[Federal Register Volume 60, Number 150 (Friday, August 4, 1995)]
[Rules and Regulations]
[Pages 39848-39851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19212]
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[[Page 39849]]
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
33 CFR Part 137
[Docket 50112]
RIN 2105-AC01
Limit of Liability for Deepwater Ports
AGENCY: Office of Secretary, Department of Transportation.
ACTION: Final rule.
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SUMMARY: This rule establishes a $62 million limit of liability for the
Louisiana Offshore Oil Port (LOOP) deepwater port. This limit applies
only to those oil spills where LOOP would be entitled to limit its
liability in accordance with the Oil Pollution Act of 1990. This action
does not alter LOOP's unlimited liability for spills caused by gross
negligence, willful misconduct, or violation of certain Federal
regulations. LOOP is the only U.S. deepwater port in operation at this
time; specific liability limits for other, future deepwater ports will
be established through separate rulemakings as appropriate.
EFFECTIVE DATE: August 4, 1995.
ADDRESSES: Unless otherwise indicated, documents referenced in this
preamble are available for inspection or copying in Docket 50112,
Office of Documentary Services (C-55), U.S. Department of
Transportation, room PL 401 (Plaza level), 400 Seventh St., SW.,
Washington, DC. 20590-0001. Certain studies referenced in this notice
may be ordered from the National Technical Information Service (NTIS),
Springfield, VA 22161; phone orders (703) 487-4650 (Visa, Mastercard
and American Express accepted).
FOR FURTHER INFORMATION CONTACT: Mr. Robert I. Stein, Office of
Environment, Energy and Safety, at (202) 366-4846, or Mr. Paul B.
Larsen, Office of the Assistant General Counsel for Environmental,
Civil Rights, and General Law, at (202) 366-9161.
SUPPLEMENTARY INFORMATION:
Regulatory History
On February 8, 1995, the Department of Transportation published a
notice of proposed rulemaking (NPRM) entitled Limit of Liability for
Deepwater Ports. The Department received 12 letters commenting on this
proposal. No public hearings were requested or held. A request for an
extension of the comment period was received, but decided against (this
is further discussed in paragraph (5) below).
Statutory Basis and Purpose
The purpose of this regulatory action is to establish an
appropriate limit of liability for deepwater ports in accordance with
section 1004 of OPA 90 (Public Law 101-380).
Section 1004 originally set the limit of liability for deepwater
ports at $350 million. However, it also allows the limit to be adjusted
to a lower amount as appropriate (but not less than $50 million),
subject to a study of the relative operational and environmental risks
of transporting oil to the United States by deepwater ports compared to
other ports.
The relative risk study, entitled the ``Deepwater Ports Study,''
has been completed and forwarded to Congress. The study concluded that
deepwater ports represent a lower operational and environmental risk
for delivering crude oil to the United States than the three other
common modes of crude oil delivery (direct vessel deliveries,
lightering, and offshore mooring stations). Copies of the Deepwater
Port Study may be ordered from NTIS (publication number PB94-124054).
At present, the only deepwater port in operation in the United
States is LOOP. However, other deepwater ports may be built in the
future. Because there may be significant engineering and environmental
differences between different deepwater ports, the Department has
determined that it is necessary to review any deepwater port
individually before setting its limit of liability within the statutory
limits of $50 million and $350 million. Limits for other deepwater
ports may be different from LOOP's limit.
Therefore, in accordance with its authority under section
1004(d)(2)(C) of OPA 90 (33 U.S.C. 2704), and for reasons explained in
the NPRM and this preamble, the Department is establishing a $62
million limit of liability for the LOOP deepwater port.
Discussion of Comments and Changes
Twelve responses were received which commented on several issues in
the NPRM. These comments, and the Department's deliberations, are
discussed below.
1. Limit of Liability
Ten comments addressed the limit of liability issue, seven of which
supported a $58 million limit and one which supported a $50 million
limit. These comments stated that the present $350 million limit of
liability is inequitable to deepwater ports, particularly when compared
to the limits of liability allowed for tank vessels. The comments
pointed out the results of the ``Deepwater Ports Study'' (which
determined that delivery of oil via deepwater ports represented a lower
environmental risk than delivery by tankers, lightering, or offshore
mooring station) and the Coast Guard's risk analysis of LOOP (which
determined the maximum credible pipeline spill to be 5,194 barrels),
and argued that the limit of liability should reflect the lower risks
and smaller credible spill sizes of deepwater ports.
One comment supported an unspecified limit between $58 million and
$150 million. Another comment alternatively suggested that it would be
more equitable for the deepwater port limit of liability to be the same
as for other offshore facilities: $75 million plus cleanup costs, with
a requirement for demonstrated financial responsibility of $150
million.
The Department has determined that it is appropriate national
policy that a deepwater port should be liable for the cost of its
maximum credible spill (assuming no gross negligence or other acts that
would disqualify it from limiting its liability). Further, since
Congress has directed that the liability limit should be based on the
study of the risk of deepwater ports relative to the risk of other
means of transporting oil by vessel, it is inappropriate to base a
deepwater port limit of liability on that for other offshore
facilities.
The NPRM discussed a worst-case unit spill cost of $11,088 per
barrel for crude oil, which was based upon national historical spill
costs up to 1992. Although it is appropriate to revise the unit cost to
a more-current amount, at this time no new historical cost data is
available and the Department has decided to use the Consumer Price
Index (CPI) as a basis for revision. The national average CPI for 1992
was 140.3 and the most current CPI (March 1995) is 151.4, an increase
of 7.9 percent. Therefore, the new unit spill cost is $11,965 per
barrel. Applying this to LOOP's maximum credible spill of 5,194 barrels
yields $62,146,210. Accordingly, the Department is setting the limit of
liability for LOOP at $62 million.
The CPI does not specifically track oil spill costs in its
analysis. However, Section 1004 (d)(4) of OPA 90 requires adjustment of
the liability limit reflecting significant increases in the CPI.
2. Periodic Review of Limits of Liability
The NPRM requested comments on whether the Department should
reassess limits of liability at fixed time intervals. Two comments
addressed this issue.
[[Page 39850]]
One comment suggested 3-year intervals (in order to be consistent with
other periodic review requirements in OPA 90) and the other comment
suggested 10 years. DOT will issue a separate CPI adjustment regulation
as required by law.
3. Universal Versus Port-by-Port Limit of Liability
One comment called for a single (universal) limit of liability for
all deepwater ports instead of the NPRM's proposed port-by-port limit
for each individual deepwater port. The comment argued that, by virtue
of the Federal licensing process, all deepwater ports would be designed
and operated at the same level of safety. Therefore, it is not
necessary to establish individual limits.
The Department disagrees that there is no basis for setting
individual limits of liability for different deepwater ports. This is
because, although all deepwater ports will be designed and operated to
the same high safety standards, the worst-case spill can still differ
substantially from port to port. LOOP's maximum credible pipeline spill
of 5,194 barrels is directly governed by its distance offshore (18
miles), its design flow rate (100,000 barrels per hour), and the size
of its pipeline (48 inches). Even when designed and operated to the
same safety standards, these parameters may be significantly different
for another deepwater port, resulting in a different maximum credible
spill.
The same commenter also discussed some economic issues; these are
addressed in the ``Assessment'' section of this preamble.
4. Consistency Determination
The state of Louisiana requested submittal of a Consistency
Determination with respect to its Coastal Zone Management Plan in
accordance with 15 CFR part 930 subpart C. Such determinations are
required whenever any action by a Federal agency affects land or water
uses with a state's coastal zone.
The Department has determined that a Consistency Determination is
not necessary because this action is administrative in nature and does
not affect either land or water usage.
5. Extension of Comment Period
One commenter has recently acquired an interest in a planned
deepwater port project off the coast of Texas and requested an
extension of the comment period to respond to the NPRM.
The Department has determined that extending the comment period for
this reason would not materially benefit the rulemaking. This is
because this final rule only directly affects the LOOP deepwater port;
other deepwater ports will be separately and individually evaluated for
their own limit of liability when appropriate.
6. Basis for Regulatory Action
One comment disagreed that the findings of the ``Deepwater Ports
Study'' form a sufficient basis for this regulatory action (to reduce
the limit of liability for deepwater ports) because the Study did not
include relative risks of other onshore and offshore facilities. The
comment stated that many onshore facilities pose less risks than
deepwater ports and, therefore, adjusting limits of liability for
deepwater ports should not be undertaken without also adjusting limits
of liability for onshore and offshore facilities.
The ``Deepwater Ports Study'' did not include relative risk
analyses of onshore and offshore facilities because these are not
alternative modes for the transportation of oil by vessel to the United
States. The Department has determined that the Study's findings are a
sufficient basis for this action. Further, although OPA 90 does give
the Department discretion to also adjust limits of liability for
transportation-related onshore facilities, such action would be a
separate rulemaking.
7. Joint Liability Scenarios
The NPRM discussed several scenarios in which LOOP might be liable
(solely or jointly) for a tanker spill. LOOP's comment on this issue
took exception to these scenarios, stating that OPA 90 does not provide
for joint liability: the source of the spill is considered the
responsible party except where a third party was solely responsible for
the spill. LOOP stated that in cases where responsibility for a spill
may be shared, liability under such a spill would not be created by OPA
90 and therefore such scenarios are outside the scope of this
rulemaking.
Although OPA 90 does not recognize joint responsible parties other
than between the owner, operator, or demise charterer of a vessel, it
does recognize (in section 1002(d)(2)(A)) that third parties might
cause an incident, and makes them liable up to their limit as if they
were the responsible party. In addition, liability under OPA 90 is
defined to be the standard of liability which obtains under 33 U.S.C.
1321. As noted in the conference report, this has been construed as
joint and several liability. The Department has determined that the
existence of potential liability for a tanker spill, under limited
circumstances, was not a determinative factor in setting the liability
limits in this rule.
8. Unlimited Liability Provisions of OPA 90
The $62 million limit of liability herein applies only to spills at
LOOP that are not caused by gross negligence, willful misconduct, or
violation of certain Federal regulations in accordance with section
1004 of OPA 90 (33 U.S.C. 2704). The unlimited liability provisions of
OPA 90 are not affected by this rulemaking.
Regulatory Analyses and Notice
DOT Regulatory Policies and Procedures
This final rule is considered to be a significant rulemaking under
DOT Regulatory Policies and Procedures, 44 FR 11040, because of
substantial industry interest.
Executive Order 12866
This final rule has been analyzed in accordance with the principles
and criteria contained in Executive Order 12866, and it has been
determined that it is not an economically significant rulemaking.
Executive Order 12612
This final rule has been analyzed in accordance with the principles
and criteria contained in Executive Order 12612, and it has been
determined that it does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
Regulatory Flexibility Act
The Department must consider whether this regulation will have a
significant impact on a substantial number of small entities.
The NPRM stated that the proposed action only directly affected a
single company, Louisiana Offshore Oil Port (LOOP), Inc., which owns
and operates the only deepwater port in the United States at present.
The NPRM also stated that neither LOOP specifically, nor deepwater
ports in general, qualify as small business concerns. The NPRM
specifically requested comments from small companies affected by the
proposed action; however, no comments were received.
Therefore, the Department concludes that this action does not
affect any small business entities.
Paperwork Reduction Act
This final rule contains no collection of information requirements
under the Paperwork Reduction Act.
[[Page 39851]]
Assessment
The regulatory evaluation in the NPRM stated that the proposed
action might have an economic effect on LOOP (depending upon what final
limit of liability was established), but that no effect was anticipated
on the general private sector, consumers, or Federal, state or local
governments. Only two comments were received that addressed the
economic effects of this action.
The first comment was from LOOP, Inc., which stated: ``OPA's
liability limit plays an important part in LOOP's insurance costs. When
the OPA limit is reduced, it will most probably result in a lowering of
the total insurance premiums paid by LOOP. These reduced costs will
enable LOOP to be more competitive and could be reflected in lower
rates for service, thus benefiting oil importers and, ultimately,
American consumers of oil products such as gasoline.''
The Department recognizes that LOOP's business activity is to
receive crude oil cargoes from offshore VLCC and ULCC tankers and
transfer those cargoes ashore (via seafloor pipeline), an activity in
which it competes with local lightering companies that provide a
similar transfer service using small tankers (typically 80,000
deadweight tons or smaller). LOOP's original limit of liability under
the Deepwater Ports Act was $50 million; in 1980 the liability limit
was established at $150 million. OPA 90's default limit of liability of
$350 million raised LOOP's insurance costs. This rulemaking establishes
$62 million as the appropriate limit of liability for LOOP. It is noted
that the limit of liability of typical lightering vessels (against
which LOOP competes) is less than $40 million.
The second comment was from Petroport, Inc., which is planning to
develop a deepwater port 35 miles offshore of Freeport, Texas.
Petroport's comment discussed the economic effect of establishing
limits of liability for deepwater ports on a port-by-port basis rather
than a single, universal limit for all deepwater ports. This comment
stated: ``Petroport is concerned that if the Department establishes a
limit only for LOOP at this time and requires separate rulemakings for
future deepwater ports, then its own deepwater port, and other such
facilities, would be placed at a severe competitive disadvantage. The
Department inadvertently would create uncertainty in the market, could
possibly discourage, and certainly would delay, other deepwater port
ventures through the creation of unnecessary regulatory burdens.''
Petroport, Inc., was also concerned that a new deepwater port would
have to operate under OPA 90's default $350 million limit of liability
until completion of a rulemaking to establish a lower, more-appropriate
limit. Petroport, Inc., was further concerned that the port-by-port
approach would impede development of other deepwater ports, thereby
creating a noncompetitive monopoly for LOOP.
The Department disagrees that the port-by-port approach for setting
individual limits of liability would discourage or delay the overall
development of a deepwater port. The deepwater port licensing process
(found in 33 CFR Part 148) already requires, among other things,
submittal of an environmental analysis which, in turn, must evaluate
spill sizes and the possibility of pollution incidents resulting from
personnel and equipment failures, natural calamities and casualties,
etc. The environmental analysis submittal will allow the Department
timely development of an appropriate limit of liability concurrently
with the overall processing of the license application. Therefore, this
action will not delay development of any new deepwater port project nor
does it impose any new or undue regulatory burden on an applicant.
The Department also disagrees that any delays in development of a
deepwater port foster a noncompetitive monopoly for LOOP. Even though
LOOP is the sole deepwater port in the United States, it does not
benefit from a monopolistic position in the market: LOOP's primary
competition comes from lightering companies, not from the presence (or
absence) of other deepwater ports. Other deepwater ports will be in a
similar competitive situation with local lightering companies.
The Department concludes that, although this action may improve
LOOP's competitiveness as an individual company, the overall
competitiveness of oil transfer business activity will not be
significantly affected. Therefore, the anticipated impact of this
rulemaking does not warrant a full Regulatory Analysis or Evaluation.
National Environmental Policy Act
The Department has determined that this rulemaking is
administrative in nature and therefore is categorically excludable from
further environmental assessment.
List of Subjects in 33 CFR Part 137
Claims; Harbors; Insurance; Oil pollution.
For the reasons discussed in the preamble, the Department amends 33
CFR part 137 as follows:
SUBCHAPTER M--MARINE POLLUTION FINANCIAL RESPONSIBILITY AND
COMPENSATION
PART 137--DEEPWATER PORT LIABILITY FUND
1. The authority citation for 33 CFR part 137 is revised to read as
follows:
Authority: 33 U.S.C. 1509(a), 1512(a), 1517(j)(1)), 2704; 49 CFR
1.46.
2. Subpart G is added as follows:
Subpart G--Limits of Liability
Sec.
137.601 Purpose.
137.603 Limits of Liability.
Subpart G--Limits of Liability
This subpart sets forth the limits of liability for U.S. deepwater
ports in accordance with section 1004 of the Oil Pollution Act of 1990
(33 U.S.C. 2704).
Sec. 137.603 Limits of Liability.
(a) The limits of liability for U.S. deepwater ports will be
established by the Secretary of Transportation on a port-by-port basis,
after review of the maximum credible spill and associated costs for
which the port would be liable. The limit for a deepwater port will not
be less than $50 million or more than $350 million.
(1) The limit of liability for the LOOP deepwater port licensed and
operated by Louisiana Offshore Oil Port, Inc., is $62,000,000.
(2) [Reserved]
(b) [Reserved]
Dated: July 31, 1995.
Federico Pena,
Secretary of Transportation.
[FR Doc. 95-19212 Filed 8-3-95; 8:45 am]
BILLING CODE 4910-62-P
