j V ESEARCH ‘wt J ONGRESS|ONAL SERVICE LIBRARY OF CONGRESS % o 0- 03860751 % 1 OIL SPILL LIABILITY AND COMPENSATION ISSUE BRIEF NUMBER IB7808O AUTHOR: Lee, Martin R. Environment and Natural Resources Policy Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE HAJOR ISSUES SYSTEM DATE ORIGINATED DATE UPDATED I010 Ema 535 FOR ADDITIONAL INFORMATION CALL 287-5700 0820 CRS- 1 A IB78080 UPDATE-O8/20/80 ( .I.§§9.r-2.1:z;r.1.1.r;2y; Because a number of international, federal, and state oil spill liability and compensation mechanisms have been established in recent years, efforts nhave been undertaken to provide a single federal program that would comprehensively and equitably address the differing situations of all areas of the nation. At issue are the provisions a comprehensive liability and compensation program would include. (See also: IB77014, Oil Spills in the Marine Environment; IB77019, Toxic Substances Contamination: Compensation and Indemnities.) §A§§§BQQ!2rA!2_2QLlQZ;A!AL!§L§ Settlement of liability and compensation for costs and damages resulting from oil spills has traditionally been left.to the courts. However, this process often proved to be cumbersome, protracted, and inequitable. It also was unable to address instances where the spillers were unknown ("mystery spills"). To offer the injured parties better redress, the concept of setting specific comprehensive provisions for liability and compensation in the event of oil spills has been set forth. Among the basic ideas behind this concept are that liability is limited except in cases of ~negligence, costs and damages are clearly stated, and ~defenses from liability are enumerated.’ ( ‘ompensation is handled through a "fund" maintained by appropriations or a fee on oil, with disbursements awarded expeditiously and without regard to fault to ensure prompt cleanup. A fund maintained by a fee on oil would internalize any future cleanup costs, rather than place these costs on the injured parties. Domestically, provisions of the Federal water Pollution Control Act (FHPCA), Section 311 (33 0.5.6. 1251), have-embraced this liability and fund concept on the national level. The FWPCA, recently amended to cover the 200-mile fishery conservation zone (fcz) and outer continental shelf activities, established levels of liability for vessels and facilities, and provided an appropriation-maintained fund of $35 million dollars to cover cleanup and restoration costs. Three other federal laws have also included similar provisions. These are the Trans-Alaska Pipeline Authorization Act (TAPAA) (us u.s.c. 1651-1655), the Deepwater Port Act (DWPA) (33 o.s.c. 1501-152a), and the Outer Continental Shelf Lands Act Amendments of 1978 (H3 U.S.C. 1301), which establish liability and compensation programs in the event spills result from any activities related to TAPAA, DWPA, and‘ OCSLA oil. Similarly, a.number of states have adopted liability and compensation provisions that address the concerns of those states over potential oil spills. some states, notably New Jersey, Alaska, and Maine, have adopted provisions equal to or exceeding the provisions of the Federal Water Pollution Control Act. Some also have established their own funds, maintained by fees on oil handled within the states. ( A . k*r Internationally, two formal conventions have been drawn up covering, oil spill liability and compensation, and two voluntary compensation programs have been established by the shipping industry.l The two conventions are: CRS- 2 IB78080 UPDRTE’08/20/30 -— International Convention on Civil Liability for Oil Pollution Damage, 1969 (CLC). Done at London, Nov. 29, 1969. Entered into force: June 19, 1975. -— International Convention on the Establishment of an International Fund for the Compensation for Oil Pollution Damage, 1971 (FUND). Done at Brussels, Dec. 18, 1971. Entered into force: Oct. 16, 1978. The first convention -—» CLC -- establishes liability provisions for vessels; and the second —— FUND -- would provide an international compensatory fund to award cleanup costs only. The United States has not yet ratified these conventions, though domestic implementing legislation was proposed in the 93d and 94thi Congresses. Lack of treatment of offshore facilities, low liability limits, and the maintenance of dual funds have been cited as the reasons the United States is reluctant to ratify. Recently, however, members of the FUND Assembly have raised the limit of the FUND to $56 million, and are further investigating the possibility of amending the convention to make it more interesting to U.S. interests. In the absence of a comprehensive international liability and compensation mechanism, the shipping industry created the Tanker Owners Voluntary Agreement Concerning Liability for Oil Pollution (TAVALOP) and the Contract Regarding an Interim Supplement to Tanker Liability (CRISTAL). The former establishes liability provisions similar to the CLC; the latter establishes fund similar to the FUND. The fund awards cleanup costs to governments only and not to private parties. 7 While improved vessel design and operation standards have sought to lessen the risk of oil spills, the potential for significant spills appears tot have remained. The amount of oil being shipped into U.S. ports has risen over 300% since 1960 (Source: Federal Energy Administration, §ng§gy_in_§ggg§, May 1977). Offshore drilling for oil has been accelerated, and the shipment of oil-related products on the nation's waterways has shown marked increase. In December 1976, the relatively small 30,000-ton tanker the "Argo Merchant" sank off the Nantucket shoals, spilling some 7.5 million gallons of No. 6 crude oil into the marine environment. The General Accounting Office (GAO) estimated that total costs resulting from this spill were $5.2 million. Another incident in February 1978 off the Brittany Coast involved the "Amoco Cadiz," a newly built Very Large Crude Carrier (VLCC) of the 230,000 PWT class, which grounded and released 1.5 million barrels of oil into the marine environment. Initial reports indicate that cleanup costs for this incident have already exceeded $84 million. These traumatic spills and the many smaller spills occurring in near-shore and inland areas have resulted in a growing concern over the potential for’ cleanup costs and damages of significant proportion. Because so many different and varying mechanisms exist to cover oil spill liability and compensation, the Congress is considering a number of legislative concepts aimed at comprehensively addressing oil spill liability. Among the issues associated with adoption of a single federal oil spill liability and compensation statute are: (1) The relationship to existing state law. Should federal law preempt state oil spill liability and compensation law? CRS— 3 IB7808O UPDATE-O8/20/80 (2) Should substances other than oil be included under the provisions? =Recent spills of substances other than oil have resulted in severe damage to the water environment. (3) What levels of liability should be set for vessels and facilities? would some levels of liability cause small owners and operators a hardship in obtaining insurance? (u) should the concept of damages be extended to include loss of natural resources, economic damages, and personal damages? (5) Should defenses be broad or narrow, including third-party defense? (6) What size fund and what method of maintenance should be adopted? Lrexsrgrrog H.R. 85 (Biaggi) Establishes a comprehensive oil pollution liability and compensation program. Introduced Jan. 15, 1979; referred to Committees on Merchant Marine and Fisheries, Public Works and Transportation, and Ways and Means. Reported from Merchant narine and Fisheries may 15, 1979 (H.Rept. 96-172, Part I). Reported May 13, 1980, from Public Works and Transportation (H.Rept. 96'172, pt. II). Reported June 20, 1980, from Committee on Ways and Means (H.Rept. 96-172, pt. III). H.R. 4566 (Johnson) Establishes a comprehensive oil, hazardous substance, and hazardous waste liability and compensation program. Introduced June 21, 1979; referred (jointly) to House Committees on Interstate and Foreign Commerce, on Merchant Marine and Fisheries, and on Public Works and Transportation. H.R. 4571 (staggers) Establishes a comprehensive oil, hazardous substances, and hazardous waste liability and compensation program. Introduced June 21, 1979; referred (jointly) to House Committees on Interstate and Foreign Commerce, on Merchant Marine and Fisheries, and on Public Works and Transportation. H.R. 5338 (Roberts) Amends the Federal Water Pollution Control Act to provide damages due to the Ixtoc I oil spill. Introduced Sept. 19, 1979; referred to House Public Works and Transportation. Reported with amendment may 13, 1980 (H.Rept. 96-956). Passed House June 16, 1980. S. 68u (nagnuson) Seeks to establish an oil pollution liability scheme for vessels. Introduced Mar. 15, 1979; referred to the Committee on Commerce, Science and ansportation. S. 953 (Cannon) CRS- fl IB7808O UPDATE-03/20/80 Establishes a comprehensive oil pollution liability and compensation scheme. Introduced Apr. 10, 1979; referred to Senate Committees on Commerce, Science and Transportation, and Environment and Public Works. S. 1301 (Culver) Establishes a comprehensive oil, hazardous substances, and hazardous waste liability and compensation program. Introduced June 10, 1979; referred to Committee on Environment and Public Works. f.1E.A1ll!§§ 0.5. Congress. House. Committee on merchant Marine and Fisheries. Oil pollution liability and compensation. Hearings, 96th Congress, 1st session, on H.R. 29 and H.R.85. Bar. 13, 1a, 1979. 0.5. Govt. Print. Off., 1980. 023 p. ---- Committee on Interstate and Foreign Commerce. Oil, Hazardous Substance and Hazardous waste Liability and Compensation Act. Hearings, 96th Congress, 1st session. June 19, 1979. (To be published) 0.5. Congress. Senate. Committee on Environment and Public works. Hazardous and Toxic Waste Disposal. Hearings, 96th Congress, 1st session. June 20, 21, 1979. 0.5. Govt. Print. Off., 1980. 850 p. 1l§BQB.'I.?§-A1l2-QQ.!.G.B..1§§§.lQ!Al-.-DQ§E!§N..I§ Floor Statement of Ho. Hario Biaggi upon introducing H.R. 85. Remarks in the House. Congressional record [daily ed.] Jan. 15, 1979: EH3-E46. Floor Statement of Hon. Howard H. Cannon upon introducing S. 953. Remarks in the Senate. Congressional record [daily ed.] Apr. 10, 1979: S4319. Floor statement of Hon. John Culver upon introducing S. 1301. Remarks in the Senate. Congressional record [daily ed.] June 10, 1979: S7695-S7719. 0.5. Congress. House. Committee on Merchant Marine and Fisheries. Methods and procedures for implementing a uniform law providing liability for cleanup costs and damages caused by oil spills from ocean related sources: a study by the Department of Justice. Washington, 0.5. Govt. Print. Off., 1975. 195 p. ----- Oil Pollution Liability and Compensation Act; report to accompany H.R. 85. Washington, 0.5. Govt. Print. Off., 1979. 102 p. (96th Congress. House. Report no. 96-172, part 1) 102 p. 08/29/79 06/19/79 06/10/79 05/13/79 06/03/79 05/31/79 05/15/79 OH/17/79 04/10/79 03/20/79 03/19/79 01/26/79 01/22/79 01/03/79 01/03/79 icns— 5 IB73080 UPDATE-08/20/80 §flBQ!QL0GY_0F EWE!1§ EPA issued final rules on reportable quantities of hazardous substances. House Committee on Interstate and Foreign Commerce conducted hearings on Administration's Superfund proposal. Proposed rules on Tank Barge Design promulgated by the Coast Guard (44 FR 3400). President transmitted draft of proposed "Oil, Hazardous Substances and Hazardous Waste Response, Liability and Compensation Act of 1979" (H.Doc. 96-149). A blowout occurred at Ixtoc I, an offshore well in the Bay of Campeche, Mexico. DOT/Coast Guard proposed rule on lightering (nu FR 31u86). House Merchant Marine and Fisheries Committee reported H.R. 85 (H.Rept. 96-172, part II) on Oil Pollution Liability and Compensation. IHCO FUND Assembly met in London, and raised the FUND limit to $56 million. House Committee on Merchant marine and Fisheries, Subcommittee on Coast Guard and Navigation met and approved, for full committee, H.R. 89, Comprehensive ‘Oil Pollution Liability and Compensation Act. Federal Haritime Commission (FHC) promulgated final rule on financial responsibility for water pollution on the Outer Continental Shelf (nu FR 16918). Departnent of Transportation Coast Guard issued final regulations on Offshore Oil Pollution Compensation Fund, Title III of OCS Land Act Amendments (nu FR 16860). New Jersey announced it will use $300,000 interest on its Oil Pollution Fund to finance basic and applied research on oil cleanup techniques. President submitted budget to Congress, including $25 million for pollution fund with “line of credit" to to $200 million. 121,u3o DWT Supertanker Betelgeuse exploded in Bantry Bay, Ireland, killing 50 people and spilling 40,000 tons of crude oil. Federal Haritime Commission proposed rules for OCS 12/Ofl/78 12/00/78 11/22/78 11/17/78 11/14/78 11/00/73 09/18/78 08/11/78 12/17/77 06/19/75 CRS- 6 IB7808O UPDATE-03/20/30 vessel financial responsibility requirements (an ER 915). Department of Transportation (Coast Guard) issued final rules on offshore drilling rigs (H3 FR 56768). Department of Transportation issued proposed rules on offshore oil Pollution Liability and Compensation according to recently enacted Outer Continental Shelf Lands Act Amendments (43 FR 568u0).~ Department of Transportation (Coast Guard) issued notice of proposed rulemaking on transportation of. hazardous materials by water (43 FR 56070). Coast Guard and Federal Maritime Commission developed guidelines for study on adequacy of oil pollution insurance. Study was required by recently enacted outer Continental Shelf Lands Amendments. National Oceanic and Atmospheric Administration established an Office of Marine Pollution. Lloyd's reported 17% drop in shipping casualties during 1967-77. 0.5. District Court Judge (N.D.N.Y.) dismissed three 0.5. government claims, each based on a different law, seeking $9.6 million in cleanup costs from the June 1976 NEPCO barge spill in the St. Lawrence River. The judge ruled that the FWPCA is the sole remedy for recovery. Lloyds Register and Coast Guard reached an agreement on exchange of information on over 60,000 merchant vessels. F NOAA/EPA environment and industry group met to outline priorities in ocean pollution research, in response to newly enacted National Ocean Pollution Research and Monitoring and Planning Act. President signed 5. 9, Amendments to the Outer Continental Shelf Lands Act (P.L. 95-372), containing oil pollution liability and compensation provisions. Federal Haritime Commission published final regulations (43 F.R. 35700) (06 CFR, p. 542) on financial responsibility for oil pollution. Amendments to Section 311 of the Federal Water Pollution Control Act extend its provisions covering oil (and hazardous substances) liability to cover the 200-mile fishing zone and activities on the outer continental shelf. 7 TIMCO International Convention on Civil Liability for CRS- 7 IB73030 UPDATE-08/20/80 Oil Pollution Damage entered into force without participation by the United States. 12/18/71 - IMCO International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage drafted in Brussels to supplement the liability convention. 11/29/69 —— IMCO International Convention on Civil Liability for Oil Pollution Damage adopted in Brussels. D..12.I...lQ£A.1.-...§§.E ......EE!§§..§QE§.§§ Environmental Policy Institute. Oil: a study of pollution Insurance liability laws. A research paper prepared by Maxine Lipeles for the Environmental Policy Institute, Energy Information Project. Oct. 10, 1975. 58 p. Glaeser, Jess H. Federal common law and ocean pollution. A private remedy for oil pollution damage? Journal of Environmental Law. v, 8. 1977: 1-Q6. Goldie, L.F. E. Liability for oil pollution disasters: international law and delimitation of competence in a federal policy. Journal of Maritime Law and Commerce. v. 6, Apr. 1975: 303-329. Kelly, Ambrose B. Pollution and insurance.t Best's review, v. 79, Dec. 1978: 20, 22, 90, 92-9a. International Union of Marine Insurance. Pollution Risks Committee Report. 1978. flop. [unpublished] Sisson, Frank. Oil pollution law and the limitation of liability act: a murky sea for claimants against vessels. Journal.of maritime Law and Commerce. V. 9, no. 3. Apr. 1978: 285-3&1. U.S. General Accounting Office. Total costs resulting from two major oil spills. U.S. Coast Guard, Department of Transportation. Report of the Comptroller General of the United States. [Washington] 1977. 15p. June 1, 1977. (CED 7 707 1) LIBRARY OF VVASHENGTON UNIVERSITY ST. LQLJB - Mo. j_i