Administration Raises Gulf of Mexico Oil Spill Penalty Cap By 77 Percent



The Bureau of Ocean Energy Management has issued a final rule increasing the limit of liability for damages under the Oil Pollution Act to $133.65 million.

BOEM’s Final Rule

On December 12, 2014, the Bureau of Ocean Energy Management (BOEM) issued a final rule that, effective January 12, 2015, will increase from $75 million to $133.65 million the limit of liability for damages for responsible parties under the Oil Pollution Act of 1990 (OPA) for those facilities subject to BOEM’s jurisdiction under the OPA (all offshore facilities, including pipelines, other than deepwater ports, which are under the aegis of the Coast Guard). The adjustment to the limit of liability is designed to reflect the significant inflation that has occurred since the enactment of the OPA in 1990. The rule also establishes triennial adjustments of the limit for inflation going forward and revises BOEM’s existing definition of “responsible party” under the OPA.

Under the OPA, the responsible parties for any vessel or facility that discharges oil into or upon navigable waters, adjoining shorelines, or the exclusive economic zone, are liable for the removal costs and damages that result from the incident. The OPA provides that responsible parties for such an incident are liable for all removal costs plus damages, with damages capped by a $75 million limit of liability.

The OPA requires that the limit of liability be adjusted not less than every three years, by regulation, to reflect significant increases in the Consumer Price Index. Although this mandate has been in place since the OPA’s enactment in 1990, this is the first time BOEM (or its predecessor agencies, BOEMRE and MMS) has adjusted the limit. The Coast Guard, in 2009, implemented inflation adjustments to the limits of liability for vessels and deepwater ports subject to its OPA jurisdiction. MMS agreed at that time to follow the Coast Guard’s inflation adjustment methodology. This rule reflects that agreement.

As noted, the rule also revises the existing definition of “responsible party” in BOEM’s regulations. The existing definition of “responsible party” does not contemplate the full range of offshore facilities covered by the limit of liability under the OPA. In this final rule, the new definition of “responsible party” makes clear that the limit of liability applies to all offshore facilities.

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