Oil Spill Liability Trust Fund to Lapse at Month's End

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

The 9-cent per barrel excise tax on all oil at U.S. refineries is set to expire 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.

Enacted in the wake of the massive Exxon Valdez spill in Alaska's Prince William Sound, the Oil Pollution Act of 1990 places the 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 Trump administration's new push for offshore drilling, letting the Oil Spill Liability Trust Fund run aground is just plain irresponsible," said Rick Steiner, a retired University of Alaska professor and 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, in 2013 the Prince William Sound Regional Citizens' Advisory Council 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 costs. Without renewal of the excise tax, the Trust Fund is even more at risk of exhaustion.

"The main advantage of having this Superfund of the Seas is the ability to respond quickly to a major spill without having to wait for Congress to act - the wisdom of which is certainly borne out by this current episode," stated PEER Executive Director Jeff Ruch, pointing out that the Republicans have kept the Trust Fund excise tax out of the major tax bill now in conference but are likely to include major oil industry tax breaks. "The basic principle that the oil industry should bear some responsibility for the costs of oil spills to the environment and to the public has gotten lost in the political shuffle."