On March 24, 1989, the tank vessel EXXON VALDEZ struck a reef in Prince William Sound, Alaska, spilling more than 11 million gallons of crude oil, resulting in one of the most devastating man-made disasters ever to occur at sea. At its peak, the cleanup effort employed more than 1,000 vessels of all types and 10,000 personnel. Forty skimmers, 300,000 feet of containment boom and 100 aircraft were used. The Coast Guard contingent included eight cutters, nine aircraft, and more than 200 people. United States Coast Guard Cutter RUSH provided traffic control for the aircraft involved, with 750 - 1,000 daily flights at the Valdez airport which normally handled a half dozen flights per day. More than 1,300 miles of pristine shoreline were impacted by oil. It has been estimated that the death toll from the spill includes 250,000 seabirds, 2,800 sea otters, 300 harbor seals, 250 bald eagles, up to 22 killer whales, and billions of salmon and herring eggs. Both fishing and tourist industries were severely damaged.
From a response funding standpoint, the morning of the spill the Coast Guard had $6.7million available for oil pollution, yet this massive federal response was soon burning through nearly $1 million per day. Guardians like Al Thuring and Jack Crawford, in what was then the Headquarters Office of Marine Environmental Response, established an expedited reimbursement process with Exxon. SK1 Miguel Bella from the Pacific Strike Team was furiously paying bills on scene and using the new fangled technology of fax machines to get the cost documentation to headquarters. Each Friday a bill was presented to Exxon which would wire transfer reimbursement to the Federal Reserve Bank in New York. A young accountant named John Barcynski at Coast Guard Headquarters would confirm for the response program that they had funds available and could continue. This went on for months resulting in a total Federal cost of $120 million, a small part of the $3 billion total cost reported by Exxon. Today, I’m fortunate to have Al, Jack, and Miguel still working their magic at the National Pollution Funds Center and John Barcynski continues to support the rest of the Coast Guard from the Finance Center.
One of the major results of the EXXON VALDEZ spill was the passage of the Oil Pollution Act of 1990 (OPA). In this act, Congress addressed tanker construction, personnel licensing and response capability. Title I of OPA established liability and compensation requirements including the Oil Spill Liability Trust Fund (OSLTF). In 1991, the National Pollution Funds Center (NPFC) was created to implement Title I of OPA and administer the OSLTF.
There are three key functions that the NPFC performs today demonstrating how far we’ve come since the EXXON VALDEZ:
Making funds available for oil spill response
To ensure rapid, effective response to oil spills, OPA provides the President with $50 million each year from the OSLTF to fund removal activities. This money goes into an Emergency Fund, and remains available until expended. Since the enactment of OPA, more than $866 million has been made available from the Emergency Fund enabling the prompt response to over 10,000 oil pollution incidents.
To ensure the solvency of the OSLTF, a Federal tax of eight cents per barrel of oil is currently authorized. The balance of the OSLTF today is $1.2 billion.
Making the polluter pay
A basic tenet of OPA holds that those responsible for oil pollution incidents are liable for costs and damages. The NPFC performs the billing and collection functions to recover costs expended from the OSLTF. Since the enactment of OPA over $234 million has been recovered from polluters and returned to the Fund.
To ensure those responsible for oil spills are able to pay, the NPFC manages the Certificate of Financial Responsibility (COFR) program that requires financial guarantees for certain vessel types should a spill occur. Currently over 22,500 vessels that carry oil in U.S. waters hold active COFRs.
In addition, actual spill data has been used to adjust OPA Limits of Liability to ensure that the liability owners and operators of vessels face matches the risk they pose to the environment.
Ensuring those damaged by oil spills are compensated
A primary objective of the OPA regime is to ensure that those damaged by oil pollution are fairly and timely compensated. Since the establishment of OPA, the NPFC has received over $1 billion in claims and has paid out over $350 million.
In addition, OPA established a restoration-based liability regime for natural resource damages, where spillers are responsible for the cost of on-the-ground projects that restore the injured resources to pre-spill conditions. This approach is a significant departure from the more traditional penalty or punitive approaches taken in other environmental statutes.
Since the NPFC started paying claims for natural resource damages in 1999, the Coast Guard has provided state and federal trustee agencies over $50 million to restore natural resource damages resulting from oil spills. This is in addition to the hundreds of millions of dollars that known responsible parties have paid trustees under the OPA liability regime.
The next twenty years?
I'm frequently asked how modernization is affecting NPFC. My answer is that NPFC has for 18 years provided bi-level support through pollution response funding directly to the end user. The end user in this case being the Coast Guard Sector Commander or their EPA counterpart exercising Federal On-Scene Coordinator (FOSC) authority. The chain of command has changed, with NPFC now reporting to the Assistant Commandant for Resources and CFO (CG-8), Rear Admiral Keith Taylor, instead of reporting directly to the Chief of Staff. This change was the right thing to do at the right time. We must develop new financial systems while continuing to harden our control environment in the contingency response world of work. I share Rear Admiral Taylor's Financial Management Vision of "A world-class financial management enterprise that enhances premier mission execution", as described in ALCOAST 619/08. While I hope we never face another EXXON VALDEZ-class oil spill, our nation is in a much stronger position to respond today than we were in 1989.
Craig Bennett
Director, National Pollution Funds Center
