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The Oil Spill Liability Trust Fund (OSLTF)


 

History of the Fund

In August 1990, when President George H. W. Bush signed the Oil Pollution Act (OPA) into law and authorized use of the Oil Spill Liability Trust Fund (OSLTF), the Fund was already four years old. Congress created the Fund in 1986, but did not pass legislation to authorize the use of the money or the collection of revenue necessary for its maintenance. It was only after the Exxon Valdez grounding and the passage of OPA that authorization was granted.

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Oil Pollution Act (OPA)

In addition to authorizing use of the OSLTF, OPA consolidated the liability and compensation requirement of certain prior federal oil pollution laws and their supporting funds, including the:

  • Federal Water Pollution Control Act (FWPCA),
  • Deepwater Port Act,
  • Trans-Alaska Pipeline System (TAPS) Authorization Act, and
  • Outer Continental Shelf Lands Act.

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Uses of the Fund

With the consolidation of these funds and the collection of a tax on the petroleum industry, the Fund increased to $1 billion. Fund uses were delineated by OPA to include:

  • Removal costs incurred by the Coast Guard and EPA
  • State access for removal activities;
  • Payments to federal, state, and Indian tribe trustees to conduct natural resource damage assessments and restorations;
  • Payment of claims for uncompensated removal costs and damages;
  • Research and development; and
  • Other specific appropriations.

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Structure of the Fund

The OSLTF has two major components.

  1. The Emergency Fund is available for Federal On-Scene Coordinators (FOSCs) to respond to discharges and for federal trustees to initiate natural resource damage assessments. The Emergency Fund is a recurring $50 million available to the President annually.
  2. The remaining Principal Fund balance is used to pay claims and to fund appropriations by Congress to Federal agencies to administer the provisions of OPA and support research and development.
chart of OSLTF

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The Emergency Fund

To ensure rapid, effective response to oil spills, the President has the authority to make available--without Congressional appropriation--up to $50 million each year to fund removal activities and initiate NRDAs. Funds not used in a fiscal year are available until expended. To the extent that $50 million is inadequate, the Maritime Transportation Security Act of 2002 granted authority to advance up to $100 million from the Principal Fund to fund removal activities. (This provision has not been utilized to date.)

A core mission of the NPFC is to administer the disbursement and ensure proper use of the Emergency Fund, 24 hours a day, every day, so that the FOSC can immediately respond to a discharge or monitor prompt and effective cleanup activities by the responsible party (RP). the Emergency Fund can be used by FOSCs to cover expenses associated with mitigating the threat of an oil spill, as well as the costs of oil spill containment, countermeasures, cleanup, and disposal activities. While the use of the OSLTF is most closely associated with discharges from ships, it has increasingly been used for discharges at industrial or onshore oil storage and production facilities.

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The Principal Fund

Sources of the Principal Fund

The Principal Fund of the OSLTF has several recurring and nonrecurring sources of revenue.

  • Barrel Tax. The largest source of revenue has been a per-barrel excise tax, collected from the oil industry on petroleum produced in or imported to the United States. The original 5-cent-per-barrel tax expired at the end of 1994 because of the sunset provision in the law. The 2005 Energy Policy Act again reinstated the tax (effective April 2006). The Energy Improvement and Extension Act of 2008 extended the per-barrel excise tax through December 2017 and increased the per-barrel excise tax from 5 cents to 8 cents from 2009-2016 and to 9 cents in 2017.
  • Transfers. A second major source of revenue has been transfers from other existing pollution funds listed above. Total transfers into the Fund since 1990 have exceeded $550 million. No additional funds remain to be transferred to the OSLTF.
  • Interest. A recurring source of OSLTF revenue is the interest on the Fund principal from U.S. Treasury investments. As a result of historically low interest rates, interest income declined in 2003 and 2004, but has rebounded in recent years as Treasury rates have risen with the economic recovery.  The Department of the Treasury serves as the OSLTF’s investment manager.
  • Cost Recoveries. Another source is cost recoveries from responsible parties (RPs); those responsible for oil incidents are liable for costs and damages. NPFC bills RPs to recover costs expended by the Fund. As these monies are recovered, they are deposited into the Fund.
  • Penalties. In addition to paying for clean-up costs, RPs may incur fines and civil penalties under OPA, the Federal Water Pollution Control Act, the Deepwater Port Act, and the Trans-Alaska Pipeline Authorization Act. Penalty deposits into the OSLTF are generally between $4 million and $7 million per year.

Uses of the Principal Fund

The Principal Fund has two types of expenses.

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Last Modified 10/22/2013