Oil Pollution Act of 1990 (OPA 90)
Like many other pollution liability regimes, OPA 90 was enacted in response to a major pollution incident-namely, the loss of 37,000 tonnes of crude oil into Prince William Sound, Alaska, following the grounding of the tanker EXXON VALDEZ on 24 March 1989.
The Alaskan Oil Spill Commission (AOSC) was then created and issued recommendations on potential policy changes. Rather than join international pollution liability conventions, the US Congress decided to enact their own legislation based upon earlier environmental legislation and the recommendations made by the AOSC.
What is the purpose of OPA 90?
OPA 90 consolidated existing federal legislation such as the Federal Water Pollution Control Act, Deep Water Port Act and others in order to more thoroughly address pollution prevention, government oversight, response and compensation. It set new requirements for vessel contingency planning and set stringent demands for evidence of financial responsibility in the event of an oil pollution incident.
The Act provides for strict liability for removal costs and damages for oil discharges, or substantial threat of oil discharge, in navigable waters of the US, EEZ and US overseas territories.
What is an ‘oil’ for the purpose of OPA 90?
‘Oil’ is defined in OPA 90 as oil in any kind or in any form, including petroleum, fuel oil, sludge, oil refuse, and oil mixed with wastes other than dredged spoil. It does not include any substance which is specifically listed or designated as a hazardous substance under separate hazardous substance legislation (CERCLA).
A list of relevant oils is maintained by the US Coast Guard, here.
What categories of loss and damage are recoverable?
Section 2702 provides that certain removal costs and damages are recoverable, namely:
- Removal costs incurred by US Government, Tribe or under State law.
- Damage to natural resources, including for injury to, destruction of, loss of, or loss of use of, natural resources, including the reasonable costs of assessing the damage
- Real or Personal Property, including for injury to, or economic losses resulting from destruction of, real or personal property, which shall be recoverable by a claimant who owns or leases that property
- Subsistence use-for loss of subsistence use of natural resources, which shall be recoverable by any claimant who so uses natural resources which have been injured, destroyed, or lost, without regard to the ownership or management of the resources.
- Revenues- equal to the net loss to the government of taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property, personal property, or natural resources
- Profits and earning capacity-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
- Public Services-for net costs of providing increased or additional public services during or after removal activities, including protection from fire, safety, or health hazards, caused by a discharge of oil
Who is liable?
The ‘Responsible Party’ in the case of a vessel is defined as any person owning, operating or demise chartering a vessel.
Are there any defences to liability available?
Yes, though liability for pollution is referred to as strict there are some limited defences.
Under section 2703 a Responsible Party would have a complete defence if they can establish by a preponderance of evidence that the discharge or substantial threat of a discharge of oil and the resulting damages or removal costs were caused solely by an act of God, act of war, or an act or omission of an unrelated third party.
If caused solely by a third party, the Responsible Party must show by a preponderance of the evidence, that the Responsible Party both:
- exercised due care with respect to the oil concerned, taking into consideration the characteristics of the oil and in light of all relevant facts and circumstances; and
- took precautions against foreseeable acts or omissions of any such third party and the foreseeable consequences of those acts or omissions
In respect of particular claimants, the Responsible Party is not liable where the incident is caused by the gross negligence or wilful misconduct of a claimant.
The right to rely on a complete defence can be lost-ie in the event the Responsible Party does not assist authorities when requested, cooperate in removal activities, comply with orders issued by authorities, or fails to report an incident.
What is the maximum amount of compensation payable under OPA 90, where limitation applies?
The maximum amount of compensation payable by the Responsible Party depends on the size and type of the vessel.
There is a requirement under OPA 90 for the United States Coast Guard to review the limits of liability not less than every three years to reflect inflation (linked to the Consumer Price Index). As from 23 March 2023 the limits were updated as follows:
Category | Previous Limit of Liability | New Limit of Liability | ||
| (1) The OPA 90 limits of liability for tank vessels, other than edible
oil tank vessels and oil spill response vessels, are: | ||||
| (i) For a single-hull tank vessel greater than 3,000 gross tons* | The greater of $3,700 per gross ton or $27,422,200 | The greater of $4,000 per gross ton or $29,591,300 | ||
| (ii) For a tank vessel greater than 3,000 gross tons, other than a
single-hull tank vessel |
| The greater of $2,500 per gross ton or $21,521,000 | ||
| (iii) For a single-hull tank vessel less than or equal to 3,000 gross
tons |
|
| ||
| (iv) For a tank vessel less than or equal to 3,000 gross tons, other
than a single-hull tank vessel |
|
| ||
| (2) The limits of liability for any vessel other than a vessel listed
above, including for any edible oil tank vessel and any oil spill
response, vessel, are: |
|
|
Can limitation be broken?
Yes. The legal threshold for breaking limitation is lower under OPA 90 than other liability Conventions, such as the Civil Liability Convention. The actions that could lead to loss of the right to limit are set out in the Act as follows:
1) Acts of responsible party
Subsection (a) does not apply if the incident was proximately caused by—
(A) gross negligence or willful misconduct of, or
(B) the violation of an applicable Federal safety, construction, or operating regulation by,
the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party (except where the sole contractual arrangement arises in connection with carriage by a common carrier by rail).
(2) Failure or refusal of responsible party
Subsection (a) does not apply if the responsible party fails or refuses—
(A) to report the incident as required by law and the responsible party knows or has reason to know of the incident;
(B) to provide all reasonable cooperation and assistance requested by a responsible official in connection with removal activities; or
(C) without sufficient cause, to comply with an order issued under subsection (c) or (e) of section 1321 of this title or the Intervention on the High Seas Act (33 U.S.C. 1471 et seq.).
How are claims made?
All claims are first presented to the Responsible Party, save for a few exceptions as set out in section 2713.
Under section 2714, once a vessel is designated as the source of an incident, the Responsible Party must, within 15 days of designation, advertise the procedure for claimants to make claims in respect of that incident. The advertisement must stay in place for no less than 30 days.
If a claimant makes a claim to a Responsible Party and it is not settled within 90 days, the claimant may then contact the OSLTF via the NPFC (see below).
Are there additional compensation funds in the US?
Yes.
The Oil Spill Liability Trust Fund (administered by the US Coast Guard National Pollution Funds Centre) may respond when the Responsible Party does not, or when the level of liability set by OPA 90 is insufficient to meet all admissible claims. The OSLTF is primarily funded through a per-barrel excise tax on imported and domestic oil.
Expenditure from OSLTF for any one incident is limited to US$1 billion (or the balance of the fund-whichever is lower). However, natural resource damage assessments and claims in connection with one incident are limited to US$500 million of the US$1 billion limit.
Where a Responsible Party is able to limit liability but pays more than the limit when initially responding to the incident, they can also present a claim to the OSLTF for compensation of the excess amount.
What time bars apply?
Claims for removal costs must be made within three years after the date of completion of all removal actions for the incident.
Claims for damage to natural resource damage must be submitted within three years of the date on which the damage (and its connection with the pollution incident) was reasonably discoverable, or three years after completion of a section 2706 (c ) natural resources damage assessment.
Claims for recovery of removal costs from the OSLTF must be presented within 6 years of the completion of the removal action.
What other requirements are placed on vessel Owners and Operators?
Financial
Section 2716 sets out requirements for a Responsible Party to provide evidence of financial responsibility up to the maximum limitation amount as follows:
Requirement
The responsible party for—
(1) any vessel over 300 gross tons (except a non-self-propelled vessel that does not carry oil as cargo or fuel) using any place subject to the jurisdiction of the United States;
(2) any vessel using the waters of the exclusive economic zone to transship or lighter oil destined for a place subject to the jurisdiction of the United States; or
(3) any tank vessel over 100 gross tons using any place subject to the jurisdiction of the United States;
shall establish and maintain, in accordance with regulations promulgated by the Secretary, evidence of financial responsibility sufficient to meet the maximum amount of liability to which the responsible party could be subjected under section 2704(a) or (d) of this title, in a case where the responsible party would be entitled to limit liability under that section. If the responsible party owns or operates more than one vessel, evidence of financial responsibility need be established only to meet the amount of the maximum liability applicable to the vessel having the greatest maximum liability
Methods of financial responsibility
Financial responsibility under this section may be established by any one, or by any combination, of the following methods which the Secretary (in the case of a vessel) or the President (in the case of a facility) determines to be acceptable: evidence of insurance, surety bond, guarantee, letter of credit, qualification as a self-insurer, or other evidence of financial responsibility. Any bond filed shall be issued by a bonding company authorized to do business in the United States. In promulgating requirements under this section, the Secretary or the President, as appropriate, may specify policy or other contractual terms, conditions, or defenses which are necessary, or which are unacceptable, in establishing evidence of financial responsibility to effectuate the purposes of this Act.
In practice, Owners obtain a Certificate of Financial Responsibility, or ‘COFR’, via a local guarantor within the US. International Group P&I Clubs can provide letters confirming a vessel’s entry in an IG Club in support.
Federal COFR requirements are separate and differ to COFRs required by individual states, like California. IG Club letters are not issued in respect of California COFRs, for example.
For more information relating to Certificates of Financial Responsibility, see our guide ‘Trading to the US’, here.
What are QI’s, SMFFs and OSRO’s?
A key aspect of OPA 90 is the requirement for certain vessels to be well prepared in the event of a major incident by training of crew and forward planning and engagement with relevant contractors in all relevant maritime zones who can respond quickly to an incident. The type of plan required depends upon whether the vessel is deemed a ‘tank’ or ‘non tank’ vessel. There are some limited circumstances where a vessel would not require an OPA compliant Vessel Response Plan, for example, public vessels (as defined by statute), and foreign flagged vessels engaged in ‘innocent passage’.
Tank Vessel Response Plans (TVRP) are required for any vessel that transfers or carries oil in bulk, or as cargo, or as cargo residues with the jurisdiction of the US. It also applies to vessels lightering oil destined for a port or place within the US jurisdiction. The TVRP must provide for responses in each and every area of the US in which the vessel will transit and handle oil. This includes contracts with salvage and marine firefighting companies, as well as OSROs (Oil Spill Response Organisations).
Members are reminded that some contractors require agreement of terms which do not conform to the IG’s Guidelines for vessel response plans. Additional insurance may therefore be required by Members trading to these areas and contracting with nonconforming OSRO and SMFF contractors and Members should contact the Club for details of the additional insurance available.
Nontank Vessel Response Plans (NTVRPs) are required for vessels of 400 gross tons or greater, other than a tank vessel, that carries oil of any kind as fuel for main propulsion or that operates on the navigable waters of the United States. A gas carrier is likely to fall under NTVRP if it does not carry oil as defined by the USCG.
Pursuant to the Nontank Vessel Response Plan Final Rule of 2013, nontank vessels must also have a contract with salvage and marine firefighting company (SMFF), as well as a contracted OSRO, for every relevant trading area. The level of compliance required for a nontank vessel to meet salvage and marine firefighting requirements depends upon oil carrying capacity and can be found here.
OPA 90 requires that vessel owners and operators practice elements of their response plans regularly.
OPA 90’ also requires that the Vessel Response Plan to nominates a ‘Qualified Individual’ (plus an alternate). This is someone who resides in the US, speaks English, and can be available 24 hours a day if needed. They will also have authority to start removal action and to activate response resources and agree to fund response action. Many Owners chose to contract with a specialist US based organisation to appoint individual employees as their Qualified Individual (and alternate).
Do I need to contact the Club to review QI, Oil Pollution Response Organisation, and SMFF Contracts?
Members are reminded that whilst many organisations contract on terms that meet International Group requirements, some may seek agreement of terms which do not conform.
Members are advised to contact the Club prior to signing QI, spill response, SMFF contracts to ensure that proposed terms do not fall foul of International Group requirements.