The Oil Spill Liability Trust Fund Tax: Reauthorization Issues and Legislation in the 115th Congress

The Oil Spill Liability Trust Fund Tax: Reauthorization Issues and Legislation in the 115th Congress

link to page 1

Updated February 12, 2018
The Oil Spill Liability Trust Fund Tax: Reauthorization Issues
and Legislation in the 115th Congress
The Oil Spill Liability Trust Fund (OSLTF) provides
damage and lost profits or earning capacity. OPA provides
immediate access to funds for a federal response to an oil
(1) limited defenses from liability—act of God, act of war,
spill and compensation for damages. The regulatory
and act or omission of certain third parties—and (2)
procedures of the National Contingency Plan establish a
conditional liability limits (i.e., caps) for cleanup costs and
framework for coordinating a federal response with state
other eligible damages.
and local officials (40 C.F.R. Part 300).
The Omnibus Budget Reconciliation Act of 1986
The OSLTF has been financed primarily by a per-barrel
established the OSLTF (P.L. 99-509), but the act did not
excise tax on domestic crude oil and imported petroleum
authorize appropriations for the fund or authorize its use.
products. As illustrated in Figure 1, the unappropriated
The 1986 act also included provisions to establish an excise
balance of the trust fund increased severalfold over the last
tax to support the fund, but the tax did not take effect at the
decade, largely due to the tax receipts. The authority to
time, because a condition triggering the effective date of the
collect the tax expired December 31, 2017. The Bipartisan
tax authority was not met. Subsequent laws authorized the
Budget Act of 2018 (P.L. 115-123) reinstated the tax
OSLTF taxing authority, appropriations from the fund, and
authority through December 31, 2018, with an effective
eligible uses for the fund. The tax first took effect at 5 cents
date of March 1, 2018.
per barrel on January 1, 1990. In the intervening years, the
taxing authority expired and was resumed, and the tax rate
Figure 1. Oil Spill Liability Trust Fund
was adjusted. The current tax rate is 9 cents per barrel.
End of Year Unappropriated Balances, FY1991-FY2019
The OSLTF is subject to both permanent and discretionary
appropriations. Discretionary appropriations from the
OSLTF have provided funding to several agencies for oil-
spill-related activities. The permanent appropriations are
limited to a maximum of $150 million annually. Permanent
appropriations provide an immediate funding source to pay
for eligible activities, including federal response actions,
eligible claims submitted by affected parties, and natural
resource damages. The U.S. Coast Guard administers the
OSLTF through its National Pollution Funds Center.
OPA authorizes the federal government to recover
payments, including response costs and claims, made from
the OSLTF through the enforcement of liability against
responsible parties. Recovered funds are to be deposited
back into the trust fund.
Source: Prepared by CRS; data from Office of Management and
Budget, annual Budget of the United States Government, Appendices.
The responsible parties may also perform and pay for
OSLTF Background and Overview
response actions up front with their own monies, subject to
direction from the federal government’s on-scene
The 1989 Exxon Valdez oil spill led to questions in
coordinator. If a responsible party’s payments were to
Congress regarding the effectiveness of federal oil spill
exceed its OPA liability limit, the party may seek
response capabilities. The Oil Pollution Act of 1990 (OPA,
reimbursement from the OSLTF for the difference.
P.L. 101-380) established a new federal oil spill liability
framework, replaced existing federal liability frameworks,
Since its inception, there has been a statutory limitation on
and amended the Clean Water Act oil spill response
expenditures from the fund that could be used for any
authorities. In addition, OPA transferred monies into the
individual incident. Congress set this limit so that any one
OSLTF from existing liability funds (the Clean Water Act
individual spill would not deplete the fund. OPA set the
revolving fund, the Deepwater Port Liability Fund, the
per-incident cap at $1 billion. Within this $1 billion limit,
Trans-Alaska Pipeline Liability Fund, and the Offshore Oil
natural resource damage awards cannot exceed $500
Pollution Compensation Fund).
million.
Under OPA, parties responsible for an oil spill may be
Although the OSLTF per-incident cap has not been
liable for cleanup costs, natural resource damages, and
breached to date, some oil spills in recent years have
specific economic damages, including personal property
https://crsreports.congress.gov

link to page 2 link to page 2 link to page 2
The Oil Spill Liability Trust Fund Tax: Reauthorization Issues and Legislation in the 115th Congress
resulted in costs paid by responsible parties that exceeded
 $1.20 billion from cost recoveries, and
$1 billion. For example, payments from BP and other
responsible parties associated with the 2010 Deepwater
 $277 million from interest on investments in U.S.
Horizon spill were above $65 billion. After the incident,
Treasury securities.
some Members of Congress proposed legislation to increase
or remove the per-incident cap, but these bills were not
The tax is scheduled to expire on December 31, 2018. If the
enacted.
tax were not reinstated, future fund balances would depend
on the difference between fund expenditures and continued
OSLTF Balance, Receipts, and Spending
receipts from fines and penalties, cost recoveries, and
Figure 2 illustrates the end-of-year unappropriated balances
interest. The recent trends for some of these receipts may
for the OSLTF between FY1991 and FY2017 with Office
not continue in the future. In particular, the fine and penalty
of Management and Budget (OMB) estimates for FY2018
receipts were significantly greater ($1.9 billion) in the eight
and FY2019.
years after the 2010 Deepwater Horizon spill than the fine
and penalty receipts collected in the eight years before the
Since the tax was reinstated on April 1, 2006, the
spill ($137 million). However, fines and penalties from that
unappropriated balance of the OSLTF has increased
spill are scheduled to provide additional revenue through
severalfold. Between FY2007 and FY2017 (the most recent
2031. Pursuant to a Clean Water Act civil penalty
year of non-estimated data), the excise tax provided annual
settlement between the federal government and BP
average receipts of $470 million. The OMB-estimated
involving the Deepwater Horizon spill, the fund is
balance for the end of FY2019 is $6.25 billion. This
scheduled to receive annual receipts of $76 million through
projection includes $465 million in FY2019 excise tax
2031.
receipts based on OMB’s assumption that the tax authority
will be in effect in 2019. In its FY2019 budget proposal, the
Reauthorization Issues for Congress
Trump Administration proposed to reinstate the tax without
The expiration (December 31, 2018) of the per-barrel
specifying a termination date.
excise tax may present a range of policy issues for Congress
regarding financing the OSLTF. The sufficiency of the
Receipts from sources other than the excise taxes have
remaining balance of the trust fund would depend on the
contributed to the fund’s growth in recent years. Figure 2
number, magnitude, and impacts of future spills and the
presents the trends in the excise tax receipts, other fund
financial viability of the responsible parties, who would
receipts (described below), and the fund appropriations
remain liable for response costs and damages with or
since the tax was reauthorized in FY2007. Appropriations
without the tax. Some receipts would continue to accrue to
presented in Figure 2 illustrate the combined total of
the OSLTF from fines and penalties, cost recoveries, and
permanent and discretionary appropriations from the fund.
interest, but the interest would decrease over time as the
remaining balance is expended if appropriations from the
Figure 2. Oil Spill Liability Trust Fund
trust fund were to exceed continuing receipts.
Fund Receipts and Appropriations, FY2007-FY2019
Authorizing the excise tax after December 31, 2018, is one
option to provide a source of dedicated receipts to finance
the OSLTF. Another option would be to transfer monies
from the General Fund of the U.S. Treasury to the OSLTF
as needed, similar to the Superfund Trust Fund for
responding to releases of hazardous substances. The
Stafford Act (42 U.S.C. 5121 et seq.) would also provide
another potential source of federal funds if the President
were to declare an oil spill a major disaster or emergency
under that statute. However, such a presidential declaration
has not been made solely for a human-caused oil spill to
date.

For additional information, see CRS Report RL33705, Oil
Source: Prepared by CRS; data from Office of Management and
Spills: Background and Governance, by Jonathan L.
Budget, annual Budget of the United States Government, Appendices.
Ramseur.
Between FY2007 and FY2017, total excise tax receipts
Jonathan L. Ramseur, Specialist in Environmental Policy
were $5.17 billion. Other receipts totaled $3.30 billion,
including:
IF10823
 $1.83 billion from fines and penalties,

https://crsreports.congress.gov

The Oil Spill Liability Trust Fund Tax: Reauthorization Issues and Legislation in the 115th Congress

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF10823 · VERSION 3 · UPDATED