The Legacy of the Oil Pollution Act of 1990
In 1989, the tanker Exxon Valdez grounded on Bligh Reef, Alaska resulting in the spill of more than 11 million gallons of oil into Prince William Sound. The resulting ecological disaster galvanized Congress to enact the Oil Pollution Act the next year. This legislation has had far-reaching implications for the carriage of oil by ship, enforcement actions against responsible parties, funding to respond to spills nationwide, and the protection of the U.S. marine environment.
Before OPA, single-hulled tankers carried oil to, from and between U.S. ports. OPA phased in the transition to double-hull tankers, which have become the norm worldwide. In 1992, the International Maritime Organization (“IMO”) modified the International Convention for the Prevention of Pollution by Ships (“MARPOL”) to phase in and extend the double-hull requirement globally. Studies show that depending on the impact speed, double hulls can reduce the likelihood of a pollution incident by more than 60 percent compared to single-hull tankers. While double-hull tankers are not a panacea to stop oil discharges at sea, they provide greater protection from pollution incidents caused by groundings, or low-speed/low-impact collisions. By way of example, in 2009, the double-hull tanker SKS Satilla allided with a submerged oil rig in the Gulf of Mexico creating a huge gash in the vessel’s outer hull, but no oil spilled. In 2021, a tug collided with the tanker Polar Endeavor in Valdez, Alaska tearing a four-foot hole in the outer hull, but no oil spilled; the inner hull remained intact. On the downside, double-hulled tankers are more expensive to build and maintain and may be less stable due to a higher center of gravity and greater free-surface effect in the ballast tanks.
Under OPA, the “Responsible Party” or RP is strictly liable for an oil spill, though it may seek contribution or indemnity from other culpable parties. OPA requires the RP to immediately respond to a pollution incident by deploying an oil spill response organization (“OSRO”) to clean it up, failing which the U.S. Coast Guard (“USCG”) may take over the spill response and manage the operation at the RP’s expense. One of the compromises that led to the passage of OPA is that cargo owners are not liable for a pollution discharge, though a variety of states also have imposed strict liability on the cargo owner in the event of a pollution discharge.
The RP must immediately report the incident to the National Response Center (“NRC”), and under Texas law to the Texas General Land Office (“TGLO”), failing which criminal and civil penalties may be imposed. Critically important is that criminal liability for an oil spill only requires proof of negligence; no intentional misconduct or mens rea is necessary. This criminal liability exposure has significantly altered the mindset of companies that transport oil by sea and has led to a far more conscious regard for safety considerations.
When a spill occurs, the USCG serves as the Federal On-Scene Coordinator (“FOSC”). The FOSC works in tandem with the RP’s spill manager and OSRO through an incident command system (“ICS”) to oversee response operations, which also involve natural resource damages trustees created by OPA assessing the spill’s environmental impact. Spills of National Significance (“SONS”), such as Deepwater Horizon, require the coordination of vast response and remediation resources overseen by a National Incident Commander (“NIC”). OPA requires the RP to cooperate in the spill response, failing which it may not be able to limit its liability as permitted by OPA. Yet, the USCG in its law enforcement capacity is also responsible to investigate the cause of a pollution discharge. Overseeing the pollution response and investigating the cause at the same time creates risk issues for the RP in dealing with USCG representatives. Further, while trying to deal with the spill response, the RP may have to deal with criminal legal representation issues for crewmembers who may be subjects of the USCG’s enforcement investigation.
OPA has also altered two traditional aspects of U.S maritime law. OPA permits a third party to recover economic losses occurring as the result of an oil spill without having suffered physical damage to property in which it holds a proprietary interest. This change alters the Robins Dry Dock economic-loss rule, which otherwise cuts off such tort liability. Secondly, while vessel owners can file a petition to limit their liability to the value of the vessel at the end of the voyage plus pending freight under the Shipowner’s Limitation of Liability Act (“the Act”), which requires all parties to file its claims by a date set by a federal district court or face a bar to recovery, OPA claims are not subject to this concursus of claims. OPA claimants cannot be forced to file their pollution claims in a shipowner’s limitation case and such claims are not subject to the Act’s liability limit, but instead to OPA’s liability limit, assuming the RP may limit. Under OPA, an RP can only limit its liability if it establishes that the spill was not caused by its gross negligence, or willful misconduct, or the violation of an applicable federal safety, construction, or operating regulation. RPs cannot easily meet this standard in the context of a marine casualty because oftentimes a regulatory violation contributes to an oil spill.
OPA also transformed the landscape for financing pollution discharge responses and the scope of such responses. OPA enhanced the Oil Spill Liability Trust Fund (“the Fund”). The Fund is financed primarily by a tax on domestically produced oil and imported oil refined in the United States and consists of two components—the Emergency Fund and the Principal Fund. The Emergency Fund is maintained such that $50 million is available annually to respond to maritime oil discharges nationwide. The Principal Fund responds to third-party and trustee claims for response costs and natural resource damages first presented to the RP, who fails to resolve same. If paid in whole or in part, the Fund becomes subrogated to the claimants’ rights to pursue the RP. The National Pollution Funds Center (“NPFC”), run by the USCG, administers the Fund. Each vessel carrying oil in bulk must have a Certificate of Financial Responsibility (“COFR”) that the NPFC must approve before the vessel may carry oil in U.S. waters. The COFR provides a minimum level of assurance that a vessel RP is financially able to respond to a pollution discharge. OPA also created a matrix of various natural resources damages that are available because of an oil spill, which has led to significant remediation efforts in various cases. The NPFC has been able to recover more than $9.0 billion dollars in oil spill settlements for use in natural resource restoration projects. Additionally, since OPA’s enactment, the International Group of P&I Clubs has broadened the scope of pollution coverage to make available to member clubs up to $1.0 billion in coverage in the event of a major spill.
Oil spills in U.S. waters have decreased in both number and volume since OPA’s enactment, though major incidents still occur from time to time. OPA has played a major role in altering the probability and recovery trajectory of oil spills in U.S. navigable waters. It is a congressional success story that has stood the test of time.
This article is one in a series of articles written for Blank Rome’s MAINBRACE: March 2024 edition.
This article was first published in Texas Lawyer on February 1, 2024.
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