U.S. Pollution Law, Regulation And Enforcement by: George M. Chalos, Esq.

“OPA 90”

The Oil Pollution Act of 1990, (“OPA 90”), established an extensive regulatory and liability regime for the protection and cleanup of the marine environment from oil spills. Congress enacted the Oil Pollution Act of 1990 (OPA) in the wake of the EXXON VALDEZ oil spill in Prince William Sound, Alaska, as well as a rash of other major spills. OPA’s scope was ambitious, including extensive provisions to prevent the circumstances under which spills occur, to enhance federal authority and resources to respond to spills and to compensate those who incur removal costs or damages when spills do inevitably occur in the navigable waters, adjoining shorelines, and exclusive economic zone of the United States.

As you know, OPA set new requirements for vessel construction, crew licensing and manning, mandated contingency planning, enhanced federal response capability, broadened enforcement authority, increased penalties, created new research and development programs, and increased the liability of those responsible for the vessels and facilities that spill oil. OPA added entirely new compensation provisions for a wide array of costs and damages caused by oil spills, and significantly strengthened financial responsibility requirements to ensure that persons liable for large vessel and offshore facility spills have the ability to compensate claimants up to their liability limit. OPA 90 affects all owners and operators whose vessels trade to the United States or its territories or possessions or whose vessels operate in United States waters, including the United States’ territorial sea and its two hundred (200) nautical mile exclusive economic zone.

Under OPA 90, should a pollution incident occur, vessel owners, operators and bareboat (or demise) charterers are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all response, removal, clean-up costs and “other damages” arising from the discharge or threatened discharge of oil from their vessel(s). Other damages are defined broadly to include (1) natural resources damages and the costs of assessing them, (2) real and personal property damages, (3) net loss of taxes, royalties, rents, fees and other lost revenues, (4) lost profits or impairment of earning capacity due to property or natural resources damage, (5) net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards, and (6) loss of subsistence use of natural resources. Previously, OPA 90 limited the liability of responsible parties to the greater of $1,200 per gross ton or $10 million per tanker that is over 3,000 gross tons (subject to possible adjustment for inflation).

However, following a recent spill incident, these limits have been increased. Up until July 11, the United States had relatively straight-forward sets of limits on liability for oil pollution incidents. Now, the new legislation subdivides tank vessels into those with qualifying double hulls and those without double hulls. The group without double hulls includes not only those with single hulls, but also those with either double sides or double bottoms.

Presently, for a tank vessel greater than 3,000 gross tons that does not have a qualifying double hull, the new limits on liability are the greater of $3,000 per gross ton or $22 million. For a tank vessel of 3,000 gross tons or less that does not have a qualifying double hull, the new limits are the greater of $3,000 per gross ton or $6 million. For tank vessels with qualifying double hulls, the new limits are the greater of $1,900 per gross ton or either $16 million (for tank vessels of greater than 3,000 gross tons) or $4 million (for tank vessels of 3,000 gross tons or less). For any other vessel, the new limits on liability are the greater of $950 per gross ton or $800,000. Of course, these limits only apply if the responsible party (“RP”) successfully demonstrates its entitlement to an OPA 90 limitation of liability.

These limits of liability do not apply if the incident was proximately caused by violation of applicable United States federal safety, construction or operating regulations or by the RP (or its agents’ or employees or any person acting pursuant to a contractual relationship with the RP) or by gross negligence or willful misconduct, or if the RP fails or refuses to report the incident or to cooperate and assist in connection with the oil removal activities.

Under OPA 90, with some limited exceptions, all newly built or converted tankers operating in United States waters must be built with double-hulls, and existing vessels which do not comply with the double-hull requirement must be phased out over a 25-year period (1990-2015) based on size, age and hull construction. Notwithstanding the phase-out period, OPA 90 currently permits existing single-hull tankers to operate until the year 2015 if their operations within United States waters are limited to discharging at the Louisiana Off-Shore Oil Platform, or off-loading by means of lightering activities within authorized lightering zones more than 60 miles off-shore.

Certificates of Financial Responsibility

OPA 90 requires owners and operators of vessels to establish and maintain with the United States Coast Guard evidence of financial responsibility sufficient to meet their potential liabilities under OPA 90. Under the regulations, evidence of financial responsibility may be demonstrated by insurance, surety bond, letter of credit, self-insurance, guaranty or other satisfactory evidence. Under OPA 90, it is generally understood that an Owner or Operator of a fleet of tankers is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the tanker in the fleet having the greatest maximum liability under OPA 90. The Coast Guard’s regulations concerning certificates of financial responsibility provide, in accordance with OPA 90, that claimants may bring suit directly against an insurer or guarantor that furnishes certificates of financial responsibility. If an insurer or guarantor is sued directly, it is prohibited from asserting any contractual defense that it may have had against the responsible party and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the responsible party.

State vs. Federal Law

OPA 90 specifically permits individual U.S. coastal states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries. Some states have enacted legislation providing for unlimited liability for oil spills. In some cases, States which have enacted such legislation have not yet issued implementing regulations defining tanker owners’ responsibilities under these laws.

Vessel Response Plans

Owners or Operators of tankers operating in United States waters are required to file Vessel Response Plans (“VRP’s”) with the Coast Guard, and their tankers are required to operate in compliance with their Coast Guard approved plans. These response plans must, among other things, (1) address a “worst case” scenario and identify and ensure, through contract or other approved means, the availability of necessary private response resources to respond to a “worst case discharge,” (2) describe crew training and drills, and (3) identify a qualified individual with full authority to implement removal actions.


The International Convention for the Prevention of Pollution from Ships, (hereinafter “MARPOL” or “MARPOL 73/78”), and it’s U.S. codification as the Act to Prevent Pollution from Ships (hereinafter “APPS”), set forth the requirements for the handling and disposal of oil, sludge, oily bilge water, amongst other things, for U.S. flagged vessels and foreign flagged vessels while in U.S. waters. U.S. law and regulation authorizes and obligates the United States Coast Guard to enforce the law, both civilly and criminally. In response, the Coast Guard has utilized Port State Control inspections to examine vessels with an eye towards investigating possible violations.

MARPOL was drafted in 1973 as part of an international effort to prevent the discharge of oil, chemicals, sewage and garbage from vessels into the world’s oceans. MARPOL was initially based on global recognition of the significant environmental damage caused by vessel pollution, as well as the failure of previous international attempts to regulate it effectively.1 The MARPOL Convention was intended as a “first step” in adding teeth to pre-existing international pollution regulations. Interestingly, the agreement was not binding on signatory states, and the United States did not ratify the Convention.

The International Maritime Organization (hereinafter “IMO”) coordinated the 1978 Protocol in response to numerous oil tanker accidents in 1976-77. The 1978 Protocol absorbed the 1973 Convention and approved measures affecting tanker design and operation.2 It entered into force on October 2, 1983. Generally speaking, the MARPOL Protocol is made up of six (6) Annexes: Annex I regulates pollution by oil; Annex II regulates pollution by noxious liquid substances; Annex III regulates pollution by harmful substances in packaged form; Annex IV regulates pollution by sewage; Annex V regulates pollution by garbage; and Annex VI3 regulates air pollution.4 This report focuses on Annex I, as more fully discussed below.

The Act to Prevent Pollution from Ships

Although the United States eventually ratified MARPOL 73/78, the Act to Prevent Pollution from Ships (“APPS”) was passed by the U.S. Congress in 1980. In its present form, APPS essentially requires that all U.S. flagged ships, and foreign flagged vessels while in United States territorial waters, must comply with Annexes I, II, and V of the MARPOL Protocol. APPS authorizes the Secretary [of the department in which the United States Coast Guard is operating] to promulgate further regulations to ensure vessels discharge oil and waste consistent with the MARPOL requirements. It is a serious federal crime to knowingly violate APPS, MARPOL, or the regulations promulgated by the Coast Guard pursuant to its authority.

U.S. Enforcement of APPS and MARPOL Annex I Violations

Since the tragic events of September 11th, the United States Coast Guard has undertaken a comprehensive program of boarding vessels calling U.S. ports. As a result of the new heightened security measures, there has been a significant increase in the scrutiny to which vessels, her logs, and her records, are being inspected. Such scrutiny, rightly or wrongly, continues to result in numerous vessel and crew detentions, as well as massive civil and criminal charges against vessel Owners, Operators, Managers, Officers and crew.

Specifically, the U.S. Coast Guard established an Oily Water Separator Task Force to examine a wide range of issues related to pollution control equipment and it use on vessels in U.S. waters. The Coast Guard and other law enforcement personnel regularly examine the use and functionality of oily water separator systems more carefully than ever before, and have made it clear that they will seek jail sentences for Masters and engineers of ships committing pollution offense, or falsifying records, including but not limited to Oil Record Books (hereinafter “ORB”). The fact that an Owner, Operator and/or their shore-side staff may be located outside the U.S. is no deterrent to dogged prosecution efforts. Quite often, even if no pollution incident has occurred, the Coast Guard and U.S. prosecutors, upon the mere “discovery” of potential by-passing paraphernalia, (such as a flexible hose or suspicious fittings and piping in the engine room), will commence a Grand Jury5 investigation seeking to prosecute alleged illegal by-passing of the OWS system and/or the presentation of an ORB containing “false entries”.

Document Review During Port State Control Inspection

A document review during a Port State Control inspection will often include an examination of the vessel’s IOPP Certificate, ORB, Incinerator Log, and Shipboard Oil Pollution Emergency Plan (hereinafter “SOPEP”). See 33 C.F.R. § 151.23(a). These documents are often utilized during the inspection of the vessel to ensure the vessel, its documentation and equipment meet all applicable APPS and Annex I requirements.

Oil Record Book

Since the ORB is supposed to record all shipboard oil transfer, and all bilge water and sludge discharge operations, it is thoroughly inspected. For this reason, the ORB must be filled out in accordance with all applicable regulations, and all internal transfers, as well as all overboard discharges, must be recorded without delay.

For example, APPS requires an entry shall be made in the ORB whenever any of the following machinery space operations take place: 1) ballasting or cleaning of fuel oil tanks; 2) discharge of dirty ballast or cleaning water from fuel oil tanks; 3) disposal of oily residues (sludge); and, 4) discharge overboard or disposal otherwise of bilge water that has accumulated in machinery spaces. Entries shall also be made in the ORB whenever any of the following cargo/ballast operations take place on any oil tanker: 1) loading of oil cargo; 2) internal transfer of oil cargo during voyage; 3) unloading of oil cargo; 4) ballasting of cargo tanks and dedicated clean ballast tanks; 5) cleaning of cargo tanks including crude oil washing; 6) discharge of ballast except from segregated ballast tanks; 7) discharge of water from slop tanks; 8) closing of all applicable valves or similar devices after slop tank discharge operations; 9) closing of valves necessary for isolation of dedicated clean ballast tanks from cargo and stripping lines after slop tank discharge operations; and, 10) disposal of residues. See 33 C.F.R. 151.25(e). All such entries “shall be fully recorded without delay in the Oil Record Book so that all the entries in the book appropriate to that operation are completed.” MARPOL, Annex I, Regulation 20(4); 33 C.F.R. §151.25(H).

During a Port State Control inspection, the Coast Guard may question the engine room staff to determine if the recent entries in ORB represent actual procedures followed by shipboard personnel. If the Coast Guard discovers any of the following “red flag” entries in the ORB, they will likely call in the Coast Guard Investigative Service (“CGIS”)6 to begin a criminal investigation:

  1. An ORB entry where the amount of bilge water or sludge processed exceeds the rated capacity of the pollution prevention equipment that is indicated on the IOPP;
  2. ORB entries that utilize the wrong code for the task performed;
  3. ORB entries that are not in chronological order;
  4. Missing pages in the ORB or entries that are concealed by “White-Out”;
  5. Repetitive entries that are indicative of the falsification of ORB activities;
  6. If waste oil, sludge, bilge and other tank levels noted during the inspection vary significantly from the last entries in the ORB;7 and,
  7. If the recorded quantities of oily bilge water pumped to holding or processed by the OWS directly from the bilge wells does not compare to observed conditions within the machinery space.

If the vessel maintains an Incinerator Log, it, too, will likely be inspected by the authorities. If the vessel is utilizing the incinerator to dispose of sludge, the Coast Guard will compare the entries in the Incinerator Log to the corresponding entries in the ORB. If there is a discrepancy between these numbers or if the log indicates that the incinerator is working beyond its rated capacity, suspicions will be raised that the vessel is improperly disposing of sludge.

The Coast Guard will also examine the SOPEP to verify that it has been approved by the vessel’s Flag. The Coast Guard will spot check the pollution response equipment listed in the SOPEP and verify that the phone numbers and points of contact listed in the SOPEP are up to date (i.e., National Response Center, local Captain of the Port, or Coast Guard or Sector offices).

Penalties for Violations of APPS

Generally, it is well settled U.S. law that in order for a person to be guilty of a crime, the person must act with “criminal intent” or “mens rea”.8 However APPS, like most environmental and public health and welfare criminal statutes, does not require that the government prove that a defendant wrongfully intended to violate the law. Instead, the government need only prove that an actor knowingly committed an act and that act violated an existing law or regulation. For example, the criminal enforcement provision of APPS provides that any person who “knowingly violates” a specific provision of the statute may be guilty of a felony, even if an individual did not know that such conduct was a crime. In addition to criminal fines, if an individual or corporation is found to have violated a provision of APPS or MARPOL, the government can also impose a civil penalty of up to twenty-five thousand dollars ($25,000.00) for each violation. See 33 U.S.C. § 1908(b).

APPS places an affirmative duty on the Master, Chief Engineer – or other person in charge – of any vessel subject to APPS to report any “discharge, probable discharge, or presence of oil” while the vessel is within the navigable waters of the United States. APPS places the same duty to report on persons in charge of seaports and oil handling facilities within United States jurisdiction. To ensure compliance with these regulations, the Coast Guard is authorized to inspect any vessel at any U.S. port. If it is determined that a vessel or her crew may have violated pollution prevention laws, its customs clearance will be revoked and the vessel “held-up” until the owner and operator post a surety satisfactory to the Secretary [of the department in which the United States Coast Guard is operating].9 The vessel may also be arrested and sold to satisfy any fine or penalty under APPS.

As stated above, APPS applies to every vessel that is operated under the authority of the United States (i.e., “U.S. flagged vessels”). In addition, it is applicable to foreign flagged vessels when these vessels are in the navigable waters of the United States10. This is a critical distinction, since the jurisdiction of the United States to criminally prosecute Owners, Operators and crewmembers of foreign flagged vessels, is strictly limited to acts committed in U.S. navigable waters. Parenthetically, we note that for Owners, Operators, and crewmembers of U.S. flagged vessels there are no such limits on the jurisdiction of the United States to prosecute violations of APPS and MARPOL. Thus, if a U.S. flagged vessel knowingly violates the provisions of APPS or MARPOL anywhere in the world, it can and will be prosecuted by the United States government.

In short, it is a class D felony to knowingly violate the provision of APPS. A class D felony is publishable by up to ten (10) years imprisonment, and a fine up to $250,000 for an individual, and up to $500,000 for a corporation, for each violation. A violation of APPS where the individual or corporation did not knowingly violate these sections is punishable by a civil penalty not to exceed $25,000 for each violation.

Other Pollution and Environmental Protection Statutes

In addition to APPS, there are a number of other federal environmental protection statutes that make it a crime to discharge oil or waste in U.S. waters. Specifically, the Clean Water Act, 33 U.S.C. § 1251, et seq. prohibits the unpermitted discharge of any pollutant, including a discharge of oil, by any person into navigable waters of the United States.11 A “knowing” violation of the Act is a felony. A “negligent” violation of the Clean Water Act is a misdemeanor. Failure to report a discharge is punishable by imprisonment of up to five (5) years, and a fine of up to $250,000 for an individual, and up to $500,000 for a corporation.

Similarly, the Rivers and Harbors Act of 1899, 33 U.S.C. § 401, et seq., provides that any discharge of refuse of any kind from a vessel into navigable waters of the United States is strictly prohibited. A violation of the Act is a misdemeanor. The courts have taken a broad view of what constitutes “refuse” under the Act, and the Act has been extended to a discharge of oil or petroleum. A person can be convicted of a misdemeanor violation of the Rivers and Harbors Act based solely upon proof that the person placed a banned substance into navigable waters of the United States.

A party can also be found guilty of a felony for conduct that does not directly involve the discharge of oil or waste into U.S. waters. Under 18 U.S.C. § 1001, it is a felony to make a false statement to the U.S. Government. To sustain a conviction for a violation of the Act, the Government must only show: (1) that a statement or concealment was made; (2) the information was false; (3) the information was material to a government investigation or activity; (4) the statement of concealment was made “knowingly and willfully;” and (5) the statement or concealment falls within the executive, legislative or judicial branch jurisdiction.

The false statement need not be an affirmative statement, but can also include the concealment of the truth when an individual has a duty to answer. For example, a false statement about, or concealment of, any discharge of oil is a violation.

Additionally, the U.S. authorities vigorously prosecute individuals and corporations suspected of tampering with witnesses in connection with an on-going investigations. Under 18 U.S.C. § 1512, anyone who knowingly uses intimidation or physical force, threatens, or corruptly persuades another person, or attempts to do so, or engages in misleading conduct toward another person with the intent to hinder, delay or prevent the communications to a law enforcement officer or a judge of the United States of information relating to the commission, or the possible commission, of a federal offense, shall be fined or imprisoned up to ten (10) years, or both.

In situations where two (2) or more persons conspire either to commit an offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, (pursuant to 18 USC § 371), each shall be fined or imprisoned up to five (5) years or both.

Recently, the Department of Justice has also been charging crewmembers and vessel owners and operators accused of presenting false records to the government with violations of the Sarbanes-Oxley Act, 18 U.S.C. § 1519.12 This statute is commonly known as the “Enron” statute and was intended to apply to corporate fraud. The significance of utilizing this statute is that it carries a potential jail sentence of 20 years, which is a powerful motivator for someone threatened with prosecution under this statute to turn “state’s evidence’ as the phrase goes. In fact, no vessel Owner, Operator or crewmember has ever been convicted under this statute, although it has been charged in recent Indictments.

Recommendations for Shipboard Personal on How to Respond to U.S. Authorities Conducting Port State Control Inspections and Prepare for Criminal Investigations

  1. Shipboard personnel must, at all times, obey all international and U.S. environmental regulations;
  2. All shipboard personnel must be truthful and forthcoming during all port state inspections;
  3. If the Port State Control inspection appears to be more than a routine inspection, immediately notify the manager and/or the vessel’s port agent and/or the P&I Club’s local correspondent;
  4. Once an investigation commences, do not under any circumstances remove or destroy any documents, computer files, emails, correspondence, piping, flanges, or other potential evidence and do not give or accept any orders to do so;
  5. Officers and crewmembers must not attempt to influence other officers and/or crew as to their discussions with the authorities, other than to insist that the officers and crew are honest and forthright with all authorities; and,
  6. Seek the advice of competent legal counsel.

The Fifth Amendment to the U.S. Constitution

The most basic, yet essential, advice any maritime criminal lawyer can give to today’s mariner is: seek the advice of counsel as soon as practical, and always be truthful and forthright in your dealings with the U.S. authorities. It is extremely advisable that if U.S. authorities undertake any onboard investigation, which goes beyond the scope of the ordinary port state control inspection, competent criminal counsel should be engaged to protect the rights of the vessel officers and crew, not to mention her Owner, Operator, Manager, and their shore-side personnel. For example, if a member of the CGIS comes onboard a vessel during a Port State Control Inspection, a criminal investigation has begun and it may be in the crewmember’s best interest to invoke his Fifth Amendment Privilege against self-incrimination.

The Fifth Amendment of the United States Constitution states that:
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

The Fifth Amendment Privilege against self-incrimination is not dependent upon the nature of the proceeding in which the testimony is sought. It is applicable wherever the answer might tend to subject one to criminal responsibility and applies in both civil and criminal proceedings.

A seaman may also invoke his Fifth Amendment privileges even if there is no U.S. criminal investigation, but rather may subject the seamen to criminal liability outside of the U.S., so long as the seaman can show that the subject of the government’s questions raises “a real danger of being compelled to disclose information that might incriminate him under foreign law,” and second, that there is a “real and substantial fear of foreign prosecution.”

Individual crew members should invoke their Fifth Amendment privilege against self-incrimination until competent counsel is engaged and present. In short, once a criminal investigation has commenced and a mariner invokes his own Fifth Amendment privilege, he is not required to speak with the U.S. authorities and/or respond to any of their questions, which may lead to self-incrimination.

The Oil Spill Liability Trust Fund

The Oil Spill Liability Trust Fund (“OSLTF”) was also established in the wake of the EXXON VALDEZ oil spill to provide funds for those who have suffered loss or damages due to an oil spill. Generally, a party who incurs a loss and/or cost as a result of an oil pollution incident must submit claims against the Responsible Party (“RP”) or its guarantor for reimbursement and compensation. Under certain circumstances, such a claimant may be entitled to submit claims directly to the OSLTF. In a similar fashion, an RP and its insurers may make a claim against the Fund for reimbursement of certain costs and expenses incurred, as expressly authorized by the relevant Regulations.

Administration of the Fund was delegated to the Coast Guard, which in turn, sparked the creation of the National Pollution Funds Center (“NPFC”). The NPFC is an independent Coast Guard unit, which is the fiduciary agent for the OSLTF. In accordance with OPA, and other pertinent laws and regulations, the NPFC executes programs to, inter alia, (1) provide funding to permit timely removal actions following pollution incidents; (2) provide funding for the initiation of natural resource damage assessments (NRDA) for oil spill incidents; and (3) compensate claimants who demonstrate certain types of damages caused by oil pollution.

The general requirements for submitting claims to the Oil Spill Liability Trust Fund (“OSLTF”) are set forth at 33 C.F.R. Part 136. This part prescribes regulations for the presentation, filing, processing, settlement and adjudication of claims authorized to be presented to the OSLTF. Historically, our firm has been retained to present claims on behalf of Responsible Party’s (“RP”) and its insurers to the NPFC for compensation and reimbursement for costs incurred as a result of a spill. Specifically, 33 C.F.R. § 136.107 provides that claims of a subrogor and subrogee for removal costs and damages arising form the same incident should be presented together and must be signed by all claimants. Accordingly, it is important to recognize early in assembling a crisis management team to address a pollution incident that the interests of the insurer and its assured may necessarily merge. Third-party claims may also be presented to the OSLTF pursuant to the applicable statutes.

The OSLTF was established by Congress in 1986. It was authorized for use as part of OPA 90 and is primarily funded by a 5¢ per barrel tax on oil produced and imported to the United States. The OSLTF provides necessary funding for oil spill removal, natural resource assessment and restoration, as well as compensation to authorized claimants. A responsible party may also successfully claim against the OSLTF for removal costs and damages allowed under §2708 of OPA if (a) the responsible party is entitled to OPA §2703 defenses to liability, and (b) no exceptions to limitation of liability apply.

The §2703 defenses to liability apply if the sole cause of discharge is: (i) an act of God; (ii) an act of War; (iii) an act or omission of an independent third-party, if the responsible party establishes, by a preponderance of the evidence, that it acted with due care and took precautions against foreseeable acts of such third-party, and; (iv) the responsible party reported the incident and provided cooperation in removal activities.

Note well, there are certain exceptions to an RP’s limitation of liability including an act of gross negligence or willful misconduct proximately causing a spill, or; if a violation of a federal safety, construction or operating regulation caused a spill.

Claims that May Be Submitted to the OSLTF

Under 33 U.S.C. §2702, a person or party may submit claims to the OSTLF for uncompensated removal costs and damages that result from an oil spill, to wit, natural resources; real or personal property; subsistence use; revenues; profits and earning capacity; and public services. An RP, under OPA §2708, may recover for damage in excess of its OPA limits of liability noted above. However, an RP may assert a claim to the OSLTF only if it can demonstrate its entitlement to a defense or limitation of liability under OPA 90. In fact, this is the first step which an RP must successfully complete before the NPFC will proceed with the review of any claim.

General Requirements for Presenting a Claim Against the OSLTF

Pursuant to 33 C.F.R. § 136.105, the claimant bears the burden of providing all evidence, information, and documentation deemed necessary by the Director of the NPFC to support the claim. In addition to complying with the general requirements of 33 C.F.R. § 136.105, a claimant must, when submitting a claim, specify all of the claimant’s known removal costs or damages arising out of a single incident; and separately list, with a sum certain attributed to each, all removal costs and each separate category of damages. Further, the NPFC’s Director retains the discretion to treat separately, for settlement purposes, removal costs and each separate category of damages for which a claim has been submitted. With respect to insurance, a claimant must provide, inter alia, pursuant to 33 CFR § 136.111, information concerning any insurance that may cover the removal costs or damages for which compensation is claimed. In this regard, the claimant is to provide the name and address of each insurer; the kind and amount of coverage; the policy number; and whether any insurer has paid the claim in full or in part.

Time Limits for the Filing of Claims

The applicable period of limitations for the filing of claims are set forth at 33 U.S.C. §2712(h) and 33 C.F.R. §136.101 and vary depending upon the specific nature of the claim being presented. The OSLTF will only consider a claim if presented in writing to the NPFC’s Director. A claim is deemed presented on the date it is actually received at the NPFC office, unless otherwise indicated in writing, by the NPFC’S Director.

A claim for recovery of removal costs must be presented, in writing, to the NPFC’s Director, within six (6) years after the date of completion of all removal actions taken as a result of the oil spill. Date of completion of all removal actions is defined as the earlier of either the actual date of completion of all removal actions for the incident or the date the Federal On-Scene Coordinator (“FOSC”) determines that the removal actions which form the basis for the cost being claimed are completed.

A claim for the recovery of damages may be presented within three (3) years after the date on which the injury and its connection with the oil discharge were reasonably discoverable with the exercise of due care. If the claim is for recovery of natural resources damages, the claim must be presented within the later period of either the date prescribed in 33 C.F.R. § 136.101(a)(1)( I), or within three (3) years from the date of completion of the natural resources assessment under 33 U.S.C. § 2706 (e).

Proof Required For Each Claim For Removal Costs Or Damages

Removal Costs

A claim for removal costs may be presented by any claimant pursuant to 33 C.F.R. § 136.201. The claimant must, however, establish that (a) the actions taken were necessary to prevent, minimize, or mitigate the effects of the oil spill; (b) that the removal costs were incurred as a result of these actions; and (c) that the actions taken were determined by the FOSC to be consistent with the National Contingency Plan or were directed by the FOSC.

The amount of compensation allowable is the total of uncompensated reasonable removal costs that were determined by the FOSC to be consistent with the National Contingency Plan or were directed by the FOSC.

Natural Resources Damages

Claims for uncompensated natural resource damages may be presented by an appropriate natural resource trustee. In order to adequately prove such claims, a claimant must provide documented costs and cost estimates for the claim; identify all trustees who may be potential claimants for the same natural resources damaged; certify the accuracy and integrity of any claim submitted to the Fund, and certify that any actions taken or proposed were or will be conducted in accordance with the applicable laws and regulations; certify whether the assessment was conducted in accordance with the applicable provisions of the natural resources damage assessment regulations (33 U.S.C. 2706(e)(1)); and, certify that, to the best of the trustee’s knowledge and belief, no other trustee has the right to present a claim for the same natural resources damages and that payment of any subpart of the claim presented would not constitute a double recovery for the same natural resources damages.

The amount of compensation allowed for these types of claims is the reasonable cost of assessing damages, and the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of the damaged natural resources. If any amounts received from the Fund exceeds the amount actually required to accomplish the activities for which the claim was paid, the trustees must reimburse the Fund for such sums.

Real or Personal Property Damages

A claim for injury to, or economic losses resulting from the destruction of, real or personal property may be presented only by a claimant either owning or leasing the property. A claimant must establish an ownership or leasehold interest in property; that the property was injured or destroyed; the cost of repair or replacement; and the value of the property both before and after the injury occurred.

For each claim for economic damages, the claimant must establish that the property was not available for use and, if it had been, the value of that use; whether the or not substitute property was available and, if used, the costs thereof; and that the economic loss claimed was incurred as the result of the injury to or destruction of the property.

The amount of compensation allowable for damaged property is the lesser of the actual or estimated net cost of repairs necessary to restore the property to substantially the same condition which existed immediately before the damage; the difference between the value of the property before and after the damage; or the replacement value of the property.

For economic losses resulting from the destruction of real or personal property, the amount of compensation which may be allowable is the reasonable costs actually incurred for the use of substitute commercial property, or if substitute commercial property was not reasonably available, in an amount equal to the net economic loss which resulted from not having use of the property. Where substitute commercial property is reasonably available, but not used, the allowable compensation for the loss of use is limited to the cost of the substitute commercial property, or the property lost, whichever is less. Compensation for the loss of use of noncommercial property is not allowable.

Subsistence Use of Natural Resources

The applicable regulations governing the procedure for obtaining compensation for this type of claim are set forth at 33 C.F.R. §§ 136.219, 136.221 and 136.223. A claim for the loss of subsistence use of natural resources may be presented only by a claimant who actually uses, for subsistence, the natural resources which have been injured, destroyed, or lost, without regard to the ownership or management of the resources. A claim for loss of profits or impairment of earning capacity due to loss of subsistence use of natural resources must be included as part of the claim.

For subsistence claims, a claimant must provide, inter alia, the identification of each specific natural resource for which compensation for loss of use is claimed; a description of the actual subsistence use made of each specific natural resource by the claimant; a description of how and to what extent the claimant’s subsistence use was effected by the injury to or loss of each specific natural resource; a description of each effort made by the claimant to mitigate the claimant’s loss of subsistence use; and a description of each alternative source or means of subsistence available to the claimant during the period of time for which loss of subsistence is claimed, and any compensation available to the claimant for loss of subsistence.

The amount of compensation allowable for subsistence claims is the reasonable replacement cost of the subsistence loss suffered by the claimant, if, during the period of time for which the loss of subsistence is claimed, there was no alternative source or means or subsistence available. Such amounts must be reduced by all compensation made available to the claimant to compensate for subsistence loss; all income which was derived by utilizing the time which otherwise would have been used to obtain natural resources for subsistence use; and overheads or other normal expenses of subsistence use not incurred as a result of the incident.

Government Revenues

The applicable regulations for this type of claim are set forth at 33 C.F.R. §§ 136.225, 136.227 and 136.229. A claim for net loss of revenues due to the injury, destruction, or loss of real property, personal property or natural resources may be presented only by an appropriate claimant sustaining the loss. Claims for lost revenue include taxes, royalties, rents, fees and net profit shares.

Such claimants must identify and describe the economic loss for which compensation is claimed, including the applicable authority, property affected, method of assessment, rate and method and dates of collection. Additionally, the claimant must establish that the loss of revenue was due to the injury to, destruction of, or loss or real or personal property or natural resources.

The amount of compensation allowable for such claims is the total net revenue actually lost.

Profits and Earning Capacity

A claim for loss or profits or impairment of earning capacity due to the injury to, destruction of, or loss of real or personal property or natural resources may be presented by a claimant sustaining the loss or impairment. The claimant need not be the owner of the damaged property or resources to recover for lost profits or income. A claim for lost of profits or impairment of earning capacity that also involves a claim for injury to, or economic losses resulting from the destruction of real or personal property must be claimed under 33 CFR 136.213. A claim for lost of profits or impairment of earning capacity that also involves a claim for loss of subsistence use of natural resources must be claimed under 33 CFR 136.219.

Such claimants must establish that real or personal property or natural resources had been injured or lost; that the claimant’s income was reduced as a consequence of injury to, destruction or, or loss of the property or natural resources, and the amount of that reduction; and the amount of the claimant’s profits or earnings in comparable periods and during the period when the claimed loss or impairment was suffered, as established by income tax returns, financial statements and similar documents. Additionally, a claimant must state whether alternative employment or business was available and undertaken and, if so, the amount of income received. All income that a claimant received as a result of the incident must be clearly indicated and any saved overhead and other normal expenses not incurred as a result of the incident must be established.

The amount of compensation allowable for claims for lost profits and earning capacity is limited to the actual net reduction or loss of earnings/profits suffered. Calculations for net reductions or losses must clearly reflect adjustments for all income resulting from the incident; all income from alternative employment or businesses undertaken; potential income from alternative employment or business not undertaken, but reasonably available; and saved overhead or normal expenses not incurred as a result of the incident; and state, local and Federal taxes.

Government Public Services

A claim for the net costs of providing increased or additional public services during or after removal activities, including protection from fire, safety or health hazards, caused by a discharge or oil may be presented only by a State or political subdivision of a State incurring the costs.

Such an authorized claimant must establish the nature of the specific public services provided and the need for those services; that the services occurred during or after removal activities; that the services were provided as a result of the discharge of oil and would not otherwise have been provided; and the net cost for the services and the methods used to compute those costs.

The amount of compensation allowable is the net cost of the increased or additional service provided by the state or political subdivision.

Settlement And Notice To Claimant

Payment in full or acceptance of an offer of settlement is final and conclusive for all purposes, and upon payment constitutes a release of the NPFC from the claim.

Upon completion of review, the NPFC will issue its recommendation and offer for each claim submitted. Once an offer is made, it is a firm and final offer. There will be no negotiation of the claim unless additional proofs are submitted. Acceptance of any compensation precludes the claimant from filing any subsequent action against any person to recover costs or damages which are the subject of the compensated claim; and constitutes an agreement by claimant to assign to the NPFC subrogation rights. The claimant’s failure to accept an offer of settlement within sixty (60) days after the date the offer was mailed by the NPFC automatically voids the offer.

If the NPFC denies a claim, the claimant will be notified by certified or registered mail. Further, failure of the NPFC’s Director to make final disposition of a claim within six (6) months after it is filed, shall be deemed, at the claimant’s option, a final denial of the claim.

Upon written request, the NPFC’s Director may reconsider any claim denied. Requests must be in writing and include the factual or legal grounds for the relief requested. Such requests must be received by the NPFC Director within sixty (60) days after the date the denial was mailed to the claimant or within thirty (30) days after receipt of the denial by the claimant, whichever date is earlier. Disposition of the request for reconsideration will be make within ninety (90) days after its receipt by the NPFC. If the NPFC denies any such motion for reconsideration, the claimant may then commence a federal court action to address the issues of obtaining reimbursement/compensation from the OSLTF.

Remedy For Denial Of Claim

The Administrative Procedure Act (“APA”) provides for judicial review of a final agency action. A denial of appeal for reconsideration is considered to be a final agency action. A court will reverse a final agency action only if an RP can affirmatively prove an abuse of discretion or that such agency was arbitrary and capricious.

If a claimant disputes a final determination by the NPFC, there are certain avenues of recourse available. An illustrative case on point is Gatlin Oil Co. Inc. v. United States. In the Gatlin Oil case, the plaintiff, Gatlin Oil Co., Inc. (“Gatlin”) commenced a suit seeking reimbursement for costs incurred in removing fuel which was discharged from its onshore storage tanks onto the surrounding land and into a local river. It had been determined that Gatlin was entitled to a complete defense because the discharge had been caused by and unknown and unidentified vandal. Gatlin sought compensation from the OSLTF for removal costs.

The NPFC determined that some claims for compensation made by Gatlin, pursuant to 33 CFR Part 136 for an oil spill were not compensable under OPA. Gatlin then filed suit in the United States District Court for the Eastern District of North Carolina. In that action, the Court reversed the NPFC’s ruling and held that the Fund Director had acted in an arbitrary and capricious manner and that Gatlin was entitled to compensation for all its recovery costs and damages with interest. The Court applied the “arbitrary and capricious” standard of review in accordance with the Administrative Procedures Act. The District Court further remanded the matter to the NPFC for further fact finding and for reconsideration in accordance with the Court’s opinion.

However, the United States appealed the District Court’s ruling. The Fourth Circuit reiterated that the Fund Director’s findings must not be arbitrary, capricious or an abuse of discretion. The Fourth Circuit further held that a reviewing court should determine whether the Fund’s Director’s allowance or disallowance of compensation was reasonable. After reviewing the case, the Fourth Circuit vacated the District Court’s rulings and concluded that the Fund Director’s findings were correct and remanded the matter to the District Court for further proceedings.

Practical Considerations For Presenting Claims To The Osltf

When presenting a claim to the OSLTF, each claimant has the burden of proving its entitlement to receive compensation. When presenting a claim on behalf of a RP, the RP is responsible for demonstrating its defenses and right to limitation of liability. In meeting these burdens, the responsible party can rely on the Coast Guard investigative findings, judicial determinations and/or any other evidence the RP wishes to submit.

Difficulty may arise if the Coast Guard investigation report is delayed. The bureaucratic nature of the Coast Guard infrastructure tends to lend itself to requiring a substantial amount of time and internal review before the final findings are available. This may create an obstacle for a party in order to prove its entitlement for further review of its claim.

While the NPFC provides an initial claim form for presenting a claim to the NPFC, there is no prescribed format for presenting a claim to the OSLTF. The claims regulations provide some guidance as to the content of claim submissions generally. In general, a claim submission must be in a signed written document with a sum certain stated. In addition to identifying the date, time, place of incident and identity of claimant, the claim submission must contain a statement to certify that all material facts are included therein, and are accurate.

In providing factual narratives and other evidence as part of the claim process, the claimant must be very careful in selecting what statements to make. Such statements may be used as admissions in third-party litigation and/or by the Coast Guard to supplement its own findings.

In the past, it had been our experience that the NPFC review process could be painstakingly slow, as undertaking such a review is a complex and tedious task. This has dramatically improved in recent years and is continuing to get better. In order to facilitate review and processing, a claim should be presented as neat, detailed, complete and organized as possible. Summary sheets can and should be prepared using spreadsheet software. Such summaries can be used as a guide to review supporting documentation such as invoices, daily job reports, etc.… Additionally, backup/supporting documentation should be segregated in binders for each spill responder and/or contractor with clear delineation of sub-contractor supports and invoices.

The neater, more complete and more organized a claim submission, the more likely it will be reviewed and adjusted “in-house” by the NPFC. We have learned through experience that the NPFC appreciates receiving well organized claim summaries. Such summary spreadsheets may be presented not only by way of hard copy, but also on computer disk. All major spreadsheet applications can be used. Presenting a claim in this manner not only saves the NPFC time by way of facilitating its claim review process, but also may speed up the claim determination process and save the claimant time and money. Haphazard submissions will necessarily result in delays in processing the claim.


In conclusion, while we trust the foregoing is self-explanatory, we stand ready to respond to any and all inquiries you, your colleagues and/or your clients may have. Of course, any specific substantive legal opinion and/or liability analysis will necessarily depend on the facts and circumstances of the underlying incident. We are available to assist in any and all ways possible, and for your convenience, confirm that the undersigned can be contacted on a 24/7 basis either at the above details; on his mobile telephone (+1 516-721-4076); or via Email at gmc@chaloslaw.com.

/s/George M. Chalos, Esq.
Chalos & Co.
123 South Street
Oyster Bay, New York 11771
E-mail: gmc@chaloslaw.com
  1. The potential for oil to pollute the marine environment was recognized by the International Convention for the Prevention of Pollution of the Sea by Oil, 1954 (OILPOL 1954). The Conference adopting the Convention was organized by the United Kingdom, and the Convention provided for certain functions to be undertaken by IMO when it came into being.
  2. Additional measures for tanker safety were incorporated into the 1978 Protocol to the International Convention for the Safety of Life at Sea (SOLAS), 1974. The SOLAS Protocol included requirements for steering gear of tankers; stricter requirements for carrying of radar and collision avoidance aids; inert gas systems, and stricter regimes for surveys and certification.
  3. MARPOL Annex VI was ratified in May 2004, and went into effect in May 2005. It sets limits on NOx emissions from ship exhausts and the sulfur content of bunkers. Specifically, Annex VI regulates the NOx emissions from diesel engines installed on ships constructed on or after January 1, 2000 and diesel engines that have undergone a majorconversion on or after that date. As of February 2007, the United States has not ratified MARPOL Annex VI.
  4. Though the United States signed MARPOL in 1978, it initially agreed only to comply with Annexes I and II. The United States later agreed to comply with Annex V as well. Presently, more than 95% of the world’s shipping tonnage is transported under the flags of signatories to MARPOL 73/78.
  5. A federal Grand Jury consists of 16 to 23 ordinary citizens, whose job is to listen to the evidence of a potential crime presented by the prosecutor, usually an Assistant US Attorney, either through the testimony of witnesses, which include government agents, and/or through tangible evidence such as photographs, graphs, charts, physical evidence in MARPOL violation cases such as piping, valves, hoses, etc. The witnesses appear in the Grand Jury without their lawyers at their side; although the lawyer is outside of the Grand Jury room and can be consulted by the witness at any time he or she feels the need to do so. However, it always appears curious and, possibly suspicious, to Grand Jurors when a witness stops the proceedings to repeatedly consult with his or her lawyer. Consequently, the prosecutor generally has a free reign in the Grand Jury room to present evidence unopposed. In the US we have a maxim that says “a prosecutor can indict a ham sandwich if he or she wanted”, meaning, that it is a fairly simple task for the prosecutor to obtain an Indictment from a grand jury. The task of the Grand Jurors is to listen to the evidence presented by the prosecutor and if they feel that “probable cause” exists that a crime has been committed in the district in which they sit, they issue what is known as a “True Bill” which then forms the basis of an “Indictment”. An Indictment is the legal document that formally charges a defendant with a crime or a series of crimes that such defendant must then respond to and defend against. An Indictment is only an accusatory instrument; it does not mean that a person is guilty of the charges proffered against him or her. Guilt or innocence is then decided by a petit jury at trial where the standard for conviction is beyond a “reasonable doubt” which, of course, is a much higher legal standard then mere “probable cause”. In addition, at trial only admissible evidence is allowed and the defendant’s lawyers are present to examine and/or cross-examine all witnesses.
  6. The Coast Guard Investigative Service (CGIS) is a division of the Coast Guard that carries out the Coast Guard’s internal and external criminal investigations. When personnel from CGIS board a vessel it is a tell-tale sign that the inspection is no longer civil in nature, and a criminal investigation is underway.
  7. For example, the ORB indicates a liquid level in the vessel’s sludge tank at the completion of the previous voyage, the sludge level is currently at a lower level, and the ORB fails to indicate how the ship disposed of this liquid
  8. The mens rea is the Latin term for “guilty mind”. The standard test of criminal liability is usually expressed in the Latin phrase, actus non facit reum nisi mens sit rea, which means that “the act does not make a person guilty unless the mind is also guilty”. Ordinarily, there must be an actus reus or “guilty act”, accompanied by some level of mens rea to constitute the crime with which the defendant is charged. As more fully discussed above, when a defendant is charged with a strict liability crime, the government is not required to prove mens rea.
  9. The Coast Guard, acting on behalf of Homeland Security, in order to release the vessel from any Custom’s hold, has generally been demanding bond security in amounts of $1 million or more. In addition, as part of its investigation, the Coast Guard generally removes from the vessel as potential “material witnesses the entire engine room crew and many times other crew members, as well. Consequently, as part of any security agreement for the vessel’s release, the Coast Guard requires, among other things, the vessel owner and/or operator to house, feed and pay the salaries for any crewmembers so removed for periods ranging from 90-270 days. Depending on the length and breadth of the investigation, such expenses can be substantial.
  10. The navigable waters of the United States are: 1) the territorial seas of the United States; 2) internal waters of the United States that are subject to tidal influence; and, 3) internal waters of the United States not subject to tidal influence that are or have been used as highways for substantial interstate or foreign commerce. See 33 C.F.R. §2.36(a). Territorial seas of the United States are the waters, 12 nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline. See 33 C.F.R. §2.22.
  11. “Navigable waters of the United States are those waters that are subject to the ebb and flow of the tide and/or are presently used, or have been used in the past, or may be susceptible for use to transport interstate or foreign commerce. A determination of navigability, once made, applies laterally over the entire surface of the waterbody, and is not extinguished by later actions or events which impede or destroy navigable capacity.” See 33 C.F.R. § 329.4.
  12. 18 U.S.C. §1519 reads: “Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.”