Mainers back oil spill fund boost

Posted Aug. 08, 2010, at 9:44 p.m.

AUGUSTA, Maine — With the estimated cost of the BP oil spill in the billions of dollars, members of Maine’s congressional delegation support increasing the reserves in the Oil Spill Liability Trust Fund that would pay cleanup and remediation of a spill by a company that does not have BP’s financial resources.

“Ultimately the responsibility should rest with the private sector,” said Sen. Olympia Snowe. “They should be the ones paying into this fund.”

She said the fund was set up so there are funds available immediately to contain a spill and start remediation efforts. The president can authorize up to $100 million from the fund for any single spill in a year.

“We need to structure this so the companies are paying, not the taxpayers,” she said.

Snowe said that while BP has pledged to pay all of the costs of the Deepwater Horizon spill, many companies do not have the resources to handle a major spill.

The fund was established in 1986 but not financed by Congress until after the Exxon Valdez spill in Alaska in 1989. There is an 8 cents a barrel tax on both oil produced in the United States, or imported into the country. That tax adds roughly one-tenth of a percent to the price of oil.

Another source of revenue for the trust fund is fines and civil penalties from companies that spill oil. The fund now has $1.6 billion.

The law allows companies that lose business, from local fishermen to motel owners, to seek damages from the fund. It also allows state and local governments to apply for aid to offset a decline in tax revenues.

“I strongly support an increase,” Rep. Chellie Pingree said. “I think we need to have a larger fund and use some of it to make sure we have the technology needed to immediately address a spill.”

She said one proposal before Congress would quadruple the tax to 32 cents a barrel and she would support that increase. She also has introduced legislation she believes would complement the source of trust fund revenue.

“I have introduced legislation that would require they continue to pay royalties on the oil that is lost [in a spill] and that is not currently covered,” Pingree said. “It should be.”

Sen. Susan Collins said it is not enough simply to increase the fees on oil. She said that while it is clear additional resources will be needed to bolster the trust fund, she does not think those taxes should be passed on to consumers.

“It seems to me that the oil company profits are sufficient that there should be a way to tie the increased fees to oil industry profits so it is not just passed through to the consumer,” she said.

Collins also supports raising the cap on the liability for economic damages a company faces from a spill above the current $75 million. Some Democrats have proposed a $10 billion cap, but Collins is not sure at what level the cap should be set.

Rep. Michael Michaud said he will not support a fee increase that oil companies could pass on to consumers. But,he said the independent commission chaired by Bob Graham, a former Florida senator and governor, and former Environmental Protection Agency Administrator William Reilly should make recommendations on both the size of the trust fund and its sources of revenue.

“I think we want to be careful about how much money we want set aside in a reserve,” he said, “but by the same token, we have to make sure we have enough resources to handle any future spills.”

Michaud said discussions have started in the House Transportation Committee, on which he serves, on both the size and funding possibilities. He said the industry recognizes that the fund needs to be changed.

“We recognize that changes are needed, but believe that proposals to arbitrarily raise or remove the fund’s cap would threaten the viability of offshore operations and could significantly reduce U.S. domestic oil and natural gas production, cost jobs and harm U.S. energy security,” said Jack Gerard, president of the American Petroleum Institute, at a June hearing. “Nor are we alone in this assessment, as independent insurers and analysts have reached similar conclusions.”

The Department of Homeland Security did a survey a year ago and found that since 1991, there have been 51 instances in which liability exceeded the caps in the law.

That survey indicated that cargo and fishing vessels have the most spills, but oil tankers and oil barges cause the most in terms of dollar damages.

The single largest expense incurred by the fund was in 2004 when a tanker in the Delaware River spilled tens of thousands of gallons of crude oil.

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