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Where does the Oil Spill Liability
Trust Fund receive its balance? Who pays into it?
The Oil Spill Liability Trust
Fund (OSLTF) established by the Oil Pollution Act (OPA) is
funded in several ways:
- Investment interest on the Fund's principal,
- Costs recovered from responsible parties,
- Civil penalties from responsible parties,
- Barrel tax on domestic and imported oil, and
- Transfers from other legacy pollution funds.
To date, the largest source of income for the Fund has been from
the 5-cents-per-barrel tax on imported and domestic oil. This tax
was discontinued on December 31, 1994; but the Energy Policy Act
of 2005 re-instated the tax beginning in April 2006. If the balance
of the OSLTF reaches $2.7 billion, the tax will no longer apply,
until and unless the Fund balance later drops below $2 billion.
The tax will be discontinued, regardless of Fund balance, on December
31, 2014.
The second largest source has been transfers from other legacy pollution funds,
but these transfers are now complete. The largest of the fund
transfers was $334.7 million from the Trans-Alaska Pipeline Liability
Fund.
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Who pays the OSLTF oil tax?
The 5-cents-per-barrel tax to finance the Oil
Spill Liability Trust Fund was reinstated by section 1361 of the
Energy
Policy Act of 2005. The Act directs that the tax will commence
on April 1, 2006, and expire on December 31, 2014.
The tax is addressed at section 4611 of the Internal Revenue Code
(26
U.S.C. 4611). The tax applies to crude oil received at a United
States (US) refinery and to petroleum products entered into the
US for consumption, use, or warehousing. The tax also applies to
other domestic crude oil used in, or exported from, the US.
The tax on crude oil received at a US refinery is paid by the refinery
operator. The tax on imported petroleum products is paid by the
person entering the product for consumption use or warehousing.
The tax on other crude oil is paid by the person using or exporting
the crude oil.
While the Coast Guard is delegated certain authorities to manage
and use the Oil Spill Liability Trust Fund, collection of taxes
and deposit of collections to the Fund is managed by the Department
of Treasury.
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What does the trust fund pay for?
The OSLTF has 2 components.
- The Emergency Fund is used to fund removal
activities and the initiation of natural resource damage assessments.
- The Principal Fund, that portion of the OSLTF
exclusive of the Emergency Fund, is used primarily to carry out
three functions:
- Adjudication and payment of claims for certain uncompensated
removal costs and damages,
- Implementation, administration, and enforcement of OPA,
and
- Research and development.
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How much money does the trust fund
have in it? What is the forecast for the Fund?
The status and forecast of the OSLTF is available in the OSLTF Forecast Report (30 KB PDF).
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How long has the trust fund been
around?
Congress created the Fund in 1986, but did
not pass legislation to authorize the use of the money or the collection
of revenue to maintain it until August 1990, when President George
H. W. Bush signed OPA into law and authorized use of the OSLTF.
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Is there a limit to how much the
OSLTF will pay into a response?
Expenditures from the Fund for any one oil
pollution incident are limited to $1 billion or the balance of the
Fund, whichever is less. Natural resource damage assessments and
claims in connection with any one incident are limited to $500 million
of the $1 billion per incident limit.
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What is the impact of the amended liability limits in Title VI of the Coast Guard and Maritime Transportation Act of 2006, which the President signed on July 11, 2006?
The limits of liability for oil removal costs and damages that result from discharges or substantial threats of discharge of oil from vessels, under OPA 90 (33 U.S.C. 2704), were amended by the enactment of the Delaware River Protection Act of 2006, title VI of the Coast Guard and Maritime Transportation Act of 2006 (Public Law # 109-241).
- The amended limits for any tank vessel are effective for an oil discharge or substantial threat of discharge that occurs on or after October 9, 2006.
- The amended limits for any other vessel are effective for an oil discharge or substantial threat of discharge that occurs on or after July 11, 2006.
The existing “Financial Responsibility for Water Pollution (Vessels)” regulations at 33 CFR part 138 will remain in effect until amended, as explained the Federal Register (August 18, 2006). Information on the promulgation status for revised regulations will be provided on this site as available.
The table below summarizes the original and amended limits.
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If the vessel is a. . . |
The original limit of liability limit was the greater of. . . |
And the amended limits of liability are the greater of. . . |
Tank vessel greater than 3,000 gross tons with a single hull, double sides only, or double bottom only |
$1,200 per gross ton or $10,000,000 |
$3,000 per gross ton or $22,000,000. |
Tank vessel less than or equal to 3,000 gross tons with a single hull, double sides only, or double bottom only |
$1,200 per gross ton or $2,000,000 |
$3,000 per gross ton or $6,000,000. |
Tank vessel greater than 3,000 gross tons with a double hull |
$1,200 per gross ton or $10,000,000 |
$1,900 per gross ton or $16,000,000. |
Tank vessel less than or equal to 3,000 gross tons with a double hull |
$1,200 per gross ton or $2,000,000 |
$1,900 per gross ton or $4,000,000. |
Any vessel other than a tank vessel |
$600 per gross ton or $500,000 |
$950 per gross ton or $800,000. |
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How much do you recover from responsible
parties to pay back the Fund?
Under OPA, those responsible for oil incidents
are liable for costs and damages. The NPFC has a billing and collection
program to recover costs expended by the Fund, carried out in accordance
with the U.S. debt collection laws. In recent years, the NPFC has
been able to collect between $7-$14 million per year of the removal costs and damage costs it pays from the Fund. There are several barriers to achieving
a higher rate of recovery:
- In nearly 50% of spills, the FOSC is unable to identify the
source of the spill or identify a responsible party (RP).
- Costs expended in excess of a responsible party's liability
limit are generally unrecoverable.
- The response for spills involving onshore facilities (such as
leaking, abandoned pipelines, underground tanks, or oil wells)
is typically complex and costly, but hard to collect on because many of these facilities are abandoned or uninsured.
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How are OPA and the OSLTF different
from CERCLA and Superfund?
Although not comprehensive, the table below
summarizes some of the differences.
| |
OPA & OSLTF |
CERCLA & Superfund |
| Law Enacted |
1990 |
1980 |
| Type of Pollution Covered |
Oil spills & threats of spills into U.S. navigable waters
(usually sudden events requiring immediate response) |
Hazardous substances, pollutants, & contaminants (often
result of newly discovered past pollution with response requiring
extensive planning & public participation) |
| Fund Administrator |
NPFC, Coast Guard |
EPA (NPFC administers only the Coast Guard use of Superfund resources) |
| Uses of Fund |
Spill response and cleanup
Claims for removal costs and damages, including natural resource
damages
Appropriations by Congress
|
Short-term removals when prompt response is required
Long-term remedial response actions
Appropriations by Congress |
| Source of Funds |
5-cent-per-barrel tax on oil
Transfers from other funds
Cost recovery
Interest on Fund balance
Fines & penalties
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Tax on chemical & petroleum industries (expired 1986)
Cost recovery
Annual Congressional appropriations |
| Size of Fund |
Authorized up to $2.7 billion |
Varies depending on Congressional appropriations |
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