GAO: Increase needed in oil spill liability trust fund

Nick Snow
Washington Correspondent

WASHINGTON, DC, Sept. 11 -- Although major oil spills do not occur frequently, the federal oil spill liability trust fund should be increased to cover higher cleanup costs, the US Government Accountability Office said in a Sept. 7 report.

"To date, the fund has been able to cover costs from major spills that responsible parties have not paid, but risks remain," GAO said in a report to leaders of the US Senate Commerce, Science, and Transportation Committee and the House Transportation and Infrastructure Committee.

While the 2006 Coast Guard and Maritime Transportation Act increased liability limits, the new limit for tank barges "remains low relative to the cost of such spills," said GAO. Similarly, the 1990 Oil Pollution Act (OPA) required that liability limits be adjusted above levels set in the law to reflect increases resulting from inflation, but such changes were not made.

Such inaction during 1990-2006 "potentially shifted an estimated $39 million in costs from responsible parties to the fund," GAO maintained.

The US Coast Guard assumed OPA enforcement responsibilities in 2005. GAO recommended that the Coast Guard determine whether and how OPA liability limits should be changed, by vessel type, and submit those findings to Congress. GAO also suggested that the liability limits for vessels be adjusted every 3 years to reflect inflation changes.

Spills since 1990
Since the 1989 Exxon Valdez spill in Prince William Sound off Alaska, which was the impetus for authorizing the fund's usage, no spill has come close to matching its $2.2 billion in cleanup costs, GAO noted. It estimated that 51 spills costing $1 million or more to clean up have occurred since 1990, requiring $240 million in outlays from the fund and $620-840 million in expenditures from responsible parties.

But payments from the fund could have been reduced by $39 million during that period if liability limits had been adjusted to reflect increases in the Department of Labor's consumer price index, it suggested.

GAO's report said the oil spill liability trust fund also faces other challenges. Additional claims can be made for as long as 3 years after spills have been cleaned up; costs and claims may occur on previously sunken vessels that may discharge oil in the future; spills may occur without an identifiable source (and responsible party); and a spill could be so catastrophic that it strains the fund's resources, the congressional watchdog's analysis suggested.

Responding, Steven J. Pecinovsky, director of the GAO's Inspector Liaison Office in the US Department of Homeland Security, of which the Coast Guard is part, said the service addressed liability limits in a January report to Congress and intends to adjust such limits annually to reflect inflation where appropriate. However, this action alone cannot ensure that the fund will remain viable, given expenses and revenues that GAO mentioned but did not address in detail in its report, Pecinovsky continued.

He said the Coast Guard is adjusting certain OPA liability limits to reflect changes in the consumer price index, and service officials are unaware of any decision to leave limits unchanged, as the report implies.

While the Coast Guard is trying to make financial responsibility certificates consistent with current liability limits, the service cannot predict that a proposed rulemaking notice will be published by the end of 2007, Pecinovsky said. "This remains a goal, and Coast Guard and [DHS] officials are working diligently to this end," he said.

Contact Nick Snow at nsnow@cox.net.

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