For example, if a vessel’s limit of liability is $10 million and a spill  resulted in $12 million in costs, the responsible party only has to pay up to  $10 million—the Fund will pay for the remaining $2 million. OPA consolidated the liability and compensation provisions of four prior  federal oil pollution initiatives and their respective trust funds into the Oil  Spill Liability Trust Fund and authorized the collection of revenue and the  use of the money, with certain limitations, with regard to expenditures. OPA also defines the costs for which responsible parties are liable and for  which the Fund is made available for compensation in the event that the  responsible party does not pay or is not identified. Oil Spills Costing At Least $1 Million Occurred Infrequently Between 1990 and 2006, but Estimated Costs Total $860 Million to $1.1 Billion

On the basis of information we were able to assemble about responsible  parties’ expenditures and payments from the Fund, we estimate that 51 oil  spills involving removal costs and damage claims totaling at least $1  million have occurred from 1990 to 2006. These 51 spills occurred in a variety of locations and involved a range of  vessel types. In  addition, as figure 4 shows, 30 of the 51 spills involved cargo/freight  vessels and tank barges, 12 involved fishing and other types of vessels, and  9 involved tanker vessels. Key Factors Affect Oil Spill Costs in Unique Ways

Location, time of year, and type of oil are key factors affecting oil spill  costs, according to industry experts, agency officials, and our analysis of  spills. According to state  officials with whom we spoke and industry experts, there are three  primary characteristics of location that affect costs:    Remoteness: For spills that occur in remote areas, spill response can be  particularly difficult in terms of mobilizing responders and equipment, and  they can complicate the logistics of removing oil from the water—all of  which can increase the costs of a spill. The time of year in which a spill occurs also affects response efforts  because of possible inclement weather conditions. Type of Oil Spilled Impacts the Extent of the Response Effort and the Amount of Damage

The type of oil spilled affects the degree to which oil can be cleaned up  and removed, as well as the nature of the natural resource damage caused  by the spill. Key Factors Will Likely Influence Cost of San Francisco Spill

The total costs of the San Francisco spill are currently unknown. However, some of the same key factors that have influenced the  cost of 51 major oil spills will likely have an effect on the costs in the San  Francisco spill. Fund Has Been Able to Cover Costs Not Paid by Responsible Parties, but Risks Remain

The Fund has been able to cover costs from major spills that responsible  parties have not paid, but risks remain. Specifically, the current liability  limits for certain vessel types, notably tank barges, may be  disproportionately low relative to costs associated with such spills. Ten of the 51 major oil spills that occurred since 1990 resulted in limit-of- liability claims on the Fund. By comparison, the 51 major oil spills since 1990 cost, in total,  between $860 million and $1.1 billion. Given these concerns, in our September 2007 report, we  recommended that the Commandant of the Coast Guard (1) determine  whether and how liability limits should be changed, by vessel type, and  make recommendations about these changes to the Congress and (2)  adjust the limits of liability for vessels every 3 years to reflect significant  changes in inflation, as appropriate.
Why GAO Did This Study

When oil spills occur in U.S. waters, federal law places primary liability on the vessel owner or operator--that is, the responsible party--up to a statutory limit. As a supplement to this "polluter pays" approach, a federal Oil Spill Liability Trust Fund administered by the Coast Guard pays for costs when a responsible party does not or cannot pay. This testimony is based on GAO's September 2007 report on oil spill costs and select program updates on the recent San Francisco spill. Specifically, it answers three questions: (1) How many major spills (i.e., at least $1 million) have occurred since 1990, and what is their total cost? (2) What factors affect the cost of spills? and (3) What are the implications of major oil spills for the Oil Spill Liability Trust Fund?

What GAO Found

On the basis of cost information collected from a variety of sources, GAO estimates that 51 spills with costs of at least $1 million have occurred from 1990 to 2006 and that responsible parties and the federal Oil Spill Liability Trust Fund (Fund) have spent between $860 million and $1.1 billion for oil spill removal costs and compensation for damages (e.g., lost profits and natural resource damages). Since removal costs and damage claims may stretch out over many years, the costs of the spills could rise. The 51 spills varied greatly from year to year in number and cost. All vessel types were involved with the 51 major spills GAO identified, with cargo/freight vessels and tank barges involved with 30 of the 51 spills. According to industry and agency officials, three main factors affect the cost of spills: a spill's location, the time of year, and the type of oil spilled. Spills that occur in remote areas, for example, can increase costs involved in mobilizing responders and equipment. Similarly, a spill occurring during tourist or fishing season might produce substantial compensation claims, while a spill occurring during another time of year may not be as costly. The type of oil affects costs in various ways: fuels like gasoline or diesel fuel may dissipate quickly but are extremely toxic to fish and plants, while crude oil is less toxic but harder to clean up. The total costs of the recent San Francisco oil spill are unknown, but these identified factors are likely to influence the costs. To date, the Fund has been able to cover costs from major spills that responsible parties have not paid, but risks remain. Specifically, GAO's analysis shows that the new 2006 limits of liability for tank barges remain low relative to the average cost of such spills. Since 1990, the Oil Pollution Act (OPA) required that liability limits be adjusted above the limits set forth in statute for significant increases in inflation, but such changes have never been made. Not making such adjustments between 1990 and 2006 potentially shifted an estimated $39 million in costs from responsible parties to the Fund.