Representing New York's Heating Fuels Industry

Oil Spill Liability Trust Fund Remains Unfunded As Long-Term Budget Deal Eludes Congress

The excise tax that is the principal source of revenue for the federal Oil Spill Liability Trust Fund sunset at the end of the year with no apparent reauthorization on the near horizon. As a result, America's ability to respond quickly to or prevent a major oil spill may be significantly compromised, according to Public Employees for Environmental Responsibility (PEER).

The 9-cent per barrel excise tax on all oil at U.S. refineries expired on December 31st. The U.S. Coast Guard, which administers the Trust Fund, estimates that its current balance is approximately $5.7 billion. However, no bill extending this excise has been introduced into the current session of Congress, although it is included in a "tax extenders" bill to be introduced by Senate Finance Committee Chairman Orrin Hatch if and when Congress takes up a regular Budget, as opposed to a series of Continuing Resolutions.

Enacted in the wake of the massive Exxon Valdez spill in Alaska's Prince William Sound, the Oil Pollution Act of 1990 places liability, up to specified limits, on the responsible party. The Oil Spill Liability Trust Fund pays for costs incurred beyond those limits, as well as...

  • Reimbursing spill-related expenses for the Coast Guard and other federal agencies;
  • State restoration costs and lost tax revenue; and
  • Losses claimed by businesses, such as fishing fleets.

"With the new push for offshore drilling, letting the Oil Spill Liability Trust Fund run aground is just plain irresponsible," said Rick Steiner, PEER board member, noting that small operators responsible for big spills can avoid liability by declaring bankruptcy, leaving taxpayers holding the bag. "Congress should not only reauthorize the funding for the Trust Fund, but should also expand it so it can meet the future challenges we are most likely to face."

By way of proposed improvements he recommended several steps be taken to improve the viability of the Trust Fund, including:

  1. Increase the per barrel oil fee paid into the Fund;
  2. Institute a spill fee on cargo ships, which are covered by the Fund but do not currently pay into it;
  3. Make the Fund easily accessible for spill prevention measures nationwide; and
  4. Increase the financial liability limits for spills.

Even when fully funded, the Government Accountability Office warned that the Trust Fund could be outstripped by a single major spill...especially if no responsible party with deep pockets helped to defray the costs. Without renewal of the excise tax, the Trust Fund is at even more risk of exhaustion.