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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 3, 2010
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>FOCUS: OIL SPILL
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>US reserve fund to help pay for oil spill cleanup
Up to US$1b of the fund can be used to compensate losses
(WASHINGTON) The federal government has a large rainy-day fund on hand to help mitigate the expanding damage on the Gulf Coast, generated by a tax on oil for use in cases such as the Deepwater Horizon spill.
Up to US$1 billion of the US$1.6 billion reserve could be used to compensate for losses from the accident, as much as half of it for what is sometimes a major category of costs: damage to natural resources such as fisheries and other wildlife habitats.
Under the law that established the reserve, called the Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than US$75 million in liability for the damages that might be claimed by individuals, companies or the government, although they are responsible for the cost of containing and cleaning up the spill.
The fund was set up by Congress in 1986, but not financed until after the Exxon Valdez ran aground in Alaska in 1989. In exchange for the limits on liability, the Oil Pollution Act of 1990 imposed a tax on oil companies, currently eight US cents for every barrel they produce in this country or import. The tax adds roughly one-tenth of a per cent to the price of oil.
Another source of revenue is fines and civil penalties from companies that spill oil.
The result is a rainy-day fund, which over the years has been used mostly for spills that exceed the liability caps by relatively small amounts.
But the trust fund managers have warned that a single big spill could make a sizable dent in the reserve.
The money is also used to prepare for spills, including such anticipatory measures as stockpiling oil containment booms. And Congress can use money from the fund to reimburse the Coast Guard and the National Oceanographic and Atmospheric Administration for their spill-related expenses.
'The idea behind creating it was that we wouldn't have to wait on money to clean up an oil spill,' said Michael LeVine, the Pacific senior counsel for Oceana, an environmental group.
A federal supervisor at the scene of a spill can authorise states to spend up to a quarter-million dollars on the spot. The president can authorise up to US$50 million a year without congressional approval.
When a rich and well-insured company such as BP is responsible for the spill, the government will seek reimbursement of what it spends on cleanup from the company and its insurers. Specialists say that the fund is invaluable in spills involving smaller companies, which may not have money for cleanup, or in cases where the identity of the responsible party is not instantly clear.
But damages in oil spills can run to big money. 'One billion dollars sounds like a lot of money, but it really might not be,' said Mr LeVine, who is based in Juneau, Alaska.
Companies that lose business - fishermen who cannot fish, or hotel owners who cannot rent out rooms - can seek damages. So can governments that see tax revenues decline. -- NYT
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>FOCUS: OIL SPILL
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>US reserve fund to help pay for oil spill cleanup
Up to US$1b of the fund can be used to compensate losses
(WASHINGTON) The federal government has a large rainy-day fund on hand to help mitigate the expanding damage on the Gulf Coast, generated by a tax on oil for use in cases such as the Deepwater Horizon spill.
Up to US$1 billion of the US$1.6 billion reserve could be used to compensate for losses from the accident, as much as half of it for what is sometimes a major category of costs: damage to natural resources such as fisheries and other wildlife habitats.
Under the law that established the reserve, called the Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than US$75 million in liability for the damages that might be claimed by individuals, companies or the government, although they are responsible for the cost of containing and cleaning up the spill.
The fund was set up by Congress in 1986, but not financed until after the Exxon Valdez ran aground in Alaska in 1989. In exchange for the limits on liability, the Oil Pollution Act of 1990 imposed a tax on oil companies, currently eight US cents for every barrel they produce in this country or import. The tax adds roughly one-tenth of a per cent to the price of oil.
Another source of revenue is fines and civil penalties from companies that spill oil.
The result is a rainy-day fund, which over the years has been used mostly for spills that exceed the liability caps by relatively small amounts.
But the trust fund managers have warned that a single big spill could make a sizable dent in the reserve.
The money is also used to prepare for spills, including such anticipatory measures as stockpiling oil containment booms. And Congress can use money from the fund to reimburse the Coast Guard and the National Oceanographic and Atmospheric Administration for their spill-related expenses.
'The idea behind creating it was that we wouldn't have to wait on money to clean up an oil spill,' said Michael LeVine, the Pacific senior counsel for Oceana, an environmental group.
A federal supervisor at the scene of a spill can authorise states to spend up to a quarter-million dollars on the spot. The president can authorise up to US$50 million a year without congressional approval.
When a rich and well-insured company such as BP is responsible for the spill, the government will seek reimbursement of what it spends on cleanup from the company and its insurers. Specialists say that the fund is invaluable in spills involving smaller companies, which may not have money for cleanup, or in cases where the identity of the responsible party is not instantly clear.
But damages in oil spills can run to big money. 'One billion dollars sounds like a lot of money, but it really might not be,' said Mr LeVine, who is based in Juneau, Alaska.
Companies that lose business - fishermen who cannot fish, or hotel owners who cannot rent out rooms - can seek damages. So can governments that see tax revenues decline. -- NYT
</TD></TR></TBODY></TABLE>
