[Senate Report 111-249]
[From the U.S. Government Publishing Office]
Calendar No. 518
111th Congress Report
SENATE
2d Session 111-249
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BIG OIL BAILOUT PREVENTION LIABILITY ACT OF 2010
_______
August 5, 2010.--Ordered to be printed
_______
Mrs. Boxer, from the Committee on Environment and Public Works,
submitted the following,
R E P O R T
together with
MINORITY VIEWS
[To accompany S. 3305]
[Including cost estimate of the Congressional Budget Office]
The Committee on Environment and Public Works, to which was
referred a bill (S. 3305) to amend the Oil Pollution Act of
1990, to require oil polluters to pay the full cost of oil
spills, and for other purposes, having considered the same,
reports favorably thereon with an amendment and recommends that
the bill, as amended, do pass.
Background and Need for the Legislation
Liability
Following the Exxon Valdez oil spill in Alaska, Congress
enacted the Oil Pollution Act of 1990 (OPA). Title I of OPA
consolidated existing Federal laws governing oil spill
liability, expanded the coverage of those laws, strengthened
Federal response authorities, and created a trust fund to pay
for cleanup costs and damages.\1\ OPA also established a
framework for liability related to oil discharges into the
navigable waters of the United States, adjoining shorelines,
and coastal ocean areas known as the exclusive economic zone.
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\1\See 33 U.S.C. Sec. Sec. 2701-2720.
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Section 1002(a) of OPA, 33 U.S.C. 2702(a), provides that a
responsible party for a vessel or facility from which oil is
discharged is strictly liable for (1) all removal costs
necessary for removing spilled oil from water and shorelines,
or for taking other actions as may be necessary to minimize or
mitigate damage to the public health or welfare, and (2)
damages caused by such discharges, including injuries to and
losses of natural resources, destruction of property, loss of
subsistence use of natural resources, loss of tax revenue, loss
of profits or earning capacity, and net increased costs for
additional public services.
Section 1004(a) of OPA, 33 U.S.C. 2704(a), establishes
monetary limitations on a responsible party's liability for
damages under the Act. Different limitation amounts apply to
various types of vessels and facilities. Section 1004(a)(3)
provides that liability for damages related to a discharge from
an offshore facility is limited to $75,000,000 for each
incident. This limitation on liability for damages does not
apply if the incident was caused by gross negligence, willful
misconduct, or violation of an applicable Federal regulation
under certain circumstances.\2\
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\2\33 U.S.C. Sec. 2704(c)(1).
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In addition, under OPA, the Oil Spill Liability Trust Fund
(Trust Fund) is available to pay claims for removal costs and
damages to the extent a responsible party's liability exceeds
an applicable liability cap or it is unable to meet its payment
obligations.\3\ The Trust Fund currently holds approximately
$1.6 billion, although OPA states that only $1 billion may be
expended per incident. Additionally, there is a limit of $500
million per incident for payments from the Trust Fund to
compensate for natural resource damages.\4\
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\3\See 33 U.S.C. Sec. 2712(a).
\4\26 U.S.C. Sec. 9509(c)(2)(A).
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The Deepwater Horizon explosion and ongoing release of oil
into the Gulf of Mexico have made it clear that the $75 million
per incident liability limit applicable to offshore facilities
under OPA is outdated and inappropriate. An analyst at the
financial services company Raymond James recently estimated the
total cost of the Deepwater Horizon disaster to be $63
billion,\5\ and Louisiana's State Treasurer has estimated that
environmental and economic damages could reach up to $100
billion.\6\ BP reports that it has incurred over $3 billion in
response costs thus far.\7\ As of July 5, 2010, BP reported
that it had already paid over $147,000,000 in claims.\8\
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\5\See BP Oil Spill Costs: $20 billion? Try $63 billion, Wall
Street Journal Blogs, June 16, 2010, http://blogs.wsj.com/deals/2010/
06/16/bp-oil-spill-costs-20-billion-try-63-billion/,
\6\See Gulf Spill damages may hit $100 billion: Louisiana
Treasurer, Reuters, June 17, 2010, http://www.reuters.com/article/
idUSTRE65G64P20100617
\7\See BP: Gulf Oil Spill Response Costs, Claims Total $3.12B To
Date, Wall Street Journal, July 5, 2010, http://online.wsj.com/article/
BT-CO-20100705-701572.html
\8\Id.
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Leaving OPA's current $75 million liability limitation in
place would thus create two alterative scenarios: either
American taxpayers would be required to pay for damages beyond
the amounts available from the OSLTF, or innocent victims would
be left uncompensated. Neither of these outcomes would be
appropriate. S. 3305, as amended, will ensure that responsible
parties are liable for all economic and natural resources
damages resulting from covered oil pollution discharges.
As the recent events make clear, the OPA limitation on
liability for offshore facilities is contrary to the public
interest. Corporations such as BP that profit from oil
exploration and production are in the best position to prevent
accidents and discharges. Companies undertaking these types of
risky activities should bear full responsibility for any
damages their actions impose on individuals, businesses, and
the environment and have every incentive to avoid damages. In
testimony before the Environment and Public Works Committee,
Professor Kenneth Murchison from Louisiana State University
described the impacts of limitations on liability and the
benefits of removing such limitations:
Increasing the damages for which a responsible party
is liable should encourage responsible parties to
exercise greater care in offshore drilling activities;
eliminating the cap altogether would encourage even
greater care. Increasing or eliminating the cap would
also reduce or eliminate the unfairness of imposing the
burden of the uncovered damages on innocent victims of
an oil spill or on the general taxpayers. * * * Given
the possibilities of huge economic gains, the cap in
the Oil Pollution Act probably does not induce drilling
that would be unprofitable without the cap on
liability; the drilling would almost certainly occur
with or without the cap on liability for damages. The
protection from economic loss may, however, have the
unconscious effect of discouraging some additional
safety and environmental protections.\9\
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\9\Statement of Kenneth M. Murchison, Senate Committee on
Environment and Public Works, Legislative Hearing: S.3305, The Big Oil
Bailout Prevention Liability Act of 2010, June 9, 2010.
In testimony before the House of Representatives, MIT
economist Michael Greenstone also described how an artificial
limit on liability removes incentives for safety.\10\ Lifting
the limit on liability, which requires companies to bear the
liability for drilling activities, will ensure companies have
the maximum incentive to avoid events such as the Deepwater
Horizon disaster.
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\10\See Statement of Michael Greenstone, House Committee on
Transportation and Infrastructure Hearing on Liability and Financial
Responsibility for Oil Spills Under the Oil Pollution Act of 1990 and
Related Statutes, June 9, 2010.
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The Obama Administration has concurred in the need to lift
the OPA liability caps. On May 12, 2010, the White House
released a package of legislation that, among other things,
would raise the caps on liability for responsible parties under
OPA.\11\
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\11\See White House Fact Sheet: Deepwater Horizon Oil Spill
Legislative Package, May 12, 2010.
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Response planning
While Section 311(j)(5) of the Clean Water Act currently
requires owners and operators of offshore oil drilling
facilities to prepare plans for responding to oil spills and
submit them to the President, the Deepwater Horizon oil spill
has demonstrated the need for a more detailed response planning
process.
S. 3305, as amended, includes provisions strengthening
contingency plan requirements and procedures to ensure the
effectiveness of response capabilities, and requires response
plans to directly address and mitigate economic and
environmental impacts to the maximum extent practicable.
Claims process
OPA also sets forth procedures for claims to be presented
to the Trust Fund. The current law requires that a claimant
must first submit a claim to a responsible party, such as BP,
and then wait 90 days to determine whether the claim can be
settled with the responsible party, before the claimant may
seek payment from the Trust Fund or commence an action in
court.\12\ Concerns have been raised that the 90-day period is
too long and may result in hardship due to delays in claims
processing. To minimize such delays, S. 3305, as amended,
shortens the 90-day period to 30 days.
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\12\See 33 U.S.C. Sec. 2713(c).
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With respect to the Deepwater Horizon disaster, at the
request of the Obama Administration BP has agreed to establish
a separate Gulf Coast Claims Facility, funded by a $20 billion
escrow account, to process and make payments for claims against
BP as a responsible party under OPA.\13\ Given the importance
of ensuring fair and timely processing and payment of such
claims, Congress should receive detailed periodic reports on
the progress and status of payments made by the Facility. The
Committee therefore approved an amendment to S. 3305 requiring
that the Administrator of the Facility shall provide quarterly
reports to Congress regarding the status of, and ongoing
payments from, the Facility.
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\13\See White House Fact Sheet: Claims and Escrow, June 16, 2010,
http://www.whitehouse.gov/the-press-office/fact-sheet-claims-and-
escrow.
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Section-by-Section Analysis
Section 1. Short title
Section 1 provides that the bill may be cited as the Big
Oil Bailout Prevention Liability Act of 2010.
Section 2. Removal of limits on liability for offshore facilities
Summary
As approved by the Committee, Section 2(a) provides that
Section 1004(a)(3) of OPA, 33 U.S.C. 2704(a)(3), is amended by
striking ``plus $75,000,000'' and inserting ``and the liability
of the responsible party under section 1002.'' This amendment
effectively eliminates the monetary limitation on liability in
this section and provides for full liability for the costs and
damages otherwise specified by OPA.
Section (2)(b) provides that the amendment to OPA made by
this section takes effect on April 15, 2010.
Discussion
This amendment to OPA removes the limitation of $75,000,000
on the liability of responsible parties owning or operating
offshore facilities other than deepwater ports. In its place,
the amendment provides that such responsible parties shall be
liable for all costs of removal and all of the categories of
other damages described in OPA Section 1002,\14\ including
damages for injury to natural resources; destruction of real or
personal property; loss of subsistence use of natural
resources; lost revenues of governmental entities; lost
business profits and individuals' earning capacity; and costs
of public services. Under S. 3005 as amended, responsible
parties operating such facilities shall be subject to the full
amount of liability for each of these categories of damages.
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\14\See 33 U.S.C. Sec. 2702.
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This change to OPA is to be effective as of April 15, 2010.
BP has already formally agreed that the current OPA limitation
of $75,000,000 shall not apply to the Deepwater Horizon
disaster. Making the bill effective as of April 15, 2010 serves
an important and broad public purpose, ensuring that entities
which cause oil spills are responsible for the damages, rather
than taxpayers or innocent victims, even in the event such a
spill occurs prior to final enactment of this bill.
Section 3. Claims procedure
Summary
Section 3 amends Section 2713(c) of OPA by striking
``settled by any person by payment within 90 days'' and
inserting ``settled in whole by any person by payment within 30
days.''
Discussion
Section 2713 of OPA sets forth procedures for handling
claims for costs and damages resulting from covered oil
discharges. It currently requires that claims first be
presented to a responsible party or guarantor. Then, unless the
responsible party denies all liability for the claim, the
claimant must wait 90 days to determine whether the claim will
be settled, before submitting a claim to the Trust Fund or
commencing an action in court.\15\
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\15\33 U.S.C. Sec. 2713(c).
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This amendment to OPA is intended to reduce delays in
claims processing and avoid resulting hardship to claimants. If
claims are not settled in whole within 30 days after being
submitted to a responsible party, it is appropriate that
claimants should be permitted to pursue other mechanisms for
recovery.
Section 4. Oil and hazardous substance response planning
Summary
Section 4 provides that Section 311(j)(5) of the Federal
Water Pollution Control Act, 33 U.S.C. Sec. 1321(j)(5) (Clean
Water Act), is amended by requiring that the President shall
ensure that the regulations establishing requirements for oil
spill response plans are designed to prevent, to the maximum
extent practicable, injury to the economy, jobs, and the
environment, including:
loss of, destruction of, or injury to real
or personal property;
loss of subsistence use of natural
resources;
loss of revenue;
loss of profits or earning capacity;
an increase in the cost of providing public
services to remove a discharge, and
loss of, or destruction to, natural
resources.
Section 4(a) provides that the President shall promulgate
regulations governing oil spill response plans prepared by
certain vessels and facilities and include the following
requirements:
describe the personnel and equipment
necessary to respond to a spill, staged and available
in the appropriate region to immediately respond and
sustain the response effort for as long as necessary;
demonstrate the financial capability to pay
for removal costs and damages;
describe the environmental effects of the
response plan methodologies and equipment;
describe the process for communications and
coordination with relevant agencies;
identify performance standards for the
quantity of oil or hazardous substances that will be
removed under the response plan immediately following
the discharge and at regular, identified periods,
including provisions for reporting the degree to which
actual removal meets the required standards;
in the case of oil production, drilling and
workover facilities, describe the specific measures to
be used in response to a blowout or other event
involving loss of well control; and
identify potential economic and ecological
impacts of a worst-case discharge and response
activities to prevent or mitigate, to the maximum
extent practicable, those impacts.
Notice of a proposed response plan is to be published in
the Federal Register followed by a public comment period of at
least 30 days. Response plans are to be promptly reviewed and
amendments shall be required as needed to meet the applicable
requirements.
This subsection adds additional requirements that must be
met before a response plan may be approved, including:
has been subject to a field test, with the
results being made publicly available;
includes methods and equipment proposed to
be used which are demonstrated to be technologically
feasible in the area and under the conditions in which
the vessel or facility is proposed to operate;
is based on available scientific information
about the area allowing for identification of potential
impacts to and protection of ecological areas and
wildlife; and
that the plan describes the quantity of oil likely to
be removed in the event of a worst-case discharge.
Section 4 further requires written concurrence in the
response plan by such other agencies as the President
determines to be appropriate.
Section 4(b) amends the definition of ``worst case
discharge'' in Section 311(a)(24)(B) of the Federal Water
Pollution Control Act\16\ by inserting the phrase ``, including
from an unanticipated and uncontrolled blowout or other loss of
well control,'' after ``foreseeable discharge.''
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\16\33 U.S.C. Sec. 1321(a)(24)(B).
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Discussion
Section 311(j)(5) of the Clean Water Act provides that
owners and operators of certain vessels and facilities,
including offshore facilities, prepare and submit to the
President response plans setting forth actions to be taken in
the event of discharges of oil into covered waters. Section 3
of S. 3305 is intended to strengthen the response planning
requirements.
Section 4(a) adds a number of new provisions to Section
311(j)(5) of the Clean Water Act to ensure that response plans
address the potential impacts of an oil spill and outline
appropriate response actions, including requirements that:
Equipment and personnel shall be available
in the quantities and locations necessary to respond
and maintain response to worst-case discharges.
Financial capability to pay for removal
costs and damages shall be demonstrated in advance as
part of a response plan.
Environmental effects of response plan
methodologies and equipment shall be described.
Processes for communications with relevant
governmental agencies shall be described.
Performance standards for oil removal shall
be identified and complied with.
For oil production facilities, specific
measures addressing blowouts or other loss of control
are required.
Potential economic and ecological impacts of
a worst-case scenario are to be identified.
Section 4(a) also adds new procedural requirements,
including that response plans will be published in the Federal
Register and subject to public comments, and that the President
will approve response plans only after determining on the
record that the requirements of the response plan regulations
are met and that the plan has been demonstrated to be
technologically feasible in the area and under the conditions
in which the facility is proposed to operate.
Section 4(b) includes a blowout or other loss in well
control in the definition of a worst case discharge.
Section 5. Reporting
At the request of the Obama Administration, BP has agreed
to establish a separate Gulf Coast Claims Facility, funded by a
$20 billion escrow account, to process and make payments for
claims against BP arising out of the Deepwater Horizon
disaster. To ensure that Congress receives detailed and timely
information on claims processing, Section 5 requires that the
Administrator of the Gulf Coast Claims Facility shall provide a
report to Congress on a quarterly basis, regarding the status
and ongoing payments from that Facility.
Legislative History
S. 3305 was introduced by Senator Menendez, with six co-
sponsors, on May 5, 2010, and referred to the Committee on
Environment and Public Works. Companion legislation was
introduced in the House on May 6, 2010 (H.R. 5214).
On June 9, 2010, Senator Menendez, with 22 co-sponsors,
introduced S. 3472, the Big Oil Bailout Prevention Unlimited
Liability Act of 2010, which was referred to the Committee on
Environment and Public Works. S. 3472 would remove the current
$75 million liability cap for offshore facilities under OPA, so
that polluters would be required to pay the full costs of oil
spills.
On June 9, 2010 the Committee held a legislative hearing on
S. 3305.
On June 30, 2010, the Committee held a business meeting at
which S. 3305 and proposed amendments were considered and the
bill as amended was approved.
Rollcall Votes
Substitute amendment adopted
At the business meeting held on June 30, 2010, an amendment
in the nature of a substitute (Boxer Amendment #1) was proposed
by Chairman Boxer. The substitute amendment would make a
responsible party associated with an oil spill at an offshore
facility liable for all economic and natural resources damages
(as defined in Section 1002 of the Oil Pollution Act). The
substitute amendment was adopted by a voice vote with Senator
Vitter recorded as voting aye.
Additional amendments adopted
Boxer Amendment #2
Chairman Boxer proposed an amendment (Boxer Amendment #2)
to add a new section to S. 3305 to modify certain requirements
of Section 311 of the Federal Water Pollution Control Act by
adding a new Section 3 to the bill relating to the development
of oil spill contingency plans. Boxer Amendment #2 was adopted
by a roll call vote, with 12 ayes and 7 nays. The Senators
voting ``aye'' were: Senators Baucus, Boxer, Cardin, Carper,
Gillibrand, Klobuchar, Lautenberg, Merkley, Sanders, Specter,
Udall and Whitehouse. The Senators voting ``nay'' were:
Senators Alexander, Barrasso, Bond, Crapo, Inhofe, Vitter and
Voinovich.
Inhofe Amendment #2
Senator Inhofe proposed an amendment (Inhofe Amendment #2)
to shorten the time period after which a claimant may elect to
present a claim to the Oil Spill Liability Trust Fund.
Inhofe Amendment #2, as amended by the second degree
amendment proposed by Chairman Boxer, was adopted by a voice
vote.
Boxer Second Degree to Inhofe Amendment #2
Chairman Boxer proposed a second degree amendment to Inhofe
Amendment #2 to clarify the provisions shortening the time
period in which a claimant may elect to present a claim to the
Oil Spill Liability Trust Fund.
Chairman Boxer's second degree amendment was adopted by a
voice vote.
Vitter Amendment #4
Senator Vitter proposed an amendment (Vitter Amendment #4)
to require a report twice a year on the status of and payments
from the $20 billion compensation fund established by BP. The
amendment was modified by consent of Senator Vitter to provide
that the Administrator of the BP Gulf Coast Claims Facility
shall provide a report to Congress four times a year, on a
quarterly basis, regarding the status and ongoing payments from
that Claims Facility.
Vitter Amendment #4, as modified by consent, was adopted by
a voice vote.
Amendments not adopted
Vitter Amendment #3
Senator Vitter proposed an amendment (Vitter Amendment #3)
that would limit attorney's fees to 5% of any claim recovered
under the Oil Pollution Act. Vitter Amendment #3 failed by a
roll call vote, with 6 ayes and 13 nays. The Senators voting
``Aye'' were: Senators Alexander, Barrasso, Bond, Inhofe,
Vitter and Voinovich. The Senators voting ``Nay'' were:
Senators Baucus, Boxer, Cardin, Carper, Crapo, Gillibrand,
Klobuchar, Lautenberg, Merkley, Sanders, Specter, Udall and
Whitehouse.
Inhofe Amendment #1
Senator Inhofe proposed an amendment (Inhofe Amendment #1)
to the Oil Pollution Act of 1990 that would direct the
President to establish a set of liability limits for offshore
facilities by taking into account the availability of insurance
products and be otherwise based and categorized by eleven other
various criteria. Inhofe Amendment #1 failed by a roll call
vote, with 6 ayes and 13 nays. The Senators voting ``Aye''
were: Senators Alexander, Barrasso, Bond, Crapo, Inhofe, and
Voinovich. The Senators voting ``Nay'' were: Senators Baucus,
Boxer, Cardin, Carper, Gillibrand, Klobuchar, Lautenberg,
Merkley, Sanders, Specter, Udall, Vitter and Whitehouse.
Final approval of S. 3305 as amended
The Committee voted to approve S. 3305, with the adopted
amendments as described above, and to report the bill as
amended to the full Senate, by a voice vote.
Regulatory Impact Statement
In compliance with section 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee notes, based on the
Congressional Budget Office estimate, that the bill would
require that owners and operators of facilities and large
vessels that could discharge oil or hazardous materials into
waters of the United States include additional information in
their spill response plans. The cost of the provision would be
any additional amounts that the entities would have to spend to
prepare plans. In addition, the bill would modify liability
limits for oil spills from offshore facilities, affecting
facilities that will have or have had an oil spill between
April 15, 2010, and the date of enactment of S. 3305. CBO
estimates that the mandate would not impose any incremental
costs on the owners or operators of offshore facilities because
it would not change the amount paid by the responsible parties.
The bill will not affect the personal privacy of individuals.
Mandates Assessment
In compliance with the Unfunded Mandates Reform Act of 1995
(Public Law 104-4), the Committee notes that the Congressional
Budget Office has concluded the bill will impose
intergovernmental and private-sector impacts but that it
``estimates that the cost of the intergovernmental mandates
would fall well below the annual threshold established in UMRA
($70 million in 2010, adjusted annually for inflation).''
Congressional Budget Office Cost Estimate
In compliance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 403 of the
Congressional Budget Act of 1974, the Committee provides the
following cost estimate, prepared by the Congressional Budget
Office.
July 27, 2010.
Hon. Barbara Boxer,
Chairman, Committee on Environment and Public Works,
U.S. Senate, Washington, DC.
Dear Madam Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 3305, the Big Oil
Bailout Prevention Unlimited Liability Act of 2010.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Sarah Puro
and Kathleen Gramp.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
S. 3305--Big Oil Bailout Prevention Unlimited Liability Act of 2010
Summary: S. 3305 would amend the Oil Pollution Act of 1990
(OPA) to eliminate the limit on liability that owners or
operators of certain off-shore drilling facilities (such as oil
drilling platforms) face when an oil spill occurs. CBO
estimates that eliminating the limit would probably result in a
net loss of receipts to the government because it would
probably lead to a reduction in offsetting receipts (a form of
direct spending) from bonus bids that oil and gas operators pay
to explore for oil and natural gas on the Outer Continental
Shelf (OCS). Enacting the bill also would likely lead to a
small reduction in direct spending from the Oil Spill Liability
Trust Fund (OSLTF) for compensating those who suffer economic
or environmental damages from future oil spills. In total, CBO
estimates that enacting S. 3305 would increase direct spending
by $50 million over the 2011-2020 period.\7\ Because enacting
the legislation would affect direct spending, pay-as-you-go
procedures apply.
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\7\Different time periods apply in the Senate for its pay-as-you-go
rule. CBO estimates that enacting S. 3305 would increase direct
spending by $40 million over the 2010-2014 period and by $50 million
over the 2010-2019 period.
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The bill also would require the United States Coast Guard
(USCG) to change its regulation of companies' plans for
responding to oil spills. CBO estimates that those provisions
would cost $45 million over the 2011-2015 period, assuming
appropriation of the amounts estimated to be necessary.
S. 3305 would impose intergovernmental and private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
on owners and operators of facilities and large vessels that
produce, use, or transport oil and hazardous materials in or
near waters of the United States. CBO estimates that the cost
of the intergovernmental mandates would fall well below the
annual threshold established in UMRA ($70 million in 2010,
adjusted annually for inflation). CBO cannot determine whether
the aggregate cost of private-sector mandates would exceed the
annual threshold established in UMRA ($141 million in 2010,
adjusted annually for inflation) because those costs would
depend on future regulations.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 3305 is shown in the following table.
The costs of this legislation fall within budget functions 300
(natural resources and environment) and 950 (undistributed
offsetting receipts).
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By Fiscal year, in millions of dollars--
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2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-2015 2011-2020
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CHANGES IN DIRECT SPENDING
Estimated Budget Authority.............. 10 15 10 5 5 5 * * * * 45 50
Estimated Outlays....................... 10 15 10 5 5 5 * * * * 45 50
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level........... 10 10 10 10 10 10 10 10 10 10 50 100
Estimated Outlays....................... 5 10 10 10 10 10 10 10 10 10 45 95
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Note: * = between -$500,000 and $500,000.
Basis of estimate: S. 3305 would amend OPA by eliminating
the $75 million liability limit for damages caused by certain
offshore oil facilities and expanding the responsibilities of
the USCG for reviewing and approving companies' plans for
responding to oil spills. CBO estimates that implementing this
legislation would increase net direct spending by $50 million
over the next 10 years and discretionary spending by $45
million over the 2011-2015 period, assuming appropriation of
the necessary amounts.
For this estimate, CBO assumes that S. 3305 will be enacted
in 2010 and that the authorized amounts will be appropriated
each year. Estimates of spending are based on historical
spending patterns for similar programs.
Background
OPA is one of several federal and state laws that determine
civil liability for the adverse effects of oil spills. S. 3305
would modify the liability limits in that law for offshore
facilities other than deepwater ports, retroactive to April 15,
2010.
Under OPA, the party responsible for discharging oil or
other hazardous materials into navigable waters of the United
States is liable for all of the cleanup costs associated with
the spill, including mitigation of the impacts on natural
resources. In addition, the responsible party is liable for
some or all of the economic and natural resource damages
stemming from the spill, subject to certain conditions
specified in OPA.
The amount of a firm's liability for economic and natural
resources damages under OPA is unlimited if the spill was
caused by a violation of any applicable federal regulations or
by gross negligence or willful misconduct. If no such violation
occurred, OPA limits the responsible party's liability for
economic and natural resources damages, depending on the type
and size of vessel or facility that caused the spill. The
current liability limit for offshore facilities (such as oil
and gas platforms) is $75 million per incident. OPA also
requires responsible parties to demonstrate their ability to
pay potential cleanup costs and damage claims before receiving
permits or other approvals to operate in affected areas. It
includes statutory guidelines for determining the amount of
those financial assurances and sets a $150 million limit on the
amount of assurance required for offshore oil and gas
facilities. Financial assurances can take different forms,
including self-insurance, indemnification by another party,
insurance policies, and other similar commitments.
Above the liability limits for private firms specified in
OPA, the OSLTF is available to pay up to $1 billion per
incident for any additional economic and natural resources
damages caused by an oil spill. The OSLTF is funded by an 8-
cent tax on each barrel of oil produced in or imported to the
United States. Such spending is not subject to appropriation.
The OSLTF is also available for emergency response to oil
spills or when the responsible party cannot be determined. In
2009, payments for damages from the OSLTF totaled $71 million.
According to the USCG, prior to 2010, there have been a few
oil spills that exceeded the liability limits specified in OPA.
None of those spills has been from an offshore facility. Most
have been from vessels transporting oil. The Deepwater Horizon
spill in the Gulf of Mexico, which began on April 20, 2010, is
the first offshore oil spill since OPA was enacted that will
involve damage claims exceeding $75 million.
Direct spending
Enacting S. 3305 would affect direct spending because
removing the liability limit would probably reduce offsetting
receipts (a form of direct spending) from bonus bids that oil
and gas operators pay to explore leases on the OCS,
particularly in the next few years as the industry adapts to
the consequences of the change in law. Also, the legislation
would probably reduce outlays slightly from the OSLTF for
claims that otherwise would have been paid by the federal
government because they exceeded the $75 million limit on
economic and natural resource damage claims contained in
current law. On balance, CBO estimates that those changes would
increase net direct spending by about $50 million over the
2011-2020 period.
Offsetting Receipts from OCS Leases. The federal government
leases the rights to develop the oil and gas resources on the
OCS in exchange for payments of a bonus bid when the lease is
awarded, annual rental fees on nonproducing leases, and annual
royalties based on the value of any production. Based on the
production and price assumptions used in CBO's March baseline,
offsetting receipts from oil and gas leases on the OCS are
projected to total more than $100 billion over the next 10
years. CBO estimates that enacting S. 3305 would reduce
offsetting receipts from OCS leases by about $50 million over
the 2011-2020 period because companies bidding on leases would
likely reduce their bids because of the concern that they would
face an increase in their potential liability for offshore
operations. The size (but not the direction) of that budgetary
impact is uncertain, and the cost could be smaller or
significantly larger than our estimate.
CBO estimates that removing the $75 million liability limit
would not significantly change assessments of the economic
value of most OCS leases. The legislation would not affect some
of the largest sources of liability--those stemming from
cleanup costs or from spills caused by noncompliance with
federal regulations or by gross negligence. Similarly, some
industry analysts have suggested that the Deepwater Horizon
spill has become the de facto standard for liability,
suggesting that many firms--particularly those that self-
insure--would anticipate needing to cover all damages even in
the absence of this legislation. Thus, CBO anticipates that
removing the limit on liability for damages would primarily
affect smaller firms that purchase insurance for such costs,
which could reduce the economic profitability of certain
leases. Based on historical trends in leasing activities, CBO
estimates that such effects would reduce proceeds from bonus
bids by less than 1 percent and that most of that impact would
occur in the next five years as firms adjust to the new policy.
Federal Spending from the OSLTF. Because the occurrence of
significant oil spills is subject to a great deal of
uncertainty, CBO has estimated the budgetary impact of this
legislation on the OSLTF on a probability basis. Industry
experts and studies suggest that, in any one year, the chance
of a large spill from an offshore facility involving more than
100,000 barrels of oil is very small. Experience also suggests
that spills are likely to be caused by actions that would
preclude the applicability of the liability limit (such as
noncompliance with regulations or negligence).
In the case of the Deepwater Horizon spill in the Gulf of
Mexico, the responsible party has provided assurances that it
will pay for all legitimate claims of damages over and above
the $75 million limit and has pledged at least $20 billion for
such damage claims. Thus, CBO estimates that making the
provisions in S. 3305 retroactive to April 15, 2010, would not
change the amount paid for damage claims by either the
responsible party or the federal government. In the future, we
expect that this provision would have a small impact on
spending from the OSLTF.
Spending subject to appropriation
S. 3305 would require the USCG to evaluate companies' plans
for responding to oil spills and certify that such plans are
both technologically feasible and have been tested in a field
situation. The USCG would require significant additional
personnel with specific technological expertise to perform that
work. Based on information from the USCG and historical
spending for similar programs, CBO estimates that implementing
the new requirements would cost $45 million over the 2011-2015
period, assuming appropriation of the necessary amounts.
Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays that are subject to those
pay-as-you-go procedures are shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 3305 AS ORDERED REPORTED BY THE SENATE COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS ON JUNE 30, 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010-2015 2010-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact....................... 0 10 15 10 5 5 5 0 0 0 0 45 50
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intergovernmental and Private-Sector Impact: S. 3305 would
impose intergovernmental and private-sector mandates as defined
in UMRA on owners and operators of facilities and large vessels
that produce, use, or transport oil and hazardous materials in
or near waters of the United States. CBO estimates that the
cost of the intergovernmental mandates would fall well below
the annual threshold established in UMRA ($70 million in 2010,
adjusted annually for inflation). CBO cannot determine whether
the aggregate cost of private-sector mandates would exceed the
annual threshold established in UMRA ($141 million in 2010,
adjusted annually for inflation) because it would depend on
future regulations.
Mandates that apply to both public and private entities
The bill would require that owners and operators of
facilities and large vessels that could discharge oil or
hazardous materials into waters of the United States include
additional information in their spill response plans. Affected
entities would include oil refineries, tugboats, oil tankers,
and ferries. According to information from the USCG,
Environmental Protection Agency, and Pipeline and Hazardous
Materials Safety Administration, owners and operators of about
30,000 onshore facilities and vessels currently submit response
plans. The cost of the mandate would be any additional amounts
that the mandated entities would have to spend to prepare
plans. Because the costs of the requirement would depend on
future regulations, CBO cannot determine the cost of the
mandate on private-sector entities. Because of the relatively
small number of public vessels affected, however, CBO estimates
the cost to state and local governments would be small.
Mandates that apply to private entities only
By retroactively eliminating the liability limit for oil
spills from offshore facilities, the bill would place a mandate
on owners and operators of any such facilities that will have
or have had an oil spill between April 15, 2010, and the date
of enactment of S. 3305. Because the chances of another large
spill occurring before enactment are very small, CBO assumes
that the only affected spill would be the Deepwater Horizon
spill. Based on information from industry testimony, CBO
estimates that the mandate would not impose any incremental
costs on the owners or operators of offshore facilities because
it would not change the amount paid by the responsible parties.
Estimate prepared by: Federal costs: Kathleen Gramp (for
Outer Continental Shelf); Sarah Puro (for Oil Spill Liability
Trust Fund); Impact on State, Local, and Tribal Governments:
Ryan Miller; Impact on the Private Sector: Samuel Wice.
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
MINORITY VIEWS OF SENATOR INHOFE
The Minority strongly believes that effective legislation
to address the BP oil spill disaster must accomplish the
following: ensure that victims of the spill are fully
compensated under the Oil Pollution Act of 1990 (OPA), minimize
the risk of future spills from occurring, and maintain access
to America's domestic offshore energy resources. S. 3305, as
amended, fails to achieve this balance, as it could render
offshore drilling in the Gulf of Mexico a proposition that only
the largest oil companies, as well state-owned firms such as
China's National Offshore Oil Corporation, could afford. This
outcome would undermine America's energy security, cost
thousands of good-paying jobs, and threaten the economic
recovery of Gulf coast communities.
These are just some of the broader ramifications associated
with S.3305, as amended, and they have not been fully examined
by this Committee or Congress. While the Minority wholly agrees
that increases to the OPA liability limits are necessary, it's
critical to fully consider the negative repercussions
associated with no limits on OPA's strict liability regime, as
well as other provisions of this act. For these reasons, S.
3305 should be opposed and returned to the Committee on
Environment and Public Works by the full Senate.
As we learned from expert testimony in the June 9th
hearing, the various liability mechanisms in the OPA and other
relevant statutes are complex and interrelated in subtle ways,
as is the relationship of liability limits to the viability of
offshore drilling. The submitted testimony of Rawle King, a
Congressional Research Service (CRS) analyst in financial
economics and risk assessment, succinctly described the dilemma
of enacting prohibitively high liability limits:
A key oil spill liability and insurance public policy
challenge stemming from the Deepwater Horizon
catastrophe involves reconciling two points of
contention: (1) the desire to increase the limitations
of liability for operators of offshore energy
facilities from $75 million to $10 billion or more for
economic losses caused by oil pollution damage and
raise the criteria for demonstrating oil spill
financial responsibility (OSFR); and (2) the limited
capacity of offshore energy insurance and reinsurance
to cover loss of well control, cost to redrill a
blowout well and liability facing operators of offshore
energy facilities.
The financial consequences of unlimited strict liability
could overwhelm the financial wherewithal of small- and medium-
sized independent operators in the Gulf. In a letter submitted
for the hearing record, Alliant Insurance, which insures
offshore oil and gas operations, stated that:
If the liability cap is increased to the levels we
understand are under consideration . . . in our view
only major oil companies and NOC's (National Oil
Companies) will be financially strong enough to
continue current exploration and development efforts.
Another letter submitted for the record from Lockton
Companies, LLC stated:
Given the limited capacity in the energy insurance
market, a material increase in the cap will eliminate
insurance as an option for many exploration and
production companies. Without insurance, many of the
active exploration and production companies would be
unable to operate in the Gulf of Mexico.
And on May 18th, even Interior Secretary Ken Salazar
testified before the Senate Energy and Natural Resources
Committee about the critical importance of calibrating the
precise level of the liability cap to the need for a
competitive offshore oil and natural gas industry:
[I]t is important that we be thoughtful relative to
that, what that cap will be, because you don't want
only the BP's of the world essentially be the ones that
are involved in these efforts, that there are companies
of lesser economic robustness.
Along with S. 3305's unlimited strict liability regime, the
bill as amended includes potential changes to existing
financial responsibility requirements. If these requirements
are ultimately promulgated through regulation at unreasonable
levels, S. 3305 could further restrict domestic production in
the Gulf, and possibly end it altogether.
S.3305, as amended, states that the ``President shall
promulgate regulations that clarify the requirements of a
response plan'' to include, among other requirements, that a
company's spill response plan shall ``demonstrate the financial
capability to pay for removal costs and damages'' of an oil
spill. This language is vague and open-ended; theoretically,
the agency responsible for defining this language (most likely
the Environmental Protection Agency, as the bill amends the
Clean Water Act) could do so in a manner that makes
``demonstrating financial capability'' so onerous that drilling
for many firms would be financially impossible.
For instance, if an operator other than one the size of BP
or CNOOC were required to demonstrate financial capability of
$10 billion to pay for ``removal costs and damages,'' such
operator would be unable to secure insurance. In a letter for
the June 9th hearing on S. 3305, INDECS insurance consultancy
stated:
. . . if the intention is to increase the limit
required under OPA90 to US$10 billion and also required
evidence of financial responsibility to something
similar, then quite simply the energy insurance market
will no longer be an option. . . . The cost of these
methods or ability to self insure these risks will far
exceed their capabilities, preventing their management
from fulfilling their fiduciary liability and
presenting a barrier to acquiring new or even servicing
existing permits in the future.
Another provision in S.3305, as amended, would ``require
notice of the proposed response plan to be published in the
Federal Register and provide for a public comment period for
the plan of at least 30 days''. This requirement would not only
extend to offshore facilities, but to every tank and non-tank
vessel required to submit a plan under OPA. In a July 22nd
letter to the Chairman and Ranking Member, the American
Waterways Operators (AWO) noted that as many as 20,000 vessels
would be affected by this requirement. As AWO contends that:
At minimum, this amounts to an extreme administrative
burden that is not justified by the benefit it
provides: the Coast Guard has a rigorous process for
review and approval of vessel response plans, and it is
difficult to see what added benefit would accrue if the
response plans for thousands of vessels--ranging from a
tank barge carrying 20,000 barrels of oil to a towboat
carrying 60,000 gallons of fuel--were subjected to
public notice and comment.
At worst, however, such a requirement could prove not
only unnecessary and administratively cumbersome, but
disruptive to critical maritime transportation. Under
current regulations, vessel owners are required to
notify the Coast Guard when a component of their
response plan changes--for example, a response
contractor merges with another company, or a person
listed in the plan gets a new cell phone number.
Requiring notice of such changes to be published in the
Federal Register could stymie the just-in-time delivery
of economically essential cargoes.
The AWO also expressed serious concern with potentially
disruptive ``performance standards'' language required under S.
3305's response plans:
In a spill response planning context, the term
``performance standards'' implies that a response plan
holder will be in violation of the regulations if an
element of the response plan fails to perform as
planned. In the 20 years since the Oil Pollution Act of
1990 (OPA 90) was enacted, the Coast Guard has
repeatedly reiterated that its response plan
regulations establish planning standards, not
performance standards. In other words, a vessel owner
must ensure, by contract or other approved means, the
availability of response resources in identified
quantities that are capable of being on scene within
designated time frames. However, the plan holder does
not violate the regulations if, on the day of a spill,
the response resources cannot perform as planned (for
example, because weather conditions prevented aircraft
from flying or boom from being deployed).
Given the many variables at play in the event of a
vessel incident, AWO knows of no response resource
provider who can guarantee that it will meet
performance (as opposed to planning) standards.
AWO explains further that mandating performance standards
in response plans raises civil and criminal liabilities for
``resource providers'' that can cripple vessel owners' ability
to operate:
Faced with the prospect of civil and criminal
liability for failure to meet the response planning
regulations, resource providers may decline to enter
into contracts with vessel owners, leaving vessel
owners unable to operate and disrupting the
transportation of vital petroleum products and other
critical cargoes.
Finally, the ``impact of this change,'' AWO stated, ``will
extend far beyond oil transportation, since non-tank vessels
over 400 gross tons that carry oil as fuel are also subject to
response plan requirements under OPA 90.'' This could ``stymie
the operations of vessels ranging from tugboats providing
tanker escort services in San Francisco Bay to towboats pushing
cement barges on the Arkansas River.
The new contingency plan requirements potentially invite
endless streams of litigation to each and every proposed
contingency plan, including challenges to the interpretation of
what is the ``available scientific information'' or what is
``technologically feasible'' to assess conditions in which a
well would operate and its potential impacts to ecological
areas and wildlife. Moreover, the requirement for written
concurrences of other Agencies as to the adequacy of response
plans could very well introduce significant delays into the
approval process.
If the intent of S.3305, as amended, is to restrict
offshore drilling to the very largest operators, such as BP, or
to perhaps even serve as a de jure ban on all offshore drilling
in American waters, then the enactment of this bill could
potentially satisfy one or both of those objectives. However,
if the intent of S.3305 is to ensure that victims of future
spills are made whole through restitution, and not at the
expense of the American taxpayer, as its proponents claim, then
more predictable, effective, and less harmful alternatives are
available.
For instance, proponents of S.3305 assert that without
unlimited strict liability, those suffering injury from a
spill, along with the American taxpayer, would pay the price
for damages in excess of a company's strict liability limit.
However, this allegation disregards one of the main purposes of
the creation of the oil and gas industry-funded Oil Spill
Liability Trust Fund (OSLTF), which serves as the primary
backstop to OPA's prescribed liability limits. As an additional
assurance, Congress should consider integrating a ``Price-
Anderson''-like mechanism, as utilized in the nuclear energy
industry, as a complimentary backstop to the OSLTF's role, so
that all other oil and gas entities operating offshore would
then intercede to compensate for any additional liabilities.
It is critical to note that small and midsize independents
produce 63 percent of the Gulf's natural gas and 36 percent of
its oil; 30 percent of US oil production comes from the Gulf of
Mexico. The offshore areas of the United States are estimated
to contain significant quantities of resources in yet-to-be-
discovered fields. MMS estimates of oil and gas resources in
undiscovered fields on the Outer Continental Shelf total 86
billion barrels of oil and 420 trillion cubic feet of gas.
These volumes represent about 60 percent of the oil and 40
percent of the natural gas resources estimated to be contained
in remaining undiscovered fields in the United States. A July
22nd study released by IHS Global Insight forecasts that by
2020 ``an exclusion of the independents from the Gulf of Mexico
would eliminate 300,000 jobs and result in a loss, over 10
years, of $147 billion in federal, state, and local taxes from
the Gulf region. If the independents are excluded just from the
deepwater, the job loss would be 265,000 jobs by 2020, and $106
billion in tax revenues over the 10-year period.''
Based on the available information, S. 3305, as amended,
could drastically decrease the number of operators in the Gulf
of Mexico, which would destroy thousands of American jobs and
jeopardize America's energy security.
Jim Inhofe.
Changes in Existing Law
In compliance with section 12 of rule XXVI of the Standing
Rules of the Senate, changes in existing law made by the bill
as reported are shown as follows: Existing law proposed to be
omitted is enclosed in [black brackets], new matter is printed
in italic, existing law in which no change is proposed is shown
in roman:
* * * * * * *
OIL POLLUTION ACT OF 1990
* * * * * * *
SEC. 1001. DEFINITIONS.
For the purposes of this Act, the term----
(1) * * *
* * * * * * *
SEC. 1004. LIMITS ON LIABILITY.
(a) General Rule.--Except as otherwise provided in this
section, the total of the liability of a responsible party
under section 1002 and any removal costs incurred by, or on
behalf of, the responsible party, with respect to each incident
shall not exceed----
(1) for a tank vessel, the greater of----
(A) $1,200 per gross ton; or
(B)(i) in the case of a vessel greater than
3,000 gross tons, $10,000,000; or
(ii) in the case of a vessel of 3,000 gross
tons or less, $2,000,000;
(2) for any other vessel, $600 per gross ton or
$500,000, whichever is greater;
(3) for an offshore facility except a deepwater port,
the total of all removal costs [plus $75,000,000] and
the liability of the responsible party under section
1002; and
(4) for any onshore facility and a deepwater port,
$350,000,000.
* * * * * * *
SEC. 1013. CLAIMS PROCEDURE.
(a) Presentation.--Except as provided in subsection (b), all
claims for removal costs or damages shall be presented first to
the responsible party or guarantor of the source designated
under section 1014(a).
(b) Presentation to Fund.----
(1) In general.--Claims for removal costs or damages
may be presented first to the Fund----
(A) if the President has advertised or
otherwise notified claimants in accordance with
section 1014(c);
(B) by a responsible party who may assert a
claim under section 1008;
(C) by the Governor of a State for removal
costs incurred by that State; or
(D) by a United States claimant in a case
where a foreign offshore unit has discharged
oil causing damage for which the Fund is liable
under section 1012(a).
(2) Limitation on presenting claim.--No claim of a
person against the Fund may be approved or certified
during the pendency of an action by the person in court
to recover costs which are the subject of the claim.
(c) Election.--If a claim is presented in accordance with
subsection (a) and----
(1) each person to whom the claim is presented denies
all liability for the claim, or
(2) the claim is not [settled by any person by
payment within 90] settled in whole by any person by
payment within 30 days days after the date upon which
(A) the claim was presented, or (B) advertising was
begun pursuant to section 1014(b), whichever is later,
the claimant may elect to commence an action in court against
the responsible party or guarantor or to present the claim to
the Fund.
* * * * * * *
Federal Water Pollution Control Act
Sec. 301. (a) Except as in compliance with this section
and sections 302, 306, 307, 318, 402, and 404 of this Act, the
discharge of any pollutant by any person shall be unlawful.
(b) * * *
* * * * * * *
Sec. 311. (a) For the purpose of this section, the term--
(1) oil'' means oil of any kind or in any form,
including, but not limited to, petroleum, fuel oil,
sludge, oil refuse, and oil mixed with wastes other
than dredged spoil;
(2) * * *
* * * * * * *
(24) ``worst case discharge'' means--
(A) in the case of a vessel, a discharge in
adverse weather conditions of its entire cargo;
and
(B) in the case of an offshore facility or
onshore facility, the largest foreseeable
discharge, including from an unanticipated and
uncontrolled blowout or other loss of well
control, in adverse weather conditions;
* * * * * * *
(j) National Response System.--
(1) In general.--* * *
* * * * * * *
(5) Tank vessel, nontank vessel, and facility
response plans.--(A)(i) The President shall issue
regulations which require an owner or operator of a
tank vessel or facility described in subparagraph (C)
to prepare and submit to the President a plan for
responding, to the maximum extent practicable, to a
worst case discharge, and to a substantial threat of
such a discharge, of oil or a hazardous substance.
(ii) The President shall also issue regulations
which require an owner or operator of a nontank vessel
to prepare and submit to the President a plan for
responding, to the maximum extent practicable, to a
worst case discharge, and to a substantial threat of
such a discharge, of oil.
(iii) The President shall ensure
that the regulations promulgated
pursuant to this paragraph are designed
to prevent, to the maximum extent
practicable, injury to the economy,
jobs, and the environment, including to
prevent--
(I) loss of, destruction
of, or injury to, real or
personal property;
(II) loss of subsistence
use of natural resources;
(III) loss of revenue;
(IV) loss of profits or
earning capacity;
(V) an increase in the cost
of providing public services to
remove a discharge; and
(VI) loss of, destruction
of, or injury to, natural
resources.
(iv) The President shall promulgate
regulations that clarify the
requirements of a response plan in
accordance with subparagraph (D).
(B) The Secretary of the Department in which the
Coast Guard is operating may issue regulations which
require an owner or operator of a tank vessel, a
nontank vessel, or a facility described in subparagraph
(C) that transfers noxious liquid substances in bulk to
or from a vessel to prepare and submit to the Secretary
a plan for responding, to the maximum extent
practicable, to a worst case discharge, and to a
substantial threat of such a discharge, of a noxious
liquid substance that is not designated as a hazardous
substance or regulated as oil in any other law or
regulation. For purposes of this paragraph, the term
noxious liquid substance'' has the same meaning when
that term is used in the MARPOL Protocol described in
section 2(a)(3) of the Act to Prevent Pollution from
Ships (33 U.S.C. 1901(a)(3)).
(C) The tank vessels, nontank vessels, and
facilities referred to in subparagraphs (A) and (B) are
the following:
(i) A tank vessel, as defined under section
2101 of title 46, United States Code.
(ii) A nontank vessel.
(iii) An offshore facility.
(iv) An onshore facility that, because of
its location, could reasonably be expected to
cause substantial harm to the environment by
discharging into or on the navigable waters,
adjoining shorelines, or the exclusive economic
zone.
[(D) A response plan required under this paragraph
shall--
[(i) be consistent with the requirements of
the National Contingency Plan and Area
Contingency Plans;
[(ii) identify the qualified individual
having full authority to implement removal
actions, and require immediate communications
between that individual and the appropriate
Federal official and the persons providing
personnel and equipment pursuant to clause
(iii);
[(iii) identify, and ensure by contract or
other means approved by the President the
availability of, private personnel and
equipment necessary to remove to the maximum
extent practicable a worst case discharge
(including a discharge resulting from fire or
explosion), and to mitigate or prevent a
substantial threat of such a discharge;
[(iv) describe the training, equipment
testing, periodic unannounced drills, and
response actions of persons on the vessel or at
the facility, to be carried out under the plan
to ensure the safety of the vessel or facility
and to mitigate or prevent the discharge, or
the substantial threat of a discharge;
[(v) be updated periodically; and
[(vi) be resubmitted for approval of each
significant change.]
(D) A response plan required under this
paragraph shall--
(i) be consistent with the
requirements of the National
Contingency Plan and Area Contingency
Plans;
(ii) identify the qualified
individual having full authority to
implement removal actions, and require
immediate communications between that
individual and the appropriate Federal
official and the persons providing
personnel and equipment pursuant to
clause (iii);
(iii) identify, and ensure by
contract or other means approved by the
President the availability of, private
personnel and equipment in the
quantities necessary, staged and
available in the appropriate region to
respond immediately to and sustain the
response effort for as long as
necessary--
(I) to remove, to the
maximum extent practicable, a
worst-case discharge (including
a discharge resulting from fire
or an explosion);
(II) to mitigate damage
from a discharge; and
(III) to prevent or reduce
a substantial threat of such a
discharge;
(iv) demonstrate the financial
capability to pay for removal costs and
damages;
(v) describe the training,
equipment testing, periodic unannounced
drills, and response actions of persons
on the vessel or at the facility, to be
carried out under the plan to ensure
the safety of the vessel or facility
and to meet the requirements of this
subparagraph;
(vi) describe the environmental
effects of the response plan
methodologies and equipment;
(vii) describe the process for
communication and coordination with
Federal, State, and local agencies
before, during, and after a response to
a discharge;
(viii) identify performance
standards for the quantity of oil or
hazardous substance that will be
removed under the response plan
immediately following the discharge and
at regular, identified periods,
including provisions for reporting the
degree to which actual removal meets
the required performance standards;
(ix) in the case of oil production,
drilling, and workover facilities,
describe the specific measures to be
used in response to a blowout or other
event involving loss of well control;
(x) identify potential economic and
ecological impacts of a worst-case
discharge and response activities to
prevent or mitigate, to the maximum
extent practicable, those impacts in
the event of a discharge;
(xi) be updated periodically; and
(xii) be resubmitted for approval
of each significant change.
(E) With respect to any response plan submitted
under this paragraph for an onshore facility that,
because of its location, could reasonably be expected
to cause significant and substantial harm to the
environment by discharging into or on the navigable
waters or adjoining shorelines or the exclusive
economic zone, and with respect to each response plan
submitted under this paragraph for a tank vessel,
nontank vessel, or offshore facility, the President
shall--
[(i) promptly review such response plan;
[(ii) require amendments to any plan that
does not meet the requirements of this
paragraph;
[(iii) approve any plan that meets the
requirements of this paragraph;
[(iv) review each plan periodically
thereafter; and
[(v) in the case of a plan for a nontank
vessel, consider any applicable State-mandated
response plan in effect on the date of the
enactment of the Coast Guard and Maritime
Transportation Act of 2004 and ensure
consistency to the extent practicable.]
(i) require notice of the proposed
response plan to be published in the
Federal Register and provide for a
public comment period for the plan of
at least 30 days;
(ii) promptly review the response
plan;
(iii) require amendments to any
plan that does not meet the
requirements of this paragraph;
(iv) approve any plan only after
finding, based on evidence in the
record, that--
(I) the response plan meets
the requirements of
subparagraph (D);
(II) there have been 1 or
more field tests of the plan in
the area in which the tank
vessel, nontank vessel, or
facility is proposed to
operate, and the results of
that field testing are publicly
available;
(III) the methods and
equipment proposed to be used
under the response plan are
demonstrated to be
technologically feasible in the
area and under the conditions
(including the depth of a well,
in the case of an offshore
facility) in which the tank
vessel, nontank vessel, or
facility is proposed to
operate;
(IV) the available
scientific information about
the area allows for
identification of potential
impacts to ecological areas and
protection of those areas in
the event of a discharge,
including adequate surveys of
wildlife; and
(V) the response plan
describes the quantity of oil
likely to be removed in the
event of a worst-case
discharge;
(v) obtain the written concurrence
of such other agencies as the President
determines to be appropriate;
(vi) review each plan periodically
thereafter; and
(vii) in the case of a plan for a
nontank vessel, consider any applicable
State-mandated response plan in effect
on August 9, 2004, and ensure
consistency to the maximum extent
practicable.
* * * * * * *