------------------------------------------------------------- 1996 to Month 1995 1996 1995 Subtotals ---------------------------------------------------------------------------------------------------------------- January..................................................... 72,133 33,348 -38,285 ........... February.................................................... 28,479 8,678 -19,801 ........... March....................................................... 36,014 10,585 -25,429 ........... April....................................................... 71,975 37,212 -34,753 ........... May......................................................... 75,569 120,054 44,435 ........... June........................................................ 323,182 114,563 -208,619 ........... July........................................................ 778,979 493,671 -235,308 -587,720 August...................................................... 636,545 699,285 62,641 ........... September................................................... 196,688 462,513 85,820 ........... October..................................................... -54,158 377,223 -26,935 ........... November.................................................... 290,834 251,886 -38,948 ........... December.................................................... 144,197 358,211 214,014 276,596 Total................................................... 3,220,349 2,929,726 -291,124 -291,124 ---------------------------------------------------------------------------------------------------------------- Data provided by Mr. Tom Angell of Rhode Island DEM on July 16, 1998. claims regulations Question 3. The natural resource damage claimant's information guide states that, ``It is likely that the interim final claims regulations will be finalized within the next several years.'' This reference is the interim claims regulations at 33 CFR Part 136. Please discuss in detail any plans that may exist for finalizing the interim claims regulations. Response. The National Pollution Funds Center (NPFC) plans to submit a regulatory project workplan for internal Coast Guard approval on or about October 1999. While the details of the plan have not been finalized, we anticipate the plan will include substantial revision to the current interim regulations, a notice of proposed rulemaking and opportunity for comments prior to publication of a final rule. Our target date for publication of the final rule is late 2000 or early 2001. __________ Statement of Craig R. O'Connor, Deputy General Counsel for Atmospheric & Ocean Research & Services, National Oceanic and Atmospheric Administration Good evening Mr. Chairman and members of the committee. I'm Craig O'Connor, Deputy General Counsel for Atmospheric and Ocean Research and Services at the Department of Commerce's National Oceanic and Atmospheric Administration (NOAA). Thank you for inviting me to participate in this discussion of damage claims submission to the Oil Spill Liability Trust Fund (the Fund) by Federal, State and tribal natural resource trustees. Under the Oil Pollution Act of 1990 (OPA), trustees act on behalf of the public to restore natural resources when they are injured by oil spills. My testimony is being presented on behalf of NOAA and the Department of the Interior and will provide a Federal trustee's perspective on submitting damage claims to the Fund. I would like to begin by commending the U.S. Coast Guard's National Pollution Funds Center (NPFC) for the progress they have made in developing guidance for processing damage claims submitted by natural resource trustees and guidance for trustees regarding the claims process. In recognition of NOAA and DOI's extensive experience with developing and pursuing natural resource damage claims, the NPFC initiated early consultation with these two Federal agencies. My agency and DOI worked closely with the NPFC to increase their understanding of the restoration planning process and the NOAA natural resource damage assessment regulations to help them develop guidance useful to natural resource trustee claimants. I can assure you that the NPFC is striving to expeditiously establish an effective process for paying natural resource damage claims from trustees. When those who are responsible for oil pollution to navigable waters do not or cannot provide compensation, OPA authorizes compensation of qualified claimants for removal costs and damages. Until recently, the NPFC relied on a Comptroller General opinion which concluded that OPA provides for payment of natural resource damage claims from the Fund only by appropriation. Then, in September 1997, the Department of Justice concluded otherwise, determining that uncompensated claims for natural resource damages, like other uncompensated damages and removal costs, are payable from the Fund without further appropriation. Since that decision, Federal trustees have worked closely with the NPFC to develop guidance for processing and considering natural resource damage claims to the Fund. The NPFC has reached a general understanding with Federal trustees about how damage claims will be treated. This understanding is reflected in the Natural Resource Damage Claimant information Guide, which began circulating on November 24, 1998. This Guide discusses how trustee damage claims are presented to the Fund and how they are given consideration, consistent with the NPFC's existing claims regulations and the NOAA natural resource damage assessment regulations. The NPFC has invited comments from users and other readers of the Guide and expects to change the Guide content from time to time to improve its informational value. We expect the NPFC to begin processing trustee claims in the late spring of 1999. The Federal trustees recognize that the NPFC must consider the interest that trustees have to obtain compensation expeditiously to support restoration needs, as well as the Fund's interest to ensure that any claims paid are valid and properly supported. At the same time, it is important to develop a consistent national approach to damage assessment and restoration planning for oil spills. The Federal regulations for conducting natural resource damage assessments under OPA should serve as an important tool for ensuring consistent, high quality restoration planning by trustees and the development of solid restoration based claims. These regulations were promulgated by NOAA, and became effective in February 1996. They represent a commitment by natural resource trustees to focus on expeditiously restoring the natural resources and services injured by oil spills. Assessments performed in accordance with the NOAA regulations are entitled to OPA's rebuttable presumption of correctness. If a responsible party denies all liability or fails to settle a claim presented by trustees within 90 calendar days after an OPA claim is presented, trustees may either file a civil action in court against the responsible party or present the claim to the Fund. Generally speaking, like any other OPA claimant, a trustee bears the burden of proving its damages to the NPFC. However, the Guide recognizes OPA's intent that, when claims are prepared in accordance with the NOAA regulations, those claims are statutorily presumed to be correct, unless rebutted by sufficient evidence in the record of the assessment. In reviewing claims, the NPFC will determine whether trustees have complied with the regulations and met the burden of proof based upon review of a comprehensive administrative record developed in accordance with the NOAA regulations. The State of Rhode Island is acutely interested in this issue because of the January 1996 oil spill from the tank barge North Cape. Before I proceed, I would like to recognize the significant contributions of the State of Rhode Island and the Department of the Interior in pursuing a natural resource damage claim in the wake of this oil spill. Full restoration of the natural resources injured by this oil spill would not be possible without the commitment and cooperation of the Rhode Island Department of Environment Management and DOI. While the trustees have been engaged in a cooperative damage assessment with the responsible parties for this incident, there is a strong possibility that the restoration plan for this oil spill could be the first claim by a Federal trustee submitted to the Fund. A Draft Restoration Plan and Environmental Assessment (Draft RP/EA) for restoring the natural resources and associated services injured by the barge North Cape oil spill was released on September 15, 1998. The restoration activities in the plan are designed to return injured natural resources and their services to their prespill conditions and compensate for interim losses. The assessment and the Draft Restoration Plan were developed in accordance with the NOAA regulations on an open, public administrative record, so we fully expect that claim will be afforded record review by the NPFC. The trustees evaluated injuries to the following resources and services: (1) the offshore marine environment, including lobsters; (2) salt ponds; (3) birds; and (4) human uses. The responsible parties (RP) for this incident, including Odin Maritime Corp., Thor Towing Corp., and Eklof Marine, were invited to participate in the injury assessment. The trustees and RP designed, performed and funded many studies used in determining the nature and extent of injuries to natural resources. The trustees evaluated 25 restoration alternatives with the potential to enhance the recovery of natural resources injured by the spill (i.e., primary restoration) and to provide additional resources to compensate for the losses pending recovery (i.e., compensatory restoration). Based on analysis of these alternatives, the trustees are proposing the following restoration actions: <bullet> Adult lobster restocking and protection project: To compensate for the 9 million lobsters killed, the trustees are proposing to purchase, ``v-notch,'' and release 1.25 million adult female and 300,000 adult male lobsters into Block Island Sound over a 5-year period. ``V-notching'' describes the practice of cutting a small v-shaped notch in the lobster's tail. Lobster harvesters will be prohibited from possessing v-notched lobsters. The v-notch should last about 2 years and give the lobsters at least one more opportunity to reproduce before becoming commercially available. <bullet> Quahog restoration--To compensate for the loss of 1 million kg of shellfish and sea stars, the trustees are proposing a 5- year quahog restoration project for the coastal salt ponds. The trustees are proposing to purchase and plant 49 million, 20 millimeter- long hatchery-reared quahog seed into several of the salt ponds. <bullet> Water quality improvement through land acquisition--To compensate for 880,000 kg of finfish, crabs, benthic animals and other organisms killed by the spill, the trustees are proposing to purchase sufficient land within the watershed of the salt ponds to prevent the development of 38 new houses. Acquiring these lands will prevent additional nitrogen loadings to the ponds from these homes, thereby preventing additional degradation of water quality and future losses of eelgrass beds and their associated animal communities. <bullet> Piping plover protection--To compensate for the loss of five to 10 piping plover chicks, a federally threatened shore bird, the trustees propose a 5-year project to protect nesting sites on South County and Block Island beaches. This project will be designed to minimize predation and human disturbance on piping plover nesting pairs and chicks through protection of nest sites. <bullet> Loon habitat protection--To compensate for the loss of loons, an iconic animal to the northeast, the trustees are proposing to purchase and protect loon nesting habitat in northern New England along lake shoreline that is threatened with development. The trustees have calculated that 33 nesting pairs and their associated nesting sites need to be protected to fully restore the loss. The trustees have identified potential acquisition sites, that would require purchasing development rights for a 500 to 1,000 foot buffer zone around nesting territories within a 25 mile stretch of lake shoreline and the purchase of easement rights for a 500 foot buffer zone along a portion of 30 miles of privately owned shoreline. <bullet> Marine bird habitat protection--To compensate for the loss of marine birds the trustees are proposing to purchase and protect island acreage in the State of Maine to prevent future losses of breeding eider populations due to development. The trustees have calculated that 414 nesting eider pairs and--their nest sites need to be protected to fully restore the loss of marine birds. The trustees have estimated that approximately 31 acres of nesting habitat will need to be acquired. <bullet> Recreational Fishing Enhancement--To compensate for injuries to the recreational fishery caused by the spill the trustees are proposing two projects: <bullet> Anadromous Fish restoration--fish passage improvements will be implemented on two rivers that flow into the coastal salt ponds to enhance populations of river herring to compensate for injuries to recreational fishing. Possible sites for improvements include Factory Brook, Cross Mills Dam, and Rum Pond/Smelt Brook. <bullet> Shore access--The trustees are proposing to improve access to the shore for recreational anglers at Matunuck Point by reconstructing a public stairway and walkway down a bluff to the shore. The trustees are currently seeking public comment on the analyses used to define and quantify natural resource injuries and the actions proposed to restore injured natural resources or replace lost resource services. The Draft RP/EA is available to the public for a 90-day comment period and the trustees conducted a public meeting to solicit additional comments. Written comments must be received by December 16, 1998 and will be reviewed before finalizing the document. If the trustees determine that significant changes to the plan are required, an additional opportunity for public review will be provided. In addition to this draft restoration plan, the trustees have compiled an administrative record containing documents considered in planning and implementing assessment and restoration planning activities. The record is available for the public to review at two locations in Rhode Island as well as through the website for the Rhode Island Department of Environmental Management. Additional material will be included in the administrative record at a Later date, including public comments received on the Draft RP/EA, the Final RP/EA and restoration planning documents. A Final Restoration Plan will be presented to the RP, either for funding or for the RP to implement the restoration projects set forth in the final plan. The natural resource trustees for the North Cape oil spill would prefer that the responsible parties agree to implement the restoration plan produced by this cooperative damage assessment process. Nevertheless, if the responsible parties are nonresponsive, the trustees are prepared to pursue their claim, either by presenting a claim to the Fund or by litigation to ensure that the American public is compensated for the losses from this oil spill. Restoring the Nation's natural resource heritage is a responsibility shared among many Federal, State and tribal agencies. The natural resource trustees look forward to working with the NPFC to guarantee that we meet the mandate to promptly restore natural resources for present as well as future generations of Americans. __________ Statement of Stephen G. Morin, Assistant to the Director, Rhode Island Department of Environmental Management the Trustee for Natural Resources of the State of Rhode Island and Providence Plantations Good evening Mr. Chairman and members of the committee. I'm Stephen G. Morin, Assistant to the Director, Rhode Island Department of Environmental Management and the State's delegate to the North Cape Oil Spill Trustee Council. Thank you for the invitation to participate in tonight's hearing. The State of Rhode Island has been the unfortunate victim of two major oil spills in the last 10 years; the World Prodigy spill in 1989 and the North Cape spill in 1996. During the World Prodigy spill, State and Federal responses operated from separate locations with harmonious but loose coordination. Afterwards the State independently pursued claims for natural resource damages and undertook separate restoration actions from the Federal Government. The Oil Pollution Act of 1990 (OPA) changed all of that. After concluding that separate, conflicting or untimely responses could exacerbate the damage from an oil spill, Congress directed the creation of a system that required all of the parties responding to an oil spill to work together. Most importantly, a Fund was created that allowed government responders, both State and Federal, to take any and all measures necessary to stop and clean up a spill. During the North Cape spill the Coast Guard and the State of Rhode Island implemented a preplanned response in which they and the Responsible Party operated in a Unified Command at a pre-designated command post. In another room the Federal and State Trustees began working with the Responsible Party's representatives on a natural resource damage assessment. The Presidentially appointed Federal On-Scene Coordinator, USCG Captain Barney Turlo, while having the ultimate say pursuant to OPA-90, insured that all of the decisions were acceptable to the State. Most importantly he made sure that we knew that the full resources of the Oil Spill Liability Trust Fund (the Fund) were available to the State of Rhode Island. As the Deputy State On-Scene Coordinator, I was repeatedly asked to estimate the amount of money Rhode Island would need to sustain the response. I was assured that, as a member of the Unified Command, all of our response expenses were consistent with the National Response Plan and eligible for immediate reimbursement by the Fund. So far the promise of OPA-90 was delivering 100 percent of its advertised benefits. However once the response phase concluded we switched our attention to the restoration of the substantial damage done to our natural resources. As in the response arena, Congress recognized that the speedy restoration of damaged natural resources was an essential element of the statutory reform. Experience showed that an absent or recalcitrant Responsible Party would delay or deny the restoration of damaged resources. Congress also recognized that the process of litigation, with its delays, costs and uncertainty might still not yield a complete or adequate restoration. The Fund was to be the remedy for these problems. It would act as the guarantor of a swift and complete restoration. In this realm the promise of OPA-90 has not yet been fulfilled. On February 5, 1996, during the North Cape oil spill, the final regulations for conducting natural resource damage assessments under OPA took effect. Since that time these rules have been challenged in court and upheld. Although able to use other methods, the State and Federal Trustees jointly decided to utilize these new rules. We agreed to work cooperatively on the damage assessment and restoration plan and to include, as required, the Responsible Party in the damage assessment phase. During the negotiations over OPA-90 the House of Representatives wanted to make the Federal liability scheme and Fund the sole methods of establishing liability and settling claims. The Senate, to your credit, insisted that States should be able to set their own liability laws and manage their own Trust Funds. The tradeoff for this however was that should States elect to sue using their own legislative authorities, outside of the OPA rules, they would not have guaranteed access to the Fund. Within hours of the spill, Rhode Island elected to follow the OPA path, giving up the ``home court advantage'' of trying a damage case in the State system. The anticipated speed and certainty offered by access to the Fund was too great an incentive to ignore. When I joined the Trustee Council, the first difference from the response operations that I noticed was the near complete absence of support from the Fund. Enough money had been provided to allow the Trustees to determine if there was damage to trust resources. Thereafter the Trustees would either have to use their own resources to undertake the assessment or they would have to rely on the Responsible Party to fund the studies. The Fund, we were told, was not available to fund either the Assessment or the Restorations. Despite the language of the Act and the endless references to the contrary in the Congressional Record, the Fund managers were told by the Comptroller General that they could pay other damage claims but not Natural Resource claims. As legislators, you know that few agencies have budgets with these kind of contingency funds. So when I joined the Trustee Council I found that the Responsible Party was funding the majority of the assessment studies. Had it not been for the small NOAA Damage Assessment Center budget the Responsible Party would have been completely in the driver's seat. This clearly was not what you intended when you set the Fund's ceiling at $1 billion. In the ensuing 2 \1/2\ years, thankfully, the Justice Department has reversed this position. The Fund can now be used to pay for Natural Resource Restorations. For the North Cape Trustees it came just in the nick of time. Our view was that with the Fund as our Insurance Company, we would not be forced to bargain from a position of weakness with the Responsible Party. Without the Fund we would have had no recourse other than lengthy litigation and we probably would have had to settle for a less than complete restoration in order to get back any of the lost resources within the next decade. In keeping with the requirements of OPA-90, Governor Almond appointed the Director of the Department of Environmental Management as the State's Natural Resource Trustee. He joined the Secretaries of Commerce and Interior as the Presidentially appointed Trustees. The Trustee Council, made up of the representatives of those three agencies, then spent nearly 3 years pursuing damage assessment and restoration planning under the new Federal NRDA regulations. We are now in the public comment stage of our Draft Environmental Assessment and Restoration Plan (the Plan). We intend to finalize the Plan by January 1999, taking into account the public comments, which we have received. In accordance with the requirements of OPA-90, we will then submit it to the Responsible Party for implementation or funding. After 90 days, if the Responsible Party is unwilling to undertake or pay for the Restoration in whole or in part it is our plan to submit a request to the Fund for the money necessary to complete the restoration of the damaged Trust resources. That sum would represent the amount that the Trustees have determined is necessary to fully implement the projects that restore the lost public resources as contained in the Plan. It would of necessity not include the cost of any of the restoration projects that would be performed or funded by the Responsible Party. The Trustees believe that this is the only rational interpretation of the language of OPA-90 and is consistent with the congressional intent as reflected in the Record. As duly appointed representatives of the Public Trust who followed properly adopted and judicially upheld Federal regulations, our Restoration Plan Is the final executive decision. As such it is entitled to immediate payment from the Fund to undertake restoration of the injured public resources. At a Conference on OPA-90 issues put on by Roger Williams Law School, we were surprised to learn that the National Pollution Funds Center (NPFC) does not necessarily share our view of the process. In their view Natural Resource claims are little different than any other claim. Since then, we have heard arguments that the NPFC's first obligation was to protect the fiscal integrity of the Fund. We also heard that the NPFC wanted to understand the Responsible Party's view, presumably to gauge the Fund's litigation risk when they sought reimbursement from the RP. In our opinion neither consideration is required by OPA-90 nor reflected in the Record. In fact the House Report (101-242) states ``In promulgating regulations establishing claims procedures under this legislation, the President shall observe the following principles: The Fund is to provide compensation for damage claims fully and promptly. While the Fund must require some evidence of loss and the establishment of a causal connection with oil pollution, it should not routinely contest or delay the settlement of damage claims. The Fund will sometimes be providing compensation where there is little chance of subrogation against the discharger. Even so, litigation or lengthy adjudicatory proceedings over liability, defenses, or the propriety of claims should be reserved for subrogation actions against dischargers.'' The Senate Report (101-94) states that ``. . . the primary purpose of this Act is to guarantee that claimants will receive rapid and equitable compensation for any economic loss suffered as the result of an oil spill, the committee expects that the claims settlement procedures established by the Secretary will be formulated with this purpose in mind. Particular care should be taken to avoid unnecessary procedural delays or overly complicated bureaucratic processes.'' That is as explicit as can be. Especially in the case of the North Cape, where the new NRDA regulations were first used, and where the Trustees have followed the National Environmental Policy Act as well as the Administrative Procedures Act. In pursuing this damage assessment the Trustees have reviewed scores of scientific reports as part of a voluminous Administrative Record. They will use these documents and the public comments they have received to make their final determination. There is no place for the Fund to review, re-work or second-guess the Trustees decision. A decision of the Trustee Council should be viewed as the decision of the executive branch of Government. The only adjudication should be by the Judiciary. All this is not to say that the NPFC should not exercise care when reviewing. Having invested 3 years in the NOAA NRDA process, the State of Rhode Island believes the Fund has a ministerial, non-discretionary duty to pay for the Restoration Projects that were developed by the duly delegated Natural Resource Trustees. Any adjudication the Fund engages in should be with the RP in a cost recovery for subrogated claims, which the Fund has already paid. I have just received a copy of the NPFC's draft Natural Resource Damage Claimant's Information Guide. The NPFC is, by their account, the final decisionmaker on the validity of an NRDA Plan. The Guide says that the NPFC will decide if a Restoration Plan is consistent with the NOAA regulations, even one submitted by NOAA!-It also says that its decision to deny a NRDA claim is final, ``subject to limited judicial review of the NPFC administrative record under the Administrative Procedures Act ``arbitrary and capricious standard.'' However two pages later they say that they may ``. . . request that a claimant supplement its administrative record. . .'' Not only is that an obvious double standard but it truly undermines the administrative decisionmaking process. The Trustees have an obligation to review the entirety of the Administrative Record and then to use their best professional judgment in crafting the Restoration Plan. The Trustees' decision is then ``subject to limited judicial review''. It is clear that the NPFC is trying to take the NRDA regulations and the process they require into account in this new type of claim. But it is also clear that they are trying to force the private party claims review process to serve in the NRDA arena. That is not what Congress intended. The Fund should allow the Trustees to begin restoring the injured resources in the near future, rather than having to wait many years to obtain a judgment against the Responsible Party in Federal court litigation under OPA. We would ask that you re-convey this sentiment to the Coast Guard National Pollution Funds Center in the strongest possible fashion. __________ Statement of Albert B. Christopher My name is Al Christopher and I appreciate the opportunity to briefly address you today. My testimony is presented as the former owner of ABC Lobster, Inc.(``ABC'' or ``ABC Lobster''), a seafood dealership that was located at 296 Great Island Road in Narragansett, RI. ABC operated by purchasing lobsters from inshore fishermen and then selling those lobsters on the wholesale market to large exporters. ABC also sold some fish and lobsters on the retail market to walk-in customers. ABC did not purchase fish or lobsters from offshore fishermen because it was not profitable for it to sell such fish and lobsters. After ABC Lobster started doing business in 1993, it subsequently increased sales every year. In 1993, ABC had gross sales in the amount of $921,582.00. In 1994, when ABC began selling lobsters on the wholesale market, it purchased all new refrigerated lobster tanks and grossed $1,531,238.00 in sales. In 1995, sales continued to increase and by the year-end ABC had grossed $2,120,605.00. 1995 was a good year for lobstering. Many fishermen who typically did not fish in the winter and spring were planning to gear up and fish hard during the winter and spring of 1996. Accordingly, I expected our lobster purchases and sales to increase and we bought four new lobster tanks which increased ABC's holding capacity dramatically. Unfortunately, that increased demand for holding capacity never happened, because on January 19, 1996, the North Cape Barge ran aground off Moonstone Beach and spilled over 800,000 gallons of heating oil into Block Island Sound (the ``Spill''). After the Spill, about 250 square miles of Block Island Sound were closed to fishing. All of the lobstermen that sold to ABC were unable to fish. Soon after this closure, the Rhode Island Department of Health ordered the removal of all lobster pots from the closed areas. When the lobstermen who supplied ABC retrieved their gear from various closed areas soon after the Spill, I purchased the few uncontaminated lobsters that they found in an attempt to mitigate my damages. ABC's retail sales were especially affected during this period. I believe that the Spill created a stigma against Rhode Island seafood. On February 12, 1996 I received a written offer of $525,000 from the State of Rhode Island for the leasehold interest and one story building housing ABC Lobster. It was the intention of the State to use the property occupied by ABC for ferry parking purposes. Despite receiving this offer after the Spill, I rejected it outright because the business of ABC had been growing dramatically and was projected to continue its healthy growth. One factor in my decision was the downplaying of the Spill's effects that was presented in the media and from government sources. As I have progressed through the claims process that brings us here today, I have had ample opportunity to regret my decision not to sell to the State. In mid-April some of the closed areas were reopened to lobstering. Many of the lobstermen that sold to ABC began the laborious process of fixing and re-setting all their gear. At least another month elapsed before the lobstermen had harvested lobsters that they could resume selling to ABC. From the time the lobstermen's gear was initially retrieved until the time the gear was re-set and able to be harvested, ABC had almost no lobster purchases. Various areas of prime lobster grounds remained closed, off and on, until June 25, 1996. However, even after all of the closed areas had been reopened to lobstering, ABC continued to experience a decrease in wholesale and retail sales in comparison with 1995. This decrease is entirely due to the lower catches experienced by the lobstermen who supplied ABC. I believe that their reduced catches were entirely due to the effects of the Spill. There is simply no other explanation. In 1996, ABC's gross sales were dramatically reduced as a result of the Spill. For example, from June 25, 1996 until December 31, 1996, ABC purchased only 300,058 pounds of lobsters. During this same period in 1995, ABC had purchased 465,459 pounds. In other words, my gross purchases declined by about 36 percent during this time period. The profitability of ABC declined accordingly. During this same time period, ABC's retail sales fell by almost 34 percent. On May 31, 1996 and May 14, 1997, by and through its attorneys, Kirkpatrick & Lockhart, LLP, ABC submitted to Turnaboat, Eklof Marine Corp.'s (``Eklof'') insurance adjuster, a claims package seeking compensation for losses from the Spill. This started the long process that brings me here today. My written testimony today includes copies of correspondence documenting my attempts to seek compensation for my losses. I have not included copies of the documents that I was forced to produce during this process because it would require the submittal today of about 2 boxes of copies. Instead, let me tell you about what bothers me with this claims process. 1. Too much documentation is required When I first filed my claim I was under the impression that it would be a simple process under the Oil Pollution Act (``OPA'') so that I would not get the run around like those affected by the Exxon Valdez catastrophe. I report today that that is plainly not the case. As you can plainly see by looking at the copies of correspondence I have included today, there has been request after request for additional information. These requests were first from Turnaboat, and after that process produced unfavorable results, the same redundant and unnecessary requests were made by Hull & Cargo Surveyors, Inc. (``Hull & Cargo'') the claims adjuster for the Fund. I learned during these productions of documents that my sworn statements as to the facts of my situation, as provided in affidavits, had no real significance. It was always a case of ``document this'' or ``compile that'' in justifying my losses. The thing that most surprised me was that even though Turnabout had requested a tremendous amount of documentation the Fund required that I provide significantly more and different documentation than Turnabout had bothered to ask for. 2. It takes too long to resolve a claim and get paid My claim was first filed with Turnabout on May 31, 1996 and was later amended to include the entire year of 1996 in a filing dated May 14, 1997. Since that amended filing, about 18 months have elapsed. That is too long. While waiting to be paid for my damages, business losses have continued to mount as the lobstermen delivering to ABC continued to experience lower and lower catches due to the decimation of the lobster stocks. In the face of these continuing losses with no end in sight, I sold my business in 1997 at a price considerably below its former market value. My business is gone and my losses remain. Having failed to get a reasonable offer for damages from Turnaboat? I filed my claim with the Fund on September 16, 1997. Instead of obtaining a quick resolution of my claim, I was forced to go through the process of delay and documentation all over again. If you look at the correspondence filed today, you will see that first the Fund asked for information, then, after assigning my claim to Hull & Cargo in January 1998, Hull & Cargo requested different information and then its accounting subcontractor required even further layers of detail. When the Fund finally came up with its settlement offer on June 18, 1998, 9 months had elapsed since the Fund had started its review. Once again, this is too long. Since the Fund's settlement offer was unreasonably low for the first half of my claim, and denied entirely the second half of my claim, I submitted a Request for Reconsideration on August 14, 1998. In this Request for Reconsideration, I provided voluminous documentation to support my claim, in particular the second half of my claim which had been denied outright by the Fund. This documentation included the complete claims of five of my largest suppliers which were pending before Turnabout. These underlying claims of my suppliers unequivocally bolster and prove my claim for damages. In any event, despite the fact that the Fund should have proposed their final offer of settlement within 90 days of this final submittal, that deadline lapsed without explanation. I have been told that I can take this inaction as a denial of my Request and then file suit. That makes no sense at all. I could have filed suit anyway without wasting time and resources by filing with the Fund. The Fund has failed me. I finally received a letter dated November 20, 1998 from the Fund. Instead of providing me with an offer on my claim, the letter stated that the Fund had waited until October 26, 1998 before authorizing action by Hull & Cargo on my Request For Reconsideration. In other words, they waited 70 days after receiving my Request For Reconsideration before doing anything at all. It is no wonder that I didn't receive their final offer of settlement within the 90 day timeframe. Even more disturbing in this letter was their statement that they still could not tie my losses in the last half of 1996 to the Oil Spill. Why is this so difficult? Don't they even read the reports of the consultants who have documented the lobster losses for the Natural Resources Damage Assessment? And guess what? They asked for even more information to justify the losses of the lobstermen who supplied me. 3. The Fund is adversarial to claimants If you look at the Fund's settlement proposal of June 18, 1998 alongside the Request for Reconsideration for ABC dated August 14, 1998, certain facts are clear: The does not recognize that the North Cape Oil Spill produced any harmful effects other than the forced closures of certain areas to fishing up until the end of June 1996. Using their analysis, the effects of the Spill stopped by the end of July 1996. They interpret an unexpected increase in the lobster catch in August as being equivalent to a full and complete recovery from the Spill. That is absurd. They just don't get the fact that the Spill resulted in enormous damage to the lobster population off the coast of Rhode Island. Why doesn't the Fund make any attempt to consult the scientists involved with the Natural Resource Damage Assessment studies in an effort to understand the significance of the Spill? They would see that not only has there been great damage, but that the effects of the Spill will be felt in ever greater degrees over the next few years. For the second half of my claim, covering the period from August through December, 1996 and amounting to $100,011, the Fund offered to pay nothing---zero dollars--on the basis that they could not see the connection between the Spill and the reduced lobster catches brought to ABC by the lobstermen. This failure in understanding astounds me and I invite you today to review the offer from the Fund and my Request for Reconsideration so that you can see how the Fund has failed me in so many different aspects. The Fund's analyses are designed to minimize damages. Great pains were taken by Hull & Cargo to reduce my potential award by selectively applying data such as weather or the relocation of fishermen from one shore facility to another as factors to lower my award. The Fund fails to understand that everything changed after the Spill. Business plans were revised and the factors that led to growth over previous years no longer had relevance. The Fund and its adjusters use a standard a proof consistent with insurance adjusting. Claimants are treated as potential scam artists seeking to capitalize on an accident, and that is simply not ask for this Spill and we only want to be made whole. I thank you for this opportunity to speak. __________ Statement of John Sorlein, Rhode Island Lobstermen's Association, Wakefield, Rhode Island Good evening. My name is John Sorlein and I am president of the Rhode Island Lobstermen's Association (RILA). RILA is a non-profit association of individuals who are engaged primarily in the business of fishing for lobsters. Several of its members also have onshore businesses or related businesses that rely in large part on lobstering for their livelihood. These businesses represent a large portion of the lobstering industry off Point Judith, Rhode Island. RILA has put together a group of over 100 businesses that have developed and continue to develop and document damage claims. The fishing industry has contributed greatly to the local and state-wide economy. Millions of dollars have been pumped back into the economy by way of direct and indirect business resulting from the successful harvesting of Rhode Island's pristine seafood beds. Many lobstermen have been fishing in this area for years and RILA represents a large portion of that total. Lobstering is mostly a small businesses--each lobsterman owns a boat or two and each hires his or her own crewmen to help. They love what they do. They are independent and self sufficient. They are successful because of their willingness to put in an honest day's hard work. The Spill Point Judith is the largest fishing port on the east coast. Until January 19, 1996, the lobsters caught in Point Judith were world renowned for their quality, in fact, we think they were the best quality lobsters caught in this country. However, On January 19, 1996, the unthinkable happened--a barge spilled over 800,000 gallons of Number 2 heating oil (the most toxic to lobsters) after running aground off Moonstone Beach. We say this was unthinkable since no one expected this to happen at all. Nobody expected this because back in 1989 there was a similar spill--The World Prodigy in Narragansett Bay, which is just a few miles from Point Judith. No one thought that such an oil spill could ever happen again, at least not in this neighborhood, but it did. The immediate impact of the spill was disastrous. In the only significant count of dead lobsters, over 60,000 were measured by weight from the sample areas located on the beach and over 18,000 of those lobsters were studied to determine their size, sex and reproductive status. That information was used to project a loss of over 2.9 million lobsters that washed up on the beaches as a result of the Spill. And that was only a portion of the total number of lobsters actually killed by the Spill. Additionally, as a result of the Spill a 250 square mile area was closed to fishing and lobstering for an extended period of time. \1\ This closed region included the entire area leading into the Port of Galilee, where many seafood processors are located. Not only were lobsters not caught in this area, but also it was virtually impossible to transport other shellfish catches (upon which onshore facilities relied) into Point Judith. --------------------------------------------------------------------------- \1\ Area closed intermittently from January 19 to June 25, 1996. --------------------------------------------------------------------------- The purpose of these comments express our support and endorsement of the comments by the other victims of this spill, and the comments our attorneys. When the spill happened we were at a loss about what to do. Few of us ever had to make claims for lost profits, and we didn't know how to do it. We immediately thought we had to file a lawsuit. We soon found out, however, that a new procedure existed under the Oil Pollution Act of 1990. Under that procedure, we would be able to file individual claims for losses without going to court, and with a reasonable amount of evidence, would be able to recover in a quick period of time. That has not happened. Many of our members and others have filed claims, and submitted literally thousands of pages of documents to establish our loss. But few of us he been paid. We provide information, and are asked for more. We provide more, and are asked for still more. We prove a loss under one standard, and the responsible party of the Fund changes the rules. We simply don't understand why this is so difficult. The barge owner was convicted of criminal offenses that caused the spill. But rather than compensate us, the Nature Conservancy was given over one million dollars. Rather than compensate us, hundreds of thousands of dollars were spent to put loons in Maine. Why haven't our claims been paid or even fairly considered? Why is it that despite our efforts, instead of the claims being decided in 6 months by the responsible party, or in 90 days by the Fund, now, 3 years later, few have been fully decided. Why is it that the responsible party and the Fund are only paying 1 dollar for every 4 dollars that are proven to have been lost? Why is it that the responsible party has decided that no one she fished next tot he closed area could not possibly have lost more than 3 percent of his catch? Many people that fished in the closed area had to move to other areas, so that there were more fisherman looking for fewer lobsters. No one seems to understand that lobsters don't stand still. They move. Yet the claims adjusters are assuming that the no lobsters moved into or outside of the closed area. And they assume that fisherman don't move either. They think if you fished outside the closed area, you can't be affected. But the fact is we are. It is no mystery when someone has consistent catches every year for 5 or more years before the spill, then suddenly, after January 19, 1996, the catch is dramatically less. We don't fish anymore. We mitigate our losses. We travel further, spend more money, work longer hours, and catch fewer lobsters. There is no mystery here. How can it be that the fancy study that was performed says there were about 200,000 adult lobsters lost in 1996 and 197, but several of us alone caught over 400,000 less during those hears than before? The responsible party and the Fund concocted theories of lost lobsters based on conjecture and guess. We have shown actual losses, but those are ignored. At this point, many of us are fed up with this administrative process. We are ready willing and able to go to court and sue these criminals for our actual losses. Clearly we cannot get a fair shake by the responsible party or by the Fund. We are being forced to go to court. That means the Oil Pollution Process has failed. We sincerely hope that you fix this for the next victims. __________ Statement of Bruce E. Kopf My name is Bruce Kopf and I appreciate the opportunity to address you today. My testimony is presented as the former owner and operator of the Fishing Vessel Spartan. I will briefly describe my claim. The F/V Spartan was an off-shore fishing vessel that used circulating sea water to keep lobsters alive after capture. My fishing grounds have been in an area about 80 miles south/southwest of Block Island to just north of Hudson's Canyon. This is an area far removed from the areas impacted by the North Cape Oil Spill (the ``Spill''). I have fished this area for well over 10 years. At the time of the Spill, my boat was in port at Point Judith ready to sail as soon as the weather cleared. However, immediately after the Spill, a large portion of Block Island Sound was closed to lobstering due to the extensive environmental contamination. I was unable to fish for lobsters offshore from January 19 through March 29, 1996 because my vessel was unable to pass through the closed area. In addition, if I had traversed the closed area and obtained my catch offshore, the sea water in the closed area remained contaminated, so I would not have been able to preserve my catch by using that circulating sea water. It was really this simple: If I used any of the water from the closed areas for my circulating system, Rhode Island authorities would have classified my whole catch as contaminated. Likewise, if I had instead elected to traverse the closed area with closed circulation tanks and returned to Point Judith, this would have resulted in freezing conditions for my catch. In my best professional judgment, I would have lost all or most of my catch under these conditions. As I have fully explained and documented to the Fund, I was unable to mitigate my damages by landing at other ports since I would have either had to traverse the closed area to reach an alternative port, or I would have had to land in a State in which I was not licensed to land my catch, was not familiar with the dockside facilities, and for which I had no prior arrangement to sell my catch. In addition, in the aftermath of the Spill there were many reports in the media suggesting that the opening of the fishing areas was imminent. I have included copies of articles from the Providence Journal in the record today to show what I and other fishermen were being told by the regulators. Based upon this information and my own professional judgment, I elected to stay in shore until the matter was resolved. My $23,762 claim as presented to Turnaboat on March 26, 1997 and to the Fund on January 30, 1998 was straightforward and simple: I asked to be compensated for my losses during that 69-day interval from January 19, 1996 to March 29, 1996 when I could not fish because of the Spill. My claim was based on my average income during that interval in the 3 years prior to the Spill. I should note here that my claim ends on March 29 since that was the date that I sold my vessel. It had been my intention to fish until the time when I transferred title to the new owner of my boat. Turnaboat denied my claim on May 9, 1997 under the theory that my fishing area was never closed and I could have landed my catch in another State. The Fund has not presented a settlement offer to date. Please note that I have experienced two major difficulties with the OPA claims process: 1. The resolution of my claim is taking too long My claim was filed with the Fund on January 30, 1998. Approximately 10 months have elapsed since that filing. My claim is simple. Why is there no resolution? Note that I have responded to all of the information requests presented to me by Mr. John P. Kelly, the adjuster hired by the Fund. My last response, which I believe resolved all of the outstanding issues for Mr. Kelly's analysis, was submitted on August 25, 1998. There had been no word from the Fund or Mr. Kelly in the 3-month interval after that submittal until just last week when I received a letter from Mr. Kelly requesting irrelevant, unnecessary and redundant documentation. More incredibly, this documentation had been provided and/or addressed to the satisfaction of both Mr. Kelly and the Fund back in August. I am a fisherman who was harmed by the Spill. Why does it take so long to get compensated for my losses? 2. I have been asked to provide too much unnecessary, irrelevant and redundant information First, note that my written submittal today includes all of the relevant correspondence for my claim showing the multiple requests for information from the Fund and its adjuster, along with my responses to those requests. I have been asked to provide the following information, which I believe has no bearing on my claim, to John P. Kelly & Associates at one time or another: Although this claim is for damages for the first quarter alone, I had to supply settlement sheets and account information for all months during 1993, 1994 and 1995. I was asked to explain what other offshore lobstermen did after the Spill. I was asked to provide the names and telephone numbers of people who purchased directly from me off the docks. I was asked to provide a retrospective analysis of the costs and difficulties of bringing my catch to alternative ports during the time period of my claim. All of the above was unnecessary and intrusive. I had previously: (1) provided my tax records and backup documents that show what I earned during the first quarter of 1993 through 1996; and (2) submitted a sworn affidavit explaining, among other things, my fishing practices and the unavailability of other ports. Does any of the other information make any significant difference? If the Fund has to make any determination at all about my claim it is whether I showed reasonable judgment in the aftermath of the Spill in not somehow finding a way to traverse the closed areas and land my catch in some other State. I tell you today, and I have sworn before, that based upon my experience and the information presented to me in the aftermath of the Spill, that would not have been a responsible course to follow. I thank you for this opportunity to speak. ______ [From the Providence (RI) Journal Bulletin, November 22, 1996] Fishing Industry Slammed by spill (By Elizabeth Abbott) Governor Almond and Rep. Jack Reed said they would seek Federal help for fishermen hurt by the oil spill. NARRAGANSETT--From offshore lobstermen who can't travel through the spreading oil slick without killing their valuable catch, to wholesalers along the Galilee waterfront whose lobster and crab supply has been embargoed by State health officials, Rhode Island's multimillion-dollar fishing industry is reeling from the grounding of the barge North Cape. ``I've got [lobster pots] six miles away, but I can't bring them up because I don't know where the oil is,'' Eric Winn, a Point Judith lobsterman, said Sunday. Peter Schone, whose lobster pots are a safe 100 miles out, has a different dilemma. Schone can't bring his catch into shore because he needs to pump ocean water into his boat to keep it alive. This he can no longer do. Commercial fishermen and seafood processors cannot use water from the fouled area, which now stretches from South County to Block Island, to store, wash or process seafood, according to emergency restrictions issued by the Departments of Health and Environmental Management. ``Nobody knows where they can bring live product,'' Schone complained. The State's fishing industry employs between 3,000 and 4,000 people, and generates about $500 million in economic activity annually, according to David Borden of DEM. A dollar estimate of damage from the spill has not been formulated, but at a news conference Sunday Governor Almond predicted it would be considerable. Not only has shellfishing been banned in coastal ponds from Point Judith to Napatree Point and out to three miles offshore, but 105 square miles of Block Island Sound Sunday was closed indefinitely to all kinds of fishing. ``The fishing industry will suffer a significant loss,'' Almond said. Almond and Rep. Jack Reed promised to seek Federal help for fishermen hurt by the oil spill. If this help comes, it won't be too soon for the State's 500 to 1,000 lobstermen. So far, they have been hardest hit by the spill. The oil has killed thousands of adult lobsters--the count as of Sunday was 11,000--and decimated the juvenile lobster population as well. ``What I don't understand is how they let the oil get in the pond,'' a frustrated Winn said, referring to Point Judith Pond. It's not just lobstermen who have been hurt. The oil has contaminated the coastal pond breeding grounds of winter flounder, a ``multimillion'' dollar fishery in Rhode Island whose stock is already perilously low, DEM's Borden said. ``This will do nothing but make matters worse,'' he said. The businesses who buy lobster and fish from the State's fishermen are also feeling the effects of the spill. On Saturday, about a dozen Health Department inspectors began embargoing lobsters and crabs from wholesalers throughout South County. Between 50 and 100 wholesalers were visited and an undetermined amount of lobster and crab seized. ``Nobody likes to have their food embargoed,'' said the Health Department's Ernest Julian, but he pointed out that this measure was necessary to keep contaminated seafood away from consumers. ``There's nothing on the market right now that's contaminated,'' Julian said. Nonetheless, health inspectors will also begin inspecting fish retailers and restaurants to ensure that no contaminated seafood is being used, he said. Fishing and shellfishing operations hurt by the spill can file a claim with the barge's owner with Turnabout Services LTD, officials said. The number to call is 800-995-4045. ______ [From the Providence (RI) Journal Bulletin, January 28, 1996] Plan Drafted for Reopening Contaminated Fishing Areas (By C. Eugene Emery, Jr.) NARRAGANSETT--Officials yesterday hammered out a draft proposal for gradually reopening the 250 square miles of ocean closed to fishing by the 828,000 gallons of oil spilled from the barge North Cape. The plan must still be formally approved by top representatives of several State and Federal agencies, and Eklof Marine, the company that owns the barge and has agreed to pay for the testing needed to allow fishing to resume. Edward S. Szymanski, associate director for water quality management at the Department of Environmental Management, said approval could come as early as tomorrow. But he and other DEM officials declined to predict how quickly, even under the best of circumstances, the fishing ban might be lifted. Other North Cape-related developments yesterday: --An official for the company holding the insurance policy on the North Cape said the total cost of the cleanup and the price tag for reimbursing fishermen for lost income will easily exceed $10 million. --Plans to begin pumping out the 70,000 gallons of diesel fuel left aboard the tug Scandia were postponed yesterday morning because heavy seas from yesterday's storm made conditions too dangerous. The Scandia lost control of the North Cape when its engine room caught fire. Workers will try to pump out the fuel today. --With the North Cape harbored in Newport, workers began disassembling the Coast Guard's command center at the Dutch Inn in Galilee. The agencies involved in the cleanup will continue working, with the Coast Guard directing operations from its headquarters in East Providence. --DEM workers at Moonstone Beach, which was hit hardest by the spill, continued finding dead birds, lobsters and starfish along the shore. The birds that have been rescued and cleaned, which are recovering in a Narragansett municipal garage, are not expected to be released for another week or so. --The Coast Guard captain overseeing the operation said yesterday's storm probably would have split the North Cape in two if it had remained grounded. The tentative blueprint for reopening the fishing areas must be approved by the DEM; the Rhode Island Department of Health, which tries to prevent contaminated fish from reaching the market; the University of Rhode Island, whose scientists are serving as consultants on the project; the National Oceanic and Atmospheric Administration; the Food and Drug Administration; and Eklof. Szymanski said that under the proposal, an area can't reopen to fishing until all oil sheens have disappeared, water tests show that the amount of oil is below Federal standards, and tests of fish and shellfish show that the animals are safe to eat. Yesterday's storm was expected to eliminate all of the sheens, Szymanski said, but aerial reconnaissance will be needed to be sure. Once the sheen has disappeared, Eklof, working under DEM supervision, will begin collecting water samples from at least two dozen areas, including Block Island Sound and the various ponds believed to be affected by the spill. The draft plan calls for collecting water 1 meter below the surface and 1 meter above the sea floor, said Szymanski. Those samples will be tested for traces of nearly four dozen oil- related chemicals. If the individual concentrations of all of those chemicals are below Federal limits--usually ranging from 0.001 to 0.004 parts per million--testers will move to the next step: looking for pollution in finfish, lobsters and shellfish. Only if the test results show that contamination levels are below Federal standards will State officials reopen an area to fishing. ``Our goal, obviously, is to open the fishery as soon as we possibly can,'' said DEM director Timothy R.E. Keeney. There has been some confusion over how much pollution is actually in the water. On Wednesday, Keeney said water samples from Point Judith Pond showing average oil concentrations of less than one part per million was ``good news'' because the Federal standard is 10 parts per million. Although one water sample showed an oil concentration of 3.8 parts per million, the results seemed to suggest that the oil that spilled had not produced a serious threat. But Keeney said yesterday that he had misunderstood the Federal standard, and one part per million is not good at all. ``If a lobster is exposed to 600 parts per billion (or 0.6 parts per million) over 4 days, it will not survive,'' Keeney said. Szymanski said he expects the closed fishing areas to be reopened a chunk at a time as test results show them to be clean. A priority, he said, will be to reopen the mouth of Narragansett Bay so fishermen can draw in ocean water as they come in and out of the Bay. Currently, if an incoming fishing vessel tries to keep its catch alive by taking on water from the mouth of the Bay, the whole catch immediately is classified by the State as contaminated. ``If we find an area that meets the standards, boom, we'll open it,'' said Keeney. The DEM director said although fishermen are eager to resume fishing, they also understand that the worst thing that can happen is to reopen a closed area and later discover that tainted fish from that area have made it to market. ``Then the whole market is at risk'' because consumers will lose all confidence in the safety of fish, he said. (U.S. Rep. Patrick J. Kennedy, saying that ``they have been inconvenienced for long enough,'' yesterday called on the Department of Health to allow lobstermen to recover their pots from the oil spill area so they can determine how much of their catch is contaminated and eventually get reimbursement from Eklof. He also said that lobstermen should be allowed to clean their traps so they'll be ready to resume work as soon as the ban is lifted. The estimate that the eventual cost of the spill will exceed $10 million came from Ben Benson, the senior surveyor for the Maritime Response Syndicate, which represents the Water Quality Insurance Co. The company underwrites the first $10 million of Eklof's insurance. ``From an operations standpoint, the cleanup won't reach $10 million,'' he said. ``But with the addition of claims and the NDRA (Federal Natural Resource Damage Assessment program) claim it will, in all likelihood, exceed $10 million.'' Eklof has additional insurance to cover claims above the first $10 million. Governor Almond and fellow Republican Nancy Mayer, general treasurer and candidate for U.S. Senate, spent part of yesterday touring the Dutch Inn command center, visiting the makeshift bird recovery shelter and checking on the progress in removing the oil from the Scandia. At the command center, Coast Guard Capt. Barney Turlo said it will probably be tomorrow or Tuesday before the North Cape, now berthed at the Newport Navy Base, gets the go-ahead to return to New York for repairs. The approach of yesterday's storm prompted Turlo to send the barge to Newport. Turlo said divers inspecting the barge found ``literally dozens of localized tears, cracks and holes'' at the bottom of the hull, made of \5/8\ths-inch steel. The biggest crack was 5 feet long and 8 inches wide. ``Some of the smaller ones were a foot and a half long and an inch wide,'' he said. Although welds prevented the cracks from spreading as the waves and tides put stress on the hull, Turlo said, ``We're not even sure it would have survived the next 2 days . . .'' without breaking in two. At the bird rehabilitation center at the Narragansett town garage, the Almond group watched one of the 23 long-necked loons being bathed in a series of steel basins. One worker used a toothbrush to clean oil from an animal's head. In all, about 40 birds are at the facility trying to regain their strength while resting in playpens, wooden boxes and 6-foot wide pools, some warmed by heaters and sunlamps. All were shielded from view by blue tarps, blankets or sheets. Lynne Frink, one of the women from the New Jersey organization in charge of the rescue operation, said the center would be in business at least another week. Even after the birds have recovered and their feathers can once again protect them from the cold, Federal officials must give their approval before the animals can be released. (The U.S. Fish and Wildlife Service announced yesterday that, beginning tomorrow, any sightings of oiled birds, either dead or alive, should be reported to the Ninigret National Wildlife Refuge headquarters in Charlestown at 364-9124.) At Moonstone, with the noontime waves crashing over the tug Scandia, the workers in charge of pumping out its fuel managed to pressure test the system. But they postponed the actual pumping because of the weather. DEM workers said they were still finding dead birds and contaminated lobsters being tossed onto the sand by the waves. A walk along the beach revealed many dead starfish and skate egg pockets. The faint smell of oil lingered, even in the bracing wind. Nonetheless, said Almond, the scene ``looks pretty good without the barge.'' Across Narragansett Bay, salvage workers and Coast Guard officials had begun moving oil from the North Cape to the smaller Clear Waters 12. Coast Guard Reserve Chief Brian Smith said the transfer would continue through today. Smith said the 17 or so members of the salvage crew would keep working as long as they could, despite the forecast of rain and a high wind warning from the National Weather Service. ``If this was a normal operation, we probably wouldn't be transferring fuel,'' Smith said. But seawater is seeping in through the North Cape's cracked hull and mixing with the oil to form ``slop.'' ``If they stop pumping, it could possibly sink. It's a Catch-22. But (Captain Turlo's) policy is that no one's been hurt yet, and we'd like to keep it that way. You can always clean up the oil, but you can't replace somebody's hand or arm.'' ______ [From the Providence (RI) Journal Bulletin, February 23, 1996] Block Island Fishing Areas Remain Shut (By Tom Mooney) The expected reopening of portions of Block Island Sound to fishing this week has been delayed by another round of sampling that found lobsters still smelling of oil a month after the North Cape spill. ``It's a cause of concern because with some kinds of fishing gear lobsters can be caught,'' said Ernest Julian, chief of the State Health Department's Division of Food Protection. And one smelly lobster on someone's table ``could destroy the industry,'' he said. State environmental officials were planning earlier this week for the reopening of part of the closed 250-square-mile area to gill netters and hook-and-line fishermen. Trawlers were still to be prohibited since their bottom nets could catch lobsters, some of which still smell of oil. Since the area is in Federal waters--beyond 3 miles and east of Block Island--State officials were awaiting final approval from the National Marine Fisheries Service. But the number of test lobsters still smelling of oil--9 out of 44 caught between Tuesday and Thursday--surprised scientists, said Julian. And even though all finfish samples continue coming back clean, Julian said, the lobster findings gave reason for pause. The scientists want more time to discuss how to enforce a prohibition against catching lobsters and whether ground fish, like flounder, should also continue being off-limits, said Julian. State and Federal officials also want to reach agreement on the type of fishing gear allowable. ``It's highly likely there will be an agreement next week,'' Julian said. But he wouldn't commit to a day. ``Things can change.'' ______ [From the Providence (RI) Journal Bulletin, March 2, 1996] Fishing Ban Tangled in Bureaucracy (By Peter B. Lord) Reopening of the 250-square-mile area off Rhode Island is expected soon, but it still needs official approval from at least a dozen State and Federal agencies. At first, they didn't realize they were doing something so unusual. Soon after the barge North Cape ran aground Jan. 19 and disgorged 828,000 gallons of oil into the churning surf off Moonstone Beach, State health and environment officials announced they were banning fishing in all waters between Galilee and Block Island. It was a prudent public health measure, they said, and it wouldn't last long. The ban probably would be lifted within a week. More than 6 weeks have passed. Not a single fish tested by scientists since then has been contaminated with oil. But fishing is still prohibited in a 250-square- mile area. State officials say they hope the ban may be partially lifted sometime next week. But they've made so many similar predictions already, they will not be more specific. Instead, they talk about a ``bizarre'' review process that has consumed the attention of dozens of State and Federal bureaucrats. One Federal official called it ``a mess.'' Among the factors cited for delays in lifting the ban are the primitive metabolisms of lobsters (which until recently continued to smell of oil), snowstorms that shut down government offices, time spent consulting experts on the West Coast who cut their teeth on the Exxon Valdez disaster, and the slowness of completing critical laboratory analyses. The single most important explanation, however, is that apparently no other State has ever instigated such an extensive fishing ban after an oil spill. Consequently, no one has any experience in determining when such a ban should be lifted. So what sounded like a simple process of inspecting and certifying the cleanliness of a body of water and its fishlife has turned into an unprecedented bureaucratic and scientific tangle. Lawyers and regulators from at least a dozen State and Federal agencies have been groping toward an agreement on reopening the waters, literally making up the rules as they go along. ``I don't know that anyone in this office has ever done this before,'' said Dan Morris, a resource conservation officer for the National Oceanic and Atmospheric Administration in Gloucester, Mass. His is one of the key agencies that must approve the reopening. ``We're aware of only two emergency fishing closures: one for an outbreak of paralytic shellfish poisoning on Georges Bank and the other for a spill of drums filled with arsenic,'' Morris said. ``All this is new ground. That's why we're having to proceed carefully.'' Insurers for the oil barge are expected to compensate fishermen for income lost during the closure. And when all the reviews are completed, there should be no doubts that the fish are safe. Ernest Julian, chief of the State Health Department's Food Protection Division, says it was his idea to close the fishing grounds the weekend of the spill. ``It was the logical thing to do,'' he recalled last week. ``You have 828,000 gallons of oil in the water, it didn't make sense to bring product up through that.'' Julian and fishery experts at the State Department of Environmental Management initially closed a 105-square-mile rectangle of Block Island Sound. Later they extended it to 250 square miles. But State officials soon learned they had overstepped their authority in a big way. Most of the waters they closed were Federal waters over which the State has no jurisdiction. The oversight was kept quiet and Federal authorities quickly made the closure of the waters legal by publishing official notice in the Federal Register. Within days, State and Federal agencies launched a massive effort to collect samples of water and fish to determine the extent of contamination. Early indications suggested the oil was rapidly dissipating. Officials hoped much of the closed area would be reopened the first week of February. Soon, the regulators would learn that it was easier to collect the information than it was to agree on what it meant. The various agencies informally agreed to a ``protocol'' that would tell them when it would be safe to reopen the fishing grounds. Most of it was fairly straightforward. The North Cape and its tug, the Scandia, would have to be removed. Visible oil sheens would have to be gone. (Sheens were reappearing in Point Judith Pond as recently as a week ago, according to Julian, as large vessels churned up the bottom and caused oil in the sediments to return to the surface. The water would have to be free of oil. Finally, fish would have to pass the odor and chemical tests agreed to by toxicologists and other scientists. Most of the experts generally agreed to the terms of the protocol a month ago. David V.D. Borden, the DEM's assistant director for fish and wildlife, said the protocol has been approved by the following State interests: the Coastal Resources Management Council, the Health Department, the attorney general's office, the Governor's office, and the DEM's legal counsel, water resources division and director's office. A similar long list of Federal agencies is involved as well, and Borden said most of them have yet to officially approve the protocol. The Federal interests include: the National Marine Fisheries Service and its offices in Gloucester, Narragansett, Seattle and Washington, D.C.; the general counsel of NOAA; the New England Fishery Management Council and the U.S. Food and Drug Administration. ``All these people have agreed to the concept,'' said Borden. ``But they haven't formally signed off. It's a little bizarre.'' ``It's one thing to get technical comments from experts. It's another thing to get the administrative sign off and approval,'' observed Bob Vanderslice, a risk assessment expert with the State Health Department. ``This is not something Federal agencies are used to doing. They have lawyers whispering in their ears telling them not to sign anything. Since they don't have clear authority, what should they be doing?'' Several weeks ago, the pattern was clear. The water was clean. The fish were fine. The problems were with lobsters: Some picked up as far as 14 miles offshore continued to smell of oil. And oil was suspected to be in the sediments near the spill site. Scientists here consulted with the Northwest Fisheries Science Center in Seattle, where scientists have been studying the effects of oil on fish for more than 20 years. John Stein, director of environmental conservation at the center, said scientists tested many of their theories after the Exxon Valdez spill in 1989. (Even though the Valdez was a much bigger spill, it caused a much shorter and more limited fishing ban, Stein said.) Stein advised local officials that the problem with lobsters is their metabolism. ``What that means is when lobsters are exposed to aromatic hydrocarbons in the oil, they take them up, as do the fish. But the liver of a lobster is not as efficient as the liver of a fish in transforming the compounds into forms that can be easily excreted.'' So while fish can consume oil and expel it from their systems, Stein said ``lobsters will accumulate appreciably higher levels.'' State officials proposed a compromise. They wanted to reopen the fishery to gillnetters--fishermen who tow nets suspended in the water-- and to hook and line fishing. That way, regulators could be fairly certain that no one would bring in contaminated lobsters or any other catch from the ocean bottom. On Feb. 16, the DEM asked the National Marine Fisheries Service to agree to the limited reopening, expecting a response any day. It's still waiting. NOAA's Dan Morris acknowledged there have been delays, but he said Thursday that he expects the reopening plan to be approved very soon. ``It's an unusual circumstance to open and close a fishery,'' Morris said. ``We're talking about public perception and public health. You have to be careful with both.'' No one suggests that any agency wasn't doing its best to resolve the fishing ban. In fact, there has been a lot of praise for the Federal-State team effort. But State officials remain amazed there are no national standards for such a situation. ``What environmental problem is more common than an oil spill?'' said Vanderslice. ``And yet there are no national protocols. No standards. They've never done it.'' But Ken Sherman, chief of NOAA's marine laboratory in Narragansett, said he wasn't surprised that there are no national rules. ``Each spill is so unique. One has to tailor a closure and opening for each event. And the events are always different. We've been very fortunate with spills in the Northeast. We didn't have to do a closure with the Argo Merchant because it was wintertime and all the oil was taken offshore. With the World Prodigy, very little got into the sediment and it evaporated much more quickly.'' Everyone agrees that the North Cape's oil is dispersing. DEM's Borden hopes fishing will be allowed to resume this week. Fishermen, however, face yet another roadblock--another problem that combines science, biology and government regulations. Gillnetting--the most important type of commercial fishing that the State is trying to reopen--will be prohibited for the month of March in waters off Rhode Island. It's just a bad coincidence. Months ago, the New England Fishery Management Council voted to ban gillnetting for all this month in a large block of water off Rhode Island and Martha's Vineyard to reduce the accidental netting of a threatened marine mammal called a harbor porpoise. Fishermen accidentally kill between 1,200 and 2,900 of the porpoises in the Northeast each year, so the council agreed to restrict fishing in certain areas where the highest number of kills occur. No one realized last fall, when the council agreed to the ban for the month of March, that the State would be trying to reopen its fishery in the same water, at the same time. ______ [From the Providence (RI) Journal Bulletin, March 14, 1996] Fishing Ban Based in Area Polluted by Oil Spill between Pt. Judith and Block Island (By Peter Lord) Fishermen are still barred from dragging for bottom fish or catching lobsters or shellfish in the oil spill area. The North Cape fishing ban was eased yesterday. The action by the Federal Government was the first letup in a 7-week-long prohibition against all fishing in a 250-square-mile area between Point Judith and Block Island. Federal fisheries officials, who had the final word, finally signed off on a State request to reopen the area to fishermen using hooks and lines or gill nets. The fishermen most affected by the partial reopening are charter boat operators and commercial fishermen seeking herring and squid. But fishermen are still prohibited from dragging for bottom fish or trying to catch lobsters or shellfish within the area tainted by the Jan. 19 spill of 828,000 gallons of home heating oil from the barge North Cape. The partial reopening reflects what scientists have discovered in thousands of tests and samplings after the oil spill: that the water is clean and the fish are OK, but lobsters from as far as six miles out still smell of oil and some oil remains trapped in sediments near the spill and under coastal ponds. ``We're making continual progress,'' said Ernest Julian, chief of the State Health Department's Division of Food Protection. ``It's slow progress. But look at the water temperature. It's so cold it's slowing the breakdown of the oil. It's like putting something in the refrigerator; it takes longer to spoil.'' Julian and other State officials recommended the limited reopening a month ago. Since then there has been growing tension between State and Federal bureaucrats over the delays in obtaining Federal approval. The final decision lay with regulators and lawyers in the National Marine Fisheries Service, an arm of the U.S. Department of Commerce. Some observers attributed the delay to the fact that no State has ever imposed such an extensive fishing ban before, so no one had any experience in lifting such a ban. For weeks State officials said fishermen had been understanding and cooperative with the ban. But tempers flared this week at a meeting in Narragansett to tell fishermen about compensation programs available to help them recoup their losses during the ban. Fishermen responded bluntly: Forget about laying blame, they said. Reopen the fishing grounds. On Tuesday, DEM spokesman Peyton Fleming said, he asked a National Marine Fisheries Service spokesman what Federal official would have the final approval on lifting the ban. The spokesman gave him a name, Fleming said, but refused to give him the person's telephone number. ``I told him that people up here are getting really impatient,'' Fleming said. Also on Tuesday, Fleming said, DEM Director Timothy R.E. Keeney called the Federal agency's general counsel and ``read him the riot act.'' Sen. John H. Chafee and Congressman Jack Reed both said yesterday that they had been pressing the Federal fisheries people in recent days to expedite their decision. Reed said he met with Rollie Schmitten, director of the National Marine Fisheries Service, on Tuesday to urge him to make a decision. Yesterday afternoon, Schmitten officially lifted the ban. He issued a statement from Washington saying, ``We've moved as quickly as possible to guarantee this reopening strikes the delicate balance between providing fishing opportunities and yet ensuring Rhode Island's seafood is safe and wholesome.'' Schmitten pledged to continue working with State officials on efforts to reopen the remaining fisheries. Governor Almond called yesterday's action ``a major step forward in getting Rhode Island commercial fishermen back to work.'' Reed and Chafee said they continue to be anxious about the fact that the shellfishing beds are still closed. ``While I am certainly pleased by this first step toward a complete reopening of Rhode Island waters to fishing, each day that the grounds remain closed to other types of commercial fishing represents an enduring economic hardship for our State,'' Chafee said. It has been more than 7 weeks since the North Cape ran aground at Moonstone Beach and State officials jumped into a bureaucratic morass by imposing the fishing ban. Yesterday Federal officials confirmed that they were officially closing a 28-square-mile area southeast of Block Island to lobstering because lobsters in the area were being brought up with oil odors. The State requested the closure a month ago, according to the National Marine Fisheries Service, and has informally enforced it with patrol activities. Julian said yesterday that a closed area near Brenton Reef is looking ``pretty good'' for lobstering right now and may be the next candidate for reopening. But he declined to guess when any other bans will be lifted. Meanwhile, more samples are being collected. Water samples were taken yesterday from Point Judith Pond. The results should be available in a few days. __________ Statement of Frank Blount for Gail Frances, Inc. My name is Frank Blount and I appreciate the opportunity to address you this evening on behalf Gail Frances, Inc. My wife and I have been for many years the owners and operators of the Frances Fleet, three vessels that operate year-round out of the port of Galilee in Narragansett. Our business is based on charter fishing trips, where one of our boats is rented and daily fishing trips, which usually carry a large number of passengers. The winter season of 1996 started great, but then the Spill hit us hard and had a tremendous impact on our charter and daily fishing business. Regular customers, scared away by the closures and negative press, went fishing in other ports in New York, Connecticut, and Massachusetts. Charter trips were canceled one after another as groups expressed concern about the effect of the spill and the closures. Unfortunately, we could do nothing to counter all the negative publicity. We even had to shut down our restaurant due to the dwindling number of fishermen. Our claim was first submitted to Turnaboat, who was responsible for the spill. We sent them a detailed analysis of our entire claim, prepared by an accountant. We also sent them corporate tax returns, financial statements, calendars documenting passenger counts, letters supporting charter cancellations, invoices for trade shows, and other pertinent information. Amazingly, they kept asking us for more and more information, like copies of our leases and salary information, that was entirely duplicitous of what we'd already given. We gave them what they wanted anyway, and tried to negotiate a fair settlement. Finally, about 18 months after the claim was first submitted, which is 12 months longer than they have under the law to decide our claim, they only offered us a fifth of what our damages were. It is clear to us now that they never intended to fairly compensate us for the damage they did. They said ``the ban on reel fishing was lifted on March 23, 1996,'' so they didn't want to pay anything after that. The funny thing is, people were not lined up outside our boats to go fishing on March 24. Everything was not back to normal. This same claim with the same exact documents given to Turnaboat was then submitted to the National Pollution Fund in August 1997 A month later, despite the fact that our claim had grown to over 200 pages, the Fund demanded even more documents that wholly duplicated the original claim. We had already given them compiled financial statements prepared by certified public accountants for 1993, 1994, and 1995, but now they wanted bank statements for every month in those years. We had already given them copies of our tax returns for 1993, 1994, and 1995, but now they wanted us to make more copies and re-sign them in ink, something a court would not even do. The IRS doesn't give signed copies back! It seems like from the beginning, the Fund had a bias against us. Nevertheless, after much time and effort, we gave the Fund exactly what they wanted. All of this information was apparently still not enough for the Fund, as they insisted on a meeting I had no choice but to attend for fear of harming my claim. In February 1998, my wife and I met with representatives of the Fund, and thoroughly discussed our claim. We responded to numerous questions at this meeting that could have been answered by a thoughtful review of all the documents we already gave them--they asked us questions about documents they already had. How Payment For Our Charter Business Was Avoided Incredibly, on March 1998, a month after the meeting, the Fund wrote a letter that demanded even more information. After asking for and receiving cancellation letters from every charter client, the Fund apparently decided that we also had the obligation of supplying the phone number of every individual who canceled a charter trip. We were amazed by this demand. We had already sent the Fund eight letters signed by each of the canceled charters that clearly stated that the Spill caused the cancellation. But that wasn't enough for the Fund. They wanted us to track down and give them the telephone number of every person who canceled with us. Where else does a victim have this burden? We nevertheless again tried to meet the excessive demands of the Fund by providing a charter history from our records for most of the clients who canceled, but that wasn't good enough, either. On July 27, 1998, almost a full year after the claim was sent to the Fund, and 6 months after they are supposed to come to a decision, its offer to Gail Frances for all of our lost charters was zero. We documented a claim for over $50,000 for those lost charters, and the Fund offered us nothing. How Payment For Our Daily Fishing Business Was Avoided As incredible as that outright denial was, the Fund also managed to come up with a brand new idea to reduce their offer for the part of our claim for lost daily passengers. The Fund told us that we would not be compensated for lost passengers on days that the wind reached 25 mph or more, apparently because it decided that even if the Spill had not occurred, the weather would have kept many passengers away. They subtracted forty passengers from our total lost passengers for every day that the wind reached 25 mph. By their calculations, 356 passengers would not have fished in 1996 based on weather alone, so the Fund reduced its offer by another $15,000. The Fund's methods are madness. The fact is, wind records from the Point Judith Coast Guard Station and the Block Island Airport demonstrate that we carried 189 passengers in 1995 on days that the Fund would have credited us with none. Furthermore, the Fund subtracted forty passengers from our total for days like February 17, 1996--a day on which the wind reached 25 mph only once, when it was 25.3 mph at midnight! I couldn't believe that the Fund was basically telling us that less than a month after 800,000 gallons of oil had spilled, it was really the wind at midnight that was keeping people away from the water! The money the Fund did offer us doesn't come close to the losses we actually suffered. Its flat-out wrong for the Fund to desperately search for ways to avoid making us whole. It seems to me that the only difference between the National Pollution Fund and Turnaboat is the letterhead of each denial we receive. Why should we have to go through the same process twice? It's been 2 years and hundreds of pages since we first made a claim for our damages from this oil spill, and we still haven't gotten a dime. Victims deserve more from a process specifically created to compensate them. __________ Statement of J. William W. Harsch, Esq. The Oil Spill Liability Trust Fund (``Fund'') is generally understood to have been set up to reimburse those suffering losses as a result of oil spills. There is no question that the massive Rhode Island oil spill which occurred on January 19, 1996 caused enormous damage and resulted in great financial loss. The process which was set up after the spill to assess and reimburse claims became a problem almost at once. it appeared that those handling the reimbursement process, or at least some of them, felt that their role was an adversarial one and one in which they should seek to settle claims for the lowest possible dollar amount. Anyone who felt that their claim was not being treated fairly had recourse to an intimidating and drawn-out court process or to submitting a claim to the Fund. Reports on the experiences of individuals and business entities in seeking to collect damages from one of these three sources vary considerably. However, the bottom line is that the claims processing mechanism set up by the owners and their insurers, quite naturally, had, as one of its objectives, keeping the claims payment numbers as low as possible and therefore resisting claims or settling for reduced amounts. The court process is by definition adversary. While the law does provide avenues for recovery, this is generally not a speedy or ``user- friendly'' process. The question then presented is whether the third alternative, the Oil Spill Liability Trust Fund, would represent a somewhat different and more accessible relief and recovery process. It is my belief, from a review of the statute and its background material, that the Fund was basically set up to provide a speedier and more impartial relief mechanism. On the one hand, this would be helpful to those seeking recovery in that the process would be less burdensome, hopefully more prompt, and less adversarial. On the other, it would serve to aggregate claims and generally develop more clout in seeking eventual recovery from those responsible for the damages and their insurers. Either as a result of administrative misunderstanding of congressional intent, or conservative administration of the Fund, or difficulties with the present statutory language as drafted, this does not appear to have turned out to be the case. You will hear a good deal of testimony, I am sure, on the subject of the Fund's handling of direct damage claims. This is one area which merits the committee's attention. I would like to put before the committee another area of difficulty as follows. I believe that the Fund has considerable difficulty, both conceptually and operationally, in dealing with indirect and consequential damages occasioned by a spill such as this one. I believe that there can be no question that oil spills, certainly larger oil spills, create injuries and damages far beyond the area of immediate and direct impact. Like ripples on a pond, the impact spreads to secondary and tertiary businesses and activities. It is my belief that the U.S. Congress intended the Fund to be capable of handling the entirety of damages reasonably attributable to an oil spill. If this were not the case, the result would be that those responsible for the spill would escape a portion of the damages which they inflicted, and would in effect transfer the cost of those damages from themselves to those who were in fact injured. A typical insurance company will use an adverse and skeptical process to resist all claims. The less direct the claim, the more the skepticism and hostility. The area of consequential damages then becomes one which I believe should be of particular concern to the Fund. The job of the Fund, in addition to handling promptly and with reasonable sympathy those damages which are direct and relatively easy to establish, should also be to respond to damage claims in the category of indirect injury. Such claims would include reduced access to resource supplies because of contamination, loss of market, loss of income from those normally involved in providing product or services in the area (and to the resource) affected by the oil spill. Naturally, at some point, the indirect and consequential impacts of an oil spill will become distant, relatively small, and difficult to ascertain. That should not mean that the Fund should not have a well-established mechanism for dealing with indirect, partial and consequential damages. Further, it should not mean that the process for dealing with such damages becomes very time- attenuated. On the plus side, there is no question that having the Fund available is an enormous positive contribution to dealing with the impacts of an oil spill and to requiring those responsible for damages to pay for them. Further, the contacts which I have had with the Fund's staff have been uniformly courteous, and the staff has certainly attempted to be helpful and responsive. However, it would be my impression that the Fund legislation requires further attention to clarify the intent that there be coverage of indirect and consequential damages, just as there is of direct damages. Perhaps above all, I urge this committee to consider whether the Fund is adequately defined and directed so as to provide what the insurance companies and the representatives of ship owners do not provide, and the court system cannot provide, which is a program directed to full recovery of damages by each and every business and individual affected by an oil spill. The Fund should, in my opinion, be clearly directed that it avoid behaving like an insurance company, avoid undue skepticism, inappropriately complex processes and over- concern with the question of whether it, in turn, will be able to recover its payouts from the insurance companies covering the generator of the spill. I believe that Congress intended, and those affected by the spills clearly need 1) a process which will allow individuals and business enterprises to recover their damages and get back on their feet as promptly as possible; and 2) a process which is fully committed to the principle of seeing that there is full recompense and that, to the extent possible, those responsible for a spill pay for the damages caused. __________ Statement of Raymond Nally My name is Raymond Nally and I appreciate the opportunity to address you today. My testimony is presented as an officer and shareholder of Betsy Enterprises, Inc. which owns and operates the Fishing Vessel Betsy. I will briefly describe my claim. The F/V Betsy is used for lobstering and uses circulating sea water to keep the lobsters alive. On or about January 19, 1996, the North Cape Barge ran aground and spilled oil into Block Island Sound. Due to the environmental contamination caused by the North Cape Barge oil spill (the ``Spill''), on or about January 20, 1996, a large portion of Block Island Sound was closed to lobstering (hereinafter referred to as the ``closed area''). At the time of the Spill I had about 40 trawls with a total of 960 pots in the water in various locations around Block Island Sound, with the majority located outside of, but within one mile of the closed area. After the Spill I was unable to tend these traps because my crewhand quit on account of the Spill. I normally remove my traps at this time of the year from areas that I knew to be conflicted, since I knew that my pots would not be safe if left in place. I could not remove the pots however, since I was unable to retain another crewhand because of the situation created by the Spill. The market for crewhands had been effectively cornered by Eklof Marine the party responsible for the Spill--who supplied crewhands with partial payments as compensation for damages from the Spill and who also employed many of these deckhands in conducting response actions due to the Spill. I would have had to spend twice the time and energy to look for my gear without the assistance of a crewhand. It was simply not practical from a business or personal safety standpoint to attempt to retrieve my pots alone. Even if I had been able to secure a deckhand, I would have had to travel through the closed areas to tend my traps and any lobsters I caught would have to be kept alive without the assistance of my water tanks, since I could not use the contaminated sea water in my circulating sea water system. It is my belief that any lobsters caught would have died during transportation without the use of circulating sea water. When I was finally able to get someone to help me tend my gear, I discovered that 11 of my trawls were missing. I strongly suspect that the 264 pots on these 11 trawls were destroyed by draggers who were forced outside the closed area following the Spill. I valued the cost of these lost trawls to be 510,736.00. After my claim was denied outright by Turnaboat, the insurance adjuster for Eklof, my claim was submitted to the Fund on March 19, 1998. I have been told by my lawyers from Kirkpatrick & Lockhart that my claim was the only claim they submitted to the Fund that wasn't assigned to an adjuster for resolution. My claim was instead handled by NPFC Legal who denied my claim in its entirety in a letter dated August 6, 1998. Their reason for the denial, if I may quote, was: ``. . . the proximate cause of the damage to your client's fishing equipment would not be the oil spill incident; rather it would be intervening action of the draggers which proximately caused the damage.'' This is wrong. My pots were in perfectly good condition before the Spill. Because of the Spill, and its effect on manpower, its closure of the port, its restriction on use of water over a wide area and its forcing of all fishermen out of a wide area--my pots were destroyed or disappeared. Was it some draggers? I don't really know because I wasn't there and they did not leave any evidence. There is one thing I do know: If there had not been an oil spill, I would not have lost $10,736.00 worth of gear. And if it was actually the actions of some draggers that caused me to lose my gear, I can tell you now that were it not for the Spill, I would have removed my gear before the damage could occur, just like I did in previous years. I thank you for this opportunity to speak. __________ National Pollution Fund Center News Release coast guard provides information on t/b north cape claims Washington--The U.S. Coast Guard National Pollution Funds Center (NPFC) announced today the availability of information concerning the methodology that it is utilizing to adjudicate or measure lost profit claims from lobstermen that occurred from damages arising from the T/B North Cape oil spill of January 19, 1996. The information will be available as a hand out at the hearing held on December 10, 1998 by the Committee on Environment and Public works of the U.S. Senate in Narragansett, Rhode Island. The NPFC is also providing information concerning the impact of the 3-year statute of limitations on potential claimants that were damaged by the oil spill. Copies of both documents are appended. They will also be available on NPFC's web site at http:/www.uscg.mil/hq/npfc/npfc.htm. Both documents are provided in an effort to address questions which have arisen concerning these issues. For additional information concerning the documents please contact, Ms. Linda Burdette, Chief Claims Adjudication Division, National Pollution Funds Center, (703)- 235-4801. information concerning statute of limitations and the t/b north cape spill provided by the u.s. coast guard's national pollution funds center 10 december 1998 The U.S. Coast Guard National Pollution Funds Center (NPFC) announced today that any person who plans to present an OPA oil spill incident claim for damages arising from the T/B North Cape oil spill of 19 January 1996, is advised that the claim must be presented to the NPFC within 3 years after the date on which the injury and its connection with the spill were reasonably discoverable with the exercise of due care. This does not mean that the timeframe for submitting claims to NFPC ends on 19 January 1999, however potential claimants do need to know the general conditions that start the clock for the 3-year statute of limitations. All OPA damage claims arising from the T/B North Cape oil spill must be first presented to the responsible party, Eklof Marine. If the responsible party denies the claim or fails to settle the claim within 90 days, the claimant may present the claim to the NPFC. While the responsible party may choose to accept and settle claims after the 3- year period has elapsed, the NPFC cannot waive the 3-year statutory limit for claims presented to the NPFC for payment from the Oil Spill Liability Trust Fund. The circumstances of each claim will determine when the 3-year period starts. It is possible that a given claimant may have more than one injury from a spill, each of which is discovered or reasonably discoverable at a different time. So a claimant may have separate claims with different 3-year periods for submission. OPA damages for which claims may be submitted include loss of profit damages. In general, a loss of profit injury is reasonably discoverable no later than when, in the course of its normal business accounting practices, or otherwise as required by law, the claimant determines, or is required to determine, business losses for a given period. But if a business in fact discovers it suffered a loss at an earlier date, that date will control. In the absence of other information as to when a loss of profit or earning capacity was in fact discovered, the NPFC may rely on the date of relevant income tax filings to establish the date the loss was reasonably discoverable. The connection of the injury to the oil spill also will be determined by the circumstances. The connection may be reasonably made when the injury is discovered or discoverable. For example if your boat was oiled by the spill and you had it cleaned the next week and have not submitted a claim, the statute of limitations is quickly coming to an end. However in some circumstances the connection may be reasonably discoverable only at a later time because, for example, information about the spill or its impact was not available until a later time. Because the circumstances of each claim will determine when the 3- year period starts for that claim, the NPFC cannot provide a single date to begin the 3-year period that will apply to any particular claim or class of claims. The only certainty is that the period begins no sooner than the initial date of the spill; therefore any claim submitted within 3 years after the initial date of the spill will certainly be timely. Beyond that, the best guidance the NPFC can offer to potential claimants is that they not delay submitting a claim for a period of years. Such delays will only increase the risk that an otherwise valid claim may be denied in whole or in part solely because it is submitted late. Presenting a claim to the NPFC does not preclude a claimant from continuing to pursue settlement with the responsible party. So claimants may submit a claim to the NPFC to meet the 3-year requirement while still pursuing a settlement with the responsible party. Of course, the claimant cannot be paid twice for the same damage. ______ Measurement of Lost Profits Claims by Lobstermen Arising from the North Cape Oil Spill us coast guard national pollution funds center--10 december 1998 The following is an explanation of the National Pollution Funds Center's (NPFC) methodology for measurement of lost profits claims filed by lobstermen in Point Judith, Rhode Island. The lobstermen were prevented from fishing during part of 1996 after the oil spill from the North Cape impacted their fishery. NPFC has concluded that damages did occur to the lobster industry as reflected by statistics indicating substantially reduced catch levels after the spill and into late summer of 1996 at which point statistics indicate that catch levels returned to previous year levels. This methodology is intended to measure the lost profits and earning capacity suffered by lobstermen during the period from the spill until late summer 1996 by taking into account the seasonal nature of the lobster industry, a benefit for additional effort expended by some individuals during 1996, and the varying levels of success among lobstermen in the area historically. Essentially, the methodology applies 1995 performance of claimants to 1996 effort to calculate an expected 1996 profit. Claims paid are the difference between expected profit and lower actual profit, adjusting for saved expenses. Methodology: (Example attached) (1) The methodology uses Rhode Island DEM statistics and quarterly catch historical data to calculate the Average pounds of marketable lobster in each trap haul (average catch per trap-haul) on monthly basis. The average catch per trap-haul is calculated on a monthly basis to account for the seasonality of lobster fishing. (2) The average catch per trap-haul is then multiplied by the Number of traps that are checked or ``hauled'' on any given trip. This number will vary for each fisherman; our example uses 300 traps per trip. The number of trap-hauls in 1996 will be revised to consider traps retired, sold or purchased. If additional traps are proven to have been purchased in 1996, we will detente the maximum number of traps that can be hauled per trip for each claimant. The number of trap-hauls is multiplied by the 1996 seasonally adjusted average catch per trap-haul to derive the 1996 Expected Catch per trip. (3) To determine the 1996 Total Expected Catch the 1996 Expected Catch per trip is multiplied by the number of trips. During the fishing closure due to the spill, the number of trips for 1996 is based on the actual number of trips made for the same period in 1995 as the determined loss period. However, for periods when the fishing areas were no longer closed due to the oil spill, the number of trips is based upon settlement sheets or receipts provided by the claimant. (4) The 1996 Total Expected Catch is then compared to the lobstermen's previous years catch in relation to the average lobsterman's catch, to account for the experience of the individual lobsterman, to calculate the 1996 Projected Catch. Expected catch for 1995 is compared with the actual catch in 1995 to calculate the 1995 Monthly Catch Variance Percentage. Expected catch for 1995 is calculated in the same manner as expected for 1996. We consider that the claimant's 1995 catch percentage variance will be the same for 1996. For example, if the claimant's settlement sheets or receipts show that they normally exceed this calculation (variance greater than 100 percent), we will adjust their expected catch upward to calculate projected catch. (5) The 1995 Quarterly Average Price Per Pound for Point Judith was provided by a New England scientific expert. (6) The 1996 Projected Monthly Stales is calculated by multiplying 1996 Projected Catch by the corresponding 1995 Pt. Judith quarterly average price per pound. (7) Actual Sales for 1996 are subtracted from projected sales for 1996 to calculate Total Lost Rules for 1996. (8) Saved Expenses (for example, fuel, bait and crew-share) are calculated as a percentage of sales. Amounts are based on the claimant's 1995 Income Tax Return. During the closure due to the spill, we calculate saved expenses as a percentage of lost sales. Any additional expenses incurred during that time will also be considered. (9) Saved Expenses are subtracted from 1996 lost sales and additional expenses are added to calculate 1996 Lost Profits. Documentation Requirements Specific information is needed from the claimant in order to utilize this methodology to calculate 1996 lost lobster income. We do not require that the information be provided in a specific form or format. We are willing to assist the claimant in assembling the necessary information in order to adjudicate claims. The information requirements and the rationale for the requested information is provided below: (1) FISHING LICENSE: Establishes a claimant's eligibility and fishing area during the period of loss. (2) VESSEL DOCUMENTATION & CREW INFORMATION: For 1996 establishes where the vessel can legally fish and how crewmembers are compensated. (3) FEDERAL INCOME TAX RETURNS: For 1993, 1994, 1995, 1996. Establishes non-continuing expenses (bait, fuel, etc.), and confirms that fishing income reported on the returns corresponds with settlement sheets or receipts. (4) DOCUMENTATION ON NUMBER OF TRAPS, TRAPS HAULED PER TRIP AND POUNDS CAUGHT MONTHLY FOR 1994, 1995 & 1996: Shows where claimant's traps were located during the course of the year, and whether fishing losses resulted from the oil spill. This information is used to project the amount of lost income due to the spill, and to account for increased effort, seasonality and new equipment, etc. (5) DOCUMENTATION FOR NEW TRAPS FOR 1996: Demonstrate claimant's intent to expand his business prior to the oil spill. (6) A MEETING WITH THE CLAIMANT: Once we and our contractor have the above information and have had an opportunity to review it, our contractor will meet or perform a telephone interview, if necessary, with the claimant to resolve any questions regarding the information provided. NATIONAL POLLUTION FUNDS CENTER Example 1996 Lobster Lost Profits Calculation December 8, 1998 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Sample Calculation of Lost Lobster 1996 Income Description -------------------------------------------------------------------------------------------------------------------------------------------- Total January February March April May June July August September October November December ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ (1) 1996 Seasonally Adjusted Average 0.262 0.262 0.262 0.877 0.877 0.877 3.364 3.364 3.364 1.461 1.461 1.461 Catch (in Pounds) Per Trap-Haul....... (2) Multiplied by: The Number of Trap- 300 300 300 300 300 300 300 300 300 300 300 300 Hauls............................... 1996 Expected Catch Per Trip........... 78.72 78.72 78.72 263.01 263.01 263.01 1,009.11 1,009.11 1,009.11 438.35 438.35 438.35 (3)Multiplied by: Number of Trips.... 4 4 4 6 6 6 12 12 12 8 8 8 1996 Total Expected Catch.............. 314.90 314.90 314.90 1,578.07 1,578.07 1,578.07 12,109.31 12,109.31 12,109.31 3,506.83 3,506.83 3,506.83 (4) Multiplied by: 1995 Quarterly 104.00 104.00 104.00 95.00 95.00 95.00 120.00 120.00 120.00 75.00 75.00 75.00 Catch Variance Percentage........... percent percent percent percent percent percent percent percent percent percent percent percent 1996 Projected Catch................... 327.50 327.50 327.50 1,499.17 1,499.17 1,499.17 14,531.17 14,531.17 14,531.17 2,630.12 2,630.12 2,630.12 (5) Multiplied by: 1995 Quarterly $4.02 $4.02 $4.02 $4.02 $4.02 $4.02 $3.01 $3.01 $3.01 $3.16 $3.16 $3.16 Average Price Per Pound............. 1996 Projected Sales................... $1,317 $1,317 $1,317 $6,027 $6,027 $6,027 $43,739 $43,739 $43,739 $8,311 $8,311 $8,311 $178,180 (6) Less: 1996 Actual Sales.......... $0 $0 $0 $0 $1,000 $2,400 $25,000 $44,500 $44,500 $8,500 $8,500 $8,500 $142,900 -------------------------------------------------------------------------------------------------------------------------------------------------------- (7) Total Lost Sales................... $1,317 $1,317 $1,317 $6,027 $5,027 $3,627 $18,739 No Loss No Loss No Loss No Loss No Loss $37,368 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ (8) Less Saved Expenses................ Fuel 5.00 $499 Bait percent $798 8.00 percent ------------ Total Saved Expenses............... $1,267 ================================================================================================================================================================================================ (9) Total Lost Profits................. ......... ......... ......... ......... ......... ......... ......... ......... ........... ........... ........... ........... $36,071 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ __________ Statement of Barry M. Hartman, Kirkpatrick and Lockhart, LLP Good Afternoon, Senator Chafee. Thank you for the opportunity to appear today. My name is Barry M. Hartman. I am a partner in the law firm of Kirkpatrick & Lockhart, LLP. I am here today my capacity as counsel to over 100 lobstermen and women, small businesses, and crew. MOST of these people have yet to be fully compensated for the severe economic losses Hat they suffered as a result of the North Cape Oil Spill on January 19, 1996. You will hear testimony today from four of our clients. Two are lobstermen, one used to run a small business on shore, and one operates a charter and daily fishing boat business. All share the common injury caused by the oil spill--their livelihoods were interrupted. They also share the characteristic of having tried and tried to recover for their losses, only to be turned down for no reason, or thwarted by unreasonable and some cases irrational demands by the responsible party and the Oil Pollution Act (OPA) Trust Fund. My testimony today will not address any individual clients. Rather, it will focus on the broader pattern and practices governing how the compensation system under the Oil Pollution Act of 1990 is functioning. Having now over 100 claimants for 3 years as a result of this spill I can sum up the compensation system in four words. ``It does not work.'' Also, the process will not work unless the attitudes of the responsible parties and the administrators of the The Fund can be adjusted. By ``work'' I mean what Congress said when it passed OPA in 1990: Finally, we make it easier for victims of oil spills to recover for economic damages, natural resource damages, subsistence loss, and others. They can seek reimbursement from the spiller or directly from the $1 billion Federal Trust Fund. The 1978 Amoco Cadiz spill off the coast of France was the biggest spill in history to come ashore. The litigation on that spill is still going on after 12 years. and not one penny in damages has been paid. This bill will make sure that that doesn't happen. 136 Cong. Reg. H6935 (August 3, 1990). Today, 3 years after the spill, precious few have been fully compensated. Before explaining why this is the case, let me give you my perspective. I served as Acting Assistant Attorney General for the Environment Division in the United States Department of Justice during the Exxon Valdez spill. I was responsible for prosecuting that company. I was also the representative of the Justice Department in connection with the development of the Oil Pollution Act of 1990. One of the issues we focused on as of fleers of the court as well as law enforcers, was how to assure that victims of the spill were made whole wisdom having to fight well paid insurance company lawyers for years and years in court proceedings. The legislation that was crafted included an administrative process that was supposed to assure the quick and full payment of claims. I believed it would work. I was wrong. The OPA compensation process is not working for a number of reasons. First, it is not providing full compensation to injured parties in the timeframe established by law, and in many cases not at all. The regulations call for a decision by the responsible park within 6 months. The Trust Fund is supposed to decide claims within 90 days. Of the claims that my Fox filed with the responsible patty for documented losses suffered by fishermen near the closed area, almost none have been decided, let alone decided within the 6-month time period. We have had claim pending with the Fund now for more than 1 year. Not a sole one has been decided within 90 days. Second, both the responsible party and the Fund administrators are requiring more proof of losses than would be required in a court room. For example, if we went to court, we could use routine business records to show our losses. Neither the Fund nor the responsible party accepts these records. In some cases, they even made us create new ones. Similarly, if we went to court, we could use the sworn statements of our clients to prove their losses. Neither the responsible parry nor the Fund accepts These. If we went to court we could use copies of our tax returns as filed with the IRS to prove our losses. After some persuasion, the adjusters stopped rejected copies of these reins. If we went to court and the responsible park Nought that something over Man the spill caused our losses, the responsible party would have to prove that. Here, the responsible party and the Fund ignore our losses and demand Bat we prove beyond any doubt that nothing else could possibly or remotely have caused our documented losses. If we went to court we could prove future losses by projections based on historical experience. The responsible party and the Fund refuse to accept this. They take a ``wait and see'' attitude and have indicated that they mill nor pay any claim for any future time period. This is inconsistent with the regulations and the law. Third, the Fund is not providing the function that it is supposed to provide. The whole purpose of this compensation system is to get the responsible parry to pay. If it will not meet its obligations then the Fund is supposed to pay, and dozen sue the responsible party for what the Fund paid on its behalf. The fact that the law gives the Fund half the time that it gives the responsible party to make a decision (90 days v. 6 months) reflects the notion that it should not start from scratch. Here, the Fund has admitted that it does start from scratch, functions exactly like an insurance company, and applies the same or higher standards of proof than what the responsible party applies. The insurance adjuster who considers claims for the responsible party has no obligation to claimants--only to the insurance company. The Fund may have a fiduciary duty to preserve the Fund for proper claims, but it also has a statutory duty to compensate victims when the responsible party fails to. In reality, it only preserves The Fund. Not a single one of the claims we have filed has been paid by the Fund. The people considering the claims for the Fund are insurance company adjusters. They work for a responsible party one week, and the Fund another. Fourth, the responsible party and the Fund are not adjudicating individual claims. They are applying secretly created legislative rules to all claims, regardless of the facts. Specifically, the responsible party has decided that no one with documented losses from fishing near but not in the closed area deserves more than 3.1 percent of their losses, regardless of the facts. My letter to the Director of the Fund outlining the absurd nature of this secret rule is attached as Exhibit A. Fifth, the delays in deciding claims are occurring because the responsible park and the Fund have erected barriers to payment, and have camouflaged them behind pretextual claims of not having sufficient documentation. (In one case, two bankers boxes of documents was insufficient). The law requires that the responsible party decide a claim within 6 months of receipt of the complete claim. It requires that the Fund do the same within 90 days of receipt of the complete claim. To avoid this, each routinely, upon receipt of the claim, writes a lever saying that it is missing information, and therefore is not complete. We submitted thousands of documents for our clients and few were considered complete. That occurred even though we provided EXACTLY what we were told to provide. In fact, before we filed our first claim we submitted a Freedom of Information Request to the Fund asking for specific examples of information that was used for approving a claim. Although the Fund initially refused to give us this, we ultimately got some information. We followed exactly what they told us to. It was not enough. Sixth, the responsible party and the Fund do not even look at what we provide before asking for more information. There have been literally dozens of instances when, after making a submission, we get a call asking for more information. We tell the caller he already has it. Seventh, are being asked for the same information in two, three and four forms. We provide tax returns that show actual net income. They ask for our books that were used to prepare the tax returns. We provide our books. They ask for documents and receipts to show our costs. We provide receipts and they ask for names of people mentioned on those receipts and other documents. We provide names, and they ask for phone numbers. It is ridiculous. Eighth, for 1996 and 1997 the claims process has apparently proceeding to adjudicate claims without regard to the draft Natural Resource Damage Assessment estimates of losses. While we think those estimates are woefully low (as explained below) the claims adjusters seem to think that there were and will be no losses at all. The attached Exhibit B documents the change in Gross Lobster Sales during 1995 through 1997 for 33 different RILA claimants represented by Kirkpatrick and Lockhart LLP (``K&L''). Each of these 33 have filed for lost profits during those years. These 33 claimants presented herein are a subset of all K&L clients, which in in turn is a subset of all of the lobstermen who fish the waters off Rhode Island. The following summarizes the lobster losses experienced by this small group of 33 claimants: <bullet> Using the analysis of Gibson et al. \1\ losses from the Spill in 1996 and 1997 for adult equivalents is projected as 45,847 and 165,493 adult equivalents, respectively, for a total of 211,340 adult equivalents during 1996 and 1997. --------------------------------------------------------------------------- \1\ Gibson, et al., Estimation of Lobster Stranding Following the North Cape Oil Spill in Block Island Sound and Equivalent Adult Estimates and Stock Status of lobster Involved in the North Cape Oil Spill in Block Island Sound. --------------------------------------------------------------------------- <bullet> Using the actual lobster catch figures of the 33 claimants (converted from adult equivalents by applying an estimated $3.25/lb. and 1.25 lb./lobster) losses for the Spill are calculated as 190,902 lobsters in 1996 and 243,912 lobsters in 1997, a total of 436,814 lobsters lost. This total figure of actual lobster loss exceeds the projected loss by 225,474 lobsters or 107 percent. <bullet> Moreover, during 1997 there were no closures of fishing grounds and the above 3 claimants demonstrably increased fishing efforts in an attempt to mitigate damage losses in 1997 amounted to an estimated 78,419 lobsters (+47 percent) more than projected by the NRDA. Finally, the adjusters are trying to make us prove negatives, and wholly ignoring what caused the damage. We show documented losses from lobstermen who fished quite close to the closed area. They say that we have to prove that nothing else caused the losses. They ignore the fact that the responsible party pled guilty to criminal conduct that caused the spill, and That: The National Transportation Safety Board determines that the probable cause of fire damage aboard the tug Scandia and subsequent grounding and pollution from the barge North Cape was the Eklof Marine Corporation's inadequate oversight of maintenance and operations aboard those vessels, which permitted a fire of unknown origin to become catastrophic and eliminated any realistic possibility of arresting the subsequent drift and grounding of the barge. Contributing to the accident was the lack of adequate Coast Guard and industry standards addressing towing safety. Our clients are fed up. We are probably going to reluctantly abandon the OPA process and file a lawsuit in court. I regret This course of action, and am frankly embarrassed to say that the process I helped create, and that I endorsed and convinced my clients to follow, just does not work--at least not the way it should. We to request that that the rules be changed to force the responsible party and the Fund to pay more promptly and without the improper resistance that exists today. Thank you. __________ Kirkpatrick & Lockhart, Washington, DC 20036, July 13, 1998. Daniel Sheehan, Director, National Pollution Funds Center, 4200 Wilson Boulevard, Suite 1000, Arlington, VA 22203-1804. Re: North Cape Oil Spill Dear Mr. Sheehan: When the North Cape barge discharged its toxic cargo into the waters off of Moonstone Beach in Rhode Island on January 19, 1996 (the ``Spill''), few sensed the awesome significance of that event. Experts from varied fields have made measurements, taken samples, counted populations, and generally worked to obtain a full understanding of the consequences of the Spill. Reports have been written and a Natural Resources Damage Assessment will one day be released for public scrutiny. However, at this point in time--over 2\1/ 2\ years after the Spill--many of the Rhode Island fisherman have not been compensated at all for the harm they have suffered. We have represented well over 100 fishermen and businesses that were impacted, to one degree or other, by the Spill. In a frustratingly tedious process, we have pursued claims with Turnabout Services, Ltd (``Turnabout'') on behalf of these claimants. Although every claim has been fully and consistently documented, few have been settled quickly and equitably. Many had to be resubmitted to the National Pollution Funds Center (the ``Fund'' or ``NPFC'') for payment after being denied or offered ridiculously unfair and wholly unjustified offers by Turnaboat. Still others have been recently subsumed to Turnaboat or will be submitted soon. The dollar value of claims submitted to date to Turnaboat and the Fund that are still awaiting resolution is well over $3 million. We learned early on that there was no ``book'' or guidance from the Federal Government or private fisheries that could tell the lobstermen who fished the Rhode Island waters just what he should do after the Spill to save his livelihood. Each responded with his individual fashion, based upon what he thought would allow him to make a living at lobstering. After the closed areas were reopened, some lobstermen stayed in their historic fishery within the coastal waters that were closed after the Spill. Despite best efforts, the catch of many of these lobstermen plummeted by a third to a half of their pre-Spill catch. Other inshore fishermen, when they saw that their lobster traps produced a greatly reduced, or nonexistent catch, pulled their traps and went to areas outside the closure zone so at they could, in effect, find new grounds or ``chase'' surviving lobsters that might have migrated from the impacted area, and obtain at least some sort of catch. Of course, these fishermen had to compete with others who were also displaced by the Spill, and with those whose traditional fishing grounds were located outside the closure boundaries to begin with. In most every case, these displaced fishermen caught far fewer lobsters than before the Spill. The final group of fishermen, who were located outside the closure boundaries in the first place, were now faced with increased competition from the displaced fishermen, and consequently saw their catch become greatly reduced as well. Here is what we do know: The lobstermen who have stayed within the closure area; the lobster who have gone out of the closure area in whole or in part, and the lobstermen who have remained outside the closure area and now must compete with the displaced fleet, all have and are experiencing real losses in their livelihood because of the Spill. Nothing else explains why their catches have drastically decreased since January 19, 1996. Under the Oil Pollution Act of 1990 (``OPA'') each is entitled to be made whole. In fact, instead of recognizing the probable causal relationship between the 1996 spill and the demonstrable 1996, 1997, and now 1998 losses, our clients are being required to prove their losses beyond doubt and to prove a negative-- that nothing else could possibly account for these losses. In this regard, while we recognize and accept the responsibility for documenting these losses, OPA does not require that losses be proved beyond a reasonable doubt, or otherwise to the degree required by a court of law. fact, that is exactly what the process was designed to avoid: Finally, we make it easier for victims of oil spins to recover for economic damages, natural resource damages, subsistence loss, and others. They can seek reimbursement from the spiller or directly from the $1 billion Federal Trust Fund. The 1978 Amoco Cadiz spill off the coast of France was the biggest spill in history to come ashore. The litigation on that spill is still going on after 12 years, and not one penny in damages has been paid. This bill will make sure that doesn't happen. 136 Cong. Rec. H6935 (Aug. 3, 1990) (statement of Rep. Jones during adoption of conference report accompanying the Oil Pollution Act of 1990) (emphasis supplied). Our Approach At the initial stages of our involvement with the claims process, our approach was straightforward. For each claimant we asks the following questions: What would a claimant have made if not for the Spill? What amount of damages would make that claimant whole? In answering these questions, we compiled the income of each claimant after the Spill, and then compared it with a ``base year, usually 1995 or an adjust version of 1995, that would stand as the income standard before the Spill. So if a claimant had earned net income of $100,000 before the Spill, and then experienced lower catches that resulted in a net income reduced to $80,000 after the Spill, we could conclude that the party had been damaged In the amount of $20,000, more or less, during that time period. Each claim was different and on some occasions we would factor in the historic growth trends of a business or an increase in lobster pots fished. But overall, the analysis was straightforward. Turnabout's Approach Unfortunately, this simple analysis has been unduly complicated by Turnabout, the adjuster hired by the responsible party (Eklof Marine) to handle and minimize payment of claims. In a meeting at Turnaboat offices on June 11, 1998, after more than 2 years of repeated and duplicative demands that we document losses, Turnaboat disclosed for the first time that it was only authorized to pay claims for damages incurred outside the former closed areas at the rate of 3.1 percent regardless of individual proof of loss. Accordingly, a fisherman who has been forced out of his traditional fishing grounds by the Spill, and who attempts to mitigate damages (i.e., feed his family and pay the bills) by fishing outside the imaginary line drawn in the water in January or February 1996, and who can show that his income has decreased by $100,000 after the Spill, will be offered only $3,100 by the representatives of those who have caused this great harm to our waters. How does Turnabout justify this 3.1 percent rule? At the aforementioned June 11, 1998 meeting, Turnabout representatives cited the Cobb/Clancy report \1\ as establishing that about 107,000 adult, or near-adult, lobsters were killed in the immediate aftermath of the Spill. We have found no reference whatsoever to a lobster mortality rate of ``107,000'' in the Cobb/Clancy report. In any event, Turnabout then applies a ``harvest rate'' of 9.5 percent to to arrive at an adjusted figure of 101,650 lobsters lost. Next it multiplies this figure by 1.25 lbs./unit to arrive at 127,062 lbs. of lobster lost. Turnabout divides this lost lobster figure by what it deems to be the local 1996 lobster catch in Area 539 during 1996 to arrive at the 3.1 percent figure. This approach is based on spurious me of data deigned solely to pay the injured fisherman the least amount possible. --------------------------------------------------------------------------- \1\ North Cape Oil Spill: An Assessment of the Impact on Lobster Populations. J.S. Cobb; M. Clancy January 5, 1998. --------------------------------------------------------------------------- NPFC Approach In this same vein, the NPPC, through and with its adjuster Hull & Cargo Surveyors, Inc., has finalized a settlement offer on one claim to date. In that claim, the final 5 months of damages have been totally denied by applying information that is as faulty and counterintuitive as the Turnaboat 3.1 percent position. Attached as Exhibit A is a table that purports to show the ``Summary of Monthly Lobster Landings (pounds)--Point Judith'' for the years 1995 and 1996. This information, the Table states, was obtained from the National Marine Fisheries Service, and alleges that landings at Pt. Judith have increased by 15.9 percent after the Spill. Based on this, Hull & Cargo chose to ignore tax returns and other data that show our clients have actually incurred great losses, concluding that if the landings at Pt. Judith increased, the availability of lobsters to inshore lobstermen must have increased as well. As explained below, that is simply nor the case. While we may infer that the intent of adjusters working for the Responsible Party is to pay the absolute bare minimum on all claims, we are greatly concerned that the Fund appears to be adopting the same approach and deciding, claims by ``rule'' rather than on their merits. Impartial Analysis We believe the best and most accurate approach remains that which the law and regulations contemplate: each claimant documents his own losses. However, if one is to even consider general data to consider claims, at the very least relevant data should be considered and it should be impartial, and reasonably accurate. For example, there is an ongoing assessment of the Rhode Island lobster fishery that culminates each year in a report by the Rhode Island Division of Fish and Wildlife (the ``RIDFW'') titled ``Rhode Island Lobster Research and Management Project Annual Report/Completion Report.'' This report results from the work of Thomas E. Angell, a lobster biologist with the RIDFW. \2\ Mr. Angell has produced a table that breaks out the Area 539 Landings from the Total Rhode Island Landings. This table is attached as Exhibit B. Attached as Exhibit C is a chart delineating the boundaries of Area 539. --------------------------------------------------------------------------- \2\ W. Angell is the project leader and coordinator for the Rhode Island Marine Fisheries Council (RIMFC) Lobster Industry Advisors' Committee and a member of the Atlantic States Marine Fisheries Commission (ASMFC) Lobster Plan Development Team (PDT), ASMFC Lobster Technical Committee, and participates in the Stock Assessment Workshop/ Stock Assessment Review Committee (SAW/SARC) process. Moreover, Mr. Angell's job objectives as defined in the above-referenced Annual Report are: (1) to process, analyze, and report on biological and population statistics collected during this project, and to characterize the Rhode Island commercial fishery for lobsters; and (2) to continue a data collection program to obtain biological and population statistics on Rhode Island lobster resources and to characterize the Rhode Island commercial lobster fishery. --------------------------------------------------------------------------- The table at Exhibit B shows two distinct trends: 1. The Total Rhode Island Landings have increased after the Spill; and 2. The Area 539 Landings (Inshore) have decreased by about 33 percent in each of the years after the Spill. By and large, the claimants we represent attempt to earn their livelihood in or very near Area 539. As stated, many have documented real losses from 25-50 percent within this area. Yet Turnaboat ignored their documented losses, ignored this study, and instead has decided to pay only 3.1 percent of any damages within Area 539 that are outside the former closure areas. Turnaboat bases this position on an ``analysis'' indicating that only 101,650 adult, or soon to be adult, lobsters were killed by the Spill in Area 539. This ``analysis'' cannot stand the light of day when contrasted with losses suffered by lobstermen and the actual catch figures contained in Exhibit B, which reveal an overall reduction in adult, caught lobsters of one million pounds per year in Area 539 during 1996 and 1997. We fear that similar results will occur in 1998. The reason that the total Rhode Island Landings have increased is easily explained by the fact that the offshore fishing fleet, whose catch does nor occur in Area 539 but which are brought to Pt. Judith, has experienced a remarkably productive 1996 and 1997. \3\ Their success is being used by Turnabout to deny the severe damages experience by the inshore fishermen. --------------------------------------------------------------------------- \3\ Of course, inshore fishermen do not have the equipment or resources to ``compete'' with the offshore fleet. --------------------------------------------------------------------------- More than 2\1/2\ years after the Spill, little has changed. Contrary to the stated intent of OPA to ``make it easier for victims of oil spills to recover'' our clients have been forced into a defensive and adversarial position. Accordingly, on our side of the fence are lobstermen with damages that are easily provable using tax returns, financial data and affidavits. Some of these victims have had to declare bankruptcy in the aftermath of the Spill. Others have drastically curtailed expenditures necessary to maintain or upgrade their livelihood. On the other side of the fence are those found by a court of law to be responsible for the Spill and liable for their negligent and criminal behavior; those adjusting for the damages claims resulting from the negligent and criminal behavior; and those specifically directed by Federal law to avoid a repeat of the Exxon Valdez oil spin claims process. All these parties have ignored the unmistakable evidence of massive damage caused by the North Cape oil spill. Conclusion The unequivocal factual data submitted for claimants and compiled by the Rhode Island Division of Fish and Wildlife and Thomas E. Angell, demonstrate actual losses well in excess of 3.1 percent. It is inconsistent with OPA for the Responsible Party and the Fund so demand detailed and extensive proof of losses, and then decide every claim based on demonstrably irrelevant data, and a 3.1 percent rule that is illegal and wrong. We request that the Fund reconsider the settlement posture it has taken to date regarding the Spill, and demand that the Responsible Party do the same. Otherwise, our clients may be forced to forego the demonstrably ineffective OPA process, and bring suit in court. Respectfully submitted, Barry M. Hartman, Thomas F. Holt, Jr. Peter N. McIsaac EXHIBIT A ABC Lobster, Inc. North Cape Oil Spill Loss--January 19, 1996 SUMMARY OF MONTHLY LOBSTER LANDINGS (POUNDS)--POINT JUDITH (Mandatory reportings by dealers to port agents) Information provided by John Spavins of the U.S. Department of Commerce--National Marine Fisheries Service ---------------------------------------------------------------------------------------------------------------- Zone ----------------------------------------------------------------- Month 2 3-12 3 > 12 Total Unknown 0 Coastal 1 < 3 miles miles miles ---------------------------------------------------------------------------------------------------------------- 1995:............................. January......................... 27,522 11,613 14,002 19,718 72,855 February........................ 9,403 10,245 7,239 13,430 40,317 March........................... 56,590 8,014 9,272 14,634 88,510 April........................... 41,445 42,112 16,071 23,909 123,537 May............................. 68,342 18,100 15,778 21,175 123,395 June............................ 54,639 65,922 55,288 77,778 253,627 July............................ 235,298 202,865 109,903 43,960 592,026 August.......................... 242,952 125,060 130,821 55,046 553,879 September....................... 304,094 104,801 162,719 81,385 652,999 October......................... 169,001 101,273 127,163 71,825 469,262 November........................ 128,721 93,240 50,593 10,119 282,673 December........................ 73,458 49,054 12,962 2,592 138,066 ----------------------------------------------------------------------------- Total 1995........................ 1,411,465 0 832,259 711,811 435,571 3,391,146 ================================================================================================================ 1996:............................. January......................... 41,405 1,448 6,981 7,386 1,476 58,696 February........................ 35,090 2,142 2,754 3,178 632 43,796 March........................... 46,438 2,136 2,638 527 51,739 April........................... 94,079 6,750 6,115 26,207 133,151 May............................. 63,413 107,006 13,634 3,635 187,688 June............................ 96,218 52,270 24,176 9,154 181,818 July............................ 224,293 64,208 109,972 34,730 433,203 August.......................... 578,189 150,049 207,499 82,998 1,018,735 September....................... 217,559 204,856 96,187 46,912 565,554 October......................... 164,297 197,495 59,422 23,767 444,981 November........................ 130,552 101,259 41,858 8,371 282,040 December........................ 72,891 413,220 35,585 7,118 528,814 ----------------------------------------------------------------------------- Total 1996........................ 1,764,424 3,590 1,309,024 607,650 245,527 3,930,215 ---------------------------------------------------------------------------------------------------------------- EXHIBIT B Rhode Island Lobster Research and Management Project NMFS Statistical Area 539 Landings Rhode Island Inshore Landings (Data Source: NMFS Weighout/Canvass Landings Data base) ------------------------------------------------------------------------ Area 539 Landings Total Rhode Year (Inshore) Island Landings ------------------------------------------------------------------------ 1991.............................. 4,388,120 7,445,169 1992.............................. 3,010,084 6,763,086 1993.............................. 3,246,286 6,229,001 1994.............................. 3,577,553 6,474,399 1995.............................. 3,151,915 5,363,810 1996.............................. 2,104,604 5,579,874 1997.............................. 2,135,065 5,587,678 ------------------------------------------------------------------------ <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> ______ Kirkpatrick and Lockhart, Washington, DC 20036, September 16, 1997. Daniel Sheehan, Director, National Pollution Funds Center, United States Coast Guard, 4200 Wilson Boulevard, Suite 1000, Arlington, Virginia 22203-1804. Re: 1996 North Cape Oil Spill Claim on Behalf of ABC Lobster, Inc. for Damages Dear Mr. Sheehan: On behalf of ABC Lobster, Inc. (``ABC Lobster''), and pursuant to the Oil Pollution Act of 1990, 33 U.S.C. Sec. Sec. 2701-2761 (Supp. 1997), Kirkpatrick & Lockhart, LLP (``Kirkpatrick & Lockhart'') hereby submits the enclosed claim for damages suffered in the 1996 North Cape Oil Spill. Specifically, ABC Lobster seeks damages of $207,250.25 for lost profits and earnings capacity, embargoed lobsters and property rental for the period of January 19, 1996 through December 31, 1996. This claim does not include claims for long-term profits and earnings. Also, it does not include claims for the reasonable costs of assessing damages. ABC Lobster reserves the right to bring such claims in the future. The damages sought by ABC Lobster are the result of a 1996 oil spill off the coast of Point Judith, Rhode Island. Point Judith is the third largest fishing port on the east coast and generates millions of dollars of revenue. On January 19, 1996, the North Cape Barge, a barge operated by Eklof Marine Corporation, ran aground and spilled at least 800,000 gallons of oil into Block Island Sound, located at Point Judith. The spill required that the entire port be closed. The local fishing community suffered significant property damage and loss of earning capacity as a direct result of the spill. The impact of the spill extended far beyond this direct area and is expected to impact the lobster and related populations for years to come. ABC Lobster seeks compensation for lost profits suffered by its seafood dealership caused as a result of the spill. Because of the spill, ABC Lobster was unable to purchase lobsters from fishermen to sell, either in wholesale or retail markets, and thus suffered severe losses. This claim was presented to Turnaboat Services, Ltd. (``Turnaboat''), the insurance company for Eklof Marine Corporation, in two parts. On May 31, 1996, ABC Lobster initially submitted a claim for $50,248.00 for its lost profits, embargoed lobsters and property rental from January 19, 1996 to April 30, 1996. Subsequently, on September 3, 1996, ABC Lobster provided supporting information (settlement tickets, retail sales records, etc.) for its claim and extended it until June 25, 1996. ABC Lobster's claim for January 19, 1996 to June 25, 1996 totaled $71,784.25. Turnaboat made an insufficient offer on this claim of $49,699.88. Turnaboat refused to increase the amount of this offer because it disputed the amounts ABC Lobster claimed it was owed for its sales of lobsters in the wholesale market. ABC Lobster considers Turnaboat's insufficient offer a denial of its claim. Later, on May 14, 1997, ABC Lobster submitted its claim for lost profits from June 26, 1996 to December 31, 1996 for $135,466.00, making ARC Lobster's total claim $207,250.25. Turnaboat refused to evaluate this claim for the latter part of 1996, which ABC Lobster considers a denial of its claim. Thus, pursuant to 33 U.S.C. Sec. 2713(c), ABC Lobster now elects to present its claims to the Oil Spill Liability Trust Fund (``Fund''). In support of this claim and pursuant to 33 C.F.R Sec. 136.105, please find enclosed the following documents and information: 1. A copy of the representation letter granting Kirkpatrick & Lockhart the authority to file this claim on behalf of ABC Lobster (Exhibit A); 2. A copy of the National Pollution Funds Center Standard Claim Form (Exhibit B); 3. Affidavit of Albert B. Christopher, Jr. (officer and shareholder of ABC Lobster) (Exhibit C); 4. Identification information for ABC Lobster (Exhibit D); 5. List of witnesses (Exhibit E); 6. Copies of the May 31, 1996 and May 14, 1997 claims submitted to Turnaboat on behalf of ABC Lobster (Exhibit F); 7. Copies of all written communications between ABC Lobster and Turnaboat (Exhibit G); and 8. A summary of all oral communications between ABC Lobster and Turnaboat (Exhibit H) As discussed in detail in these materials, ABC Lobster provided significant supporting documentation (settlement tickets, retail sales records, etc.) to Turnaboat in support of its claims. At the Coast Guard's request, we would be happy to supply copies of any or all of these materials. However, because these materials are quite lengthy, we have not provided copies herewith. Please do not hesitate to contact the undersigned if you have any questions. Thank you for your prompt attention to this matter. Respectfully submitted, Barry M. Hartman, Thomas F. Holt, Jr., Linda L. Raclin, Elizabeth L. Smith, Kirkpatrick & Lockhart, LLP ______ U.S. Department of Transportation, U.S. Coast Guard, National Pollution Funds Center, Arlington, VA 22203, 27 October 1997. Kirpatrick & Lockhart, 1800 Massachusetts Avenue NW Washington, DC 20036. Dear Ms. Raclin: This is in response to the $207,250.25 claim submitted by ABC Lobster, Inc. for loss of profits and earning capacity, arising from the 19 January 1996 T/B North Cape oil spill. Before the National Pollution Funds Center (NPFC) adjudicates this claim, we request the following information from the claimant: (1) Monthly financial statements for the claimant's period of loss, and for the years 1995, 1994 and 1993. (2) According to Exhibit C of the claimant's submission, ABC Lobster states that it buys lobsters from ``inshore lobstermen'' and not from ``offshore lobstermen''. Please explain the difference between these two types of lobstermen. In addition. please explain and document why ABC Lobster considers lobster from ``offshore lobstermen'' unprofitable. (3) Accord to Exhibit C of the claimant's submission, ABC Lobster states that because of the oil spill, it shut down its retail counter on 11 March 1996 to undertake renovations on the counter that were completed sometime in mid-April. When did ABC Lobster intend to make these renovations. and what impact did it expect to have on the company's profits? (4) Regarding the ``mark-up'' of $1.50 per pound on lobster in ABC Lobster's analysis of lost lobster profits, please explain the purpose of the ``markup'', and how the claimant derived this figure. (5) The claimant asserts that estimated daily lobster sales Averaged $1,893 per day from January through April 1996. What were ABC Lobster's actual January lobster sales just prior to the oil spill? (6) Please provide the amount of lobster by pounds sold by ABC Lobster on monthly basis for 1996. (7) Please provide the dollar amount of lobster sales by ABC Lobster on a monthly basis for 1996. (8) Does ABC Lobster purchase lobster or any other types of seafood outside the State of Rhode Island? If not, why not? (9) Please provide the amount of fish and shellfish by pounds sold by ABC Lobster on a monthly basis for 1994, 1995, and 1996. (10) Please provide the dollar amount of fish and shellfish sales on a monthly basis for 1994, 1995 and 1996. (11) After the finfishing and shellfishing bans were lifted, how did the oil spill result in continue lost profits into the summer, fall and winter of 1996? Please provide with this explanation with supporting documentation. (12) Finally, we request all information ABC Company provided to the responsible party in support of this claim, that has not already been provided to the NPFC. We believe that it is in the best interest of the claimant, the responsible party and the NPFC that all parties have available all information used to adjust this claim. The claimant is in the best position to provide sufficient, supporting documentation needed to demonstrate that his losses resulted from an oil spill subject to the Oil Pollution Act (OPA). Pursuant to the Claims Regulations (33 CFR 136.105(a)), the claimant bears the burden to provide all evidence to support his claim. Generally, it has been our experience that the greater removed the claim time period of an alleged loss is from the date of an OPA incident, the greater the documentation needed to demonstrate that the alleged loss resulted from the incident. We ask that your client provide this information within sixty days of the date of this letter. The NPFC may have additional questions or request more information based upon the responses to these questions. If you have any questions would like to discuss the matter, you may write me at the above address or contact me by phone at (703) 235-4793. Sincerely, Ernie Worden, Claims Manager. ______ Kirkpatrick and Lockhart, Washington, DC 20036 November 11, 1997 Ernie Worden, Claims Manager, National Pollution Funds Center, United States Coast Guard, 4200 Wilson Boulevard, Suite 1000, Arlington, Virginia 22203-1804. Re: T/B NORTH CAPE oil spill Claim Number 016203-007 Dear Mr. Worden: We are writing on behalf of ABC Lobster, Inc. (``ABC Lobster'') in response to your letter dated October 27, 1997, and as a followup to our telephone conversation of Friday, November 7, 1997. First, enclosed please find copies of ABC's settlement tickets and other financial documents previously submitted to Turnaboat Services, Ltd. (attached hereto as Exhibit ``J''). We believe this information should suffice to answer your requests numbered 1,5,6,7,9,10 and 12 from your October 27, 1997 letter. Note that these copies comprise the entirety of documents maintained by ABC Lobster. The remaining information requests can be addressed in the following manner: Item 2: Inshore and offshore lobstermen differ for the most part from the point of view of equipment (offshore requires larger, more sturdy boats, longer lines for pots which are set at much greater depths, greater storage facilities to preserve catch, etc.), and length of trips (inshore trips last a day, at most; offshore trips are in multiple day segments). More importantly, for this claim, inshore lobstermen were prevented from fishing in their normal area due to closure of the fishery by State and Federal officials, and after the areas were reopened, were faced with a lobster population substantially depleted by the toxic effects of the oil spill. Offshore lobstermen, on the other hand, suffered chiefly through an inability to pass through closure areas, and by being unable to use (potentially contaminated) waters for recirculating purposes. As discussed in the Affidavit of Albert B. Christopher, Jr., which was provided as Exhibit C in our September 16, 1997 submittal to the Fund, ABC Lobster has only bought lobsters from a select group of inshore lobstermen since its founding. This developing relationship with the inshore lobstermen has allowed ABC Lobster to acquire sufficient lobsters at a reasonable price in order to be profitable. ABC Lobster does not yet have this relationship with any of the offshore lobstermen who have chosen to enter into business relationships with other wholesale operations. It should also be noted that few offshore boats were coming into port after the spill due to the contamination of inshore waters. Attached for your information please find Exhibit I which reflects the timing and substance of correspondence and conversations between Booka Smith and Turnaboat concerning the ABC Claim. This Exhibit should clarify some of your questions and concerns. Item 3: Concerning the renovations of the retail counter, please see Exhibit I on the entry dated August 30, 1996. Item 4: Please see the August 22, 1996 entry in Exhibit I. Item 8: Please see Item 2, above, and the October 22, 1996 and November 6, 1996 entries in Exhibit I. Item 11: Please see the entry dated September 11, 1996 in Exhibit I. Note generally that the high mortality rates to the lobster and to species that the lobster relies upon as a food source resulted in a much smaller population class of lobsters that could be caught by the lobstermen serviced by ABC Lobster. Please do not hesitate to contact the undersigned with any further questions regarding ABC's claim for damages. Respectfully submitted, Elizabeth L. Smith, Esq., Gregory P. Grimes, Environmental Consultant, Kirkpatrick & Lockhart, LLP. ______ Kirkpatrick and Lockhart, Washington, DC 20036, December 18, 1997 Ernie Worden, Claims Manager, National Pollution Funds Center, United States Coast Guard, 4200 Wilson Boulevard, Suite 1000, Arlington, Virginia 22203-1804. Re: T/B NORTH CAPE oil spill Claim Number 016203-007 Dear Mr. Worden: Thank you for responding to my inquiry regarding the status of ABC Lobster Inc.'s (ABC's'') claim for damages incurred in connection with the North Cape Barge oil spill. It is my understanding that you are in the process of completing the paperwork needed to secure an outside accounting firm to review RBC's claim and that ABC can expect to receive an update on its claim on January 15, 1998. Please understand that ABC has already experienced great difficulty in dealing with Eklof Marine Corporation (the party responsible for the North Cape Barge oil spill) and does not wish to repeat the experience with the United States Coast Guard. Accordingly, I am requesting that you contact me on January 15, 1998 to discuss the status of ABC's claim. I look forward to hearing from you. Very truly yours, Elizabeth L. Smith, ______ Hull and Cargo Surveyors, Inc. San Rafael, CA 94901, January 6, 1998. Ms. Elizabeth Smith, Kirkpatrick & Lockhart LLP One International Place Boston, Massachusetts 02110-2637 RE: 1996 North Cape Oil Spill Claim on Behalf of ABC Lobster, Inc. for Damages--NPFC File No.: 016203-007 Dear Ms. Smith: We wish to advise you that we are the subcontractors for the United States Coast Guard National Pollution Funds Center on the above-referenced claim. We are currently reviewing the documentation you have previously submitted to the NPFC. After we have completed our review, we will contact you to set up a meeting to discuss the details of your claim and any additional information we may require. If you have any questions, please feel free to contact me. Sincerely, Albert F. Dugan, Jr., Vice President. ______ Kirkpatrick and Lockhart, One International Place, Boston, MA 02110, January 22, 1998. Albert B. Christopher, Jr. Anne Christopher, 606 Shannock Road, Wakefield, RI 02879. Re: North Cape Barge Oil Spill Dear Anne and Al: I am writing as a followup to our January 20, 1998 meeting with Hull & Cargo. In order to push along the process of settling ABC Lobster Inc's (``ABC's'') claim for damages, I need you to forward to me the following documentation: <bullet> a copy of ABC's tax return for 1997: <bullet> copies of ABC's settlement tickets for the period December 31, 1996 to October 1, 1997; <bullet> a copy of the State's offer to purchase ABC for $500,000; and <bullet> copies of any documents evidencing the purchase of additional tanks immediately prior to the Spill (for example, check receipts). Thank you in advance for your cooperation. Please do not hesitate to contact me with any questions, comments, or concerns. Very truly yours, Elizabeth L. Smith. ______ Kirkpatrick and Lockhart, One International Place, Boston, MA 02110, January 22, 1998. Richard H. Miner, Neil G. Stoddard, Hull & Cargo Surveyors, Inc., Raynham Woods Executive Building, 175 Paramount Drive, Raynham, MA 02767. Re: 1996 North Cape Oil Spill ABC Lobster, Inc. Claim for Damages H&CSI File No.: SF 980006 OS NPFC Claim No.: 016203-007 Gentlemen: Thank you for taking the time to meet with Al Christopher and me yesterday to discuss ABC Lobster Inc.'s (``ABC's'') claim for damages incurred in connection with the North Cape Barge oil spill. I hope that Al and I were able to alleviate any concerns or doubts you may have had regarding ABC's claim. It is my understanding that at this juncture, you will have your accountants review ABC's claim and will make a recommendation of settlement to the National Pollution Funds Center within the next thirty days. As you know, almost 2 years have passed since Mr. Christopher filed this claim and justifiably, his patience is wearing thin. Accordingly, if there is anything I can do to speed the processing of ABC's claim, please let me know. Very truly yours, Elizabeth L. Smith. ______ Hull and Cargo Surveyors, Inc. Raynham, MA 02767, 23 January 1998. Ms. Elizabeth L. Smith, Esq., Kirkpatrick & Lockhart LLP, One International Place, Boston, MA. 02110-2637. Re: 1996 North Cape Oil spill ABC Lobster Claim Your File No: 505715.701 H&CSI File No: SF 980006 OS NPFC Claim No: 016203-007 Dear Ms. Smith: We acknowledge receipt of your facsimile letter of 22 January 1998, and thank you for same. In case there was any misunderstanding during our meeting, I want to clarify one point. As I told you at the meeting we, and our accountants, are in the process of reviewing the claim documentation at this time. We will, as soon as possible, advise you in writing of any additional documentation required, and of any questions that may arise an a result of our review of the documents. Following receipt of any requested additional documentation we will strive to complete our analysis of the claim, and submit a claim summary to the National Pollution Fund Center within thirty (30) days. As we discussed, two (2) items that we will be requesting are copies of the original dealer slips with the boat name shown, and receipts and documentation supporting the installation of the increased storage capacity at the claimant's facility. As soon as we have finished reviewing the documents we will advise you of any other required information that we need to complete our analysis of your client's claim. Yours truly, Richard R. Miner, Hull & Cargo Surveyors, Inc. ______ Kirkpatrick and Lockhart, One International Place, Boston, MA 02110, January 23, 1998. Richard H. Miner Hull & Cargo Surveyors, Inc., Raynham Woods Executive Building, 175 Paramount Drive, Raynham, MA 0276. Re: 1996 North Cape Oil Spill ABC Lobster, Inc. Claim for Damages H&CSI File No.: SF 980006 OS NPFC Claim No.: 016203-007 Dear Mr. Miner: I am writing in response to your facsimile dated January 23, 1998. As I mentioned in our meeting on January 20, 1998, ABC Lobster, Inc. (``ABC'') plans to produce to you documentation evidencing the installation and increased capacity of the shore-side facility. Also, I discussed with Mr. Christopher the issue of producing original dealer slips with the boat name shown and he has agreed to produce these documents on the grounds that such information not be released into the public domain. If you agree to keep this information confidential, then I will forward the aforementioned documentation to you just as soon as I receive it from Mr. Christopher. As I also indicated in our meeting, ABC has already produced all other documentation in support of its claim for damages. Accordingly, while Mr. Christopher would be happy to answer any specific questions your accountants may have, any requests for additional documentation will be fruitless. ABC has presented a complete claims package and Mr. Christopher has been kind enough to spend almost 2 hours of his time with you answering questions about his former business. It would shock the conscious to think that you would be unable to make a recommendation on ABC's claim within the next thirty days. For Mr. Christopher's sake and for his wife's sake, I urge you to make every effort to come to closure on ABC's claim. Thank you for your attention to ABC's claim. Very truly yours, Elizabeth L. Smith. ______ Hull and Cargo Surveyors, Inc. San Rafael, CA 94901, February 9, 1998. Ms. Elizabeth L. Smith, Esq. Kirkpatrick & Lockhart LLP One International Place Boston, MA 02110-2673 RE: ABC Lobster Inc. 1996 NORTH CAPE Oil Spill Our File No. SP. 980006 OS NPFC Claim No. 016203407 Dear Ms. Smith: Our accountants have completed their review of the documents previously submitted by your office. I have enclosed their listing of the documents that were previously submitted. I have received a copy of your letter dated February 5, 1998 outlining the additional documents you have sent. The accountants will begin their review of these documents. Although I acknowledge you have stated that we have received all of the documentation Mr. Christopher has, please provide the following documentation or provide an explanation of why this documentation does not exist: 1) The previous redacted settlement sheets did not include the periods April 1994 through December 1995 or May 1995 through December of 1995. We have not had time to determine if the settlement sheets for these time periods are included in your February 5, 1998 submission. If they were not, please either provide the settlement sheets for these dates or provide art explanation of why they cannot be provided. 2) Monthly summary of sales: 1996, 1997 3) Monthly summary of purchases (pounds): May and June 1996, 1997 4) Monthly of purchases ($): 1994, 1996, 1997 5) Monthly retail sales: May through December 1996, 1997 6) Rental income for temporary rental of tanks. 7) 1997 U.S. Tax return (We will need this for your unspecified fixture claim.) Please provide answers or explanation to the following: 1) Provide explanation for the decline, from prior months, in pounds of lobster purchased in December 1995 and January 1 through 18, 1996. 2) Explain relationship of F/V Miss Stacie with ABC Lobster. 3) Explain the difference between summary of monthly purchases of $1,483,235 and purchases per the tax return for 1995 of $1,808,274 Please provide any corresponding support with your explanation. Thank you for your assistance in this matter. Sincerely, Albert F. Dugan, Jr., Vice President. ______ Summary of Documents Provided as of 2/4/98 Source: ABC Lobster, Inc. ---------------------------------------------------------------------------------------------------------------- Item Description ---------------------------------------------------------------------------------------------------------------- 1).......................................... Tax Returns 1933 1994 1995 1996 2).......................................... Monthly sales ($) Summary 1994 1995 3).......................................... Monthly Purchase (pounds) Summary 1994 1985 January though April 1996 June 28 through December 31, 1996 4).......................................... Monthly Purchase ($) Summary 1995 5).......................................... Daily Retail Sales 1993 1994 1995 January through July 15, 1998 6).......................................... Monthly Retail Sales Summary 1993 1994 1985 January through April, 1898 7).......................................... Settlement Tickets for Lobster Purchases December 24, 1993 through April 6, 1994 January 8, 1995 through May 4, 1995 January 2, 1996 through March 27, 1996 (includes 2 tickets dated 12/15/95 and 12/23/95) May 2, 1996 through June 25, 1996 (includes 1 ticket dated 4/17/ 1996) June 28, 1996 through August 1, 1996 July 28, 1996 through September 22, 1996 September 14, 1996 through January 2, 1997 ---------------------------------------------------------------------------------------------------------------- ______ Hull and Cargo Surveyors, Inc. San Rafael, CA 94901, February 12, 1998. FAX TO: Ms. Elizabeth L. Smith, Kirkpatrick & Lockhart LLP Subject: ABC Lobster, Inc. We have received the box of documents sent under your cover letter of February 5, 1998 and we wish to acknowledge that all settlement tickets in the timeframe that were previously missing have been received. Thank you for your assistance on this matter. Albert F. Dugan, Jr. ______ Kirkpatrick & Lockhart LLP One International Place, Boston, MA 02110, February 20, 1998. Albert F. Dugan, Vice President, Hull and Cargo Surveyors, Inc., 2175 E. Francisco Boulevard, Suite A-5, San Rafael, CA 94901. Re: ABC Lobster, Inc. 1996 North Cape Oil Spill Your File No. SF 980006 OS NPFC Claim No. 016203-007 Dear Mr. Dugan: Thank you for taking the time yesterday to speak with Greg Grimes and me about issues raised in a request for additional documentation in your letter to Elizabeth Smith dated February 9, 1998. As a result of our conversation, it is our understanding that in your request for certain summaries of data (sales, purchases, etc.) you are not asking us to create anything that is not kept in the normal course of business. As long as we provided the underlying business records from which such a summary can be created, we will have fulfilled our responsibility under OPA. You indicated that you had no problem creating such summaries from our data, but wanted to make sure we had not done so already, so that when the Fund seeks reimbursement from Eklof; Eklof cannot claim that your doing this work duplicated that which we already did. As I indicated to you, Eklof has been insisting that we create new documents summarizing business data. To the extent we have done so, we will, of course provide this to you. We may not, however, continue to do so in the future, particularly when Eklof denies that our costs of doing so are recoverable. We do not see why Eklof can insist on us creating new documents, when the Fund itself does not insist on it. In addition, we understand that we need not provide 1997 tax returns to support our 1996 claim. As we indicated, when this claim was filed (in 1996) no such returns existed. Therefore we did not include it in our claim filed with Eklof. You have indicated that under these circumstances, and since the claim before you is only that which was denied by Eklof, no ``new'' data not previously submitted to Eklof needs to be submitted to you. Finally, you indicated that other than the published guidelines on claims (in the CFR) you have no handbook or other written materials (including your contract with the Fund) that govern your evaluation of claims for the Fund, or contain criteria or other instructions affecting your consideration of the claims. We look forward to working with you on the claims that are being submitted to the Fund for resolution. Please continue to direct your correspondence to Mr. Grimes. Sincerely, Barry M. Hartman, Esq. Gregory P. Grimes, Environmental Project Manager. ______ Hull and Cargo, Inc., San Rafael, CA 94901, February 25, 1998. Mr. Barry Hartman, Esq., Kirkpatrick & Lockhart LLP One International Place Boston, MA 02110-2637 RE: ABC Lobster, Inc. 1996 NORTH CAPE Oil Spill Our File No.: SF 980006 OS NPFC Claim No.: 016203-007 Dear Mr. Hartman: Thank you for your facsimile letter of February 20, 1997. Your letter reflects our conversation, except for two points that require clarification. First, I did not indicate ``. . . no new data not previously submitted to Eklof needs to be submitted . . .'' for our review of your client's claim. I only agreed that the 1997 tax return would not be required for the current claim submission. As I mentioned, our review is not limited to the information that was provided to Eklof, or their claims representative Turnaboat. We are completing an independent claim review and measurement. Secondly, you asked if I had guidelines from the NPFC on what to pay and not pay, and I referred you to the published guidelines on claims (in the CFR). Your letter is a much broader statement. Our contract of course provides some general guidelines that ``govern'' our evaluation of claims, but with regard to what is paid and not paid, we are guided by the published guidelines on claims (in the CFR). We look forward to working with you and Mr. Grimes to resolve your client's claim as soon as possible. Sincerely, Albert F. Dugan, Jr., Vice President. ______ Hull and Cargo Surveyors, Inc. San Rafael, CA 94901, February 25, 1998. Mr. Gregory Grimes, Environmental Project Manager, Kirkpatrick & Lockhart LLP, One International Place, Boston MA 02110-2673. Dear Mr. Grimes: We have finished our preliminary review of the settlement sheets for which the claimant did not have summaries. Accordingly we have the following questions. 1) Please indicate the reason the following vessels stopped deliveries in 1995 and 1996. <bullet> Spirit of Peace <bullet> Ellen June <bullet> Ziggy <bullet> Whillden <bullet> Ray Carr <bullet> Hohn Keiper <bullet> Steve Crandall <bullet> H.T. <bullet> Miss Nancy 2) Please indicate how deliveries from the following new vessels were obtained in 1996, and please indicate any other new vessels contacted to increase business. <bullet> Fun Yet <bullet> Cancel Bay <bullet> Spud Mack <bullet> Roy Carr <bullet> Walter Kowal 3) Explain the difference of $325,039 between the summary of monthly purchases of $1,483,235 and purchases per the tax return for 1995 of $1,808,274. Please provide any corresponding support with your explanation. Please note that the purchases based on settlement sheets were $1,472,280. 4) Explain the difference of $353,750 between the purchases based on settlement sheets of $948,914 and purchases per the tax return for 1996 of $1,302,664. Please provide any corresponding support with your explanation. We also await your response to our February 9, 1998 letter, and we would also recommend any assessment cost you may wish to submit for this claim at this time. Thank you for your assistance in this matter. Sincerely, Albert F. Dugan. Jr., Vice President. ______ Hull and Cargo Surveyors, Inc. San Rafael, CA 94901, March 4, 1998. Mr. Gregory Grimes, Environmental Project Manager, Kirkpatrick & Lockhart LLP, One International Place, Boston MA 02110-2673. Dear Mr. Grimes: We completed on review of the settlement sheets and financial information you provided to date. Accordingly, we have the following questions. 1) Please explain the reduction in deliveries from 1995 to 1996 in the months of May through December (except August) for the vessels of the fishermen listed below. Were any of the vessels or fishermen selling lobsters to sources other than ABC Lobster Inc.? 1. Mason Ann 2. Undertaker 3. Amelia Ann (no deliveries after August 1996) 4. Rachel & Henry 5. Jayne Sue 6. Heather Rose 7. Select Fisheries 8. Eider 9. Gillian (no deliveries after March 1996) 2) Please provide the explanation for the reduced lobster catch for Miss Stacie from 1995 to 1996 in the months of June through August. Please also provide the explanation of why there was none or minimal catch during the months of September through December 1996. 3) Please provide the daily retail sales summary for July 1996. 4) Our accountant needs to discuss purchases and sales with Mr. or Mrs. Christopher. Please have the individual who would best be able to discuss this aspect of the business contact Dawn Dunne, CPA of RGL Gallagher, at (415) 956-8323. Thank you for your assistance in this matter. Sincerely, Albert F. Dugan, Jr., Vice President. ______ Hull and Cargo Surveyors, Inc. San Rafael, CA 94901, March 4, 1998. Mr. Gregory Grimes, Environmental Project Manager, Kirkpatrick & Lockhart LLP, One International Place, Boston MA 02110-2673. Dear Mr. Grimes: This is to confirm our conversation regarding the submission of your assessment costs for ABC Lobster Inc., which I requested in my facsimile of February 25, 1998. You have advised that you had not yet submitted these costs to the Responsible Party (RP), but you planned to submit them to the RP in the future. I reviewed this information with the NPFC, and based on this information, you should not submit your assessment costs to our office or the NPFC until you have followed the necessary procedures per 33 CFR 136.103. Furthermore, the NPFC has advised that under 33 USC 2712(h)(2), no claim may be presented for recovery of damages ``unless the claim is presented within 3 years after the date on which injury and its connection with the discharge in question were reasonably discoverable with the exercise of due care. . . .'' Sincerely, Albert F. Dugan, Jr., Vice President. ______ Kirkpatrick & Lockhart LLP One International Place, Boston, MA 02110, March 20, 1998. Albert F. Dugan, Vice President, Hull and Cargo Surveyors, Inc., 2175 E. Francisco Boulevard, Suite A-5, San Rafael, CA 94901. Re: ABC Lobster, Inc. 1996 North Cape Oil Spill Your File No. SF 980006 OS NPFC Claim No. 016203-007 Dear Mr. Dugan: This letter is in response to your letters dated February 25, 1998 and March 4, 1998, requesting additional information and clarification about the claim of ABC Lobster Inc. I. February 95, 1998 letter Item 1: Why certain vessels stopped deliveries in 1995 and 1996 The Spirit of Peace did not have dock space at the State docks in Point Judith. The boat was on the waiting list for dockage, but often times space opens only after an existing space-user dies or goes out of business. Since a space did not open up, the Spirit of Peace eventually made arrangements to dock at the Snug Harbor Marina. As a condition of this dockage, the Spirit of Peace was required to sell its catch to Al Conti at the Snug Harbor Marina. For their own personal business reasons, the Ellen June made the decision to switch its catch to Champlin's. The owner of Ziggy came down from Connecticut and worked part time. He stopped bringing lobsters to ABC due to illness (he is now deceased). The Whillden is based in Block Island and normally offloads the lobster catch at that location. Ray Carr worked lobstering part-time while seeking full-time employment. He stopped deliveries after finding a full-time job. Keiper stopped hauling his own traps at this time. Steve Crandall, Harry Towne and Walter Kowal sold small amounts to ABC during those times when their usual shore side facilities were closed. Item 2: How deliveries from new vessels were obtained For each party listed, the answer is the same: They simply didn't like where they were previously selling and decided to move their catch to ABC. ABC Lobster did not solicit their business and has not solicited the business of other fishermen. The business of ABC had grown from its inception due to the favorable treatment of fishermen by the Christophers. In other words, word of mouth accounted for their new business. Item 3 and 4: Differences in purchases per tax returns and summaries in 1995 and 1996 Joseph Mansour of the accounting firm of Sansiveri, Kimball & McNamee addressed these issues with your accountant, Dawn Dunne, via telephone conversation on March 19. 1998. II. March 4. 1998 letter Item 1: Reduction in deliveries for certain vessels All of the listed vessels experienced lower catches due to the Oil Spill. The Oil Spill resulted in the temporary closure of their fishing grounds, the loss of fishing time due to the need to remove (and later re-set) their gear, and to reduced catches when fishing resumed (stocks were virtually wiped out in many areas). The Amelia Anne made a business decision to stop deliveries to ABC Lobster in August. 1996. This vessel made another business decision in 1997 and resumed deliveries to ABC. Before starting deliveries to ABC Lobster, the Gillian had a relationship with the former Point Judith Lobster Company. After that company went out of business, the Gillian moved to ABC. The Point Judith Lobster Company later, under new ownership, became the Ocean State Lobster Company. The Gillian was owed money by the Point Judith Lobster Company and in order to recover as much as possible of the former Point Judith Lobster Company business, Ocean State agreed to pay to the Gillian the money owed by the Point Judith Lobster Company, as long as the Gillian agreed to re-start deliveries to Ocean State. The Gillian made the business decision to recover the moneys owed to them and moved from ABC to Ocean State on. or about, March 1996. Item 2: Reduced catch for Miss Stacie Five (5) lobster boats fished the area to the immediate western portion of Rhode Island waters, near the (Connecticut line. Three (3) of those boats, the Undertaker, Amelia Anne and Miss Stacie, delivered to ABC Lobster. This area was particularly hard hit by the Oil Spill, forcing these boats to move elsewhere. The Miss Stacie, which was owned by Al Christopher, was captained by a younger captain who was leery of competing with the larger vessels in the heavily fished eastern fishing grounds. Accordingly, the Miss Stacie was forced out onto less productive areas. This accounted for the reduced catch from June through August in 1996. In September, the crewman on the Miss Stacie quit. It was also about this time that Al Christopher decided to sell the Miss Stacie. Since he had no crewman, and fishing had been poor, the captain spent much time in Maine hunting. This explains why there was no catch in September, 1996. The low figures for October and November (and the zero figure for December) resulted from the necessity to remove all of the gear from the water to allow for the closing on the Miss Stacie (which was completed in November). Item 3: Retail sales for July 1996 Attached please find the ``Analysis of Monthly Retail Sales-- 1996'', which should provide the necessary information in summary form. Item 4: Purchase and sale information Joseph Mansour of the accounting firm of Sansiveri, Kimball & McNamee addressed these issues with your accountant, Dawn Dunne, via telephone conversation on March 19, 1998. If further clarification of any of the above information is necessary, please call me at your earliest convenience. I look forward to the speedy resolution of this claim. Cordially, Gregory P. Grimes, Environmental Project Manager. Peter N. McIsaac. Esq. ______ Hull and Cargo Surveyors, Inc. San Rafael, CA 94901, June 11, 1998. Mr. Gregory Grimes, Environmental Project Manager, Kirkpatrick & Lockhart LLP, One International Place, Boston MA 02110-2673. Dear Mr. Grimes: The National Pollution Funds Canter (NPFC) has completed their review of our recommendation for ABC Lobster, Inc. Before we send it to you, we wanted to review a procedural issue avid you regarding this claim. We have recommended a settlement offer for the claim period of January 19, 19 through July 31, 1996. For the period of August 1, 1996 through December 31, 1996 we cannot yet reasonably attribute the reduced deliveries of the fishermen who supplied your client to be the result of the oil spill based on the information and documentation you have provided. You claimed the reduced deliveries were due to the feet that ``stocks were virtually wiped out in many areas.'' Although this may be true, the enclosed ``Summary of Monthly Lobster Landings (Pounds)--Point Judith'' for 1995 & 1996 indicates that significantly more pounds of lobster, approximately 743,245 pounds, were landed in 1998 than in 1996 in the time period of August 1 through December 31, 1996. Thus, we need to evaluate the fishermen who supplied your client to determine if their reduced deliveries to ABC Lobster, Inc. during the period of September through December 1996 were the result of the oil spill. (Your claim acknowledged that significantly more lobster were caught in August 1996 then in August 1995.) We would expect claims by the fishermen, if their reduced catch were due to the oil spill. (We currently have the claim submission of John. J. Swoboda win the F/V Karen Ann.) If we determine that their reduced catch and subsequent reduced deliveries to your client are due to the oil spill we would be able to address ABC Lobster, Inc.'s loss of profits claim during this period. Considerlng the above, we can split the ABC Lobster claim into two time periods to facilitate a settlement to your client. We can make the claim period from January 19, 1996 through July 31, 1996 one claim, designated the 007-001, for which a settlement offer would be offered. The claim period of August 1, 1998 through December 31, 1996 would be designated 007-002. Please let me know if you wish us to proceed in this manner. It not, we can provide you with one claim measurement for the period of January 19, 1996 through December 31, 1996. I await your written response to this matter. Sincerely, Albert F. Dugan, Jr., Vice President. <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> ______ Turnaboat Services, Ltd., Oil Spill Claims Center, P.O. Box 558, Narragansett, RI 02882, May 9, 1997. Kirkpatrick & Lockhart, LLP, 1800 Massachusetts Avenue, NW, Second Floor, Washington, DC 20036-1800. RE: IN NORTH CAPE Oil Spill at Pt. Judith, Rhode Island Bruce Kopf Claim No. 4013-96422 Your file No. 3524-325 Dear Ms. Raclin: We have reviewed the above claim file, received at our office on March 27, 1997. The documentation provided does not support that Mr. Kopf sustained a loss as a result of the spill. Specifically, Mr. Kopf is an offshore lobsterman and the area where he fishes was never closed. Mr. Kopf was not precluded from mitigating his loss by landing his catch at other nearby fishing ports (e.g. Montauk, NY; Stonington, CT; Sakonnet, RI or Westport, MA). Further, the records provided indicate that Mr. Kopf stopped fishing on December 31, 1995 as he shows no earnings for the first 3 weeks of January 1996. This appears to be consistent with his historical fishing practices since at least 1994. Based on the above, we are not in a position to proffer a settlement at this time. If further information becomes available, we will gladly review it for possible reconsideration. Thank you for your cooperation and patience. Very truly yours, Michael L. Collyer, Staff Adjuster, Turnaboat Services, Ltd. ______ Kirkpatrick & Lockhart LLP One International Place, Boston, MA 02110, March 26, 1997. Mike Collyer, Turnaboat Services, Ltd. Oil Spill Claims Center, P.O. Box 558, 7 Pier Market Place, Narragansett, RI 02882. Re: Rhode Island Oil Spill Dear Mr. Collyer: As you know, Kirkpatrick & Lockhart LLP represents Bruce Kopf with respect to his claim for damages arising out of the oil spill which occurred on or about January 19, 1996 in Block Island Sound, Rhode Island. Enclosed please find a partial claims package for Mr. Kopf containing all of the information necessary to state a valid claim for certain damages directly relating to the Rhode Island oil spill for the period January 19, 1996 through March 39, 1996, together with all the documentation and information Eklof Marine Corp. has requested to support a claim for partial damages. This partial claim does not include claims for reimbursement of the reasonable costs of assessing damages (e.g. accounting fees), attorneys' fees or, in some cases, certain other costs resulting from the oil spill. Mr. Kopf reserves the right to bring such claims in the future, as appropriate. Included in this package you will find a form indicating that we have provided all the information Eklof Marine Corp. requires to support a claim for partial damages. As with all previous partial claims we submitted, we consider the information and documentation provided in these packages to be complete so as to trigger the 90 settlement period required by the Oil Pollution Act of 1990. See 33 U.S.C. Sec. 2713 (c)(2)(claims not settled within 90 days after the date presented to the responsible party may be submitted to the Oil Spill Liability Trust Fund). Please process this partial claim and then forward to us a breakdown sheet outlining the terms of your initial partial settlement offer. If you have any comments or questions, please direct them to the undersigned at the address and phone number listed on this letter. We look forward to working with you to assure the prompt and efficient processing and payment of these partial claims. Thank you for your anticipated cooperation. Very truly yours, Thomas L. Crotty, Jr., Elizabeth L. Smith. ______ Kirkpatrick & Lockhart, Washington, DC 20036, January 30, 1998 Daniel Sheehan, Director, National Pollution Funds Center, 4200 Wilson Boulevard., Suite 1000, Arlington, VA 22203-1804. Re: Claim on Behalf of Bruce E. Kopf for Damages from 1996 Rhode Island Oil Spill Dear Mr. Sheehan: Kirkpatrick & Lockhart, LLP (``Kirkpatrick & Lockhart'') submits this claim pursuant to 33 U.S.C. Sec. 2713 (Supp. 1997) on behalf of Mr. Bruce E. Kopf for dear ages suffered in the 1996 Rhode Island Oil Spill. Mr. Kopf seeks partial damages of $23,762 for lost profits and earning capacity for the period January 19, 1996 through March 31, 1996. This claim does not include claims for lost long-term profits and earnings. Mr. Kopf reserves the right to bring such claims in the future. The damages sought by Mr. Kopf are the result of a 1996 oil spill off the coast of Point Judith, Rhode Island. Point Judith is the third largest fishing port on the east coast and generates millions of dollars of revenue annually. On January 19, 1996, the North Cape Barge, a barge operated by Eklof Marine Corporation, ran aground and spilled over 800,000 gallons of oil into Block Island Sound, near Point Judith. The spill required that the entire port be closed and millions of lobsters died as a result of the spill. The impact of the spill extended far beyond this direct area and is expected to impact the lobster and related population for years in the future. The local fishing community suffered significant property damage and loss of earning capacity as a direct result of the spill. Many of the fishing boats and other equipment have been damaged or destroyed. Mr. Kopf seeks partial damages for the lost profits and earnings for the period January 19. 1996 through March 29, 1996. Mr. Kopf presented this claim for short term lost earnings, to Turnaboat Services, Ltd. (``Turnaboat''), the insurance company for Eklof Marine Corporation on March 26, 1997. On May 9, 1997, Turnaboat denied Mr. Kopf s claim for partial damages. In accordance with 33 C.F.R. Sec. 136.215, enclosed are the following documents in support of Mr. Kopf's claim for property damages: 3 . A copy of representation letter granting Kirkpatrick it: Lockhart the authority to file this claim on behalf of Mr. Kopf (Exhibit A); 2. A copy of the National Pollution Funds Center Standard Claim Form (Exhibit B); 3. Affidavit of Bruce E. Kopf (Exhibit C); 4. Identification information for Mr. Kopf (Exhibit D); 5. A copy of the 1996 tax returns for Bruce E. and Dorothy M. Kopf (Exhibit E); 6. A copy of the claim submitted to Turnaboat on March 26, 1997, including tax returns and other financial statement (Exhibit F); and 7. A copy of communications between Mr. Kopf and Turnaboat Services, Ltd. (Exhibit G). Please do not hesitate to contact the undersigned if you have any questions regarding this matter. Thank you for your prompt attention to this matter. Respectfully submitted, Barry M. Hartman, Esq. Thomas F. Holt, Jr., Esq. Gregory P. Grimes, Environmental Project Manager. Kirkpatrick & Lockhart, LLP ______ U.S. Department of Transportation, United States Coast Guard, National Pollution Funds Center, Arlington, VA 22203-1804, 25 February 1998. Bruce E. Kopf, One International Place, Boston, MA 02110-2637. RE: Claim Number 016203-003 T/B NORTH CAPE oil spill Dear Mr. Holt: This is in response to the loss of profits and earning capacity claim submitted by Mr. Bruce E. Kopf, arising from the T/B North Cape oil spill. The National Pollution Funds Center (NPFC) intends to hire, in accordance with Federal Government contracting regulations, a private claims adjusting company to adjust this claim. Once the NPFC has hired a claims adjusting company, I will immediately notify you of the name of the company and a point-of-contact person. The Claims Regulations requires that each claim must be signed in ink by the claimant certifying to the best of the claimant's knowledge and belief that the claim accurately reflects all material facts (33 CFR 136.105(c)). The standard claim form signed by Mr. Kopf appears to be a copy and not the signed original. Please provide the NPFC with the signed, original standard claim form. We also note that Mr. Kopf's claim package includes unsigned Federal tax returns. As we noted in a letter to Kirkpatrick & Lockhart on 11 September 1997, we require copies of tax returns that have been signed by the claimant. If you have any questions or would like to discuss this matter, you may write me at the above address or contact me by phone at (703) 235- 4793. Sincerely, Ernie Worden, Claims Manager. ______ Kirkpatrick & Lockhart, Washington, DC 20036, March 9, 1998 Ernie Worden, Claims Manager, National Pollution Funds Center, 4200 Wilson Boulevard, Suite 1000, Arlington, VA 22203-1804. Re: T/B NORTH CAPE Oil Spill Dear Mr. Worden: Per your request in letters dated February 25 and 26, 1998, please find the signed, original, standard claim forms to the NPFC for the following: 1. Claim Number 016203-008, Mr. Bruce E. Kopf 2. Claim Number 016203-009, Mr. Charles Follett dba Cindy-Bet, Inc. 3. Claim Number 016203-010, Mr. James D. Patterson 4. Claim Number 016203-011, Fran Dek, Inc. If additional information or clarification is needed, please do not hesitate to contact the undersigned. Sincerely, Barry M. Hartman, Esq. Thomas F. Holt, Jr., Esq. Gregory P. Grimes, Environmental Project Manager. ______ John P. Kelly & Associates, 117 Kentucky Street, Vallejo, CA 94590, March 25, 1998. Gregory P. Grimes, Environmental Project Manager, Kilpatrick & Lockhart, LLP One International Place Boston, MA 02110-2637 Re: Bruce Kopf North Cape Oil Spill NPFC 016203-008 Dear Mr. Grimes: We have been asked by the National Pollution Fund Center to investigate Bruce Kopf's claims for damage as a result of the North Cape Oil Spill. As we discussed, please provide the all the claims document that were sent to Turnaboat Services, Ltd. Also, please provide any other information you feel will document your client's claim. We look forward to working with you in this matter. Regards, John P. Kelly, John P. Kelly and Associates ______ Kirkpatrick & Lockhart, LLP, Boston MA, March 26, 1998. John P. Kelly & Associates 117 Kentucky Street Vallejo, CA 94590. Re: North Cape Oil Spill Bruce E. Kopf NPFC Claim Number 016903-008 Dear John: Per our conversation of March 95, 1998, it is my understanding that your firm will be evaluating the Fund submittal of Bruce E. Kopf for the National Pollution Fund Center. Per your request, please find enclosed a copy of the entire Fund submittal for Mr. Kopf. I look forward to working with you on this matter. Cordially, Gregory P. Grimes, Environmental Project Manager. ______ John P. Kelly & Associates, 117 Kentucky Street, Vallejo, CA 94590, March 25, 1998. Gregory P. Grimes, Environmental Project Manager, Kilpatrick & Lockhart, LLP One International Place Boston, MA 02110-2637 Re: Bruce Kopf North Cape Oil Spill NPFC 016203-008 Dear Mr. Grimes: We have reviewed the documents provided by Berry Kopf through you. After reviewing The Affidavit of Bruce E. Kopf, we believe it necessary to request additional information from Mr. Kopf. 1. We wish to request documentation that Mr. Kopf's vessel actually needed to use circulating sea water. 2. We need to determine and confine Mr. Kopf's normal fishing area with maps or charts. 3. We need documentation of the amount and value of Mr. Kopf's landings by month for 1993-94-95. 4. We need documentation of the type of repairs to Mr. Kopf's vessel, the location of the repair facility and when the repairs were to be completed. 5. We need documentation of Mr. Kopf's intention to resume fishing in late January 1996. 6. We need documentation of the areas closed. 7. We need to know why the water circulation system could not be turned off while heading to Mr. Kopf's fishing areas. 8. We need to know why it was necessary to pass through the closed areas to deliver caught lobsters to an open port. 9. Please provide documentation of the sale of the Fishing Vessel Spartan. After we receive this information, we may have further questions. We believe that these questions will provide essential information regarding this claim. If you have any questions please contact us. Regards, John P. Kelly, John P. Kelly & Associates. ______ Kirkpatrick & Lockhart, One International Plaza, Boston, MA 02110, April 27, 1998. John P. Kelly & Associates, 117 Kentucky, Vallejo, California 94590. Re: TIB North Cape Oil Spill Claim No. 01690-008 Claimant: Bruce E. Kopf Dear Mr. Kelly: The following information is provided in response to your letter request for additional information dated April 10, 1998, and is answered by numbered paragraph. 1. It is the understanding of Mr. Kopf that circulating sea water is used on all lobster boats on the East Coast. It is the only way that lobsters are kept other than some boats which have refrigerated salt water systems. This occurs maims on vessels fishing lone trips or vessels catching red crabs. The F/V Spartan is outfitted with three salt water pumps. The main pump is 4 inches and runs organ auxiliary engine. The other two smaller pumps run off the main engine. It is especially necessary to have circulating seawater in sub-freezing temperatures as the lobsters drop their claws under those conditions. Attached at Exhibit A please find documentation regarding the sale of the F/V Spartan to Violet Fish & Trap Corporation. If additional information to verify the existence or use of the circulating system is necessary. please feel free to contact the existing owner. When there were lobsters on board from fishing. the circulating system served the following functions. (a) It provided for a constant replenishment of oxygen for the lobsters and allowed for the dispersion of wastes (primarily: nitrogenous compounds) from the lobsters stored on board: these lobsters were caught at a considerable distance off-shore and were densely packed and subjected to a long period of transport; the recirculating system was essential for their survival: (b) In the winter. it provided an environment for the successful storage and transport of the lobsters without freezing; and (c) The water served to cushion the impact of the massed lobsters on each other. 2. As stated in the Affidavit of Bruce E. Kopf, which was part of the Fund submittal. the fishing area for Mr. Kopf for the past 10 years was in an area about 80 miles south/southwest of Block Island to just north of Hudson's Canyon. See Exhibit B. which is a chart outlining the fishing grounds of the F/V Spartan, and Exhibit C, which is Mr. Kopf s trip log of his last trip to the ``dumping grounds'' prior to the Spill. 3. Exhibit D contains the following information responsive to this request: (a) 1993 and 1994 Statement of Accounts for the F/V Spartan; and (b) 1995 settlement sheets (Note: Mr. Kopf was unable to locate all of the bank statements and settlement sheets responsive to your request [namely, 5/93, 12/93 and 8194 Statement of Accounts, and 3/95-6/95 settlement sheets]. However, the underlying claim submitted to Turnaboat, provided as Exhibit F in the claim to the Fund, is for damages solely for the period of January 19, 1996 to March 99. 1996. That submittal included the financial information required by Turnaboat, namely, bank statements for January, February, March, October, November and December, 1995). 4. As stated in his Affidavit, Mr. Kopf was making the repairs to his boat in early January 1996. The repairs were made at dockside and included replacing all deck lighting, plumbing and main pump replacement with spare, wiring upgrades, engine repairs and general maintenance. These repairs were made by Mr. Kopf and Carr Marine. See Exhibit E for copies of repair receipts. Note that Mr. Kopf effected the repairs prior to the Spill and was awaiting a favorable weather forecast to resume fishing. 5. Documents provided in the underlying claim clearly evidence that Mr. Kopf had fished in January 1995 and January 1994, as well as December 199 . The only reason Fir. Kopf was not fishing in January prior to the Spill was the aforementioned need to perform some maintenance on his boat. Said repairs were completed prior to the Spill. 6. The following information documenting the areas closed to fishing as a result of the Spill can be found at Exhibit F (a) Barge North Cape Incident Fisheries Closures Prepared by Rhode Island Department of Environmental Management, Department of Health 23 January 1996. (b) Federal Register Closure Notices dated 2/1/96, 3/19/96, 4/15/ 96, 5/6/96, 6/3/96 and 6/05/96. 7. At the time of the Spill on January 19, 1996 Mr. Kopf's Fishing Vessel Spartan was docked at Point Judith. In order to reach his off- shore fishing grounds after the Spill, Mr. Kopf would have had to travel through polluted waters which were closed to fishing. Theoretically, Mr. Kopf's vessel could operate with, or without. the use of circulating sea water. However, that is theory. In practice Mr. Kopf would only travel with the catch hold full of water since the weight of the water was necessary for the proper stabilization of the vessel. If Mr. Kopf had attempted to travel from port and through the closed waters with an empty catch hold. he would have been bounced around and experienced a particularly uncomfortable ride. Furthermore. if successful in traveling through the closure areas with a dry hold, Mr. Kopf would then have had to fill the system at sea a practice which could have damaged the baffles within the hold. 8. When Turnaboat denied the Kopf claim. they noted that he could have landed his catch at Montauk, NY, Stonington, CT. Sakonnet. Ri or Westport. MA. This was simply not the case for the following reasons: Montauk, NY was closed for the winter; more importantly. Mr. Kopf no longer possessed a valid New York Landing Permit which would have allowed him to offload his vessel in a New York port; Stonington, CT is over 90 miles south of Mr. Kopf's home port at Point Judith; in addition to this port being unreasonably out of the way (extended travel time and fuel costs), Mr. Kopf had never sailed to this port, had no knowledge of the shoreside facilities. indeed, did not even know if a shoreside facility at this location would be geared to handle his volume or if he could be fairly compensated for his catch at this location. Most importantly, Mr. Kopf did not possess a Landing Permit to be able to offload in Connecticut: Westport, MA could only be reached by traversing completely around the closure area. a course unreasonably far removed from his fishing grounds. In addition. Mr. Kopf did not possess a Landing Permit for Massachusetts; and Sakonnet, RI could only be reached by traversing completely around the closure area. a course unreasonably far removed from his fishing grounds and his home port. Furthermore, Mr. Kopf does not believe that the port facilities in Sakonnet, RI would have been able to accommodate his 70-foot vessel. 9. See Exhibit A. Please call if you need further clarification on any of the above. Cordially, Peter N. McIsaac. Esq. Gregory P. Grimes, Environmental Project Manager. <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> <all>