Oil Pollution Act (OPA) Frequently Asked Questions
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Where does the Oil Spill Liability Trust Fund receive its balance? Who pays into it?
The Oil Spill Liability Trust Fund (OSLTF) established by the Oil Pollution Act (OPA) is funded in several ways:
- Investment interest on the Fund's principal,
- Costs recovered from responsible parties,
- Civil and criminal penalties from responsible parties,
- Barrel tax on domestic and imported oil, and
- Transfers from other legacy pollution funds.
To date, the largest source of income for the Fund has been from the per-barrel excise tax on imported and domestic oil, originally 5-cents-per-barrel tax. The Energy Policy Act of 2005 re-instated the tax in 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.
The Act also repealed the requirement that the tax be suspended when the Fund balance exceeded any given amount.
Who pays the OSLTF oil tax?
The per-barrel tax to finance the Oil Spill Liability Trust Fund is addressed at section 4611 of the Internal Revenue Code (26 U.S.C. 4611). The tax applies to crude oil received at a United States (US) refinery and to petroleum products entered into the US for consumption, use, or warehousing. The tax also applies to other domestic crude oil used in, or exported from, the US.
The tax on crude oil received at a US refinery is paid by the refinery operator. The tax on imported petroleum products is paid by the person entering the product for consumption use or warehousing. The tax on other crude oil is paid by the person using or exporting the crude oil.
While the Coast Guard is delegated certain authorities to manage and use the Oil Spill Liability Trust Fund, collection of taxes and deposit of collections to the Fund is managed by the Department of Treasury.
What does the trust fund pay for?
The OSLTF has 2 components.
- The Emergency Fund is used to fund removal activities and the initiation of natural resource damage assessments.
- The Principal Fund, that portion of the OSLTF exclusive of the Emergency Fund, is used primarily to carry out two functions:
- Adjudication and payment of claims for certain uncompensated removal costs and damages
Congressional Appropriations to various federal agencies (including the Coast Guard) responsible for implementation, administration, and enforcement of OPA, and oil spill research and development.
How much money does the trust fund have in it? What is the forecast for the Fund? How long has the trust fund been around?
Congress created the Fund in 1986, but did not pass legislation to authorize the use of the money or the collection of revenue to maintain it until August 1990, when President George H. W. Bush signed OPA into law and authorized use of the OSLTF.
Is there a limit to how much the OSLTF will pay into a response?
Expenditures from the Fund for any one oil pollution incident are limited to $1 billion or the balance of the Fund, whichever is less. Natural resource damage assessments and claims in connection with any one incident are limited to $500 million of the $1 billion per incident limit.
How much do you recover from responsible parties to pay back the Fund?
Under OPA, those responsible for oil incidents are liable for costs and damages. The NPFC has a billing and collection program to recover costs expended by the Fund, carried out in accordance with the U.S. debt collection laws. In recent years, the NPFC has been able to collect between $7-$14 million per year of the removal costs and damage costs it pays from the Fund. There are several barriers to achieving a higher rate of recovery:
- In nearly 50% of spills, the FOSC is unable to identify the source of the spill or identify a responsible party (RP).
- Costs expended in excess of a responsible party's liability limit are generally unrecoverable.
- The response for spills involving onshore facilities (such as leaking, abandoned pipelines, underground tanks, or oil wells) is typically complex and costly, but hard to collect on because many of these facilities are abandoned or uninsured.
How are OPA and the OSLTF different from CERCLA and Superfund?
Although not comprehensive, the table below summarizes some of the differences.
||OPA & OSLTF
||CERCLA & Superfund
|Type of Pollution Covered
||Oil spills & threats of spills into U.S. navigable waters (usually sudden events requiring immediate response)
||Hazardous substances, pollutants, & contaminants (often result of newly discovered past pollution with response requiring extensive planning & public participation)
||NPFC, Coast Guard
||EPA (NPFC administers only the Coast Guard use of Superfund resources)
|Uses of Fund
||Spill response and cleanup
Claims for removal costs and damages, including natural resource damages
Appropriations by Congress
|Short-term removals when prompt response is required
Long-term remedial response actions
Appropriations by Congress
| Source of Funds
||per-barrel tax on oil
Transfers from other funds
Interest on Fund balance
Fines & penalties
|Tax on chemical & petroleum industries (expired 1986)
Annual Congressional appropriations