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Delivered by William
H. Bode, Esquire
Managing Partner, Bode & Grenier,
LLP
Washington , D.C.
at
the
24 th Annual ILTA International Operating
Conference and Trade Show
June 15, 2004
FIFTEEN YEARS AGO, IN THE
WAKE OF THE EXXON VALDEZ DISASTER, SECRETARY OF TRANSPORTATION
SAMUEL SKINNER AND EPA ADMINISTRATOR WILLIAM K. REILLY WERE ASKED
BY THE FIRST BUSH ADMINISTRATION TO STUDY THE INCIDENT AND PROVIDE
A REPORT ADDRESSING THE PREPAREDNESS FOR, RESPONSE TO, AND LESSONS
LEARNED FROM IT. IN THE EXECUTIVE SUMMARY OF THAT REPORT – ISSUED
IN MAY 1989 – SECRETARY
SKINNER AND ADMINISTRATOR REILLY WARNED THAT “[C]ONTINGENCY
PLANNING IN THE FUTURE NEEDS TO INCORPORATE REALISTIC WORST-CASE
SCENARIOS.” IT IS ONE OF THOSE HYPOTHETICAL “WORST-CASE
SCENARIOS” – BUT ONE I DOUBT ANY ONE OF US CONTEMPLATED
IN 1989 – THAT I PROPOSE TO USE TODAY AS A VEHICLE FOR DISCUSSING
THE OIL POLLUTION ACT.
OUR EVENT IS A TERRORIST ATTACK ON A PETROLEUM TERMINAL OWNED
AND OPERATED BY THE HAPLESS OIL COMPANY.
LET’S ASSUME THAT THE TERRORISTS, USING EXPLOSIVES, BLOW
UP HAPLESS TANKS CONTAINING GASOLINE AND MIDDLE DISTILLATES. THE
RESULTING FIRE DESTROYS BUILDINGS NOT ONLY AT THE TERMINAL FACILITY,
BUT ALSO ON NEIGHBORING PROPERTY BELONGING TO A COMPETITOR. APPROXIMATELY
THREE MILLION GALLONS OF REFINED PETROLEUM PRODUCTS FLOW INTO A
NEARBY DITCH, AND, FROM THERE, INTO AN ADJOINING STREAM. DAMAGE
TO THE NEARBY BUSINESS AND SURROUNDING ENVIRONMENT IS EXTENSIVE.
THE OIL POLLUTION ACT OF 1990 – WHOSE PASSAGE WAS PROMPTED
IN LARGE MEASURE BY THE EXXON VALDEZ FIASCO – MANDATED A
NUMBER OF CHANGES IN THE MANNER IN WHICH PETROLEUM IS SHIPPED AND
STORED, AS ALL OF YOU ARE SO WELL AWARE. MY PRESENTATION TODAY,
HOWEVER, CONCENTRATES INSTEAD ON THREE OF THE ACT’S MAJOR
PROVISONS CONCERNING LEGAL RESPONSIBILTY.
FIRST : THE IMPOSITION OF LEGAL LIABILITY ON A “RESPONSIBLE
PARTY;”
SECOND : THE DEFENSES THAT CAN SHIELD A “RESPONSIBLE
PARTY” FROM LIABILITY; AND
THIRD : THE MECHANISMS FOR THE PAYMENT OF REMOVAL COSTS
AND DAMAGAES.
LET’S BEGIN WITH THE LIABILITY Of A “RESPONSIBLE
PARTY.”
THE LIABILITY PROVISIONS
OF THE OIL POLLUTION ACT ARE MODELED AFTER THOSE IN CERCLA AND
ARE STRAIGHTFORWARD, CLEAR AND FAIRLY ALL ENCOMPASSING:
EACH
RESPONSIBLE PARTY FOR A … FACILITY FROM WHICH
OIL IS DISCHARGED … INTO OR UPON THE NAVIGABLE WATERS
OR ADJOINING SHORELINES ... IS LIABLE FOR THE REMOVAL COSTS
AND DAMAGES.
MOREOVER, THE DEFINITIONS OF THE KEY WORDS IN THAT LIABILITY
PROVISION ARE BROAD – AND HAVE OFTEN BEEN CONSTRUED BROADLY
BY THE COURTS.
FOR EXAMPLE, THE “FACILITY” UNMISTAKABLY INCLUDES
A TERMINAL AND ITS ASSOCIATED PIPELINES:
“FACILITY” MEANS
ANY STRUCTURE, GROUP OF STRUCTURES, EQUIPMENT, OR DEVICE....WHICH
IS USED FOR ONE OR MORE OF THE FOLLOWING PURPOSES: EXPLORING
FOR, DRILLING FOR, PRODUCING, STORING, HANDLING, TRANSFERRING,
PROCESSING, OR TRANSPORTING OIL. THIS TERM INCLUDES ANY MOTOR
VEHICLE, ROLLING STOCK, OR PIPELINE USED FOR ONE OR MORE OF THESE
PURPOSES.
THE DEFINITION OF “RESPONSIBLE PARTY” CASTS
A SIMILARLY WIDE NET:
“RESPONSIBLE PARTY” MEANS THE FOLLOWING:
IN THE CASE OF A VESSEL, ANY PERSON OWNING, OPERATING, OR
DEMISE CHARTERING THE VESSEL.
IN THE CASE OF AN ONSHORE FACILITY …ANY PERSON OWNING
OR OPERATING THE FACILITY.
(C) OFFSHORE FACILITY
THE CASE LAW UNDER OPA SHOWS THAT THE EPA WILL SEEK TO HOLD LIABLE EVERY “PERSON” WITHIN
THE DEFINITION OF “RESPONSIBLE PARTY.” THUS, IN A SINGLE SUIT
FILED BY THE AGENCY, EPA SOUGHT TO HOLD RESPONSIBLE: (a) THE OWNER
OF A FACILTY; (b) THE THEN CURRENT LESSEE OF THE FACILITY, AND (c)
A CONTRACT OPERATOR.
ADDITIONALLY, IN CASES IT DEEMS APPROPRIATE, EPA HAS FILED SUIT
NAMING THE PRESIDENT OF A FACILITY, A VICE-PRESIDENT FOR ENVIRONMENT,
AND A SAFETY/ENVIRONMENTAL OFFICER AS LIABLE PARTIES.
THUS, VIRTUALLY ANYONE WITH ANY RELEVANT OWNERSHIP, MANAGEMENT
OR SUPERVISORY AUTHORITY MUST – AT HIS OR HER OWN PERIL – BE
FAMILIAR WITH THESE RULES.
FOLLOWING OUR HYPOTHETICAL,
ASSUME THAT HAPLESS OIL BELIEVES THAT IT MAY HAVE SOME LIABILITY – AN
ASSESSMENT WITH WHICH HAPLESS’S COUNSEL READILY CONCURS.
ARE THERE DEFENSES TO THAT LIABILITY UNDER THE OPA? AFTER ALL,
IT WAS THE TERRORISTS WHO
ACTUALLY CAUSED THE DISCHARGE! THE ANSWER IS YES. IN ITS WISDOM,
CONGRESS ACTUALLY PROVIDED TWO DEFENSES TO THE OTHERWISE ABSOLUTE
LIABLITY THAT MAY BE INVOKED: THE “ACT OF WAR” DEFENSE
AND THE “THIRD PARTY” DEFENSE.
BUT THE FIRST QUESTION OUR OWNER/OPERATOR (OR ITS
LAWYERS) SHOULD BE ASKING – BEFORE EVEN CONSIDERING THESE
DEFENSES -- IS WHETHER OPA APPLIES AT ALL.
OPA APPLIES ONLY WHEN THE DISCHARGE ENTERS THE “NAVIGABLE
WATERS” OF THE UNITED STATES. WHAT ABOUT OUR HYPOTHETICAL
CASE HERE? WELL, THAT MAY DEPEND ON WHERE THE “HERE” IS.
SOME COURTS HAVE DEFINED THE TERM “NAVIGABLE WATERS” VERY
BROADLY. INDEED, A COURT IN NEW JERSEY TOOK WHAT ALMOST SEEMS TO
BE A RUBE GOLDBERG APPROACH – FINDING THAT THE DISCHARGE
OF OIL ONTO A NON-NAVIGABLE WETLAND, THAT (IN TURN) DRAINED INTO
A DITCH ADJACENT TO A NON-NAVIGABLE TRIBUTARY, THAT THEN DRAINED
INTO A TRIBUTARY, WHICH DRAINED INTO A NAVIGABLE RIVER CONSTITUTED
WHAT THE COURT FOUND TO BE A SUFFICIENT “HYDROLOGICAL NEXUS” TO
CONFER JURISDICTION UNDER THE OPA.
HAPPILY, THE 5 TH CIRCUIT COURT OF APPEALS, WHICH HAS RESPONSIBILITY
FOR TEXAS AND LOUISIANA, RULED IN THE RICE v. HARKEN EXPLORATION
CASE THAT A DISCHARGE INTO A CREEK IN THE TEXAS PANHANDLE, 500
MILES FROM ANY OCEAN OR SHORELINE, WAS TOO TENUOUS A CONNECTION
TO BRING OPA INTO PLAY.
ON JANUARY 15, 2003, THE EPA ENTERED THE FRAY WITH A NOTICE OF
RULEMAKING PROVIDING A REGULATORY DEFINITION OF “WATERS OF
THE UNITED STATES.”
THE BROAD DEFINITION OF “NAVIAGABLE WATERS” THEREIN
PROMPTED A LAWSUIT BY MARATHON OIL AND THE AMERICAN PETROLEUM INSTITUTE.
THE BRIEFING SCHEDULE IN THIS CASE HAS JUST BEEN SET.
ADDING TO THE MIX, THE COAST GUARD ON APRIL 6, 2004, ENTERED
INTO A SETTLEMENT AGREEMENT WITH THE WILDLIFE FEDERATION IN A SUIT
INVOLVING COSTCO CORPORATON AND THE HINTON DEVELOPMENT CORPORATION.
IN THE SETTLEMENT, THE COAST GUARD COMMITTED TO ABIDE BY THE NINTH
CIRCUIT COURT OF APPEALS DECISION IN HEADWATERS, INC. V. TALENT
IRRIGATION DISTRICT IN DETERMINING ITS JURISDICTION OVER NAVIGABLE
WATERS. THE PETROLUEM INDUSTRY HAS SOME CONCERNS ABOUT THIS ACCORD
PARTICULARLY WITH THE BREADTH OF SOME OF THE LANGUAGE IN THE HEADWATERS
DECISION THAT COULD EXTEND JURISDICITION FOR PETROLEUM DISCHARGES
OVER TRIBUTARIES THAT FLOW INTERMITTENTLY.
THE BOTTOM LINE NOW IS THAT THE EPA AND COAST GUARD ARE LIKELY
TO ASSERT JURISDICTION OVER SPILLS WHEN THERE EXISTS EVEN A REMOTE
POSSIBILILTY OF CAUSING A SHEEN ON A STREAM OR RIVER. THE COURTS
ARE LIKELY TO GIVE SUBSTANTIAL DEFERENCE TO THE AGENCIES UNTIL
THE D.C. COURT OF APPEALS (AND POSSIBLY THE SUPREME COURT) RULES
IN THE MARATHON/API CASE.
BACK TO OUR TERRORIST SCENARIO. FOR SIMPLICITY, LET’S ASSUME
THAT THE NOW DECIMATED TERMINAL WAS SERVED BY OCEAN TANKERS; IN
SUCH A CASE, WE CAN SAFELY ASSUME THAT OPA JURISDICTION APPLIES.
AS A RESULT, IT IS TIME TO CONSIDER DEFENSES.
THE FIRST DEFENSE THAT MAY SHIELD OUR FACILITY OWNER/OPERATOR
FROM LIABILITY IS THE “ACT OF WAR” DEFENSE. OPA PROVIDES
THAT DISCHARGES ARISING FROM “ACTS OF WAR” ARE NOT THE
LEGAL (OR, AS A RESULT, THE FINANCIAL) RESPONSIBILITY OF THE FACILITY
OWNERS OR OPERATORS. SO THE QUESTION BECOMES: IS A TERRORIST ATTACK
OR “JIHAD” PLANNED BY AL QAEDA AN ACT OF WAR? WE NOW
ENTER MURKIER WATERS.
OPA DOES NOT DEFINE “ACT OF WAR” -- BUT THE COURTS
HAVE NARROWLY DEFINED THE TERM UNDER CERCLA. LEGAL TREATISES ON
THE MATTER ARGUE THAT THE ACT OF WAR DEFENSE SHOULD BE LIMITED
TO HOSTILE ACTS ARISING FROM GOVERNMENT SPONSORSHIP OR FROM FORMALIZED
HOSTILITIES. THE EVENTS OF 9-11, HOWEVER, MAY HAVE CHANGED THIS
PARTICULAR AVENUE IN THE LEGAL LANDSCAPE. BY SPECIAL PROCLAMATION,
THE PRESIDENT LABELLED THE WORLD TRADE CENTER AND PENTAGON ATTACKS
AN “ACT OF WAR.” IT IS THEREFORE CONCEIVABLE THAT AN
ISOLATED TERRORIST ATTACK ON A PETROLEUM TERMINAL WOULD BE TREATED
SIMILARLY. BUT THERE ARE NO GUARANTEES THAT THIS WOULD HAPPEN;
AND WITHOUT A SPECIFIC PRESIDENTIAL PROCLAMATION THE “ACT
OF WAR” DEFENSE WOULD NOT LIKELY SHIELD HAPLESS OIL FROM
LIABILITY.
THE SO-CALLED “THIRD PARTY” DEFENSE IS MUCH MORE
PROMISING HERE. OPA PROVIDES THAT A COMPLETE DEFENSE TO LIABILITY
IS AVAILABLE TO A RESPONSIBLE PARTY (SUCH AS A FACILITY OWNER)
WHO ESTABLISHES THAT THE DISCHARGE IN QUESTION WAS CAUSED SOLELY
BY: “AN ACT…OF A THIRD PARTY” AND THAT
THE THIRD PARTY --
* IS NOT AN EMPLOYEE OR AGENT OF THE RESPONSIBLE PARTY (OR ARGUABLY
PART OF A CONSPIRACY INVOLVING AN EMPLOYEE OR AGENT); AND
* IS NOT IN A CONTRACTUAL RELATIONSHIP WITH THE FACILITY OWNER/OPERATOR.
THE INQUIRY, HOWEVER, DOES NOT STOP THERE. TO SUCCESSFULLY INVOKE
THE THIRD PARTY DEFENSE, THE RESPONSIBLE PARTY MUST ALSO SHOW BY
A PREPONDERANCE OF THE EVIDENCE (MEANING MUST PROVE THAT IT IS
MORE LIKELY THAN NOT) THAT HE –
- (A) EXERCISED DUE CARE WITH RESPECT TO THE OIL CONCERNED… AND
- (B) TOOK PRECAUTIONS AGAINST FORESEEABLE ACTS OR OMISSIONS.
THIS IS VERY IMPORTANT, FOR THE STAKES HERE CAN BE HUGE.
IF NO DEFENSES CAN BE SUCCESSFULLY RAISED, A FACILITY OPERATOR
CAN BE LIABLE FOR REMOVAL COSTS AND DAMAGES IN THE MILLIONS OF
DOLLARS. BY CONTRAST, IF THE “THIRD PARTY” DEFENSE IS SUCCESSFUL,
THE REMOVAL COSTS, AND SOME OF THE DAMAGES INCURRED BY THE FACILITY
OWNER, ARE PAID FROM THE OIL SPILL LIABILITY TRUST FUND.
WHAT THEN IS THE STANDARD OF CARE THAT HAPLESS OIL MUST HAVE
EXERCISED TO AVOID LIABILITY FOR THE DISCHARGE CAUSED BY OUR HYPOTHETICAL
TERRORIST ATTACK?
A REVIEW OF CASE AND ADMINISTRATIVE LAW, AND EPA AND COAST GUARD
GUIDANCE DOCUMENTS, SUGGESTS THAT FACILITIES FULLY COMPLIANT WITH
ALL SPCC REGULATIONS WILL BE DEEMED TO HAVE EXERCISED DUE CARE.
BY COMPARISON, A FACILITY THAT IS NOT FULLY COMPLIANT WITH
THE REGULATONS, OR THAT HAS NOT UPDATED ITS SPCC PLAN BY AUGUST
13, 2004, COULD BE DEEMED TO HAVE FAILED TO EXERCISE DUE CARE.
THIS RESULT WOULD PROBABLY ARISE EVEN IF THAT OMISSION DID NOT INCREASE
THE SEVERITY OF THE DISCHARGE – OR ITS HARMFUL EFFECTS. AS
YOU CAN SEE, IN THIS ARENA, CAREFUL ATTENTION TO DETAILS CAN YIELD
MILLIONS IN SAVINGS SHOULD THE “WORST CASE SCENARIO” OCCUR.
BUT WHAT ABOUT THE SECOND REQUIREMENT – PROOF THAT OUR
HYPOTHETICAL OWNER/OPERATOR TOOK “PRECAUTIONS AGAINST ACTS”?
WHAT DOES THAT MEAN? AND HOW WOULD HE PROVE IT?
UNFORTUNATELY, THIS REQUIREMENT IS BOTH MORE PROBLEMATIC AND UNTESTED
IN THE COURTS. MOREOVER, IT MAY DEPEND ENTIRELY ON THE EXTANT PATTERN
OF FACTS. CONSIDER THE FOLLOWING:
LET’S ASSUME THAT THE OFFICE OF HOMELAND SECURITY HAS ISSUED
A “YELLOW ALERT” IN THE GEOGRAPHICAL AREA WHERE THE
HAPLESS OIL TERMINAL IS LOCATED. DOES THIS MEAN THAT THE FACILITY
MUST HEIGHTEN ITS OWN OVERSIGHT PROCEDURES OR RISK FORFEITING ITS
RIGHT TO INVOKE THE “THIRD PARTY” DEFENSE IN THE EVENT
OF CATASTROPHE? IF SO, WHAT STEPS, EXACTLY, MUST THE FACILITY TAKE?
HOW SHOULD IT DO SO? FOR EXAMPLE, WOULD IT BE REQUIRED TO POST
ADDITIONAL SECURITY PERSONNEL? ONE THING SEEMS FAIRLY CERTAIN:
AT A MINIMUM, KEY SECURITY PERSONNEL SHOULD BE NOTIFIED OF THE
ALERT. AN ORANGE ALERT MAY REQUIRE THE POSTING OF ADDITIONAL SECURITY
GUARDS OR OTHER ENHANCED SECURITY MEASURES.
NEXT ASSUME THAT THE FACILITY OPERATOR RECEIVED A TELEPHONE THREAT
OF AN ATTACK. WHAT IS THEN REQUIRED? CERTAINLY, EVEN IF THE CALL
IS CONSIDERED A “CRANK” CALL, APPROPRIATE AUTHORITIES
SHOULD BE ALERTED, INCLUDING THOSE WHO WOULD BE NOTIFIED
IN CASE OF AN ACTUAL SPILL. DOCUMENTATION REGARDING THE
NOTIFICATION SHOULD BE PRESERVED. ADDITIONAL SECURITY MEASURES
WOULD ALSO APPEAR NECESSARY. EMPLOYERS SHOULD CONSIDER NOTIFYING
EMPLOYEES OF THE THREAT BY E-MAIL. IN CERTAIN CIRCUMSTANCES, A
PERIMETER SECURITY PATROL WOULD BE WARRANTED.
IN ADDITION TO LESSENING THE ACTUAL RISK OF DAMAGE FROM AN ATTACK
(IF NOT THE POSSIBILITY OF THE ATTACK ITSELF), THESE PRECAUTIONS
(AND OTHERS LIKE THEM) ARE ALL CRITICAL FROM A FINANCIAL STANDPOINT
BECAUSE OF THE VERY HIGH STAKES INVOLVED. SPECIFICALLY, THE DETERMINATION
BY THE EPA/COAST GUARD THAT A RESPONSIBLE PARTY IN FACT EXERCISED “DUE
CARE” AND “TOOK PRECAUTIONS AGAINST FORESEEABLE RISKS” CAN
HAVE ENORMOUS POSITIVE MONETARY CONSEQUENCES.
A FAVORABLE RULING MEANS THAT THE COSTS OF REMOVAL AND DAMAGES
ARE PAID OUT OF THE OIL SPILL FUND. A CONTRARY CONCLUSION OPENS
THE RESPONSIBLE PARTY TO LIABILITY FOR POTENTIALLY DEVASTATING
REMOVAL COSTS AND DAMAGES.
And while we’re on the subject
of appropriate precautions, let me issue a not so subtle warning
about “precautions” that
should never be taken.
NEEDLESS TO SAY, IF THERE IS EVER A TIME TO OUT EAGLE SCOUT THE
EAGLE SCOUTS, IT IS WHEN THE EPA COMES KNOCKING.
FOR THESE REASONS, ALL PROCEDURES (INCLUDING, JUST AS
AN EXAMPLE, RECORD RETENTION POLICIES) SHOULD BE REVIEWED WITH
THE “WORST CASE SCENARIO” IN MIND. BUT IN NO EVENT – LET
ME REPEAT: NO EVENT – SHOULD ANY STEPS BE TAKEN
TO OBSTRUCT ANY INVESTIGATION, EVEN IF THE PROCEDURES FAILED OR
MISTAKES WERE MADE.
CONSIDER THIS SCENARIO: PRIOR TO THE ARRIVAL OF THE EPA,
AN E-MAIL IS SENT AROUND SAYING: “PLEASE BE AWARE OF COMPANY
POLICY THAT E-MAILS OLDER THAN 30 DAYS SHOULD BE DESTROYED.” CONSISTENT
WITH THIS DIRECTION, AN E-MAIL NOTING A CRANK CALL ABOUT A “PIPE-BOMB” IS
ELIDED. THE EPA INVESTIGATORS ARRIVE AND INQUIRE WHETHER ANY DOCUMENTS
HAVE BEEN DESTROYED; THE COMPANY EXECUTIVE RESPONDS THAT NONE HAVE
BEEN.
THE FIRST SITUATION IS THAT WHICH CONFRONTED FRANK QUATTRONE,
FORMER INVESTMENT BANKER AT CREDIT SUISSE FIRST BOSTON , AT HIS
CRIMINAL TRIAL. THE SECOND SITUATION IS THAT WHICH CONFRONTED MARTHA
STEWART AT HER CRIMINAL TRIAL. BOTH ARE NOW FEDERAL CONVICTS.
AND LADIES AND GENTLEMEN, THAT IS A JOB DESCRIPTION
NONE OF US WANTS.
THE LESSON MUST BE CLEARLY UNDERSTOOD. A PERSON DEEMED TO HAVE
OBSTRUCTED THE CONDUCT OF A CIVIL INVESTIGATION CAN BE SUBJECT
TO SERIOUS CRIMINAL SANCTIONS. NEVER DESTROY OR ELIDE
ANY DOCUMENT THAT MIGHT BE EVEN TANGENTIALLY RELEVANT TO ANY EPA/COAST
GUARD INVESTIGATION, AND NEVER LIE TO A GOVERNMENT INVESTIGATOR.
SO EVEN IF MISTAKES HAVE BEEN MADE, DO NOT COMPOUND THEM.
NOW LET’S EXAMINE WHAT COSTS MAY BE RECOVERED FROM THE
OIL SPILL FUND BY THE FACILITY OWNER WHO SUCCESSFULLY RAISES THE
THIRD PARTY DEFENSE.
IN SO DOING, LET’S ALSO CONSIDER WHAT COSTS MUST BE PAID BY
THE RESPONSIBLE PARTY WHO IS THE VICTIM OF A TERRORIST ATTACK – BUT
HAS BEEN UNSUCCESFUL IN RAISING ANY DEFENSE TO LIABILITY.
OPA PROVIDES FOR RECOVERY OF WHAT IT CALLS “REMOVAL COSTS” AND “DAMAGES.” THESE
ARE:
- REMOVAL COSTS CONSISTENT WITH THE NATIONAL CONTINGENCY PLAN;
- DAMAGES TO NATURAL RESOURGES (WHICH INCLUDES INJURY TO, DESTRUCTION
OF, LOSS OF, OR LOSS OF USE OF, NATURAL RESOURCES, INCLUDING
THE REASONABLE COSTS OF ASSESSING WHAT THOSE DAMAGES ARE);
- DAMAGE
TO REAL OR PERSONAL PROPERTY (INCLUDING INJURY TO, OR ECONOMIC
LOSSES RESULTING FROM, THE DESTRUCTION OF REAL OR PERSONAL
PROPERTY);
- DAMAGES FOR SUBSISTENCE (LOSS OF SUBSISTENCE USE OF
NATURAL RESOURCES THAT HAVE BEEN INJURED, DESTROYED, OR LOST);
- DAMAGES FOR LOST REVENUES (NET LOSS OF TAXES, ROYALTIES, RENTS,
FEES, OR NET PROFIT SHARES DUE TO THE LOSS OF REAL PROPERTY,
PERSONAL PROPERTY, OR NATURAL RESOURCES BY GOVERNMENTAL UNIT);
- DAMAGES FOR LOST PROFITS (LOST PROFITS OR IMPAIRMENT OF EARNING
CAPACITY DUE TO THE INJURY, DESTRUCTION, OR LOSS OF REAL PROPERTY,
PERSONAL PROPERY, OR NATURAL RESOURCES);
- DAMAGES TO PUBLIC
SERVICES (INCREASED COSTS OF PUBLIC SERVICES, INCLUDING PROTECTION
FROM FIRE, SAFETY, OR HEALTH HAZARDS RECOVERABLE BY GOVERNMENTAL
UNITS).
AS YOU CAN SEE, THE SCOPE OF DAMAGES RECOVERABLE IN THE EVENT
OF A DISCHARGE IS ALMOST ALL ENCOMPASSING. THE INDUSTRY
DID PREVAIL IN ONE SKIRMISH, HOWEVER. THE NATIONAL OCEANIC AND
ATMOSPHERIC ADMINISTRATION (NOAA) -- THE AGENCY ENTRUSTED WITH
DEFINING BY REGULATION “NATURAL RESOURCE DAMAGES” --
INITIALLY INCLUDED IN THE “RECOVERABLE” CATEGORY ALL
ATTORNEYS’ FEES INCURRED IN INVESTIGATING A DISCHARGE.
IN AN INDUSTRY LAWSUIT CHALLENGING THIS PROVISION, WHICH WAS LEAD
BY GENERAL ELECTRIC, THE COURT RULED THAT ATTORNEYS FEES MAY NOT
BE INCLUDED AS DAMAGES. BUT THE COURT REASONED, THE FEES OF ATTORNEYS
PERFORMINGING BUSINESS, AS DISTINGUISED FROM LEGAL, FUNCTIONS MAY BE
INCLUDED.
BUT CAN A TERMINAL OPERATOR WHO SUCCESSFULLY ERECTS THE THIRD
PARTY DEFENSE RECOVER FROM THE OIL SPILL FUND THE COST OF PETROLEUM
LOST DUE TO THE TERRORIST ATTACK? IN OUR HYPOTHEICAL, AT YOU WILL
RECALL, THE LOSS WAS 3 MILLION GALLONS OF GASOLINE AND DISTILLATES.
THE FOURTH CIRCUIT COURT OF APPEALS ADDRESSED THE SCOPE OF DAMAGES
RECOVERABLE FROM THE OIL SPILL FUND BY A RESPONSIBLE PARTY IN A
CASE INVOLVING GATLIN OIL, A COMPANY IN NORTH CAROLINA . THE FACTS
ARE INSTRUCTIVE.
AT MIDNIGHT ONE MARCH EVENING, A VANDAL JAMMED OPEN SEVEN OF
GATLIN’S ABOVE-GROUND FUEL STORAGE TANKS, CAUSING AN OIL
SPILL IN THE RANGE OF 20,000 TO 30,000 GALLONS. VAPORS FROM THE
DISCHARGED OIL IGNITED A FIRE THAT BURNED FOR SEVERAL HOURS, AND,
BEFORE BEING PUT OUT, DESTROYED A WAREHOUSE, THE BULK PLANT, INVENTORY
AND OTHER PROPERTY, A LOADING DOCK, SEVERAL VEHICLES, AND MOST
OF THE DISCHARGED FUEL. GATLIN COMPLIED WITH THE DIRECTIONS OF
THE FEDERAL ON-SCENE COORDINATOR, AND WITH THE DIRECTIVES OF THE
NORTH CAROLINA ENVIRONMENTAL AUTHORITIES, OVERSEEING THE CLEAN-UP.
THE COMPANY THEN DUTIFULLY FILED A CLAIM WITH THE OIL SPILL LIABILITY
TRUST FUND FOR $850,000 PLUS INTEREST, REPRESENTING THE DAMAGES
IT HAD INCURRED.
THE U.S. COAST GUARD, WHICH ADMINISTERS THE OIL SPILL FUND, DENIED
MOST OF THE CLAIMS OF GATLIN OIL, GRANTING AN AWARD OF ONLY $6,959
(THAT IS, LESS THAN ONE PERCENT OF WHAT GATLIN OIL HAD REQUESTED).
GATLIN THEN FILED SUIT IN THE APPROPRIATE FEDERAL TRIAL COURT,
WHICH PROVIDED A LARGER AWARD, AND, SUBSEQUENTLY, THE COAST GUARD
APPEALED. THE MATTER WAS FINALLY RESOLVED – NEARLY FIVE YEARS
TO THE DAY AFTER THE VANDAL STRUCK -- BY THE FOURTH CIRCUIT COURT
OF APPEALS. THAT COURT HELD THAT GATLIN:
- “WAS ENTITLED TO A COMPLETE DEFENSE BECAUSE AN UNKNOWN
VANDAL CAUSED THE OIL SPILL”;
- “WAS ENTITLED TO FULL COMPENSATION FOR REMOVAL COSTS
THAT THE FEDERAL COORDINATOR DETERMINED WERE CONSISTENT WITH
THE NATIONAL CONTINGENCY PLAN”;
- “WAS ENTITLED TO FULL COMPENSATION FOR LOSS OF EARNINGS
AND EARNING CAPACITY CAUSED …CARRYING OUT THE DIRECTIVES
OF THE FEDERAL COORDINATOR”; BUT
- WAS NOT ENTITLED TO “RECOVER FROM THE
FUND COMPENSATION FOR FIRE DAMAGE BECAUSE THE EVIDENCE DID NOT
ESTABLISH THAT THE FIRE CAUSED THE DISCHARGE OF OIL INTO NAVIGABLE
WATERS”;
- WAS NOT ENTITLED TO RECOVER FOR COSTS IT INCURRED
IN FOLLOWING THE ORDERS OF THE NORTH CAROLINA ENVIRONMETNAL AUTHORITIES;
AND
- WAS NOT ENTITLED TO RECOVER INTEREST.
IN OUR HYPOTHETICAL, THE EXPLOSIONS AND RESULTING FIRE CAUSED THE
DISCHARGE OF OIL. UNDER THE REASONING OF THE GATLIN COURT
, THEN, THE TERMINAL OPERATOR IN OUR CASE WOULD BE ENTITLED
TO RECOVER ALL COSTS ASSOCIATED WITH THE FIRE, INCLUDING THE LOSS
OF FUEL. INDEED, AS THE NEXT CHART SHOWS, SUBSTANTIAL MONIES HAVE
BEEN PAID OUT BY THE FUND TO COMPENSATE FOR LOSSES SUFFERED BY
FACILITIES.
CAREFUL PREPARATION AND IMPLEMENTATION OF A SPCC PLAN, AS WE
HAVE SEEN, CAN PROVIDE A RICH REWARD IN THE EVENT OF A TERRORIST
ATTACK ON A TERMINAL FACILITY. THE FACILITY OWNER MAY RECOVER FROM
THE OIL SPILL FUND A SUBSTANTIAL PORTION OF THE COSTS INCURRED
AS A RESULT OF THE ACT.
BUT NONE OF US SHOULD FORGET THE OTHER SIDE OF THAT COIN. THE
FAILURE TO COMPLY CAN RESULT IN THE IMPOSITON OF PENALTIES. THE
CLEAN WATER ACT, AS AMENDED BY THE OIL POLLUTION ACT, LISTS VARIOUS
CRITERIA FOR IMPOSING CIVIL PENALTIES, INCLUDING THE SERIOUSNESS
OF THE VIOLATION, THE DEGREE OF CULPABILITY INVOLVED, ANY HISTORY
OF PRIOR VIOLATIONS, ANY OTHER PENALTIES IMPOSED FOR THE SAME VIOLATION,
AND THE ECONOMIC IMPACT OF THE PENALTY ON THE VIOLATOR. THE FOLLOWING
CHART DETAILS SOME OF THE PENALTIES IMPOSED OVER THE LAST FEW YEARS.
IN CONCLUSION, WHEN WE CONSIDER A TERRORIST ATTACK ON A TERMINAL
FACILITY, WE MUST REMEMBER THAT VIRTUE AND VIGILANCE HAVE THEIR
OWN REWARDS. A CAREFULLY PREPARED AND IMPLEMENTED SPPC PLAN CAN
GIVE THE FACILITY OPERATOR THE BASIS FOR A DEFENSE AGAINST LIABILITY
AND THE RIGHT TO RECOVER RESULTING DAMAGES FROM THE OIL SPILL LIABILITY
TRUST FUND. AND PLEASE LADIES AND GENTLEMEN, DO NOT ATTEMPT
TO CHANGE THE RECORD WHEN THE EPA INVESTIGATORS COME KNOCKING!
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