The Oil Spill Liability Trust Fund
In 1986, the federal government established an Oil Spill Liability Trust Fund to help with the cleanup costs after an oil spill. However, when the Exxon Valdez oil spill occurred in 1989 the Oil Spill Liability Trust Fund was still not funded and thus no help to Exxon, Alaska or the people affected by the disaster.
Learning from that mistake, the government took action in 1990 to fund the Oil Spill Liability Trust Fund so that the Fund could serve its intended function and provide the government with the necessary funds to help in the aftermath of an oil spill. In 2005, The Energy Policy Act of 2005 increased the amount of money that may be contained in the Fund to $2.7 billion. It is estimated that there was approximately $1.6 billion in the Fund at the time of the BP Deepwater Horizon spill in April 2010. Currently, the law provides that $1 billion may be spent on any one oil spill event.
The Oil Spill Liability Trust Fund is divided into two components, the emergency fund and the principal fund. Each component has the potential to assist with the 2010 BP Deepwater Horizon oil spill in the Gulf of Mexico.
Oil Spill Liability Trust Fund – The Emergency Fund
The emergency fund is available for use at the discretion of the President of the United States, without congressional approval, for things such as for providing federal on-scene coordinators and to have federal trustees assess damage to natural resources. $50 million of the Oil Spill Liability Trust Fund is in the emergency fund. However, the Maritime Transportation Security Act of 2002 granted authority to move an additional $100 million from the Principal Fund to properly fund these emergency activities.
Emergency funds are dispersed from the Oil Spill Liability Trust Fund by the National Pollution Funds Center which is available 24 hours a day to ensure that oil spills are dealt with as quickly as possible.
Oil Spill Liability Trust Fund – The Principal Fund
The Principal Fund of the Oil Spill Liability Trust Fund has a different purpose. The Principal Fund may reimburse people who have financial claims because of the cleanup efforts or effects of the oil spill. The procedures for making a claim are very specific and must be followed before an individual or business can collect damages. Generally, every effort must be made to collect damages from the responsible parties before the government will issue damages from the Trust Fund.
The Principal Fund also provides financial support to several federal agencies to help them with their roles in cleaning up oil spills. Some of those agencies include the Coast Guard, the Minerals Management Service and the Environmental Protection Agency, for example.
$1 billion sounds like a lot of money but the current reports from the Gulf Coast indicate that this oil spill may take a long time to stop, and a lot of money to fix. Significant economic damage may be done. Thus, while the Oil Spill Liability Trust Fund is helpful during this oil spill crisis, it is not yet known if it will be sufficient for a disaster of this magnitude.
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