Owners’ & Charterers’ Owners’ & Charterers’ Liability for Oil PollutionLiability for Oil Pollution

FREEHILL HOGAN & MAHAR, LLPFREEHILL HOGAN & MAHAR, LLP80 PINE STREET80 PINE STREET

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Who is liable under Federal Law?Who is liable under Federal Law?Oil Pollution Act of 1990Oil Pollution Act of 1990

33 USC §270233 USC §2702 … …each responsible party for a vessel or a facility from which oil is discharged, or 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 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 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 for the removal costs and damages specified in subsection (b) that result from such incident.such incident.

33 USC §2701 (32)33 USC §2701 (32) “ “responsible party” means the following:responsible party” means the following: (A) Vessels (A) Vessels In the case of a vessel, any person owning, operating or demise chartering the In the case of a vessel, any person owning, operating or demise chartering the

vessel.vessel.

Under OPA 90 a vessel owner is clearly a “responsible party” liable for oil Under OPA 90 a vessel owner is clearly a “responsible party” liable for oil pollution.pollution.

A time or voyage charterer unlikely to be held as a “responsible party” unless A time or voyage charterer unlikely to be held as a “responsible party” unless they are operationally involved in the spill incident.they are operationally involved in the spill incident.

Who is liable under State law?Who is liable under State law?

OPA 90 does not prevent individual states from passing their OPA 90 does not prevent individual states from passing their own pollution statutes and 26 coastal states have such statutes.own pollution statutes and 26 coastal states have such statutes.

As under OPA 90, vessel owners are clearly liable under state As under OPA 90, vessel owners are clearly liable under state pollution laws. pollution laws.

State statutes do not uniformly define who is responsible and State statutes do not uniformly define who is responsible and some of the definitions are vague and broad. Examples:some of the definitions are vague and broad. Examples:

Alabama – “any person” whose wrongful act, omission Alabama – “any person” whose wrongful act, omission or or negligence results in pollutionnegligence results in pollution

Delaware – “any other person” who is responsible for the Delaware – “any other person” who is responsible for the operation, manning, victualling and supplying of the operation, manning, victualling and supplying of the

vessel.vessel.

Therefore, a charterer could have liability under the broad Therefore, a charterer could have liability under the broad wording of certain state pollution statuteswording of certain state pollution statutes

However, it would be unusual for a However, it would be unusual for a charterer to be pursued under state law charterer to be pursued under state law becausebecause::

OPA 90 requires shipowners to post financial OPA 90 requires shipowners to post financial guarantees in order to trade to the U.S. - $1,200guarantees in order to trade to the U.S. - $1,200per grt for a tanker. The guarantee is used toper grt for a tanker. The guarantee is used topay for clean up and claimspay for clean up and claims

Even if the vessel owner’s financial guarantee Even if the vessel owner’s financial guarantee is exceeded, the owners P&I Club will almostis exceeded, the owners P&I Club will almostcertainly continue to fund clean up and claims.certainly continue to fund clean up and claims.Why? Concern over “federalization” of spillWhy? Concern over “federalization” of spill

OPA 90 established National Pollution TrustOPA 90 established National Pollution TrustFund to cover damages not covered by theFund to cover damages not covered by theresponsible party responsible party

There are few instances of charterers being pursued for pollution liabilityThere are few instances of charterers being pursued for pollution liability

What costs and damages are What costs and damages are recoverable for an oil spill?recoverable for an oil spill?33 USC § 2702(b)33 USC § 2702(b)

Removal costsRemoval costs

Damage to natural resourcesDamage to natural resources

Damage to real or personal propertyDamage to real or personal property

Damage to subsistence useDamage to subsistence use

Loss of revenues by U.S. or stateLoss of revenues by U.S. or state

Loss of profitsLoss of profits

Public servicesPublic services

A responsible party can also be liable for:A responsible party can also be liable for:Civil and criminal penaltiesCivil and criminal penalties

Federal and state costs of natural resource damage Federal and state costs of natural resource damage assessmentassessment

The responsible party will also bear it’s own defense costs – The responsible party will also bear it’s own defense costs – lawyers, experts, etc. lawyers, experts, etc.

Is the responsible party’s liability Is the responsible party’s liability limited under OPA 90?limited under OPA 90?

Yes and no.Yes and no.

OPA 90 provides for complete exoneration OPA 90 provides for complete exoneration

33 USC §2703 relieves a responsible party from 33 USC §2703 relieves a responsible party from allallliability if the spill was solely due to:liability if the spill was solely due to:

-- Act of GodAct of God

-- Act of WarAct of War

-- Act of a third party not in contract with the responsible party, Act of a third party not in contract with the responsible party, but but responsible party still must prove:responsible party still must prove:

● ● iit exercised due care for the oilt exercised due care for the oil

● ● took precautions against the foreseeable acts of the third took precautions against the foreseeable acts of the third party party

OPA 90 provides for a limit on OPA 90 provides for a limit on responsible party’s liabilityresponsible party’s liability

33 USC § 2704 limits liability to $1,200 per grt for a tanker and to33 USC § 2704 limits liability to $1,200 per grt for a tanker and to$600 per grt for a non-tank vessel$600 per grt for a non-tank vessel

BUT, the right to limit is lost if the spill was proximately causedBUT, the right to limit is lost if the spill was proximately causedby:by:

gross negligence of willful misconductgross negligence of willful misconduct

the violation of an applicable Federal safety,construction or operating regulation by the violation of an applicable Federal safety,construction or operating regulation by responsible party, employee, agent or contracting partyresponsible party, employee, agent or contracting party

The right to limit is lost if the responsible party:The right to limit is lost if the responsible party:

fails to report the spillfails to report the spill

fails to cooperate in clean upfails to cooperate in clean up

fails to comply with orders given by Federal authoritiesfails to comply with orders given by Federal authorities

In reality, limitation under OPA 90 is very difficult.In reality, limitation under OPA 90 is very difficult.

Examples Of Major Spills:Examples Of Major Spills:

BOUCHARD B 155/BALSA 37/ BOUCHARD B 155/BALSA 37/ BARGEBARGE OCEAN 255 - 1993 OCEAN 255 - 1993

-- 300,000 barrels no. 6 oil300,000 barrels no. 6 oil

-- Cost of clean up and third party claims - Cost of clean up and third party claims - $82.5M$82.5M

-- NRDA claim - $8.5MNRDA claim - $8.5M

BARGE NORTHCAPE – 1996BARGE NORTHCAPE – 1996-- 828,000 gallons of no. 2 oil828,000 gallons of no. 2 oil

-- Cost of clean up - $12.2MCost of clean up - $12.2M

-- Cost of third party claims - $21MCost of third party claims - $21M

-- NRDA - $8M plus lobster restoration projectNRDA - $8M plus lobster restoration project

-- Criminal fine - $8.5MCriminal fine - $8.5M

JULIE N - 1996JULIE N - 1996-- 179,634 gallons of oil179,634 gallons of oil-- Cost of clean up - $39.2MCost of clean up - $39.2M-- Cost of third party claims - $7.4MCost of third party claims - $7.4M-- NRDA - $1MNRDA - $1M

A rare case where the shipowner was able to limit liability.A rare case where the shipowner was able to limit liability.

STAR EVVIVA - 1999STAR EVVIVA - 1999

-- 24,000 gallons fuel oil – but 30-50 miles off coast of South 24,000 gallons fuel oil – but 30-50 miles off coast of South CarolinaCarolina-- Clean up – noneClean up – none-- Third party claims – noneThird party claims – none-- NRDA settlement for deaths of 183 birds - $2MNRDA settlement for deaths of 183 birds - $2M-- Criminal fine - $500,000Criminal fine - $500,000

ATHOS I - 2004ATHOS I - 2004

-- 265,000 gallons crude oil affecting 115 miles of 265,000 gallons crude oil affecting 115 miles of shorelineshoreline

-- Cost of clean up - $125M Cost of clean up - $125M

-- Cost of third party claims – unknownCost of third party claims – unknown

-- NRDA – unknownNRDA – unknown

-- This is another rare case where the vessel This is another rare case where the vessel owner owner may be able to limit liability.may be able to limit liability.

SERGO ZAKARIADZESERGO ZAKARIADZE - 1999- 1999

-- Bulk carrier loaded with cement – Bulk carrier loaded with cement – grounded on breakwater at entrance to grounded on breakwater at entrance to San Juan HarborSan Juan Harbor-- No spillNo spill-- Cost of removal of vessel - $15MCost of removal of vessel - $15M-- Cost of USCG response to threat of Cost of USCG response to threat of spill spill from Bunkers - $1Mfrom Bunkers - $1M

Natural Resource Damage Assessments

Goal of NRDA is to measure and quantify damage to Goal of NRDA is to measure and quantify damage to environmentenvironment

Cooperative NRDACooperative NRDA

Importance of baseline dataImportance of baseline data

Computer modelingComputer modeling

Restoration Projects Restoration Projects

NRDA claims usually settleNRDA claims usually settle

Criminal SanctionsCriminal SanctionsCriminal investigations of oil spills are now almost the rule, not Criminal investigations of oil spills are now almost the rule, not the exceptionthe exception

Refuse Act, 33 USC §411 – strict criminal liability for Refuse Act, 33 USC §411 – strict criminal liability for discharging oil in U.S,. waters, discharging oil in U.S,. waters, regardlessregardless of fault or intent of fault or intent

Migratory Bird Treaty Act, 16 USC §707 – strict criminal liability Migratory Bird Treaty Act, 16 USC §707 – strict criminal liability for discharge of oil which kills migratory birdsfor discharge of oil which kills migratory birds

Clean Water Act, 33 USC 1319(c) - makes negligent discharge Clean Water Act, 33 USC 1319(c) - makes negligent discharge a misdemeanor, but negligence is measured by ordinary civil a misdemeanor, but negligence is measured by ordinary civil standard (more likely than not) as opposed to criminal standard standard (more likely than not) as opposed to criminal standard (beyond a reasonable doubt)(beyond a reasonable doubt)

Fines can be up to double the damages Fines can be up to double the damages

Conviction of an individual can result in a jail sentence under Conviction of an individual can result in a jail sentence under Mandatory Federal Sentencing Guidelines Mandatory Federal Sentencing Guidelines

RecommendationsRecommendations1.1. Pre-plan - have operable vessel response plans in place, along with current Pre-plan - have operable vessel response plans in place, along with current

contracts with clean up contractors and your Qualified Individualcontracts with clean up contractors and your Qualified Individual

2.2. Make certain the contractors and advisors in your plan are experienced and Make certain the contractors and advisors in your plan are experienced and competent. Negotiate rates in advance.competent. Negotiate rates in advance.

3. 3. React fast and in force. Better to overreact than under-react.React fast and in force. Better to overreact than under-react.

4. 4. Remember possible criminal liability. Advise crew of their rights. Get criminal Remember possible criminal liability. Advise crew of their rights. Get criminal counsel to the scene.counsel to the scene.

5.5. Delegate responsibility – clean up, third party claims, NRDA and criminal issues Delegate responsibility – clean up, third party claims, NRDA and criminal issues are too much for one person to handle.are too much for one person to handle.

6. 6. Aggressively settle third party claims. This may help to avoid class actions.Aggressively settle third party claims. This may help to avoid class actions.

7. 7. Cooperate with the media - may help to stem public outrage, which can affect Cooperate with the media - may help to stem public outrage, which can affect politicians and prosecutors. politicians and prosecutors.

8. 8. Get baseline data for NRDA Get baseline data for NRDA

9.9. DON’T SPILL OIL! DON’T SPILL OIL!