Oil Spill in the Gulf of Mexico
If You Suffer Damages Because of an Oil Spill …
Prepared by Louisiana Sea Grant Law & Policy Program
May 14, 2010
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Oil Pollution Act (OPA)
The spill response to the 1989 Exxon Valdez oil spill was initially an uncoordinated effort between the tanker owner, federal, state, and local officials, and private citizens. There was no organized federal response. This allowed the spill to spread further than it would have had there been an organized spill response effort.
Also in 1989 there was no federal provision for payment of damages to public natural resources, lost income to fishermen, increased local government costs and lost tax revenue, except by suing under common law actions. The Oil Pollution Act (OPA), passed by Congress in 1990, corrected some of these loopholes in federal law
Under OPA, the party responsible for a spill from a vessel or offshore or onshore facility must respond immediately to contain the oil spill and contact the United States Coast Guard. The Coast Guard activates the spill response and damage prevention and assessment capability of federal, state, and local agencies pursuant to the National Oil Spill and Hazardous Substance Contingency Plan (NCP).
Damages and Costs Covered under 33 USC 2702
OPA provides for categories of damages and costs that can be recovered against the responsible party by individuals, businesses and governmental bodies.
These damages/costs include :
- For Governmental Bodies
- Removal costs incurred by the United States, a State, or an Indian tribe.
- Damages for injury to, destruction of, loss of, or loss of use of, natural resources, including the reasonable costs of assessing the damage
- This is recoverable by a trustee of: the United States, the State, an Indian tribe, or a foreign government.
- Damages equal to the net loss of taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property, personal property, or natural resources.
- This is recoverable by the United States, a State, or a political subdivision.
- Damages for net costs of providing increased or additional public services during or after the removal activities, including protection from fire, safety, or health hazards, caused by the discharge or oil.
- This is recoverable by a State or political subdivision.
- Example: If a political body, such as a city or parish, has to use its fire protection crew or equipment for activities caused by the oil spill, it can recover the costs of doing so.
- For Any Claimant, Including Individuals, Businesses, and Governmental Bodies
- Removal costs incurred by a person for acts taken by the person that are consistent with the National Contingency Plan.
- Damages for injury to, or economic losses resulting from destruction of, real or personal property.
- Recoverable by any claimant who owns or leases that property.
- Example: damages to coastal land you own or lease when oil washes onto it.
- Damages for loss of subsistence use of natural resources.
- Recoverable by any claimant who uses natural resources that have been injured, destroyed, or lost, without regard to ownership or management of the resources.
- Example: A person who relies on the consumption of natural resources to sustain his life will have a claim if the oil spill prevents him from doing so.
- Damages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources
- Example: If you are the owner of a commercial fish dock or a marina, or you are a commercial fisherman, you can file a claim for lost profits or reduced earning capacity due to the closure of a fishery.
Limits to Liability under 33 USC 2704
OPA limits the liability of the responsible party. For an offshore facility, the responsible party’s liability will be limited to the total of all removal costs plus $75,000,000 ($75 million) in other damages. Therefore, the damage claims listed above against the responsible party are capped at $75 million total for all claimants, over and above the removal costs.
The limitation on liability will not apply if the incident that resulted in the spill was proximately caused by either: 1) gross negligence or willful misconduct of the responsible party or 2) the violation of an applicable federal safety, construction, or operating regulation by the responsible party. This extends to agents or employees of the responsible party and people acting pursuant to a contractual relationship with the responsible party.
The Oil Spill Liability Trust Fund & Claims for Damages
OPA created the Oil Spill Liability Trust Fund (Fund), which provides money for federal and state governments to respond quickly to spills, generally with the assistance of the party responsible for the spill. OPA describes expenses for which the Fund can be used: removal costs, costs related to the assessment of natural resource damages, and costs for developing and implementing plans for the restoration, rehabilitation, replacement, or acquisition of equivalent damaged natural resources. It also allows for the recovery of uncompensated damages (33 USC 2712). This includes damages that can be claimed by an individual under 33 USC 2702. The Fund is created in the Internal Revenue Code, which can be found at 26 USC 9509.
The procedure for filing a claim against the Fund is found in 33 USC 2713. The claim usually must first be presented to the responsible party but can be presented first to the Fund in certain circumstances. It is important to understand that if these circumstances do not exist, the claimant must present a case first to the responsible party and they must be given an opportunity to pay.
Circumstances under which a claim may be made to the Fund first include:
- If the President has advertised or otherwise notified claimants to present claims to the fund because:
- The responsible party and the guarantor both deny liability,
- The source of the discharge was a public vessel, or
- It is impossible to determine the source of the discharge.
- If the claim is being presented by the responsible party where the responsible party is entitled to a defense to liability or the responsible party is entitled to a limitation of liability,
- If the claim is being presented by the Governor of a state for removal costs incurred by that state, or
- If the claim is being presented against a foreign offshore unit.
The responsible party or its guarantor is liable to the claimant for interest on removal and damages claims (33 USC 2705). Interest will begin to accumulate on the 30 th day after the date on which the claim is presented to the responsible party or guarantor and will end on the date the claim is paid, with three exceptions. First, if the responsible party offers the claimant an amount equal to or greater than that finally paid in satisfaction of the claim, interest will not accumulate from the day the offer is made until the day the offer is accepted. Second, if the offer is made within 60 days after the claim is presented, interest will not start to accrue until after the offer is accepted. Third, if a claimant is not paid due to reasons beyond the control of the responsible party or because it would not serve the interest of justice, interest will not accrue. Most importantly, interest is in addition to damages and removal costs and must be paid regardless of any limitation of liability that may apply. Therefore, in the case of offshore facilities where liability is limited to $75 million, any interest on removal costs or damages does not count toward the $75 million cap.
If the claimant files a claim with the responsible party, and the responsible party either denies liability or does not settle the claim by payment within 90 days after the claim was presented, the claimant may either commence an action in court against the responsible party or present the claim to the Fund. However, a claim against the Fund will not be approved or certified for payment if there is litigation pending in court to recover the same costs from the responsible party (33 CFR 136.103). In this circumstance, it may be better to file the claim directly with the fund rather than taking the responsible party to court; a claimant should discuss his options with an attorney.
The claims procedure for the Fund was enacted by the United States Coast Guard in 1992 and can be found starting at 33 CFR 136. Section 136.105 describes what information must be provided in the claim. Each claim must be in writing and contain, along with other information:
- A general description of the nature and extent of the impact of the incident,
- The costs associated with removal actions and damages claimed,
- An explanation of how and when the removal costs or damages were caused by, or resulted from, an incident,
- Evidence to support the claim,
- Examples include photographs, reports from witnesses, and invoices and receipts. Please see the Coast Guard procedures, starting at 33 CFR 136, or the additional document on filing claims provided by the Louisiana Sea Grant Law & Policy program.
- A description of the actions taken by the claimant, or a person on the claimant’s behalf, to avoid or minimize removal costs or damages,
- The name and address of any witnesses, and a brief description of the claim, and
- A copy of written communications and a description of verbal communications, if any, between the claimant and the responsible party.
If the responsible party has not paid damages up to the $75 million cap, or if the cap does not apply because of factors discussed above, and another person, including the Fund, pays compensation, the person who paid compensation is subrogated to all rights, claims, and causes of action that the claimant has under any law (33 USC 2715). In other words the Fund sues the responsible party for reimbursement for payments made up to the cap on damages, or if the cap is removed, for payments made for all damages paid. The Attorney General has the authority to commence action on behalf of the Fund to recover any compensation from the responsible party paid by the Fund (33 USC 2715).
Under OPA, an action for damages against the responsible party must be brought in a court of proper jurisdiction within 3 years after either: 1) the date on which the loss and the connection of the loss with the discharge in question are reasonably discoverable or 2) in the case of natural resource damages, the date of completion of the natural resources damage assessment. An action for removal costs must be brought within 3 years after the completion of the removal action (33 USC 2717).
If the claimant is filing a claim against the Fund, a claim for damages must be presented within three years of either: 1) the date on which the injury and its connection with the incident in question were reasonably discoverable or 2) in the case of natural resource damages, within three years of the completion of the natural resource damage assessment. For removal costs, the claim must be presented within six years after the date of completion of all removal actions for the incident. These time limits are set out in 33 CFR 136.101.
Financial Limitations of Fund
There are some limits to access to the Fund. The President may make up to $250,000 from the Fund available to states for the immediate removal of a discharge of oil or the mitigation or prevention of a substantial threat of an oil discharge (33 USC 2712). Federal law limits the maximum that may be paid out of the Fund per incident to $1,000,000,000 ($1 billion). Natural resource damage assessment and related claims from a single incident are limited to $500,000,000 ($500 million). There is, however, one significant limitation: the Fund must maintain a balance of $30,000,000 ($30 million). Therefore, a payment cannot be made from the Fund if the balance in the Fund after payment would be less than $30,000,000, unless the payment is for removal costs (26 USC 9509).
Louisiana Oil Spill Prevention and Response Act (L OSPRA)
OPA directly addresses the relationship to other laws (33 USC 2718). There is nothing in OPA that affects the authority of a state to establish or maintain an additional fund to pay for costs or damages arising out of, or directly resulting from, oil pollution or the threat of oil pollution, and nothing in OPA prevents a state from requiring any person to contribute to such a fund. Additionally, there is nothing in OPA that affects the authority of the United States, a state, or a political subdivision from imposing additional liability or additional requirements or imposing any fine or penalty for any violation of law.
LOSPRA establishes the Louisiana Oil Spill Coordinator’s Office (LOSCO) in the Department of Public Safety, under the State Police. LOSPRA names LOSCO, the State Police and Louisiana Department of Environmental Quality (DEQ) as the primary state responders for oil spills. The state can recover oil spill prevention and response costs, and, as provided in OPA, recover loss of state public natural resources damages and loss of ecological services from the responsible party, through various state trustees. LOSCO does not, however, authorize private causes of action or increase the $75 million dollar cap on the responsible party’s liability.
Applicability of other law
Some claimants have tried to sue for damages under general maritime law and other state law. While some have been successful, most have not. The Louisiana Sea Grant Law & Policy program is currently working on additional fact sheets that discuss these other claims.