Bay area oil spill cleanup costs to surpass vessel’s liability coverage

Bay area oil spill cleanup costs to surpass vesselÆs liability coverage The cost of cleaning up a San Francisco Bay oil spill that followed the sideswiping of the Oakland Bay Bridge by a container vessel is likely to exceed the amount of liability insurance the owners of the vessel carry, federal officials were told Tuesday by the head of the U.S. Coast Guard.
   Total cost of cleaning up the Nov. 7 spill that emptied 58,000 gallons of diesel fuel from the vessel into the bay is expected to hit at least $61 million, Adm. Thad Allen told a Senate Commerce subcommittee Tuesday. More than $54.7 million has been spent so far.
   The cleanup is costing $770,000 per day, Allen said, with no immediate end in sight. The liability limit of the ship at the center of the oil spill, the COSCO Busan, is $61.8 million. However, those limits can be waived if the Justice Department finds that gross negligence led to the spill, he added.
   “You can waive the limits of liability under certain circumstances,” Allen said at a Senate Commerce Subcommittee on Oceans, Atmosphere, Fisheries and the Coast Guard hearing on the spill. “Quite frankly, we are discussing that now.”
   Most vessel liability claims are capped by certain criteria under U.S. and international law. In the case of the Busan, Allen was referring to the liability limit specified under the U.S. Oil Protection Act of 1990. In the case of incidents not involving oil spills, greater limits of liability may prevail.
   Allen has previously suggested that there is a strong likelihood of gross negligence in the Busan incident. Investigators have said they believe that members of the vessel's bridge crew — namely the local bar pilots and the vessel's captain — might have made critical errors leading directly to the collision.
   The bar pilot, Capt. John Cota, has been relieved of active duty and had his licenses either suspended or revoked pending the outcome of several investigations.
   Numerous civil suits have been filed against the owner of the Busan, Hong Kong-based Regal Stone Ltd.; its insurer, Shipowners’ Insurance & Guaranty; and Cota.
   A spokesperson for Regal Stone refused to comment on what might happen if the cleanup costs exceed the vessel's liability limits.
   The Busan, which had been tied up in San Francisco Bay undergoing initial repairs since the Nov. 7 incident, was allowed to sail to South Korea last week for permanent repairs after the owners posted a $79 million bond.
   Lawmakers cited the Busan case as an example of why liability limits for container vessels need to be raised, just as tanker liability limits were after the Exxon Valdez oil spill.
   Allen told the subcommittee that his agency is rewriting regulations on cargo vessel liability limits that, when finished, would raise the limits.
   A recent Government Accountability Office report found that 72 percent to 78 percent of the cleanup costs following an oil spill are paid by those found responsible. Federal law requires that the owners and the operators of a vessel involved in a spill suffer the greatest burden in paying for the cleanup. However, if costs go beyond the liability limit of the vessel, the additional costs are typically paid out of the federal Oil Spill Liability Trust Fund.
   The federal fund, set up under the Oil Protection Act of 1990 and administered by the Coast Guard, was paid for by a 5-cent-per-barrel surcharge on imported and domestic oil that ended in 1994. Revenue for the fund now comes from interest on the fund and collections from those responsible for oil spills that require use of the fund.
   Since 1990, the fund has paid out nearly $240 million for oil spill cleanups. The fund has about $800 million at the end of 2007, with a projected net increase (from interest and revenue) after expenses of about $170 million each year. Annual expenditures (including claims) remained steady over the past five years at about $150 million. Last year saw a one-time spike in expenditures of about $225 million.
   The fund can provide up to $1 billion for any one oil pollution incident, including up to $500 million for the initiation of natural resource damage assessments and claims in connection with any single incident. ' Keith Higginbotham