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[Senate Report 111-249]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 518
111th Congress                                                   Report
                                 SENATE
 2d Session                                                     111-249

======================================================================

 
            BIG OIL BAILOUT PREVENTION LIABILITY ACT OF 2010

                                _______
                                

                 August 5, 2010.--Ordered to be printed

                                _______
                                

    Mrs. Boxer, from the Committee on Environment and Public Works, 
                        submitted the following,

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 3305]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Environment and Public Works, to which was 
referred a bill (S. 3305) to amend the Oil Pollution Act of 
1990, to require oil polluters to pay the full cost of oil 
spills, and for other purposes, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill, as amended, do pass.

                Background and Need for the Legislation

Liability

    Following the Exxon Valdez oil spill in Alaska, Congress 
enacted the Oil Pollution Act of 1990 (OPA). Title I of OPA 
consolidated existing Federal laws governing oil spill 
liability, expanded the coverage of those laws, strengthened 
Federal response authorities, and created a trust fund to pay 
for cleanup costs and damages.\1\ OPA also established a 
framework for liability related to oil discharges into the 
navigable waters of the United States, adjoining shorelines, 
and coastal ocean areas known as the exclusive economic zone.
---------------------------------------------------------------------------
    \1\See 33 U.S.C. Sec. Sec. 2701-2720.
---------------------------------------------------------------------------
    Section 1002(a) of OPA, 33 U.S.C. 2702(a), provides that a 
responsible party for a vessel or facility from which oil is 
discharged is strictly liable for (1) all removal costs 
necessary for removing spilled oil from water and shorelines, 
or for taking other actions as may be necessary to minimize or 
mitigate damage to the public health or welfare, and (2) 
damages caused by such discharges, including injuries to and 
losses of natural resources, destruction of property, loss of 
subsistence use of natural resources, loss of tax revenue, loss 
of profits or earning capacity, and net increased costs for 
additional public services.
    Section 1004(a) of OPA, 33 U.S.C. 2704(a), establishes 
monetary limitations on a responsible party's liability for 
damages under the Act. Different limitation amounts apply to 
various types of vessels and facilities. Section 1004(a)(3) 
provides that liability for damages related to a discharge from 
an offshore facility is limited to $75,000,000 for each 
incident. This limitation on liability for damages does not 
apply if the incident was caused by gross negligence, willful 
misconduct, or violation of an applicable Federal regulation 
under certain circumstances.\2\
---------------------------------------------------------------------------
    \2\33 U.S.C. Sec. 2704(c)(1).
---------------------------------------------------------------------------
    In addition, under OPA, the Oil Spill Liability Trust Fund 
(Trust Fund) is available to pay claims for removal costs and 
damages to the extent a responsible party's liability exceeds 
an applicable liability cap or it is unable to meet its payment 
obligations.\3\ The Trust Fund currently holds approximately 
$1.6 billion, although OPA states that only $1 billion may be 
expended per incident. Additionally, there is a limit of $500 
million per incident for payments from the Trust Fund to 
compensate for natural resource damages.\4\
---------------------------------------------------------------------------
    \3\See 33 U.S.C. Sec. 2712(a).
    \4\26 U.S.C. Sec. 9509(c)(2)(A).
---------------------------------------------------------------------------
    The Deepwater Horizon explosion and ongoing release of oil 
into the Gulf of Mexico have made it clear that the $75 million 
per incident liability limit applicable to offshore facilities 
under OPA is outdated and inappropriate. An analyst at the 
financial services company Raymond James recently estimated the 
total cost of the Deepwater Horizon disaster to be $63 
billion,\5\ and Louisiana's State Treasurer has estimated that 
environmental and economic damages could reach up to $100 
billion.\6\ BP reports that it has incurred over $3 billion in 
response costs thus far.\7\ As of July 5, 2010, BP reported 
that it had already paid over $147,000,000 in claims.\8\
---------------------------------------------------------------------------
    \5\See BP Oil Spill Costs: $20 billion? Try $63 billion, Wall 
Street Journal Blogs, June 16, 2010, http://blogs.wsj.com/deals/2010/
06/16/bp-oil-spill-costs-20-billion-try-63-billion/,
    \6\See Gulf Spill damages may hit $100 billion: Louisiana 
Treasurer, Reuters, June 17, 2010, http://www.reuters.com/article/
idUSTRE65G64P20100617
    \7\See BP: Gulf Oil Spill Response Costs, Claims Total $3.12B To 
Date, Wall Street Journal, July 5, 2010, http://online.wsj.com/article/
BT-CO-20100705-701572.html
    \8\Id.
---------------------------------------------------------------------------
    Leaving OPA's current $75 million liability limitation in 
place would thus create two alterative scenarios: either 
American taxpayers would be required to pay for damages beyond 
the amounts available from the OSLTF, or innocent victims would 
be left uncompensated. Neither of these outcomes would be 
appropriate. S. 3305, as amended, will ensure that responsible 
parties are liable for all economic and natural resources 
damages resulting from covered oil pollution discharges.
    As the recent events make clear, the OPA limitation on 
liability for offshore facilities is contrary to the public 
interest. Corporations such as BP that profit from oil 
exploration and production are in the best position to prevent 
accidents and discharges. Companies undertaking these types of 
risky activities should bear full responsibility for any 
damages their actions impose on individuals, businesses, and 
the environment and have every incentive to avoid damages. In 
testimony before the Environment and Public Works Committee, 
Professor Kenneth Murchison from Louisiana State University 
described the impacts of limitations on liability and the 
benefits of removing such limitations:

          Increasing the damages for which a responsible party 
        is liable should encourage responsible parties to 
        exercise greater care in offshore drilling activities; 
        eliminating the cap altogether would encourage even 
        greater care. Increasing or eliminating the cap would 
        also reduce or eliminate the unfairness of imposing the 
        burden of the uncovered damages on innocent victims of 
        an oil spill or on the general taxpayers. * * * Given 
        the possibilities of huge economic gains, the cap in 
        the Oil Pollution Act probably does not induce drilling 
        that would be unprofitable without the cap on 
        liability; the drilling would almost certainly occur 
        with or without the cap on liability for damages. The 
        protection from economic loss may, however, have the 
        unconscious effect of discouraging some additional 
        safety and environmental protections.\9\
---------------------------------------------------------------------------
    \9\Statement of Kenneth M. Murchison, Senate Committee on 
Environment and Public Works, Legislative Hearing: S.3305, The Big Oil 
Bailout Prevention Liability Act of 2010, June 9, 2010.

    In testimony before the House of Representatives, MIT 
economist Michael Greenstone also described how an artificial 
limit on liability removes incentives for safety.\10\ Lifting 
the limit on liability, which requires companies to bear the 
liability for drilling activities, will ensure companies have 
the maximum incentive to avoid events such as the Deepwater 
Horizon disaster.
---------------------------------------------------------------------------
    \10\See Statement of Michael Greenstone, House Committee on 
Transportation and Infrastructure Hearing on Liability and Financial 
Responsibility for Oil Spills Under the Oil Pollution Act of 1990 and 
Related Statutes, June 9, 2010.
---------------------------------------------------------------------------
    The Obama Administration has concurred in the need to lift 
the OPA liability caps. On May 12, 2010, the White House 
released a package of legislation that, among other things, 
would raise the caps on liability for responsible parties under 
OPA.\11\
---------------------------------------------------------------------------
    \11\See White House Fact Sheet: Deepwater Horizon Oil Spill 
Legislative Package, May 12, 2010.
---------------------------------------------------------------------------

Response planning

    While Section 311(j)(5) of the Clean Water Act currently 
requires owners and operators of offshore oil drilling 
facilities to prepare plans for responding to oil spills and 
submit them to the President, the Deepwater Horizon oil spill 
has demonstrated the need for a more detailed response planning 
process.
    S. 3305, as amended, includes provisions strengthening 
contingency plan requirements and procedures to ensure the 
effectiveness of response capabilities, and requires response 
plans to directly address and mitigate economic and 
environmental impacts to the maximum extent practicable.

Claims process

    OPA also sets forth procedures for claims to be presented 
to the Trust Fund. The current law requires that a claimant 
must first submit a claim to a responsible party, such as BP, 
and then wait 90 days to determine whether the claim can be 
settled with the responsible party, before the claimant may 
seek payment from the Trust Fund or commence an action in 
court.\12\ Concerns have been raised that the 90-day period is 
too long and may result in hardship due to delays in claims 
processing. To minimize such delays, S. 3305, as amended, 
shortens the 90-day period to 30 days.
---------------------------------------------------------------------------
    \12\See 33 U.S.C. Sec. 2713(c).
---------------------------------------------------------------------------
    With respect to the Deepwater Horizon disaster, at the 
request of the Obama Administration BP has agreed to establish 
a separate Gulf Coast Claims Facility, funded by a $20 billion 
escrow account, to process and make payments for claims against 
BP as a responsible party under OPA.\13\ Given the importance 
of ensuring fair and timely processing and payment of such 
claims, Congress should receive detailed periodic reports on 
the progress and status of payments made by the Facility. The 
Committee therefore approved an amendment to S. 3305 requiring 
that the Administrator of the Facility shall provide quarterly 
reports to Congress regarding the status of, and ongoing 
payments from, the Facility.
---------------------------------------------------------------------------
    \13\See White House Fact Sheet: Claims and Escrow, June 16, 2010, 
http://www.whitehouse.gov/the-press-office/fact-sheet-claims-and-
escrow.
---------------------------------------------------------------------------

                      Section-by-Section Analysis

Section 1. Short title

    Section 1 provides that the bill may be cited as the Big 
Oil Bailout Prevention Liability Act of 2010.

Section 2. Removal of limits on liability for offshore facilities

            Summary
    As approved by the Committee, Section 2(a) provides that 
Section 1004(a)(3) of OPA, 33 U.S.C. 2704(a)(3), is amended by 
striking ``plus $75,000,000'' and inserting ``and the liability 
of the responsible party under section 1002.'' This amendment 
effectively eliminates the monetary limitation on liability in 
this section and provides for full liability for the costs and 
damages otherwise specified by OPA.
    Section (2)(b) provides that the amendment to OPA made by 
this section takes effect on April 15, 2010.
            Discussion
    This amendment to OPA removes the limitation of $75,000,000 
on the liability of responsible parties owning or operating 
offshore facilities other than deepwater ports. In its place, 
the amendment provides that such responsible parties shall be 
liable for all costs of removal and all of the categories of 
other damages described in OPA Section 1002,\14\ including 
damages for injury to natural resources; destruction of real or 
personal property; loss of subsistence use of natural 
resources; lost revenues of governmental entities; lost 
business profits and individuals' earning capacity; and costs 
of public services. Under S. 3005 as amended, responsible 
parties operating such facilities shall be subject to the full 
amount of liability for each of these categories of damages.
---------------------------------------------------------------------------
    \14\See 33 U.S.C. Sec. 2702.
---------------------------------------------------------------------------
    This change to OPA is to be effective as of April 15, 2010. 
BP has already formally agreed that the current OPA limitation 
of $75,000,000 shall not apply to the Deepwater Horizon 
disaster. Making the bill effective as of April 15, 2010 serves 
an important and broad public purpose, ensuring that entities 
which cause oil spills are responsible for the damages, rather 
than taxpayers or innocent victims, even in the event such a 
spill occurs prior to final enactment of this bill.

Section 3. Claims procedure

            Summary
    Section 3 amends Section 2713(c) of OPA by striking 
``settled by any person by payment within 90 days'' and 
inserting ``settled in whole by any person by payment within 30 
days.''
            Discussion
    Section 2713 of OPA sets forth procedures for handling 
claims for costs and damages resulting from covered oil 
discharges. It currently requires that claims first be 
presented to a responsible party or guarantor. Then, unless the 
responsible party denies all liability for the claim, the 
claimant must wait 90 days to determine whether the claim will 
be settled, before submitting a claim to the Trust Fund or 
commencing an action in court.\15\
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    \15\33 U.S.C. Sec. 2713(c).
---------------------------------------------------------------------------
    This amendment to OPA is intended to reduce delays in 
claims processing and avoid resulting hardship to claimants. If 
claims are not settled in whole within 30 days after being 
submitted to a responsible party, it is appropriate that 
claimants should be permitted to pursue other mechanisms for 
recovery.

Section 4. Oil and hazardous substance response planning

            Summary
    Section 4 provides that Section 311(j)(5) of the Federal 
Water Pollution Control Act, 33 U.S.C. Sec. 1321(j)(5) (Clean 
Water Act), is amended by requiring that the President shall 
ensure that the regulations establishing requirements for oil 
spill response plans are designed to prevent, to the maximum 
extent practicable, injury to the economy, jobs, and the 
environment, including:
           loss of, destruction of, or injury to real 
        or personal property;
           loss of subsistence use of natural 
        resources;
           loss of revenue;
           loss of profits or earning capacity;
           an increase in the cost of providing public 
        services to remove a discharge, and
           loss of, or destruction to, natural 
        resources.
    Section 4(a) provides that the President shall promulgate 
regulations governing oil spill response plans prepared by 
certain vessels and facilities and include the following 
requirements:
           describe the personnel and equipment 
        necessary to respond to a spill, staged and available 
        in the appropriate region to immediately respond and 
        sustain the response effort for as long as necessary;
           demonstrate the financial capability to pay 
        for removal costs and damages;
           describe the environmental effects of the 
        response plan methodologies and equipment;
           describe the process for communications and 
        coordination with relevant agencies;
           identify performance standards for the 
        quantity of oil or hazardous substances that will be 
        removed under the response plan immediately following 
        the discharge and at regular, identified periods, 
        including provisions for reporting the degree to which 
        actual removal meets the required standards;
           in the case of oil production, drilling and 
        workover facilities, describe the specific measures to 
        be used in response to a blowout or other event 
        involving loss of well control; and
           identify potential economic and ecological 
        impacts of a worst-case discharge and response 
        activities to prevent or mitigate, to the maximum 
        extent practicable, those impacts.
    Notice of a proposed response plan is to be published in 
the Federal Register followed by a public comment period of at 
least 30 days. Response plans are to be promptly reviewed and 
amendments shall be required as needed to meet the applicable 
requirements.
    This subsection adds additional requirements that must be 
met before a response plan may be approved, including:
           has been subject to a field test, with the 
        results being made publicly available;
           includes methods and equipment proposed to 
        be used which are demonstrated to be technologically 
        feasible in the area and under the conditions in which 
        the vessel or facility is proposed to operate;
           is based on available scientific information 
        about the area allowing for identification of potential 
        impacts to and protection of ecological areas and 
        wildlife; and
          that the plan describes the quantity of oil likely to 
        be removed in the event of a worst-case discharge.
    Section 4 further requires written concurrence in the 
response plan by such other agencies as the President 
determines to be appropriate.
    Section 4(b) amends the definition of ``worst case 
discharge'' in Section 311(a)(24)(B) of the Federal Water 
Pollution Control Act\16\ by inserting the phrase ``, including 
from an unanticipated and uncontrolled blowout or other loss of 
well control,'' after ``foreseeable discharge.''
---------------------------------------------------------------------------
    \16\33 U.S.C. Sec. 1321(a)(24)(B).
---------------------------------------------------------------------------
            Discussion
    Section 311(j)(5) of the Clean Water Act provides that 
owners and operators of certain vessels and facilities, 
including offshore facilities, prepare and submit to the 
President response plans setting forth actions to be taken in 
the event of discharges of oil into covered waters. Section 3 
of S. 3305 is intended to strengthen the response planning 
requirements.
    Section 4(a) adds a number of new provisions to Section 
311(j)(5) of the Clean Water Act to ensure that response plans 
address the potential impacts of an oil spill and outline 
appropriate response actions, including requirements that:
           Equipment and personnel shall be available 
        in the quantities and locations necessary to respond 
        and maintain response to worst-case discharges.
           Financial capability to pay for removal 
        costs and damages shall be demonstrated in advance as 
        part of a response plan.
           Environmental effects of response plan 
        methodologies and equipment shall be described.
           Processes for communications with relevant 
        governmental agencies shall be described.
           Performance standards for oil removal shall 
        be identified and complied with.
           For oil production facilities, specific 
        measures addressing blowouts or other loss of control 
        are required.
           Potential economic and ecological impacts of 
        a worst-case scenario are to be identified.
    Section 4(a) also adds new procedural requirements, 
including that response plans will be published in the Federal 
Register and subject to public comments, and that the President 
will approve response plans only after determining on the 
record that the requirements of the response plan regulations 
are met and that the plan has been demonstrated to be 
technologically feasible in the area and under the conditions 
in which the facility is proposed to operate.
    Section 4(b) includes a blowout or other loss in well 
control in the definition of a worst case discharge.

Section 5. Reporting

    At the request of the Obama Administration, BP has agreed 
to establish a separate Gulf Coast Claims Facility, funded by a 
$20 billion escrow account, to process and make payments for 
claims against BP arising out of the Deepwater Horizon 
disaster. To ensure that Congress receives detailed and timely 
information on claims processing, Section 5 requires that the 
Administrator of the Gulf Coast Claims Facility shall provide a 
report to Congress on a quarterly basis, regarding the status 
and ongoing payments from that Facility.

                          Legislative History

    S. 3305 was introduced by Senator Menendez, with six co-
sponsors, on May 5, 2010, and referred to the Committee on 
Environment and Public Works. Companion legislation was 
introduced in the House on May 6, 2010 (H.R. 5214).
    On June 9, 2010, Senator Menendez, with 22 co-sponsors, 
introduced S. 3472, the Big Oil Bailout Prevention Unlimited 
Liability Act of 2010, which was referred to the Committee on 
Environment and Public Works. S. 3472 would remove the current 
$75 million liability cap for offshore facilities under OPA, so 
that polluters would be required to pay the full costs of oil 
spills.
    On June 9, 2010 the Committee held a legislative hearing on 
S. 3305.
    On June 30, 2010, the Committee held a business meeting at 
which S. 3305 and proposed amendments were considered and the 
bill as amended was approved.

                             Rollcall Votes

Substitute amendment adopted

    At the business meeting held on June 30, 2010, an amendment 
in the nature of a substitute (Boxer Amendment #1) was proposed 
by Chairman Boxer. The substitute amendment would make a 
responsible party associated with an oil spill at an offshore 
facility liable for all economic and natural resources damages 
(as defined in Section 1002 of the Oil Pollution Act). The 
substitute amendment was adopted by a voice vote with Senator 
Vitter recorded as voting aye.

Additional amendments adopted

            Boxer Amendment #2
    Chairman Boxer proposed an amendment (Boxer Amendment #2) 
to add a new section to S. 3305 to modify certain requirements 
of Section 311 of the Federal Water Pollution Control Act by 
adding a new Section 3 to the bill relating to the development 
of oil spill contingency plans. Boxer Amendment #2 was adopted 
by a roll call vote, with 12 ayes and 7 nays. The Senators 
voting ``aye'' were: Senators Baucus, Boxer, Cardin, Carper, 
Gillibrand, Klobuchar, Lautenberg, Merkley, Sanders, Specter, 
Udall and Whitehouse. The Senators voting ``nay'' were: 
Senators Alexander, Barrasso, Bond, Crapo, Inhofe, Vitter and 
Voinovich.
            Inhofe Amendment #2
    Senator Inhofe proposed an amendment (Inhofe Amendment #2) 
to shorten the time period after which a claimant may elect to 
present a claim to the Oil Spill Liability Trust Fund.
    Inhofe Amendment #2, as amended by the second degree 
amendment proposed by Chairman Boxer, was adopted by a voice 
vote.
            Boxer Second Degree to Inhofe Amendment #2
    Chairman Boxer proposed a second degree amendment to Inhofe 
Amendment #2 to clarify the provisions shortening the time 
period in which a claimant may elect to present a claim to the 
Oil Spill Liability Trust Fund.
    Chairman Boxer's second degree amendment was adopted by a 
voice vote.
            Vitter Amendment #4
    Senator Vitter proposed an amendment (Vitter Amendment #4) 
to require a report twice a year on the status of and payments 
from the $20 billion compensation fund established by BP. The 
amendment was modified by consent of Senator Vitter to provide 
that the Administrator of the BP Gulf Coast Claims Facility 
shall provide a report to Congress four times a year, on a 
quarterly basis, regarding the status and ongoing payments from 
that Claims Facility.
    Vitter Amendment #4, as modified by consent, was adopted by 
a voice vote.

Amendments not adopted

            Vitter Amendment #3
    Senator Vitter proposed an amendment (Vitter Amendment #3) 
that would limit attorney's fees to 5% of any claim recovered 
under the Oil Pollution Act. Vitter Amendment #3 failed by a 
roll call vote, with 6 ayes and 13 nays. The Senators voting 
``Aye'' were: Senators Alexander, Barrasso, Bond, Inhofe, 
Vitter and Voinovich. The Senators voting ``Nay'' were: 
Senators Baucus, Boxer, Cardin, Carper, Crapo, Gillibrand, 
Klobuchar, Lautenberg, Merkley, Sanders, Specter, Udall and 
Whitehouse.
            Inhofe Amendment #1
    Senator Inhofe proposed an amendment (Inhofe Amendment #1) 
to the Oil Pollution Act of 1990 that would direct the 
President to establish a set of liability limits for offshore 
facilities by taking into account the availability of insurance 
products and be otherwise based and categorized by eleven other 
various criteria. Inhofe Amendment #1 failed by a roll call 
vote, with 6 ayes and 13 nays. The Senators voting ``Aye'' 
were: Senators Alexander, Barrasso, Bond, Crapo, Inhofe, and 
Voinovich. The Senators voting ``Nay'' were: Senators Baucus, 
Boxer, Cardin, Carper, Gillibrand, Klobuchar, Lautenberg, 
Merkley, Sanders, Specter, Udall, Vitter and Whitehouse.

Final approval of S. 3305 as amended

    The Committee voted to approve S. 3305, with the adopted 
amendments as described above, and to report the bill as 
amended to the full Senate, by a voice vote.

                      Regulatory Impact Statement

    In compliance with section 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee notes, based on the 
Congressional Budget Office estimate, that the bill would 
require that owners and operators of facilities and large 
vessels that could discharge oil or hazardous materials into 
waters of the United States include additional information in 
their spill response plans. The cost of the provision would be 
any additional amounts that the entities would have to spend to 
prepare plans. In addition, the bill would modify liability 
limits for oil spills from offshore facilities, affecting 
facilities that will have or have had an oil spill between 
April 15, 2010, and the date of enactment of S. 3305. CBO 
estimates that the mandate would not impose any incremental 
costs on the owners or operators of offshore facilities because 
it would not change the amount paid by the responsible parties. 
The bill will not affect the personal privacy of individuals.

                          Mandates Assessment

    In compliance with the Unfunded Mandates Reform Act of 1995 
(Public Law 104-4), the Committee notes that the Congressional 
Budget Office has concluded the bill will impose 
intergovernmental and private-sector impacts but that it 
``estimates that the cost of the intergovernmental mandates 
would fall well below the annual threshold established in UMRA 
($70 million in 2010, adjusted annually for inflation).''

               Congressional Budget Office Cost Estimate

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office.

                                                     July 27, 2010.
Hon. Barbara Boxer,
Chairman, Committee on Environment and Public Works,
U.S. Senate, Washington, DC.
    Dear Madam Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 3305, the Big Oil 
Bailout Prevention Unlimited Liability Act of 2010.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Sarah Puro 
and Kathleen Gramp.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 3305--Big Oil Bailout Prevention Unlimited Liability Act of 2010

    Summary: S. 3305 would amend the Oil Pollution Act of 1990 
(OPA) to eliminate the limit on liability that owners or 
operators of certain off-shore drilling facilities (such as oil 
drilling platforms) face when an oil spill occurs. CBO 
estimates that eliminating the limit would probably result in a 
net loss of receipts to the government because it would 
probably lead to a reduction in offsetting receipts (a form of 
direct spending) from bonus bids that oil and gas operators pay 
to explore for oil and natural gas on the Outer Continental 
Shelf (OCS). Enacting the bill also would likely lead to a 
small reduction in direct spending from the Oil Spill Liability 
Trust Fund (OSLTF) for compensating those who suffer economic 
or environmental damages from future oil spills. In total, CBO 
estimates that enacting S. 3305 would increase direct spending 
by $50 million over the 2011-2020 period.\7\ Because enacting 
the legislation would affect direct spending, pay-as-you-go 
procedures apply.
---------------------------------------------------------------------------
    \7\Different time periods apply in the Senate for its pay-as-you-go 
rule. CBO estimates that enacting S. 3305 would increase direct 
spending by $40 million over the 2010-2014 period and by $50 million 
over the 2010-2019 period.
---------------------------------------------------------------------------
    The bill also would require the United States Coast Guard 
(USCG) to change its regulation of companies' plans for 
responding to oil spills. CBO estimates that those provisions 
would cost $45 million over the 2011-2015 period, assuming 
appropriation of the amounts estimated to be necessary.
    S. 3305 would impose intergovernmental and private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
on owners and operators of facilities and large vessels that 
produce, use, or transport oil and hazardous materials in or 
near waters of the United States. CBO estimates that the cost 
of the intergovernmental mandates would fall well below the 
annual threshold established in UMRA ($70 million in 2010, 
adjusted annually for inflation). CBO cannot determine whether 
the aggregate cost of private-sector mandates would exceed the 
annual threshold established in UMRA ($141 million in 2010, 
adjusted annually for inflation) because those costs would 
depend on future regulations.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 3305 is shown in the following table. 
The costs of this legislation fall within budget functions 300 
(natural resources and environment) and 950 (undistributed 
offsetting receipts).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             By Fiscal year, in millions of dollars--
                                         ---------------------------------------------------------------------------------------------------------------
                                            2011     2012     2013     2014     2015     2016     2017     2018     2019     2020   2011-2015  2011-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

Estimated Budget Authority..............       10       15       10        5        5        5        *        *        *        *        45         50
Estimated Outlays.......................       10       15       10        5        5        5        *        *        *        *        45         50

                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level...........       10       10       10       10       10       10       10       10       10       10        50        100
Estimated Outlays.......................        5       10       10       10       10       10       10       10       10       10        45        95
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note:  * = between -$500,000 and $500,000.

    Basis of estimate: S. 3305 would amend OPA by eliminating 
the $75 million liability limit for damages caused by certain 
offshore oil facilities and expanding the responsibilities of 
the USCG for reviewing and approving companies' plans for 
responding to oil spills. CBO estimates that implementing this 
legislation would increase net direct spending by $50 million 
over the next 10 years and discretionary spending by $45 
million over the 2011-2015 period, assuming appropriation of 
the necessary amounts.
    For this estimate, CBO assumes that S. 3305 will be enacted 
in 2010 and that the authorized amounts will be appropriated 
each year. Estimates of spending are based on historical 
spending patterns for similar programs.

Background

    OPA is one of several federal and state laws that determine 
civil liability for the adverse effects of oil spills. S. 3305 
would modify the liability limits in that law for offshore 
facilities other than deepwater ports, retroactive to April 15, 
2010.
    Under OPA, the party responsible for discharging oil or 
other hazardous materials into navigable waters of the United 
States is liable for all of the cleanup costs associated with 
the spill, including mitigation of the impacts on natural 
resources. In addition, the responsible party is liable for 
some or all of the economic and natural resource damages 
stemming from the spill, subject to certain conditions 
specified in OPA.
    The amount of a firm's liability for economic and natural 
resources damages under OPA is unlimited if the spill was 
caused by a violation of any applicable federal regulations or 
by gross negligence or willful misconduct. If no such violation 
occurred, OPA limits the responsible party's liability for 
economic and natural resources damages, depending on the type 
and size of vessel or facility that caused the spill. The 
current liability limit for offshore facilities (such as oil 
and gas platforms) is $75 million per incident. OPA also 
requires responsible parties to demonstrate their ability to 
pay potential cleanup costs and damage claims before receiving 
permits or other approvals to operate in affected areas. It 
includes statutory guidelines for determining the amount of 
those financial assurances and sets a $150 million limit on the 
amount of assurance required for offshore oil and gas 
facilities. Financial assurances can take different forms, 
including self-insurance, indemnification by another party, 
insurance policies, and other similar commitments.
    Above the liability limits for private firms specified in 
OPA, the OSLTF is available to pay up to $1 billion per 
incident for any additional economic and natural resources 
damages caused by an oil spill. The OSLTF is funded by an 8-
cent tax on each barrel of oil produced in or imported to the 
United States. Such spending is not subject to appropriation. 
The OSLTF is also available for emergency response to oil 
spills or when the responsible party cannot be determined. In 
2009, payments for damages from the OSLTF totaled $71 million.
    According to the USCG, prior to 2010, there have been a few 
oil spills that exceeded the liability limits specified in OPA. 
None of those spills has been from an offshore facility. Most 
have been from vessels transporting oil. The Deepwater Horizon 
spill in the Gulf of Mexico, which began on April 20, 2010, is 
the first offshore oil spill since OPA was enacted that will 
involve damage claims exceeding $75 million.

Direct spending

    Enacting S. 3305 would affect direct spending because 
removing the liability limit would probably reduce offsetting 
receipts (a form of direct spending) from bonus bids that oil 
and gas operators pay to explore leases on the OCS, 
particularly in the next few years as the industry adapts to 
the consequences of the change in law. Also, the legislation 
would probably reduce outlays slightly from the OSLTF for 
claims that otherwise would have been paid by the federal 
government because they exceeded the $75 million limit on 
economic and natural resource damage claims contained in 
current law. On balance, CBO estimates that those changes would 
increase net direct spending by about $50 million over the 
2011-2020 period.
    Offsetting Receipts from OCS Leases. The federal government 
leases the rights to develop the oil and gas resources on the 
OCS in exchange for payments of a bonus bid when the lease is 
awarded, annual rental fees on nonproducing leases, and annual 
royalties based on the value of any production. Based on the 
production and price assumptions used in CBO's March baseline, 
offsetting receipts from oil and gas leases on the OCS are 
projected to total more than $100 billion over the next 10 
years. CBO estimates that enacting S. 3305 would reduce 
offsetting receipts from OCS leases by about $50 million over 
the 2011-2020 period because companies bidding on leases would 
likely reduce their bids because of the concern that they would 
face an increase in their potential liability for offshore 
operations. The size (but not the direction) of that budgetary 
impact is uncertain, and the cost could be smaller or 
significantly larger than our estimate.
    CBO estimates that removing the $75 million liability limit 
would not significantly change assessments of the economic 
value of most OCS leases. The legislation would not affect some 
of the largest sources of liability--those stemming from 
cleanup costs or from spills caused by noncompliance with 
federal regulations or by gross negligence. Similarly, some 
industry analysts have suggested that the Deepwater Horizon 
spill has become the de facto standard for liability, 
suggesting that many firms--particularly those that self-
insure--would anticipate needing to cover all damages even in 
the absence of this legislation. Thus, CBO anticipates that 
removing the limit on liability for damages would primarily 
affect smaller firms that purchase insurance for such costs, 
which could reduce the economic profitability of certain 
leases. Based on historical trends in leasing activities, CBO 
estimates that such effects would reduce proceeds from bonus 
bids by less than 1 percent and that most of that impact would 
occur in the next five years as firms adjust to the new policy.
    Federal Spending from the OSLTF. Because the occurrence of 
significant oil spills is subject to a great deal of 
uncertainty, CBO has estimated the budgetary impact of this 
legislation on the OSLTF on a probability basis. Industry 
experts and studies suggest that, in any one year, the chance 
of a large spill from an offshore facility involving more than 
100,000 barrels of oil is very small. Experience also suggests 
that spills are likely to be caused by actions that would 
preclude the applicability of the liability limit (such as 
noncompliance with regulations or negligence).
    In the case of the Deepwater Horizon spill in the Gulf of 
Mexico, the responsible party has provided assurances that it 
will pay for all legitimate claims of damages over and above 
the $75 million limit and has pledged at least $20 billion for 
such damage claims. Thus, CBO estimates that making the 
provisions in S. 3305 retroactive to April 15, 2010, would not 
change the amount paid for damage claims by either the 
responsible party or the federal government. In the future, we 
expect that this provision would have a small impact on 
spending from the OSLTF.

Spending subject to appropriation

    S. 3305 would require the USCG to evaluate companies' plans 
for responding to oil spills and certify that such plans are 
both technologically feasible and have been tested in a field 
situation. The USCG would require significant additional 
personnel with specific technological expertise to perform that 
work. Based on information from the USCG and historical 
spending for similar programs, CBO estimates that implementing 
the new requirements would cost $45 million over the 2011-2015 
period, assuming appropriation of the necessary amounts.
    Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

     CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 3305 AS ORDERED REPORTED BY THE SENATE COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS ON JUNE 30, 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2010   2011   2012   2013   2014   2015   2016   2017   2018   2019   2020  2010-2015  2010-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT

Statutory Pay-As-You-Go Impact.......................      0     10     15     10      5      5      5      0      0      0      0        45         50
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and Private-Sector Impact: S. 3305 would 
impose intergovernmental and private-sector mandates as defined 
in UMRA on owners and operators of facilities and large vessels 
that produce, use, or transport oil and hazardous materials in 
or near waters of the United States. CBO estimates that the 
cost of the intergovernmental mandates would fall well below 
the annual threshold established in UMRA ($70 million in 2010, 
adjusted annually for inflation). CBO cannot determine whether 
the aggregate cost of private-sector mandates would exceed the 
annual threshold established in UMRA ($141 million in 2010, 
adjusted annually for inflation) because it would depend on 
future regulations.

Mandates that apply to both public and private entities

    The bill would require that owners and operators of 
facilities and large vessels that could discharge oil or 
hazardous materials into waters of the United States include 
additional information in their spill response plans. Affected 
entities would include oil refineries, tugboats, oil tankers, 
and ferries. According to information from the USCG, 
Environmental Protection Agency, and Pipeline and Hazardous 
Materials Safety Administration, owners and operators of about 
30,000 onshore facilities and vessels currently submit response 
plans. The cost of the mandate would be any additional amounts 
that the mandated entities would have to spend to prepare 
plans. Because the costs of the requirement would depend on 
future regulations, CBO cannot determine the cost of the 
mandate on private-sector entities. Because of the relatively 
small number of public vessels affected, however, CBO estimates 
the cost to state and local governments would be small.

Mandates that apply to private entities only

    By retroactively eliminating the liability limit for oil 
spills from offshore facilities, the bill would place a mandate 
on owners and operators of any such facilities that will have 
or have had an oil spill between April 15, 2010, and the date 
of enactment of S. 3305. Because the chances of another large 
spill occurring before enactment are very small, CBO assumes 
that the only affected spill would be the Deepwater Horizon 
spill. Based on information from industry testimony, CBO 
estimates that the mandate would not impose any incremental 
costs on the owners or operators of offshore facilities because 
it would not change the amount paid by the responsible parties.
    Estimate prepared by: Federal costs: Kathleen Gramp (for 
Outer Continental Shelf); Sarah Puro (for Oil Spill Liability 
Trust Fund); Impact on State, Local, and Tribal Governments: 
Ryan Miller; Impact on the Private Sector: Samuel Wice.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                    MINORITY VIEWS OF SENATOR INHOFE

    The Minority strongly believes that effective legislation 
to address the BP oil spill disaster must accomplish the 
following: ensure that victims of the spill are fully 
compensated under the Oil Pollution Act of 1990 (OPA), minimize 
the risk of future spills from occurring, and maintain access 
to America's domestic offshore energy resources. S. 3305, as 
amended, fails to achieve this balance, as it could render 
offshore drilling in the Gulf of Mexico a proposition that only 
the largest oil companies, as well state-owned firms such as 
China's National Offshore Oil Corporation, could afford. This 
outcome would undermine America's energy security, cost 
thousands of good-paying jobs, and threaten the economic 
recovery of Gulf coast communities.
    These are just some of the broader ramifications associated 
with S.3305, as amended, and they have not been fully examined 
by this Committee or Congress. While the Minority wholly agrees 
that increases to the OPA liability limits are necessary, it's 
critical to fully consider the negative repercussions 
associated with no limits on OPA's strict liability regime, as 
well as other provisions of this act. For these reasons, S. 
3305 should be opposed and returned to the Committee on 
Environment and Public Works by the full Senate.
    As we learned from expert testimony in the June 9th 
hearing, the various liability mechanisms in the OPA and other 
relevant statutes are complex and interrelated in subtle ways, 
as is the relationship of liability limits to the viability of 
offshore drilling. The submitted testimony of Rawle King, a 
Congressional Research Service (CRS) analyst in financial 
economics and risk assessment, succinctly described the dilemma 
of enacting prohibitively high liability limits:

          A key oil spill liability and insurance public policy 
        challenge stemming from the Deepwater Horizon 
        catastrophe involves reconciling two points of 
        contention: (1) the desire to increase the limitations 
        of liability for operators of offshore energy 
        facilities from $75 million to $10 billion or more for 
        economic losses caused by oil pollution damage and 
        raise the criteria for demonstrating oil spill 
        financial responsibility (OSFR); and (2) the limited 
        capacity of offshore energy insurance and reinsurance 
        to cover loss of well control, cost to redrill a 
        blowout well and liability facing operators of offshore 
        energy facilities.

    The financial consequences of unlimited strict liability 
could overwhelm the financial wherewithal of small- and medium-
sized independent operators in the Gulf. In a letter submitted 
for the hearing record, Alliant Insurance, which insures 
offshore oil and gas operations, stated that:

          If the liability cap is increased to the levels we 
        understand are under consideration . . . in our view 
        only major oil companies and NOC's (National Oil 
        Companies) will be financially strong enough to 
        continue current exploration and development efforts.

    Another letter submitted for the record from Lockton 
Companies, LLC stated:

          Given the limited capacity in the energy insurance 
        market, a material increase in the cap will eliminate 
        insurance as an option for many exploration and 
        production companies. Without insurance, many of the 
        active exploration and production companies would be 
        unable to operate in the Gulf of Mexico.

    And on May 18th, even Interior Secretary Ken Salazar 
testified before the Senate Energy and Natural Resources 
Committee about the critical importance of calibrating the 
precise level of the liability cap to the need for a 
competitive offshore oil and natural gas industry:

          [I]t is important that we be thoughtful relative to 
        that, what that cap will be, because you don't want 
        only the BP's of the world essentially be the ones that 
        are involved in these efforts, that there are companies 
        of lesser economic robustness.

    Along with S. 3305's unlimited strict liability regime, the 
bill as amended includes potential changes to existing 
financial responsibility requirements. If these requirements 
are ultimately promulgated through regulation at unreasonable 
levels, S. 3305 could further restrict domestic production in 
the Gulf, and possibly end it altogether.
    S.3305, as amended, states that the ``President shall 
promulgate regulations that clarify the requirements of a 
response plan'' to include, among other requirements, that a 
company's spill response plan shall ``demonstrate the financial 
capability to pay for removal costs and damages'' of an oil 
spill. This language is vague and open-ended; theoretically, 
the agency responsible for defining this language (most likely 
the Environmental Protection Agency, as the bill amends the 
Clean Water Act) could do so in a manner that makes 
``demonstrating financial capability'' so onerous that drilling 
for many firms would be financially impossible.
    For instance, if an operator other than one the size of BP 
or CNOOC were required to demonstrate financial capability of 
$10 billion to pay for ``removal costs and damages,'' such 
operator would be unable to secure insurance. In a letter for 
the June 9th hearing on S. 3305, INDECS insurance consultancy 
stated:

        . . . if the intention is to increase the limit 
        required under OPA90 to US$10 billion and also required 
        evidence of financial responsibility to something 
        similar, then quite simply the energy insurance market 
        will no longer be an option. . . . The cost of these 
        methods or ability to self insure these risks will far 
        exceed their capabilities, preventing their management 
        from fulfilling their fiduciary liability and 
        presenting a barrier to acquiring new or even servicing 
        existing permits in the future.

    Another provision in S.3305, as amended, would ``require 
notice of the proposed response plan to be published in the 
Federal Register and provide for a public comment period for 
the plan of at least 30 days''. This requirement would not only 
extend to offshore facilities, but to every tank and non-tank 
vessel required to submit a plan under OPA. In a July 22nd 
letter to the Chairman and Ranking Member, the American 
Waterways Operators (AWO) noted that as many as 20,000 vessels 
would be affected by this requirement. As AWO contends that:

          At minimum, this amounts to an extreme administrative 
        burden that is not justified by the benefit it 
        provides: the Coast Guard has a rigorous process for 
        review and approval of vessel response plans, and it is 
        difficult to see what added benefit would accrue if the 
        response plans for thousands of vessels--ranging from a 
        tank barge carrying 20,000 barrels of oil to a towboat 
        carrying 60,000 gallons of fuel--were subjected to 
        public notice and comment.
          At worst, however, such a requirement could prove not 
        only unnecessary and administratively cumbersome, but 
        disruptive to critical maritime transportation. Under 
        current regulations, vessel owners are required to 
        notify the Coast Guard when a component of their 
        response plan changes--for example, a response 
        contractor merges with another company, or a person 
        listed in the plan gets a new cell phone number. 
        Requiring notice of such changes to be published in the 
        Federal Register could stymie the just-in-time delivery 
        of economically essential cargoes.

    The AWO also expressed serious concern with potentially 
disruptive ``performance standards'' language required under S. 
3305's response plans:

          In a spill response planning context, the term 
        ``performance standards'' implies that a response plan 
        holder will be in violation of the regulations if an 
        element of the response plan fails to perform as 
        planned. In the 20 years since the Oil Pollution Act of 
        1990 (OPA 90) was enacted, the Coast Guard has 
        repeatedly reiterated that its response plan 
        regulations establish planning standards, not 
        performance standards. In other words, a vessel owner 
        must ensure, by contract or other approved means, the 
        availability of response resources in identified 
        quantities that are capable of being on scene within 
        designated time frames. However, the plan holder does 
        not violate the regulations if, on the day of a spill, 
        the response resources cannot perform as planned (for 
        example, because weather conditions prevented aircraft 
        from flying or boom from being deployed).
          Given the many variables at play in the event of a 
        vessel incident, AWO knows of no response resource 
        provider who can guarantee that it will meet 
        performance (as opposed to planning) standards.

    AWO explains further that mandating performance standards 
in response plans raises civil and criminal liabilities for 
``resource providers'' that can cripple vessel owners' ability 
to operate:

          Faced with the prospect of civil and criminal 
        liability for failure to meet the response planning 
        regulations, resource providers may decline to enter 
        into contracts with vessel owners, leaving vessel 
        owners unable to operate and disrupting the 
        transportation of vital petroleum products and other 
        critical cargoes.

    Finally, the ``impact of this change,'' AWO stated, ``will 
extend far beyond oil transportation, since non-tank vessels 
over 400 gross tons that carry oil as fuel are also subject to 
response plan requirements under OPA 90.'' This could ``stymie 
the operations of vessels ranging from tugboats providing 
tanker escort services in San Francisco Bay to towboats pushing 
cement barges on the Arkansas River.
    The new contingency plan requirements potentially invite 
endless streams of litigation to each and every proposed 
contingency plan, including challenges to the interpretation of 
what is the ``available scientific information'' or what is 
``technologically feasible'' to assess conditions in which a 
well would operate and its potential impacts to ecological 
areas and wildlife. Moreover, the requirement for written 
concurrences of other Agencies as to the adequacy of response 
plans could very well introduce significant delays into the 
approval process.
    If the intent of S.3305, as amended, is to restrict 
offshore drilling to the very largest operators, such as BP, or 
to perhaps even serve as a de jure ban on all offshore drilling 
in American waters, then the enactment of this bill could 
potentially satisfy one or both of those objectives. However, 
if the intent of S.3305 is to ensure that victims of future 
spills are made whole through restitution, and not at the 
expense of the American taxpayer, as its proponents claim, then 
more predictable, effective, and less harmful alternatives are 
available.
    For instance, proponents of S.3305 assert that without 
unlimited strict liability, those suffering injury from a 
spill, along with the American taxpayer, would pay the price 
for damages in excess of a company's strict liability limit. 
However, this allegation disregards one of the main purposes of 
the creation of the oil and gas industry-funded Oil Spill 
Liability Trust Fund (OSLTF), which serves as the primary 
backstop to OPA's prescribed liability limits. As an additional 
assurance, Congress should consider integrating a ``Price-
Anderson''-like mechanism, as utilized in the nuclear energy 
industry, as a complimentary backstop to the OSLTF's role, so 
that all other oil and gas entities operating offshore would 
then intercede to compensate for any additional liabilities.
    It is critical to note that small and midsize independents 
produce 63 percent of the Gulf's natural gas and 36 percent of 
its oil; 30 percent of US oil production comes from the Gulf of 
Mexico. The offshore areas of the United States are estimated 
to contain significant quantities of resources in yet-to-be-
discovered fields. MMS estimates of oil and gas resources in 
undiscovered fields on the Outer Continental Shelf total 86 
billion barrels of oil and 420 trillion cubic feet of gas. 
These volumes represent about 60 percent of the oil and 40 
percent of the natural gas resources estimated to be contained 
in remaining undiscovered fields in the United States. A July 
22nd study released by IHS Global Insight forecasts that by 
2020 ``an exclusion of the independents from the Gulf of Mexico 
would eliminate 300,000 jobs and result in a loss, over 10 
years, of $147 billion in federal, state, and local taxes from 
the Gulf region. If the independents are excluded just from the 
deepwater, the job loss would be 265,000 jobs by 2020, and $106 
billion in tax revenues over the 10-year period.''
    Based on the available information, S. 3305, as amended, 
could drastically decrease the number of operators in the Gulf 
of Mexico, which would destroy thousands of American jobs and 
jeopardize America's energy security.
                                                        Jim Inhofe.
                        Changes in Existing Law

    In compliance with section 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill 
as reported are shown as follows: Existing law proposed to be 
omitted is enclosed in [black brackets], new matter is printed 
in italic, existing law in which no change is proposed is shown 
in roman:

           *       *       *       *       *       *       *

OIL POLLUTION ACT OF 1990

           *       *       *       *       *       *       *

SEC. 1001. DEFINITIONS.

  For the purposes of this Act, the term----
          (1) * * *

           *       *       *       *       *       *       *

SEC. 1004. LIMITS ON LIABILITY.

  (a) General Rule.--Except as otherwise provided in this 
section, the total of the liability of a responsible party 
under section 1002 and any removal costs incurred by, or on 
behalf of, the responsible party, with respect to each incident 
shall not exceed----
          (1) for a tank vessel, the greater of----
                  (A) $1,200 per gross ton; or
                  (B)(i) in the case of a vessel greater than 
                3,000 gross tons, $10,000,000; or
                  (ii) in the case of a vessel of 3,000 gross 
                tons or less, $2,000,000;
          (2) for any other vessel, $600 per gross ton or 
        $500,000, whichever is greater;
          (3) for an offshore facility except a deepwater port, 
        the total of all removal costs [plus $75,000,000] and 
        the liability of the responsible party under section 
        1002; and
          (4) for any onshore facility and a deepwater port, 
        $350,000,000.

           *       *       *       *       *       *       *

SEC. 1013. CLAIMS PROCEDURE.

  (a) Presentation.--Except as provided in subsection (b), all 
claims for removal costs or damages shall be presented first to 
the responsible party or guarantor of the source designated 
under section 1014(a).
  (b) Presentation to Fund.----
          (1) In general.--Claims for removal costs or damages 
        may be presented first to the Fund----
                  (A) if the President has advertised or 
                otherwise notified claimants in accordance with 
                section 1014(c);
                  (B) by a responsible party who may assert a 
                claim under section 1008;
                  (C) by the Governor of a State for removal 
                costs incurred by that State; or
                  (D) by a United States claimant in a case 
                where a foreign offshore unit has discharged 
                oil causing damage for which the Fund is liable 
                under section 1012(a).
          (2) Limitation on presenting claim.--No claim of a 
        person against the Fund may be approved or certified 
        during the pendency of an action by the person in court 
        to recover costs which are the subject of the claim.
  (c) Election.--If a claim is presented in accordance with 
subsection (a) and----
          (1) each person to whom the claim is presented denies 
        all liability for the claim, or
          (2) the claim is not [settled by any person by 
        payment within 90] settled in whole by any person by 
        payment within 30 days days after the date upon which 
        (A) the claim was presented, or (B) advertising was 
        begun pursuant to section 1014(b), whichever is later,
the claimant may elect to commence an action in court against 
the responsible party or guarantor or to present the claim to 
the Fund.

           *       *       *       *       *       *       *

                  Federal Water Pollution Control Act

      Sec. 301. (a) Except as in compliance with this section 
and sections 302, 306, 307, 318, 402, and 404 of this Act, the 
discharge of any pollutant by any person shall be unlawful.
      (b) * * *

           *       *       *       *       *       *       *

      Sec. 311. (a) For the purpose of this section, the term--
            (1) oil'' means oil of any kind or in any form, 
        including, but not limited to, petroleum, fuel oil, 
        sludge, oil refuse, and oil mixed with wastes other 
        than dredged spoil;
            (2) * * *

           *       *       *       *       *       *       *

            (24) ``worst case discharge'' means--
                    (A) in the case of a vessel, a discharge in 
                adverse weather conditions of its entire cargo; 
                and
                    (B) in the case of an offshore facility or 
                onshore facility, the largest foreseeable 
                discharge, including from an unanticipated and 
                uncontrolled blowout or other loss of well 
                control, in adverse weather conditions;

           *       *       *       *       *       *       *

      (j) National Response System.--
            (1) In general.--* * *

           *       *       *       *       *       *       *

            (5) Tank vessel, nontank vessel, and facility 
        response plans.--(A)(i) The President shall issue 
        regulations which require an owner or operator of a 
        tank vessel or facility described in subparagraph (C) 
        to prepare and submit to the President a plan for 
        responding, to the maximum extent practicable, to a 
        worst case discharge, and to a substantial threat of 
        such a discharge, of oil or a hazardous substance.
            (ii) The President shall also issue regulations 
        which require an owner or operator of a nontank vessel 
        to prepare and submit to the President a plan for 
        responding, to the maximum extent practicable, to a 
        worst case discharge, and to a substantial threat of 
        such a discharge, of oil.
                            (iii) The President shall ensure 
                        that the regulations promulgated 
                        pursuant to this paragraph are designed 
                        to prevent, to the maximum extent 
                        practicable, injury to the economy, 
                        jobs, and the environment, including to 
                        prevent--
                                    (I) loss of, destruction 
                                of, or injury to, real or 
                                personal property;
                                    (II) loss of subsistence 
                                use of natural resources;
                                    (III) loss of revenue;
                                    (IV) loss of profits or 
                                earning capacity;
                                    (V) an increase in the cost 
                                of providing public services to 
                                remove a discharge; and
                                    (VI) loss of, destruction 
                                of, or injury to, natural 
                                resources.
                            (iv) The President shall promulgate 
                        regulations that clarify the 
                        requirements of a response plan in 
                        accordance with subparagraph (D).
            (B) The Secretary of the Department in which the 
        Coast Guard is operating may issue regulations which 
        require an owner or operator of a tank vessel, a 
        nontank vessel, or a facility described in subparagraph 
        (C) that transfers noxious liquid substances in bulk to 
        or from a vessel to prepare and submit to the Secretary 
        a plan for responding, to the maximum extent 
        practicable, to a worst case discharge, and to a 
        substantial threat of such a discharge, of a noxious 
        liquid substance that is not designated as a hazardous 
        substance or regulated as oil in any other law or 
        regulation. For purposes of this paragraph, the term 
        noxious liquid substance'' has the same meaning when 
        that term is used in the MARPOL Protocol described in 
        section 2(a)(3) of the Act to Prevent Pollution from 
        Ships (33 U.S.C. 1901(a)(3)).
            (C) The tank vessels, nontank vessels, and 
        facilities referred to in subparagraphs (A) and (B) are 
        the following:
                    (i) A tank vessel, as defined under section 
                2101 of title 46, United States Code.
                    (ii) A nontank vessel.
                    (iii) An offshore facility.
                    (iv) An onshore facility that, because of 
                its location, could reasonably be expected to 
                cause substantial harm to the environment by 
                discharging into or on the navigable waters, 
                adjoining shorelines, or the exclusive economic 
                zone.
            [(D) A response plan required under this paragraph 
        shall--
                    [(i) be consistent with the requirements of 
                the National Contingency Plan and Area 
                Contingency Plans;
                    [(ii) identify the qualified individual 
                having full authority to implement removal 
                actions, and require immediate communications 
                between that individual and the appropriate 
                Federal official and the persons providing 
                personnel and equipment pursuant to clause 
                (iii);
                    [(iii) identify, and ensure by contract or 
                other means approved by the President the 
                availability of, private personnel and 
                equipment necessary to remove to the maximum 
                extent practicable a worst case discharge 
                (including a discharge resulting from fire or 
                explosion), and to mitigate or prevent a 
                substantial threat of such a discharge;
                    [(iv) describe the training, equipment 
                testing, periodic unannounced drills, and 
                response actions of persons on the vessel or at 
                the facility, to be carried out under the plan 
                to ensure the safety of the vessel or facility 
                and to mitigate or prevent the discharge, or 
                the substantial threat of a discharge;
                    [(v) be updated periodically; and
                    [(vi) be resubmitted for approval of each 
                significant change.]
                    (D) A response plan required under this 
                paragraph shall--
                            (i) be consistent with the 
                        requirements of the National 
                        Contingency Plan and Area Contingency 
                        Plans;
                            (ii) identify the qualified 
                        individual having full authority to 
                        implement removal actions, and require 
                        immediate communications between that 
                        individual and the appropriate Federal 
                        official and the persons providing 
                        personnel and equipment pursuant to 
                        clause (iii);
                            (iii) identify, and ensure by 
                        contract or other means approved by the 
                        President the availability of, private 
                        personnel and equipment in the 
                        quantities necessary, staged and 
                        available in the appropriate region to 
                        respond immediately to and sustain the 
                        response effort for as long as 
                        necessary--
                                    (I) to remove, to the 
                                maximum extent practicable, a 
                                worst-case discharge (including 
                                a discharge resulting from fire 
                                or an explosion);
                                    (II) to mitigate damage 
                                from a discharge; and
                                    (III) to prevent or reduce 
                                a substantial threat of such a 
                                discharge;
                            (iv) demonstrate the financial 
                        capability to pay for removal costs and 
                        damages;
                            (v) describe the training, 
                        equipment testing, periodic unannounced 
                        drills, and response actions of persons 
                        on the vessel or at the facility, to be 
                        carried out under the plan to ensure 
                        the safety of the vessel or facility 
                        and to meet the requirements of this 
                        subparagraph;
                            (vi) describe the environmental 
                        effects of the response plan 
                        methodologies and equipment;
                            (vii) describe the process for 
                        communication and coordination with 
                        Federal, State, and local agencies 
                        before, during, and after a response to 
                        a discharge;
                            (viii) identify performance 
                        standards for the quantity of oil or 
                        hazardous substance that will be 
                        removed under the response plan 
                        immediately following the discharge and 
                        at regular, identified periods, 
                        including provisions for reporting the 
                        degree to which actual removal meets 
                        the required performance standards;
                            (ix) in the case of oil production, 
                        drilling, and workover facilities, 
                        describe the specific measures to be 
                        used in response to a blowout or other 
                        event involving loss of well control;
                            (x) identify potential economic and 
                        ecological impacts of a worst-case 
                        discharge and response activities to 
                        prevent or mitigate, to the maximum 
                        extent practicable, those impacts in 
                        the event of a discharge;
                            (xi) be updated periodically; and
                            (xii) be resubmitted for approval 
                        of each significant change.
            (E) With respect to any response plan submitted 
        under this paragraph for an onshore facility that, 
        because of its location, could reasonably be expected 
        to cause significant and substantial harm to the 
        environment by discharging into or on the navigable 
        waters or adjoining shorelines or the exclusive 
        economic zone, and with respect to each response plan 
        submitted under this paragraph for a tank vessel, 
        nontank vessel, or offshore facility, the President 
        shall--
                    [(i) promptly review such response plan;
                    [(ii) require amendments to any plan that 
                does not meet the requirements of this 
                paragraph;
                    [(iii) approve any plan that meets the 
                requirements of this paragraph;
                    [(iv) review each plan periodically 
                thereafter; and
                    [(v) in the case of a plan for a nontank 
                vessel, consider any applicable State-mandated 
                response plan in effect on the date of the 
                enactment of the Coast Guard and Maritime 
                Transportation Act of 2004 and ensure 
                consistency to the extent practicable.]
                            (i) require notice of the proposed 
                        response plan to be published in the 
                        Federal Register and provide for a 
                        public comment period for the plan of 
                        at least 30 days;
                            (ii) promptly review the response 
                        plan;
                            (iii) require amendments to any 
                        plan that does not meet the 
                        requirements of this paragraph;
                            (iv) approve any plan only after 
                        finding, based on evidence in the 
                        record, that--
                                    (I) the response plan meets 
                                the requirements of 
                                subparagraph (D);
                                    (II) there have been 1 or 
                                more field tests of the plan in 
                                the area in which the tank 
                                vessel, nontank vessel, or 
                                facility is proposed to 
                                operate, and the results of 
                                that field testing are publicly 
                                available;
                                    (III) the methods and 
                                equipment proposed to be used 
                                under the response plan are 
                                demonstrated to be 
                                technologically feasible in the 
                                area and under the conditions 
                                (including the depth of a well, 
                                in the case of an offshore 
                                facility) in which the tank 
                                vessel, nontank vessel, or 
                                facility is proposed to 
                                operate;
                                    (IV) the available 
                                scientific information about 
                                the area allows for 
                                identification of potential 
                                impacts to ecological areas and 
                                protection of those areas in 
                                the event of a discharge, 
                                including adequate surveys of 
                                wildlife; and
                                    (V) the response plan 
                                describes the quantity of oil 
                                likely to be removed in the 
                                event of a worst-case 
                                discharge;
                            (v) obtain the written concurrence 
                        of such other agencies as the President 
                        determines to be appropriate;
                            (vi) review each plan periodically 
                        thereafter; and
                            (vii) in the case of a plan for a 
                        nontank vessel, consider any applicable 
                        State-mandated response plan in effect 
                        on August 9, 2004, and ensure 
                        consistency to the maximum extent 
                        practicable.

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