• Increase in Limits of Liability for Vessels and Deepwater Ports
  • August 4, 2009 | Authors: Jeanne M. Grasso; Jonathan K. Waldron
  • Law Firm: Blank Rome LLP - Washington Office
  • New Development

    On July 1, 2009, the U.S. Coast Guard published an Interim Rule (“IR”) increasing the limits of liability under the Oil Pollution Act of 1990 (“OPA 90”) for vessels and deepwater ports subject to the Deepwater Port Act of 1974 to reflect increases in the Consumer Price Index (“CPI”). The IR also describes the method that the Coast Guard used to determine the increase, and explains how and when the Coast Guard will make increases to the limits of liability in the future. Lastly, the IR clarifies the applicability of OPA 90 to single-hull tank vessels. The IR is effective July 31, 2009. Comments are due by August 31, 2009. The following is the link to the IR: http://edocket.access.gpo.gov/2009/pdf/E9-15563.pdf.

    Background

    Under OPA 90, each responsible party is strictly liable, jointly and severally, for removal costs and damages resulting from pollution incidents. OPA 90 also limits liability for such incidents and mandates periodic increases of the limits of liability to reflect significant increases in the CPI. The limits of liability for vessels were last increased in 2006, as discussed in a previous advisory, located at: http://www.blankrome.com/index.cfm?contentID=37&itemID=1017.

    New Limits of Liability

    The table below summarizes the previous and amended limits.

    Source Category

    Previous Limit of Liability

    New Limit of Liability

    Oil cargo tank vessels greater than 3,000 gross tons with a single hull, including a single-hull tank vessel fitted with double sides only or a double-bottom only.

    The greater of $3,000 per gross ton or $22,000,000.

    The greater of $3,200 per gross ton or $23,496,000.

    Tank vessels greater than 3,000 gross tons, other than vessels with a single-hull.

    The greater of $1,900 per gross ton or $16,000,000.

    The greater of $2,000 per gross ton or $17,088,000.

    Oil cargo tank vessels less than or equal to 3,000 gross tons with a single hull, including a single-hull tank vessel fitted with double sides only or a double-bottom only.

    The greater of $3,000 per gross ton or $6,000,000.

    The greater of $3,200 per gross ton or $6,408,000.

    Tank vessels less than or equal to 3,000 gross tons, other than vessels with a single-hull.

    The greater of $1,900 per gross ton or $4,000,000.

    The greater of $2,000 per gross ton or $4,272,000.

    Any vessel other than a tank vessel.

    Any vessel other than a tank vessel.

    The greater of $1,000 per gross ton or $854,400.

    Deepwater Ports, other than a Deepwater Port with a limit of liability established by regulation under 33 U.S.C. 2704(d)(2).

    $350,000,000

    $373,800,000

    Louisiana Offshore Oil Port (“LOOP”).

    $62,000,000

    $87,606,000

    Methodology

    In determining the new limits of liability, the Coast Guard used the 2008 annual CPI commonly relied upon in commercial transactions and by the media and economic analysts. The 2008 annual CPI was compared to the annual CPI of the year the limits of liability were last adjusted (i.e., 2006 for vessels and deepwater ports, and 1995 for LOOP).

    Future CPI adjustments to the limits of liability are scheduled for 2012, and every three years thereafter. However, the Coast Guard notes that it has discretion to adjust the limits more frequently than every three years. If, at the scheduled time of adjustment, the cumulative change in CPI is less than three percent, there will be no adjustment and the Coast Guard will re-evaluate the CPI each subsequent year until the cumulative percent change is three percent or greater.

    Applicability to Single-Hull Tank Vessels

    Under the IR, the single-hull tank vessel limits of liability apply only to tank vessels that are subject to the phase-out requirements of OPA 90. The “other” category of tank vessel limits of liability apply to tank vessels, regard-less of hull construction, that do not carry oil as cargo (e.g., chemical tank vessels).

    Conclusion

    Owners and operators of tank vessels and deepwater port facilities should be aware of the new limits of liability and be familiar with the CPI adjustment process set out in the IR. The Coast Guard’s continued review of the CPI adjustment system provides the industry with another opportunity to provide comments regarding the adjustment process and new limits of liability. Comments are due by August 31, 2009.