PUBLISHED: 3:58 PM on Wednesday, May 18, 2005
USCG warns fund for oil spills will run out
WASHINGTON - The Oil Spill Liability Trust Fund, which helps fund the cleanup of spills nationwide, is expected to be depleted before fiscal year 2009, according to a Coast Guard report provided to Congress on May 12.

"A stable source of funding for oil spill clean-up costs and damages is vital in protecting the environment and compensating those who have been damaged by spills," said Jan Lane, the director of the National Pollution Funds Center, which administers the fund. "The trust fund makes it possible for cleanup equipment and personnel to be instantly deployed, provides money to compensate claimants for their costs and damages from oil spills and provides money to restore natural resources.

"We are working closely with the administration and Congress to ensure the fund's long-term viability."

The Oil Pollution Act of 1990 established the fund, making it the ultimate insurer for oil spill removal costs and damages when those responsible can not or do not pay. In many incidents, liable responsible parties cannot be located, do not have the ability to pay or have defenses or limits to their liability. Therefore, recoveries from liable parties cannot fully reimburse all removal costs and damages incurred by the fund. The result is the fund spends more than it takes in.

Between now and fiscal year 2007, expenditures from the fund are expected to significantly rise as a result of several large spills in the in the past few years.

"Before the creation of the trust fund, various federal funds existed to handle cleanup, but there was no mechanism to pay for the restoration of the environment or compensate claimants for their costs and damages," Lane said. "In addition, the Exxon Valdez incident in 1989 highlighted that there was no fund large enough to handle a spill of that magnitude."

Until 1994, there was a five-cent per barrel tax on petroleum produced in or imported to the United States. Between the tax and the consolidation of the other federal funds, the fund at one time held $1 billion. At the start of fiscal year 2005, the fund held $842 million. Between recurring costs, appropriations for various agencies, and the increasing costs of several major spills, the fund balance will not be sufficient to sustain all of its demands starting around fiscal year 2007.

The complete report to Congress, as well more information on the fund, the Oil Pollution Act and the National Pollution Funds Center can be downloaded from the National Pollution Funds Center's home page at