The legal framework for addressing and paying for maritime oil spills is identified in OPA, which was enacted after the 1989 Exxon Valdez spill. OPA places the primary burden of liability and the costs of oil spills on the owner and operator of the vessel or on shore facility and the lessee or permittee of the area in which an offshore facility is located. This “polluter pays” framework requires that the responsible party or parties assume the burden of spill response, natural resource restoration, and compensation to those damaged by the spill, up to a specified limit of liability. In general, the level of potential exposure under OPA depends on the kind of vessel or facility from which a spill originates and is limited in amount unless the oil discharge is the result of gross negligence or willful misconduct, or a violation of federal operation, safety, and construction regulations, in which case liability under OPA is unlimited. For oil spills from an offshore facility, such as the Deepwater Horizon, liability is limited to all removal— or cleanup—costs plus $75 million. Under OPA, before any vessel larger than 300 gross tons can operate in U.S. waters, the owner/operator must obtain a Certificate of Financial Responsibility (COFR) from NPFC. This COFR demonstrates that the owner/operator has provided evidence of financial responsibility to pay for removal costs and damages up to the liability limits required by OPA. These OPA requirements for demonstrating financial responsibility apply only to the statutory maximum amount of potential liability under OPA, although states may impose additional liabilities and requirements related to oil spills in state waters. OPA requires that, subject to certain exceptions, such as removal cost claims by states, all nonfederal claims for OPA-compensable removal or damages be submitted first to the responsible party or the responsible party’s guarantor. If the responsible party denies a claim or does not settle it within 90 days, a claimant may present the claim to the federal government to be considered for payment. To pay specified claims above a responsible party’s liability limit, as well as to pay claims when a responsible party does not pay or cannot be identified, OPA authorizes use of the Fund subject to limitations on the amount and types of costs. For example, under OPA, the authorized limit on Fund expenditures for a single spill is currently set at $1 billion (without consideration of whether the Fund was reimbursed for any expenditures). In addition to paying claims, the Fund is used to reimburse government agencies for certain eligible costs they incur. Further, within the $1 billion cap, the costs for conducting a natural resource damage assessment and claims paid in connection with any single incident shall not exceed $500 million. OPA provides that the President designate the federal officials and that the governors designate the state and local officials who act on behalf of the public as trustees for natural resources. OPA regulations provide that the trustees may recover costs for natural resource damage assessment and restoration. The Fund may not be used for certain types of personal injuries or damages that may arise related to an oil spill incident, such as financial losses associated with oil company investments by members of the public. Recovery for such damages and injuries may be governed by other federal statutes, common law, or various state laws. Federal agencies are authorized to use the Fund to cover their oil removal costs from the affected areas to the extent the Fund has funds available within the $1 billion cap. The federal government is entitled to reimbursement from responsible parties for such costs. The Coast Guard’s NPFC administers uses of the Fund to reimburse government agencies for their removal and cleanup costs; adjudicating individual and business claims submitted to the Fund for payment; and pursuing reimbursement from the responsible party for costs and claims paid by the Fund. NPFC bills the responsible parties directly, including BP in this case, for costs government agencies have incurred, and all payments received from responsible parties are deposited into the Fund. OPA 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, cannot pay, or is not identified. As described in greater detail in appendix V, “OPA compensable” costs include two main types:  Removal Costs: Removal costs are incurred by the federal government or any other entity taking approved action to respond to, contain, and clean up the spill. For example, removal costs include cleaning up adjoining shoreline affected by the oil spill and the equipment used in the response—skimmers to pull oil from the water, booms to contain the oil, planes for aerial observation—as well as salaries, travel, and lodging costs for responders.  Damages: OPA-compensable damages cover a wide range of both actual and potential adverse impacts from an oil spill. For example, damages from an oil spill include the loss of profits to the owner of a commercial charter boat if the boat was trapped in port because the Coast Guard closed the waterway in order to remove the oil, or personal property damage to the owner of a recreational boat or waterfront property that was oiled by the spill, for which a claim may be made first to the responsible party, if possible, or to the Fund. In addition to OPA-compensable costs, the federal government can also incur other non OPA-compensable costs associated with oil spills. For example, the federal government had various non-OPA-compensable costs for the Deepwater Horizon oil spill, such as Department of Homeland Security (DHS) costs associated with providing additional staff to NPFC for receiving and processing claims. The National Oil and Hazardous Substances Pollution Contingency Plan, more commonly called the National Contingency Plan is the federal government’s blueprint for responding to oil spill and hazardous substance releases. The National Contingency Plan provides the organizational structure and procedures for preparing for and responding to discharges of oil and releases of hazardous substances, pollutants, and contaminants. The plan outlines approved procedures and removal activities when responding to an oil spill and identifies the following four phases of response operations for oil discharges: 1. Discovery and Notification include activities conducted to discover oil spills or to notify appropriate authorities of oil spills. 2. Preliminary Assessment and Initiation of Action include activities conducted to assess the magnitude and severity of the spill and to assess the feasibility of removal and plan appropriate actions. These activities are necessary whether or not the responsible party is taking action. 3. Containment, Countermeasures, Cleanup, and Disposal include oil spill cleanup activities such as hiring contractors and transporting and staging required supplies and needed equipment. 4. Documentation and Cost Recovery include the activities necessary to support cost recovery and record uses of the Fund. Three of the four phases for oil removal remain under way for the Deepwater Horizon incident, and the operational response is likely to continue for years. The first phase, discovery and notification, is substantially complete. Subject to certain thresholds, the costs incurred in phases two, three, and four are eligible to be paid from the Fund. The Fund’s primary revenue source is an 8 cent per barrel tax on petroleum products either produced in the United States or imported from other countries. Other revenue sources include recoveries from responsible parties for costs of removal and damages, fines and penalties paid pursuant to various statutes, and interest earned on the Fund’s U.S. Treasury investments. In fiscal year 2009, the barrel tax was 92 percent of the Fund’s revenue. As shown in figure 1, the Fund’s balance has varied over the years. The barrel tax expired in December 1994 and was reinstituted at 5 cents per barrel in April 2006 as mandated by the Energy Policy Act of 2005. The Energy Improvement and Extension Act of 2008 increased the tax to 8 cents per barrel and provides that the Fund’s barrel tax shall expire after December 31, 2017. In fiscal year 2011, the increase to the Fund is primarily attributable to reimbursements received from responsible parties for the Coast Guard’s costs incurred in response to the Deepwater Horizon incident. Specifically, as of May 31, 2011, the Coast Guard has billed and received from responsible parties, $315.3 million for Coast Guard recoverable, or indirect costs, such as personnel and equipment. According to the agency, the Coast Guard has historically viewed its OPA recoverable costs as activities normally funded through the agency’s operating expense appropriation, and thus it has not sought reimbursement for these costs from the Fund. As shown in figure 2, the Fund has been administratively divided into two major components—the Emergency Fund and the Principal Fund— administered by the Coast Guard’s NPFC. The Emergency Fund authorizes the President to make available $50 million each year to cover immediate expenses associated with mitigating the threat of an oil spill, costs of oil spill containment, countermeasures, and cleanup and disposal activities, as well as paying for other costs to initiate natural resource damage assessments. Amounts made available remain available until expended. For the Deepwater Horizon oil spill, the Coast Guard’s Federal On-Scene Coordinator used the Emergency Fund to pay for oil spill removal activities (i.e., the equipment used in removal activities and for the proper disposal of recovered oil and oil debris), and the Federal Natural Resource Damage Trustees also entered into reimbursable agreements with NPFC with respect to funding for activities to initiate natural resource damage assessments. To the extent that available amounts are inadequate for an emergency (as was the case in the Deepwater Horizon oil spill), the Maritime Transportation Security Act of 2002 granted authority for the Coast Guard to advance up to $100 million to pay for oil spill removal activities, and that amount was advanced from the Principal Fund to the Emergency Fund. In June 2010, Congress amended OPA to authorize emergency advances for the Deepwater Horizon oil spill in increments of up to $100 million for each cash advance, but the total amount of all advances may not exceed the $1 billion per incident cap.