Presented: 19th Annual Admiralty and Maritime Law Institute

November 10, 2010

Houston, Texas

OPA 90 Complexities and Recent Legislative Developments

Lawrence I. Kiern

Author contact information: Lawrence I. Kiern Winston & Strawn LLP Washington, D.C. 20006 Lkiern@winston.com (202) 282-5811

1

OPA90 Complexities and Recent Legislative Developments

University of Texas School of Law 19th Annual Admiralty and Maritime Law Conference

Lawrence I. Kiern, Partner Winston & Strawn LLP

Introduction

This paper accompanies the presentation to the conference by the author following the presentation by Andrew J. Garger of WQIS about the basic provisions of the Oil Pollution Act of 1990 (“OPA” or “OPA90”). Mr. Garger’s presentation summary indicates that it will include such issues as “the role of ‘responsible parties,’ the allocation and limitation of liability, and the Act’s relationship with state and general maritime law.”

Therefore, this paper will highlight an important OPA90 topic for practitioners that has proven particularly complex, claims against the Oil Spill Liability Trust Fund (“Fund” or “OSLTF”) and will also address recent legislative developments concerning OPA90.

Claims Against the Oil Spill Liability Trust Fund

Among other things, the OSLTF is used to pay claims "in accordance with section 1013 for uncompensated removal costs determined by the President to be consistent with the National Contingency Plan (NCP) or uncompensated damages."1 However, OPA90 limits expenditures from the OSLTF for removal costs and damage claims from any one oil pollution incident to one billion dollars. Additionally, expenditures for natural resource damages from the OSLTF for any one incident may not exceed $500 million.2 Therefore, the limitations of the Fund as a reliable source for compensation of claimants were starkly illustrated by the recent DEEPWATER HORIZON incident.

As a practical matter, the OSLTF claims process is governed principally by the statute

and the claims regulations.3 The National Pollution Funds Center (“NPFC”) which administers the claims process is a component of the U.S. Coast Guard.

For the responsible party the claims process typically begins early in an incident when the

NPFC or the federal on-scene coordinator "designates the source or sources of the discharge" and notifies "the responsible party and the guarantor . . . of that designation."4 The designation takes the form of a letter which identifies the source and explains the advertising requirements, e.g., content and scope.

1 OPA § 1012(a) (4); 33 U.S.C. § 2712(a)(4). The NCP provides the "organization and procedures for preparing for and responding to discharges of oil. . ." 40 C.F.R. § 300 et. seq. 2 26 U.S.C. § 2509, as amended by OPA § 9001. 3 33 C.F.R. Part 136. 4 OPA § 1014; 33 U.S. C. § 2714.

2

Generally, claims must be presented first to the responsible party or guarantor.5 This

requirement is critically important because it is a mandatory. Failure to comply will not only bar consideration of the claim by the NPFC, but also it will prevent a claimant from filing suit against the responsible party and asserting an OPA claim. In litigation surrounding the major oil spill from a pipeline into Sugarland Run near Washington, D.C., the court explained,

OPA provides that all claims for damages shall be

presented first to the party responsible for the spill. . . . If such a claim is presented and the responsible party denies all liability or the claim is not settled within 90 days, the claimant may elect to commence an action in court against the responsible party. . . . If plaintiffs fail to comply with the prerequisites for bringing such an action, the OPA claim must be dismissed. Cf. Hallstrom v. Tillamook County, 493 U.S. 20, 31 (1989) (plaintiff's failure to comply with Resource Conservation and Recovery Act's 60-day notice and presentation requirement mandates dismissal of case).6

Furthermore, the court ruled that the claimants' demand letter to the responsible party in

that case "plainly inadequate." Pointing to NPFC's regulations governing the submission of claims to the OSLTF, he observed that "the claim presented must inform the responsible party with some precision of the nature and extent of the damages alleged and the amount of monetary damages claimed."7

Similarly, in litigation flowing from a major oil spill in Tampa Bay oil, the court

dismissed a class action lawsuit for lack of jurisdiction in part because the plaintiffs failed to present their claims to the responsible parties before filing the lawsuit. In its opinion, the court cited Johnson v. Colonial Pipeline approvingly and opined that:

The purpose of the claim presentation procedure is to

promote settlement and avoid litigation. Therefore, in drafting the OPA, Congress mandated a 90-day period in which the parties would attempt to resolve monetary disputes arising from oil spills prior to commencing litigation. . . . The hope was to avoid costly and cumbersome litigation.8

For routine claims, one of the most challenging aspects of the claims adjudication process

is collecting evidence to satisfy the bureaucracy. This challenge is often compounded because claimants delay years in submitting claims and the NPFC can be quite demanding in its requirements for documentation. 5 OPA § 1013(a); 33 U.S.C. § 2713(a). 6 Johnson v. Colonia Pipeline, 830 F. Supp. 309, 310 (E.D. Va. 1993). Also, see Puerto Rico v. M/V EMILY S, 132 F.3d 818 (1st Cir. 1997) citing Judge Hilton's analysis in Johnson with approval and LeBoeuf, et al. v. TEXACO, et al., 9 F.Supp. 2d 661 (E.D. La. 1998)(OPA's present requirement is a "mandatory condition precedent"). 7 Id. 8 Boca Ciega Hotel, Inc. v. Maritrans Operating Partners, L.P., Civil No. 93-1616-Civ (M.D. Fla. 1994), aff'd 51 F.3d 235 (11th Cir. 1995).

3

The NPFC's requires claimants to provide the evidence necessary to adjudicate their

claims. Unfortunately, the NPFC demands documentation to substantiate and justify all costs claimed. Therefore, the importance of complete documentation is paramount. The NPFC also carefully evaluates all evidence submitted by claimants for reliability and trustworthiness and requires all claims to be submitted under penalty of perjury and subject to sanctions under the False Claims Act.

The NPFC requires that the removal cost or damage claimed must have been proximately

caused by the discharge of oil. Claims must also be for a damage recognized by OPA, e.g., an uncompensated removal cost, injury to personal property, subsistence use of natural resources, government revenue or economic loss. Importantly, OPA does not provide compensation for personal injury or punitive damages. Additionally, claimants must adhere to NPFC's claims regulations, and they also bear the burden of proof to establish both a cognizable claim and that they sustained a certain amount of damages.9

Claims by responsible parties to the OSLTF are severely limited by OPA to

circumstances in which they have either a complete defense or have exceeded their limit of liability.10

Suing The Fund

International Marine Carriers, Inc. v. OSLTF On August 2, 1993, a dissatisfied claimant sued the OSLTF for the first time.11 This

seminal case established important principles under OPA90 with respect to lawsuits by claimants against the Fund. In the litigation, the plaintiff-vessel-operator, International Marine Carriers, Inc. (IMC), asserted that the defendant-OSLTF was liable for its expenditure of over $49,000 to remove 10-12 barrels of bunkers discharged from the USNS SEALIFT ATLANTIC on April 13, 1991 into the Houston Ship Channel when a fuel tank overflowed. IMC alleged that it was entitled to reimbursement for its removal costs because the discharge was the sole fault of the oil terminal operated by Amerada Hess Corporation that was transferring the bunkers to the vessel.12

In dismissing charges brought by the Coast Guard against the Chief Engineer's license,

the Coast Guard's own Administrative Law Judge concluded that the vessel's Chief Engineer was not negligent and that the incident occurred because the Amerada Hess dock worker negligently left his station on the dock for more than five minutes without notifying the vessel's chief Engineer and without establishing any means of communicating with the Chief Engineer.13

9 33 C.F.R. Part 136. 10 OPA § 1008; 33 U.S.C. § 2708. 11 International Marine Carriers, Inc. v. The Oil Spill Liability Trust Fund, 903 F.Supp. 1097 (S.D. Tex. 1993), reconsideration motion denied 914 F.Supp. 149 (S.D. Tex. 1995). 12 OPA § 1003(a)(3); 33 U.S.C. § 2703(a)(3). 13 International Marine Carriers, Inc. v. The Oil Spill Liability Trust Fund at 1100.

4

The NPFC denied the claim largely because it concluded that IMC had a contractual relationship with the terminal it alleged was responsible.14 On July 18, 1994, the court granted the government’s motion for summary judgment. The Court rejected IMC's challenge to the OSLTF and concluded:

This court finds that the Fund was reasonable in concluding

that the section 2703 third-party defense does not extend to the type of arrangement between IMC and the Amerada Hess Terminal at the time of the fuel spill. This court cannot find it unreasonable for the Fund to determine that the commercial contacts between IMC and the Terminal, including the Declaration of Inspection, constitute an OPA contractual relationship within the meaning of section 2703(a)(3). . . . The court AFFIRMS the Fund's determination that a contractual relationship existed between IMC and the Amerada Hess Terminal at the time of the spill, and that this contractual relationship precludes IMC's successful assertion of the OPA section 2703 third-party defense to liability.15

This early decision regarding the claims asserted against the OSLTF is important in key

respects. Substantively, the court accepted as reasonable an interpretation of OPA by the OSLTF that significantly restricts responsible parties from resorting to the statutory defense of sole-fault of a third party. While IMC attacked the reference to the Declaration of Inspection by the OSLTF as evidence of a contractual relationship, the Court showed deference to the assessment of the OSLTF that in addition to the Declaration, other commercial contacts between IMC and Amerada Hess established a contractual relationship under OPA.

Additionally, in its decision the Court addressed important threshold issues. For

example, the court rejected the Government's argument that the denial of IMC's claim was not subject to judicial review under the Administrative Procedures Act (APA) 16 because it was a suit for money damages. Instead, the Court likened IMC's claim to one for restitution and analogous to cost recovery actions under CERCLA. Also, citing the APA, the court refused to dismiss IMC's action because it had failed to name the United States as a party.17

The Court's adoption of the APA's arbitrary and capricious standard of review of agency

actions set the standard for judicial review of actions by the Coast Guard and the OSLTF in most OPA litigation and has had far-reaching implications. While this standard is unquestionably deferential to the Government it does provide a mechanism to check both Government excesses and inflexibility because at its core is the notion of reasonableness.18 Moreover, the claims regulations of the OSLTF are infused with a reasonableness standard that appears throughout its complex provisions.19 As an additional safeguard for claimants, in taking decisions on claims 14 See OPA §§ 1008 and 1003(a)(3), 33 U.S. C. §§ 2708 and 2703, which bar recovery by the responsible party under this circumstance. 15 International Marine Carriers v. The Oil Spill Liability Trust Fund , supra. at 1106. 16 5 U.S.C. § 704. 17 International Marine Carriers v. The Oil Spill Liability Trust Fund, at 1102-3. 18 See, Chevron U.S.A., Inc., v. Natural Resources Defense Counsel, Inc., 467 U.S. 837, 843-46 (1984). 19 33 C.F.R. Part 136.

5

the OSLTF must explain and justify its decisions.20 Therefore, to the extent the OSLTF insists on overly burdensome documentation and requires a claimant to exceed its burden of proof under OPA and its implementing regulations, the OSLTF exceeds its authority and acts in an arbitrary and capricious manner.21 Experience shows that claimants can successfully challenge arbitrary actions by the OSLTF to deny claims for reimbursement of removal costs and for damages.22 Challenges have been successfully mounted both through administrative channels and the courts. Importantly, where the agency position is not "substantially justified," claimants may be eligible for an award of attorneys fees pursuant to the Equal Access to Justice Act.23

Gatlin Oil Company, Inc. v. United States

Because of the statutory advantages enjoyed by the OSLTF and the federal government

however, most challenges are likely to be difficult. For example, on March 2, 1999, the Fourth Circuit rejected the second major judicial challenge to the OSLTF.24 In that case, Gatlin Oil Company had asserted a claim of $850,000 to the Fund for uncompensated costs incurred to respond to an oil spill and fire caused by vandals who opened valves on seven fuel oil storage tanks. The Fourth Circuit granted the Government’s appeal of the decision of the U.S. District Court of the Eastern District of North Carolina. The District Court had found “arbitrary and capricious” the Fund’s denial of the vast bulk of Gatlin’s claim.25 The majority of the three judge panel accepted the Government’s argument that a claimant “cannot recover from the Fund compensation for fire damage because the evidence did not establish that the fire caused the discharge of oil into navigable waters or posed a substantial threat to do so.”26 Although the dissenting opinion explained that the statutory language permitted a more generous reading, the majority held that the Coast Guard’s interpretation was “permissible” reaffirming the longstanding OSLTF policy to limit the payment of removal cost claims strictly to actions directly implicating pollution prevention and mitigation.27

Therefore, it is essential for any claimant to the Fund to demonstrate that removal costs

are related directly to the removal of a discharge or mitigation of a substantial threat of a discharge. Additionally, the Court's review of the agency's analysis in Gatlin Oil underscores the critical importance for claimants to establish the most favorable administrative record possible before the OSLTF in order both to influence the administrative adjudication of the claim and subsequent judicial review.

20 Keystone Shipping v. United States, 801 Supp. 771, 782 (D.D.C. 1992); National Employees Treasury Union v. Horner, 854 F.2d 490, 498 (D.C. Cir. 1998); Commonwealth of Pennsylvania v. Interstate Commerce Commission, 561 F.2d 278 (D.C. Cir. 1977). 21 See, Mine Reclamation Corp. v. F.E.R.C., 30 F3d 1519, 1524 (D.C. Cir. 1994); Kelly v. EPA, 15 F.3d 1100 (D.C. Cir. 1994), cert denied. 22 For example, see Gorthon Lines AB v. United States, Civ, No. 98-190-Orl-19C (M.D. Fla. 1998) wherein the OSLTF rejected the claim for reimbursement of removal costs only to capitulate after being sued in Federal District Court. 23 5 U.S.C. § 504; 49 C.F.R. Part 6. 24 Gatlin Oil Company, Inc. v. United States, 169 F.3d 207 (4th Cir. 1999). 25 Id. at 210. 26 Id. at 212. 27 Id. at 211.

6

Water Quality Insurance Syndicate v. United States

In a more recent challenge to the Fund, on November 29, 2007, the U.S. District Court for the District of Columbia soundly rejected the Coast Guard's denial of the claim of environmental insurer WQIS for reimbursement of uncompensated damages and removal costs incurred in responding to the massive oil spill from the barge MORRIS J. BERMAN in Puerto Rico, January 1994.28 In its ruling, the Court rejected the Coast Guard's erroneous application of the common law doctrine of "willful misconduct" and key statutory provisions OPA90.29 The Court also rejected the agency's post hoc rationalization for its decision, highlighting important judicial limitations to the agency's discretion. In an encouraging ruling for OPA90 claimants, the Court demonstrated the willingness of the judiciary to enforce statutory provisions as enacted by Congress rather than as misconstrued by the Agency.

Importantly, the Court ruled that the Coast Guard’s erroneous construction of the statute’s plain language constituted reversible error. According to the Court, the agency erred by refusing to consider the legal cause of the OPA "incident." Additionally, it erred in applying key statutory provisions regarding OPA guarantors30 and eligible claimants.31 The Court ruled that the Coast Guard erroneously concluded that cause of the "discharge" or the "oil spill," rather than the "incident" should be the focus. Additionally, the Court ruled that the agency erred by concluding that as an insurer, WQIS, “stepped into the shoes” of its assureds, and was therefore ineligible to recover from the Fund because the assureds, as OPA “responsible parties,” had no basis to recover from the Fund. Importantly, the Coast Guard’s arguments not only misstated the applicable law, but as a practical matter frustrated a central purpose of OPA wherein Congress sought to promote prompt response to oil pollution incidents by private parties. Therefore, the Court's decision was not only welcome news for the claimant, but also for the public interest in promoting prompt responses to oil pollution in the United States.

First, the agency's consideration of the WQIS claim erred by departing from the statute. As an initial matter, the agency myopically restricted its analysis to the "sole proximate cause" of the "oil spill" or the "discharge." The Court explained that "the agency erred when it focused only on the 'oil spill' or the 'discharge,' rather than on the broader meaning of the statutory term 'incident.' The relevant question for this case is not whether the willful misconduct was the proximate cause of the oil spill. Rather, the relevant question is whether the 'incident' was caused by the willful misconduct of the responsible party."32

The Court further explained that "The agency's decision thus appears to focus on the wrong question, and its analysis leads to the erroneous conclusion that a series of negligent acts cannot constitute willful misconduct. An 'incident' is defined in the statute as 'any occurrence or series of occurrences having the same origin, involving one or more vessels, facilities, or any combination thereof, resulting in the discharge or substantial threat of discharge of oil.'"33 The significance of this error was decisive according to the Court: "The 'incident,' therefore, is not 28 Water Quality Ins. Syndicate v. United States, 522 F. Supp. 2d 220 (D.D.C. 2007)("WQIS"). 29 Pub.L. No. 101-380, August 18, 1990; 104 Stat. 484 (1990); codified at 33 U.S.C. § 2701, et seq. 30 OPA § 1016(h); 33 U.S.C. § 2716(h). 31 OPA § 1013; 33 U.S.C. § 2713. 32 WQIS, supra. at 228-29. 33 OPA § 1001(14); 33 U.S.C. § 2701(14) (emphasis added).

7

the oil spill. Under the plain language of the statute, the 'incident' is what caused the spill. More importantly, the 'incident' may be a 'series of occurrences' resulting in the oil spill. While the faulty repair of the tow line was part of the series of occurrences, that led to the discharge of the oil, the agency was wrong under the statute to focus on any one occurrence, event or cause as the proximate cause of the spill. It should have looked at the series of 'occurrences' or events that together constitute the 'incident' that led to the spill."34

Second, the Coast Guard misapplied the statute by refusing to treat WQIS as an OPA claimant. Instead, the agency erroneously labeled WQIS as merely an insurer entitled only to the rights of its assured. By contrast, WQIS argued that OPA provides in relevant part that any ''person"35 incurring uncompensated damages and removal costs36 may submit a claim for reimbursement from the Fund.37

The Court agreed with WQIS and explained the Coast Guard's error: "Unfortunately, the agency's decision relies on a legal doctrine (subrogation) that does not apply, and is devoid of any analysis whatsoever. The decision simply makes the bare assertion that a guarantor does not have a claim for removal costs because the responsible party has no such claim."38 Moreover, the Court criticized the Coast Guard further observing that "Defendant has not cited any cases under the Oil Pollution Act to support its position" and further that the one case it did cite "is not the least bit relevant to the question in this case."39

Continuing in its explanation of the Coast Guard's error, the Court emphasized that "Defendant's argument – that plaintiff is not a person who can present a claim on its own behalf against the Fund but rather only has the rights it acquired by subrogation – contradicts the plain language of the OPA. . . . The statute does not purport to exempt the Fund from liability for claims of guarantors and insurers such as plaintiff, which asserts that a policy defense exempts it from liability. There is no dispute in this case that plaintiff did not engage in gross negligence or willful misconduct that caused the incident."40

Recent Legislative Developments Concerning OPA90.

The Deepwater Horizon incident has sparked a flurry of legislative activity, including amendments and proposed amendments to OPA90.

Emergency Funding Measure Enacted Into Law

The extraordinary scope and prolonged nature of the incident quickly exhausted the $150 million in emergency funding annually available to the U.S. Coast Guard and other federal agencies through the Oil Spill Liability Trust Fund (OSLTF). Consequently, following a June 4, 34 WQIS, supra. at 229. 35 OPA § 1001(27); 33 U.S.C. § 2701 ("'person' means an individual, corporation, partnership, association, State, municipality, commission, or political subdivision of a State, or any interstate body"). 36 OPA § 1002; 33 U.S.C. § 2702. 37 OPA §§ 1012(a)(4) and 1013(d); 33 U.S.C. §§ 2712(a)(4) and 2713(d). 38 WQIS, supra. at 230. 39 Id. at 231. 40 Id. at 232.

8

2010 letter from Coast Guard Admiral Thad Allen warning that the Coast Guard would exhaust the annual cap within two weeks, on June 15, 2010 Congress and the President increased emergency funding available from the OSLTF. The Senate passed the measure by voice vote and sent it to the House of Representatives which quickly approved it by a vote of 410 – 0, thereby ensuring uninterrupted funding for this unprecedented government response.

The legislation amends the Oil Pollution Act of 1990 (OPA90) to permit additional emergency advances to the Coast Guard and other federal agencies up to $100 million for each advance, but only for the Deepwater Horizon incident and provided that Congress is notified “of the amount advanced and the facts and circumstances necessitating the advance.”

Cargo Owner Liability

The Coast Guard Authorization Act of 2010, Pub. L. No. 111-281, 124 Stat. 2905 (2010) (CGAA) was signed into law by President Obama on October 15, 2010. The legislation included an amendment to OPA90’s liability provisions that for the first time extends OPA90 liability to cargo owners. The provision amends the OPA90 definition of the term “responsible party” as follows:

Section 1001(32)(A) of the Oil Pollution Act of 1990 (33 U.S.C. § 2701(32)(A)) is amended by inserting “In the case of a vessel, the term ‘responsible party’ also includes the owner of oil being transported in a tank vessel with a single hull after December 31, 2010 (other than a vessel described in section 3703a(b)(3) of title 46, United States Code). after “vessel.”

CGAA § 713. The exception for vessels described in 46 U.S.C. § 3703a(b)(3) pertains to vessels unloading oil in bulk at a deepwater port licensed under the Deepwater Port Act of 1974 or delivering vessels offloading in lightering activities within a lightering zone established under 46 U.S.C. § 3715(b)(5) and which is more than 60 miles offshore from the United States. This exception expires on January 1, 2015. As a practical matter the use of single hull tank vessels in the United States is unusual today. However, this provision represents a significant change in the political compromise that was struck in OPA90 which did not include cargo owner liability.

Expanded Financial Responsibility

The CGAA also amended OPA90’s financial responsibility provision by expanding its reach to include “any tank vessel over 100 gross tons using any place subject to the jurisdiction of the United States.” CGAA § 712. Previously, this provision had only applied to vessels over 300 gross tons.

Proposals to End Oil Pollution Limitation of Liability

Beyond the foregoing modest amendments to OPA90, legislators have proposed more far reaching revisions. Sen. Bob Menendez (D-NJ) introduced The Big Oil Bailout Prevention Act of 2010, S.3305, to require the responsible parties to pay the entire cost of the Deepwater Horizon pollution cleanup and compensate victims without the benefit of any legal limitation of liability such as that provided by OPA90 or state law. Opposition to this and other proposals to

9

end limitation of liability for oil pollution damages met fierce opposition. Senator Lamar Alexander (R-TN) decried the retroactive nature of the legislation arguing that, “We are not a banana republic.” He also warned of unintended consequences, including driving oil drilling out of the Gulf of Mexico and leaving the United States more dependent on foreign oil. However, on June 30, 2010, the Senate Environment Committee rejected these protests and approved the bill.

The next day, the U.S. House of Representatives Transportation and Infrastructure Committee approved a companion measure, The Oil Spill Accountability and Environmental Protection Act of 2010, H.R. 5629, that would eliminate the $75 million damages liability cap under OPA90. And, the House Transportation Committee measure also included proposals to increase up to $1.5 billion the proof of financial responsibility required under OPA90. By July 30, 2010, the House of Representatives passed a package of reform measures in a bill (H.R. 3534), known as the CLEAR Act, that was developed by several House committees, particularly the Natural Resources, Transportation and Infrastructure, and Judiciary Committees. Although similar changes have been under active discussion in the U.S. Senate, no bills were adopted by the Senate on the subject before the Senate recessed for the midterm election of November 2, 2010.

OPA90’s oil pollution liability framework reflected a compromise between competing interests and is manifested in a combination of strict liability of responsible parties and a limitation of liability for certain types of damages. The CLEAR Act proposes to revise this compromise. Most of those changes target mobile offshore drilling units like the DEEPWATER HORIZON and offshore exploration, development and production of oil and gas. Other changes, however, also will affect vessels – both tank vessels and non-tank vessels – entering U.S. waters irrespective of offshore drilling operations.

The most important proposed change that has received widespread publicity is the potential increase or elimination of the $75 million cap on certain damages by a facility spill under OPA90. Related changes have been proposed with respect to Certificates of Financial Responsibility (COFR) by which vessel owners and facility owners must provide evidence of financial responsibility up to certain limits. The CLEAR Act would eliminate the $75 million cap altogether for all offshore facilities (but not the corresponding vessel limits) and dramatically increase COFR limits for facilities (but not for vessels).

However, the CLEAR Act does allow for future administrative changes to the liability cap and COFR guarantees applicable to vessels as it directs the President to review at least once every three years whether the cap is sufficient and to increase that cap by regulation “commensurate with the risk of discharge of oil presented by a particular category of vessel, facility, or port.”

The CLEAR Act would also expand the OPA90 definition of responsible party to include minority owners of the responsible party so long as they owned at least 25 percent of that entity (directly or indirectly) and the assets of the responsible party proved to be insufficient to pay claims. This amendment would be effective for any incident occurring on or after Jan. 1, 2010. This proposal would dramatically alter a fundamental OPA90 concept. OPA90’s definition of “responsible party” with respect to a discharge aimed to provide certainty and clarity,

10

particularly with respect to oil pollution response and payment of claims. In an effort to expand the scope of potential responsible parties to ensure there are sufficient economic resources to pay for oil pollution response and damages, the proposal complicates the previous clarity provided by OPA90. Additionally, the proposal to extend OPA90 liability to minority owners could have an unintended chilling effect on the willingness of investors to subject themselves to such potential unlimited liabilities.

Proposals To Expand The Scope of Recoverable Damages

The CLEAR Act would also expand the scope of permissible damages recoverable from both vessel and facility responsibility parties under OPA90. Currently, those damages consist of damages to natural resources, real or personal property, subsistence use, government revenues, profits and earning capacity, and public services. The CLEAR Act would add a new category relating to damages to human health to include fatal injuries and mental health impacts. As with other proposed changes, the inclusion of human health damages would be retroactive to April 19, 2010 irrespective of whether claims were connected to the DEEPWATER HORIZON incident.

The CLEAR Act also proposes to ease recovery of government expenditures. OPA90 permits the Fund to recover in federal court from a responsible party or other person liable for any compensation paid by the Fund for removal costs or damages. The CLEAR Act proposes that “the Fund shall recover all costs and damages paid from the Fund unless the decision to make the payment is found to be arbitrary and capricious.” This proposal would relieve the Fund of its existing burden to prove its underlying damages in the federal court proceeding and would heighten the importance for a responsible party to challenge payments by the Fund during the administrative process.

Likewise, the CLEAR Act would ease the burden on the government in seeking recovery of natural resource damages. OPA90 authorizes recovery from the responsible party of natural resource damages and such damages have been routinely recovered under OPA90, most often through settlement agreements. The CLEAR Act would further strengthen the government’s hand in the process. It would make any determination or assessment of a trustee subject only to the deferential standard of judicial review afforded to U.S. government agencies by the Administrative Procedure Act. This could have the effect of increasing the already significant leverage natural resource trustees have to extract settlements from responsible parties.

The CLEAR Act also proposes expanding the definition of “removal cost” payable by the responsible party to include the federal government’s cost of enforcing OPA90. Consequently, a responsible party would be obligated have to pay the cost of the federal government’s prosecution for violations of OPA90.

Response Plans And Claims Processing

The oil pollution response plan applicable to the DEEPWATER HORIZON came under intense public scrutiny and critics charged that it was inadequate. The CLEAR Act proposes to respond to this criticism by tightening up the process of for federal government review and approval. The legislation also proposed to require “a probabilistic risk analysis for all critical engineered systems of the vessel or facility,” making such analysis available to the public, and

11

increasing significantly administrative penalties for failure to comply with response plan requirements.

Finally, the CLEAR Act proposed changes in OPA90’s claims regime. Most importantly, it would prevent a responsible party from securing a meaningful release from a claimant without compensating the claimant for its OPA 90 damages. Additionally, it would enhance the roles of the federal government in ensuring that the processing of claims occurs locally for any spill of national significance and in obtaining information from any responsible party regarding the processing of claims such as average processing times.

12

OIL SPILL LEGISLATION AMENDING PUBLIC LAW 101‐380 

THE OIL POLLUTION ACT OF 1990

HOUSE MEASURES 

BILL 

NUMBER TITLE  Introduced by & 

Date: OFFICIAL TITLE 

HR 2693  Oil Pollution Research and Development Program Reauthorization Act of 2010 

Woolsey (D‐Calif.) on 6/3/2009 

To amend title VII of the Oil Pollution Act of 1990, and for other purposes. 

HR 3534   Consolidated Land, Energy and Aquatic Resources Act of 2010 

Rahall (D‐W.Va.) on September 8, 2009 

A bill to provide greater efficiencies, transparency, returns and accountability in the administration of federal mineral and energy resources by consolidating administration of various federal energy minerals management and leasing programs into one entity to be known as the Office of Federal Energy and Minerals Leasing of the Department of the Interior, and for other purposes. 

HR 3619 Pub. L. No. 111‐281 

Coast Guard Authorization Act of 2010 

Oberstar (D‐Minn.) on September 22, 2009 

An act to authorize appropriations for the Coast Guard for fiscal year 2011, and for other purposes. 

HR 4899 Pub. L. No. 111‐212   

Supplemental Appropriations Act, 2010 

Obey (D‐Wis.) on March 21, 2010 

A bill making emergency supplemental appropriations for disaster relief and summer jobs for the fiscal year ending Sept. 30, 2010, and for other purposes.  Disaster/War Supplemental Appropriations 

HR 5214   Big Oil Bailout Prevention Act of 2010 

Holt (D‐N.J.) on May 5, 2010 

A bill to require oil polluters to pay the full cost of oil spills, and for other purposes. 

13

BILL NUMBER 

TITLE  Introduced by & Date: 

OFFICIAL TITLE 

HR 5355   A bill to amend the Oil Pollution Act of 1990 to repeal the limitation of liability of a responsible party for a discharge or substantial threat of a discharge of oil from an offshore oil facility. 

Grijalva (D‐Ariz.) on May 20, 2010 

A bill to amend the Oil Pollution Act of 1990 to repeal the limitation of liability of a responsible party for a discharge or substantial threat of a discharge of oil from an offshore oil facility. 

HR 5356   Oil Spill Response and Assistance Act 

Blunt (R‐Mo.) on May 20, 2010 

A bill to amend the Oil Pollution Act of 1990 to increase the cap on liability for economic damages resulting from an oil spill, and for other purposes. 

HR 5499   A bill to amend the Oil Pollution Act of 1990 to authorize advances from Oil Spill Liability Trust Fund for the Deepwater Horizon oil spill. 

Mica (R‐Fla.) on June 10, 2010 

A bill to amend the Oil Pollution Act of 1990 to authorize advances from Oil Spill Liability Trust Fund for the Deepwater Horizon oil spill. 

HR 5503   Securing Protections for the Injured from Limitations on Liability Act 

Conyers (D‐Mich.) on June 10, 2010 

A bill to revise laws regarding liability in certain civil actions arising from maritime incidents, and for other purposes. 

HR 5572   Oil Spill Prevention Act of 2010 

Buchanan (R‐Fla.) on June 22, 2010 

A bill to reform the Minerals Management Service and offshore drilling for oil and gas, to repeal the limitation of liability of a responsible party for discharge of oil from an offshore facility, and for other purposes. 

14

BILL NUMBER 

TITLE  Introduced by & Date: 

OFFICIAL TITLE 

HR 5629   Oil Spill Accountability and Environmental Protection Act of 2010 

Oberstar (D‐Minn.) on June 29, 2010 

A bill to ensure full recovery from responsible parties of damages for physical and economic injuries, adverse effects on the environment and clean up of oil spill pollution, to improve the safety of vessels and pipelines supporting offshore oil drilling, to ensure that there are adequate response plans to prevent environmental damage from oil spills, and for other purposes. 

HR 5654   Gulf Coast Restoration Act 

McDermott (D‐Wash.) on June 30, 2010 

A bill to amend the Workforce Investment Act of 1998 to provide oil spill relief employment, and for other purposes. 

HR 5676   Omnibus Right to Equitable Means of Ensuring Damages for Injuries are Efficiently Secured (REMEDIES) Act of 2010 

Jackson Lee, S. (D‐Texas) on July 1, 2010 

A bill to provide equitable means for ensuring that damages for injuries are efficiently secured, and for other purposes. 

HR 5677   Secure All Facilities to Effectively Guard the United States Against and Respond to Dangerous Spills (SAFEGUARDS) Act of 2010 

Young, C.W. (R‐Fla.) on July 1, 2010 

A bill to amend the Outer Continental Shelf Lands Act and the Federal Water Pollution Control Act to modernize and enhance the federal government's response to oil spills, to improve oversight and regulation of offshore drilling, and for other purposes. 

HR 5686   Stand by your Oil Pollution (STOP) Act 

Connolly (D‐Va.) on July 1, 2010 

A bill to amend the Oil Pollution Act of 1990 to extend liability to corporations, partnerships and other persons having ownership interests in responsible parties, and for other purposes. 

15

BILL NUMBER 

TITLE  Introduced by & Date: 

OFFICIAL TITLE 

HR 5698   A bill to amend Oil Pollution Act of 1990 and the Outer Continental Shelf Lands Act to protect employees from retaliation for notifying government officials of violations of those acts, and for other purposes. 

Melancon (D‐La.) on July 1, 2010 

A bill to amend Oil Pollution Act of 1990 and the Outer Continental Shelf Lands Act to protect employees from retaliation for notifying government officials of violations of those acts, and for other purposes. 

HR 5709   Oil Spill Preparation and Protection Act 

Tsongas (D‐Mass.) on July 1, 2010 

A bill to amend the Outer Continental Shelf Lands Act to require, as a condition and term of any exploration plan or development and production plan submitted under that act, that the applicant for the plan must submit an oil spill containment and clean‐up plan capable of handling a worst‐case scenario oil spill, and for other purposes. 

HR 5745   Supplemental Appropriations Act, 2010 

Lewis on July 15, 2010 

Official Title: Making supplemental appropriations for the fiscal year ending September 30, 2010, and for other purposes. 

HR 5905   A bill to amend the Internal Revenue Code of 1986 to deny a deduction for removal costs and damages for which taxpayers are liable under the Oil Pollution Act of 1990. 

Connolly (D‐Va.) on July 28, 2010 

A bill to amend the Internal Revenue Code of 1986 to deny a deduction for removal costs and damages for which taxpayers are liable under the Oil Pollution Act of 1990. 

HR 5995   Closing Oil Spill Tax Loopholes Act of 2010 

Grijalva (D‐Ariz.) on July 30, 2010 

A bill to amend the Internal Revenue Code of 1986 to deny the trade or business expense deduction for damages paid pursuant to the Oil Pollution Act of 1990. 

16

BILL NUMBER 

TITLE  Introduced by & Date: 

OFFICIAL TITLE 

HR 6031   Denial of Certain Tax Benefits to Offending Oil Polluters Act of 2010 

Engel (D‐N.Y.) on July 30, 2010 

A bill to amend the Internal Revenue Code of 1986 to deny certain tax benefits to persons responsible for an oil spill if such person commits certain additional violations. 

HR 6053   A bill to amend the Oil Pollution Act of 1990 to provide for timely consideration of claims submitted by states and political subdivisions for reimbursement of removal costs. 

Meek, K. (D‐Fla.) on July 30, 2010 

A bill to amend the Oil Pollution Act of 1990 to provide for timely consideration of claims submitted by states and political subdivisions for reimbursement of removal costs. 

HR 6292   

Securing Health for Ocean Resources and Environment (SHORE) Act 

Richardson (D‐Calif.) On 9/29/2010  

A bill to improve the ability of the National Oceanic and Atmospheric Administration, the Coast Guard and coastal states to sustain healthy ocean and coastal ecosystems by maintaining and sustaining their capabilities relating to oil spill preparedness, prevention, response, restoration and research, and for other purposes. 

H Res 1665   A resolution providing for the concurrence by the House in the Senate amendment to HR 3619, with amendments. 

Oberstar (D‐Minn.) on September 28, 2010 

A resolution providing for the concurrence by the House in the Senate amendment to HR 3619, with amendments. 

17

 SENATE MEASURES 

BILL 

NUMBER TITLE  Introduced by & 

Date: OFFICIAL TITLE 

S 684  Oil Pollution Prevention and Response Act of 2009 

Cantwell (D‐Wash.) on March 24, 2009 

A bill to provide the Coast Guard and NOAA with additional authorities under the Oil Pollution Act of 1990, to strengthen the Oil Pollution Act of 1990, and for other purposes. 

S 1041    Murkowski (R‐Alaska) on May 14, 2009 

A bill to amend the Oil Pollution Act of 1990 to modify the applicability of certain requirements to double hulled tankers transporting oil in bulk in Prince William Sound, Alaska. 

S 1194  Coast Guard Authorization Act for Fiscal Years 2010 and 2011 

Cantwell (D‐Wash.) on June 4, 2009 

A bill to reauthorize the Coast Guard for fiscal years 2010 and 2011, and for other purposes. 

S 1564  Arctic Oil Spill Research and Prevention Act of 2009 

Begich (D‐Alaska) on August 3, 2009 

A bill to enhance the readiness of the United States to deal with increased maritime and development activity in the Arctic as a result of climate change, and for other purposes. 

S 3305   Big Oil Bailout Prevention Liability Act of 2010 

Menendez (D‐N.J.) on May 4, 2010 

A bill to amend the Oil Pollution Act of 1990 to require oil polluters to pay the full cost of oil spills, and for other purposes. 

S 3306  Big Oil Bailout Prevention Trust Fund Act of 2010 

Menendez (D‐N.J.) on May 4, 2010 

A bill to amend the Internal Revenue Code of 1986 to require polluters to pay the full cost of oil spills, and for other purposes. 

S 3375  Oil Spill Response and Assistance Act 

Vitter (R‐La.) on May 13, 2010 

A bill to amend the Oil Pollution Act of 1990 to increase the cap on liability for economic damages resulting from an oil spill, and for other purposes. 

S 3410  Acceptance of Liability and Expedited Claims at Mississippi Canyon 252 Act 

Vitter (R‐La.) on May 25, 2010 

A bill to create a fair and efficient system to resolve claims of victims for economic injury caused by the Deepwater Horizon incident, and to direct the secretary of the Interior to renegotiate the terms of the lease known as "Mississippi Canyon 252" with respect to claims relating to the Deepwater Horizon explosion and oil spill that exceed existing applicable economic liability limitations. 

18

BILL NUMBER 

TITLE  Introduced by & Date: 

OFFICIAL TITLE 

S 3472  Big Oil Bailout Prevention Unlimited Liability Act of 2010 

Menendez (D‐N.J.) on June 9, 2010 

A bill to amend the Oil Pollution Act of 1990 to require oil polluters to pay the full costs of oil spills, and for other purposes. 

S 3473 Pub. L. No. 111‐191 

A bill to amend the Oil Pollution Act of 1990 to authorize advances from Oil Spill Liability Trust Fund for the Deepwater Horizon oil spill. 

Reid, H. (D‐Nev.) on June 9, 2010 

A bill to amend the Oil Pollution Act of 1990 to authorize advances from Oil Spill Liability Trust Fund for the Deepwater Horizon oil spill. 

S 3514   Guaranteed Oil Spill Compensation Act of 2010 

Begich (D‐Alaska) on June 21, 2010 

A bill to amend the Outer Continental Shelf Lands Act to prohibit a person from entering into any federal oil or gas lease or contract unless the person pays into an Oil Spill Recovery Fund, or posts a bond, in an amount equal to the total of the outstanding liability of the person and any removal costs incurred by, or on behalf of, the person with respect to any oil discharge for which the person has outstanding liability, and for other purposes. 

S 3515   Department of the Interior Research and Technologies for Oil Spill Prevention and Response Act of 2010 

Shaheen (D‐N.H.) on June 21, 2010 

A bill to authorize and enhance the programs of the Department of the Interior relating to the detection of, response to, and mitigation and cleanup of oil spills on federal land managed by the department, and for other purposes. 

S 3542   Oil Spill Compensation Act of 2010 

Murkowski (R‐Alaska) on June 28th, 2010 

A bill to create a fair and efficient system to resolve claims of victims for economic injury caused by the Deepwater Horizon incident, to establish a Commission to investigate and report on corrective measures to prevent similar incidents, to improve the Oil Spill Liability Trust Fund and Federal oil spill research, and for other purposes. 

19

BILL NUMBER 

TITLE  Introduced by & Date: 

OFFICIAL TITLE 

S 3580   Resources for Oil Spill Research and Prevention Act 

Begich (D‐Alaska) on July 14, 2010 

A bill to amend the Oil Pollution Act of 1990 to permit funds in the Oil Spill Liability Trust to be used by the National Oceanic and Atmospheric Administration, the Coast Guard and other federal agencies for certain research, prevention and response capabilities with respect to discharges of oil, for environmental studies, and for grant programs to communities affected by oil spills on the outer Continental Shelf, and to provide funding for such uses. 

S 3584  Responsible Arctic Energy Development Act of 2010 

Begich (D‐Alaska) on July 14, 2010 

A bill to To direct the Administrator of the National Oceanic and Atmospheric Administration to institute research into the special circumstances associated with oil spill prevention and response in Arctic waters, including assessment of impacts on Arctic marine mammals and other wildlife, marine debris research and removal, and risk assessment, and for other purposes. 

 S 3597   Securing Health 

for Ocean Resources and Environment (SHORE) Act 

Rockefeller (D‐W.Va.) on July 15, 2010 

A bill to improve the ability of the National Oceanic and Atmospheric Administration, the Coast Guard, and coastal States to sustain healthy ocean and coastal ecosystems by maintaining and sustaining their capabilities relating to oil spill preparedness, prevention, response, restoration, and research, and for other purposes. 

S 3600   Fairness in Admiralty and Maritime Law Act 

Rockefeller (D‐W.Va.) on July 15, 2010 

A bill to amend the Jones Act and related statutes with respect to the liability of vessel owners and operators for damages. 

S 3603   Oil Spill Technology and Research Act of 2010 

Cantwell (D‐Wash.) on July 15, 2010 

A bill to amend the Oil Pollution Act of 1990 to establish the Federal Oil Spill Research Committee and to amend the Federal Water Pollution Control Act to include in a response plan certain planned and demonstrated investments in research relating to discharges of oil and to modify the dates by which a response plan is required to be updated. 

S 3607   Fiscal 2011 Homeland Security Appropriations 

Lautenberg (D‐N.J.) on July 19, 2010 

An original bill making appropriations for the Department of Homeland Security for the fiscal year ending Sept. 30, 2011, and for other purposes. 

20

BILL NUMBER 

TITLE  Introduced by & Date: 

OFFICIAL TITLE 

S 3643   Oil Spill Response Improvement Act of 2010 

McConnell (R‐Ky.) on July 22, 2010 

A bill to amend the Outer Continental Shelf Lands Act to reform the management of energy and mineral resources on the Outer Continental Shelf, to improve oil spill compensation, to terminate the moratorium on deepwater drilling, and for other purposes. 

S 3663   Clean Energy Jobs and Oil Company Accountability Act of 2010 

Reid, H. (D‐Nev.) on July 28, 2010 

A bill to promote clean energy jobs and oil company accountability, and for other purposes. 

S 3763   Restoring Ecosystem Sustainability and Protection on the Delta Act 

Landrieu (D‐La.) on August 5, 2010 

A bill to improve safety and preparedness surrounding offshore energy production and to respond to the blowout and explosion of the mobile offshore drilling unit Deepwater Horizon that occurred on April 20, 2010, and resulting hydrocarbon releases into the environment, and for other purposes. 

S 3862  Oil Spill Victims Redress Act 

Whitehouse (D‐RI.) 

To amend the Oil Pollution Act of 1990 to facilitate the ability of persons affected by oil spills to seek judicial redress.