Owners’ & Charterers’
Liability for Oil Pollution
FREEHILL HOGAN & MAHAR, LLP
80 PINE STREET
NEW YORK, NY 10005-1759
TEL: 212 425-1900
FAX: 212 425 1901
Who is liable under Federal Law?
Oil Pollution Act of 1990
33 USC §2702
…each responsible party for a vessel or a facility from which oil is discharged,
or which poses the substantial threat of a discharge of oil into or upon the
navigable waters or adjoining shoreline or the exclusive economic zone is liable
for the removal costs and damages specified in subsection (b) that result from
such incident.
33 USC §2701 (32)
“responsible party” means the following:
(A) Vessels
In the case of a vessel, any person owning, operating or demise chartering the
vessel.
Under OPA 90 a vessel owner is clearly a “responsible party” liable for oil
pollution.
A time or voyage charterer unlikely to be held as a “responsible party” unless
they are operationally involved in the spill incident.
Who is liable under State law?
OPA 90 does not prevent individual states from passing their
own pollution statutes and 26 coastal states have such statutes.
As under OPA 90, vessel owners are clearly liable under state
pollution laws.
State statutes do not uniformly define who is responsible and
some of the definitions are vague and broad. Examples:
Alabama – “any person” whose wrongful act, omission or
negligence results in pollution
Delaware – “any other person” who is responsible for the
operation, manning, victualling and supplying of the vessel.
Therefore, a charterer could have liability under the broad
wording of certain state pollution statutes
However, it would be unusual for a
charterer to be pursued under state law
because:
OPA 90 requires shipowners to post financial
guarantees in order to trade to the U.S. - $1,200
per grt for a tanker. The guarantee is used to
pay for clean up and claims
Even if the vessel owner’s financial guarantee
is exceeded, the owners P&I Club will almost
certainly continue to fund clean up and claims.
Why? Concern over “federalization” of spill
OPA 90 established National Pollution Trust
Fund to cover damages not covered by the
responsible party
There are few instances of charterers being pursued for pollution liability
What costs and damages are
recoverable for an oil spill?
33 USC § 2702(b)
Removal costs
Damage to natural resources
Damage to real or personal property
Damage to subsistence use
Loss of revenues by U.S. or state
Loss of profits
Public services
A responsible party can also be liable for:
Civil and criminal penalties
Federal and state costs of natural resource damage
assessment
The responsible party will also bear it’s own defense costs –
lawyers, experts, etc.
Is the responsible party’s liability
limited under OPA 90?
Yes and no.
OPA 90 provides for complete exoneration
33 USC §2703 relieves a responsible party from all
liability if the spill was solely due to:
-
Act of God
-
Act of War
-
Act of a third party not in contract with the responsible party, but
responsible party still must prove:
● it exercised due care for the oil
● took precautions against the foreseeable acts of the third
party
OPA 90 provides for a limit on
responsible party’s liability
33 USC § 2704 limits liability to $1,200 per grt for a tanker and to
$600 per grt for a non-tank vessel
BUT, the right to limit is lost if the spill was proximately caused
by:
gross negligence of willful misconduct
the violation of an applicable Federal safety,construction or operating regulation by
responsible party, employee, agent or contracting party
The right to limit is lost if the responsible party:
fails to report the spill
fails to cooperate in clean up
fails to comply with orders given by Federal authorities
In reality, limitation under OPA 90 is very difficult.
Examples Of Major Spills:
BOUCHARD B 155/BALSA 37/
BARGE OCEAN 255 - 1993
-
300,000 barrels no. 6 oil
-
Cost of clean up and third party claims $82.5M
-
NRDA claim - $8.5M
BARGE NORTHCAPE – 1996
-
828,000 gallons of no. 2 oil
Cost of clean up - $12.2M
Cost of third party claims - $21M
NRDA - $8M plus lobster restoration project
Criminal fine - $8.5M
JULIE N - 1996
-
179,634 gallons of oil
Cost of clean up - $39.2M
Cost of third party claims - $7.4M
NRDA - $1M
A rare case where the shipowner was able to limit liability.
STAR EVVIVA - 1999
-
24,000 gallons fuel oil – but 30-50 miles off coast of South
Carolina
Clean up – none
Third party claims – none
NRDA settlement for deaths of 183 birds - $2M
Criminal fine - $500,000
ATHOS I - 2004
-
265,000 gallons crude oil affecting 115 miles of
shoreline
Cost of clean up - $125M
Cost of third party claims – unknown
NRDA – unknown
This is another rare case where the vessel owner
may be able to limit liability.
SERGO ZAKARIADZE - 1999
-
-
Bulk carrier loaded with cement –
grounded on breakwater at entrance to
San Juan Harbor
No spill
Cost of removal of vessel - $15M
Cost of USCG response to threat of spill
from Bunkers - $1M
Natural Resource
Damage Assessments
Goal of NRDA is to measure and quantify damage to
environment
Cooperative NRDA
Importance of baseline data
Computer modeling
Restoration Projects
NRDA claims usually settle
Criminal Sanctions
Criminal investigations of oil spills are now almost the rule, not
the exception
Refuse Act, 33 USC §411 – strict criminal liability for
discharging oil in U.S,. waters, regardless of fault or intent
Migratory Bird Treaty Act, 16 USC §707 – strict criminal liability
for discharge of oil which kills migratory birds
Clean Water Act, 33 USC 1319(c) - makes negligent discharge
a misdemeanor, but negligence is measured by ordinary civil
standard (more likely than not) as opposed to criminal standard
(beyond a reasonable doubt)
Fines can be up to double the damages
Conviction of an individual can result in a jail sentence under
Mandatory Federal Sentencing Guidelines
Recommendations
1.
Pre-plan - have operable vessel response plans in place, along with current
contracts with clean up contractors and your Qualified Individual
2.
Make certain the contractors and advisors in your plan are experienced and
competent. Negotiate rates in advance.
3. React fast and in force. Better to overreact than under-react.
4. Remember possible criminal liability. Advise crew of their rights. Get criminal
counsel to the scene.
5. Delegate responsibility – clean up, third party claims, NRDA and criminal issues
are too much for one person to handle.
6. Aggressively settle third party claims. This may help to avoid class actions.
7. Cooperate with the media - may help to stem public outrage, which can affect
politicians and prosecutors.
8. Get baseline data for NRDA
9. DON’T SPILL OIL!