Maritime Transportation: Major Oil Spills Occur Infrequently, but Risks to the Federal Oil Spill Fund Remain

GAO-07-1085 Published: Sep 07, 2007. Publicly Released: Sep 07, 2007.
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Highlights

When oil spills occur in U.S. waters, federal law places primary liability on the vessel owner or operator--that is, the responsible party--up to a statutory limit. As a supplement to this "polluter pays" approach, a federal Oil Spill Liability Trust Fund administered by the Coast Guard pays for costs when a responsible party does not or cannot pay. The Coast Guard and Maritime Transportation Act of 2006 directed GAO to examine spills that cost the responsible party and the Fund at least $1 million. This report answers three questions: (1) How many major spills (i.e., $1 million or more) have occurred since 1990, and what is their total cost? (2) What factors affect the cost of spills? and (3) What are the implications of major oil spills for the Oil Spill Liability Trust Fund? GAO's work to address these objectives included analyzing oil spill costs data, interviewing federal, state, and private-sector officials, and reviewing Coast Guard files from selected spills.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
United States Coast Guard To improve and sustain the balance of Oil Spill Liability Trust Fund, the Commandant of the Coast Guard should determine whether and how liability limits should be changed, by vessel type, and make specific recommendations about these changes to the Congress.
Closed – Not Implemented
Although the Coast Guard generally agreed with our recommendation, to date, the Coast Guard has not implemented GAO's recommendation. Officials indicated that there are no new initiatives underway in the Coast Guard related to the recommendation. GAO has no reason to believe that the Coast Guard will take further action on the recommendation and is therefore closing this recommendation as not implemented.
United States Coast Guard To improve and sustain the balance of Oil Spill Liability Trust Fund, the Commandant of the Coast Guard should adjust the limits of liability for vessels every 3 years to reflect significant changes in inflation, as appropriate.
Closed – Implemented
In our review, we found that vessels' liability limits have not been adjusted at least every 3 years for significant increases in inflation, as mandated by the Oil Pollution Act of 1990. We noted that adjusting liability limits for significant increases in inflation is necessary to help protect the Oil Spill Liability Trust Fund (Fund) from insolvency from oil spills with costs exceeding the responsible parties' limits of liability. In response to our recommendation, the Coast Guard issued an interim rule effective July 31, 2009, to increase liability limits to reflect significant increases in the Consumer Price Index. These adjustments will help ensure that oil spills with costs exceeding the responsible parties' limits of liability will not continue to place the Fund at risk.

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