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OPA: Oil Polluters’ Alleviation? October 8, 2010

OPA: Oil Polluters’ Alleviation? October 8, 2010. David Ashton Assistant General Counsel. OPA: Oil Polluters’ Alleviation?. This is an OPA Update We will cover: Limitation and Exoneration Actions & Oil Pollution Liability under OPA Responsible Parties Facilities Preemption

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OPA: Oil Polluters’ Alleviation? October 8, 2010

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  1. OPA: Oil Polluters’ Alleviation?October 8, 2010 David Ashton Assistant General Counsel

  2. OPA: Oil Polluters’ Alleviation? • This is an OPA Update • We will cover: • Limitation and Exoneration Actions & Oil Pollution • Liability under OPA • Responsible Parties • Facilities • Preemption • Limitation of Liability • Late Breaking Legislative Developments

  3. OPA: Oil Polluters’ Alleviation? • Personal Background: • Portland Harbor Superfund Site RIFS consent order negotiation 2001 • Marine Terminals Corporation Terminal 6 diesel oil spill 2003 • 2006 Deskbook Chapter on OPA • Portland Harbor Superfund Site Litigation, Arkema v. Anderson (D.Or. 2009)

  4. OPA: Oil Polluters’ Alleviation? • After the April 20, 2010 Deepwater Horizon disaster we saw a flurry of attempted legislative action • You might well ask why? • Big Oil Bailout Prevention Acts (e.g., HR 5212) proposed to: • Increase liability of offshore facilities from $75 MM damages to $10 Billion • Direct President to promulgate regulations for advance payments from OSLTF to help states and local governments deal with oil spills • Remove $1 Billion per incident expenditure limitation on use of, and on borrowing authority of, OSLTF fund • Retroactive to April 15, 2010

  5. OPA: Oil Polluters’ Alleviation? • Recent proposed Spill Victims Redress Act to: • Clarify that victims of oil spills could seek damages from allpersons involved in the incident • Victims would not simply be limited to recourse against those considered “responsible parties” under OPA • When victims sue for state law remedies in state court, defendants cannot automatically remove to federal court • Allows for more timely resolution of claims • Would allow for suits against parties like Transocean, the well driller, and Halliburton, the well cement grouter • Who, according to sponsor Senator Whitehouse, “are trying to evade responsibility by arguing that current law only allows BP to be held accountable”

  6. Perceived Flaws with OPA: Background • Limitation and Exoneration Actions • In re Triton Asset Leasing, 2010 WL 2487939 (S.D. Tex 2010) • April 20, 2010 MODU Deepwater Horizon exploded into flames, killing 11 crew and injuring many others. • May 13, 2010 Transocean filed limitation action in SD Tex seeking to limit its liability to $26,764,083 • value of the vessel and its freight. • Limitation Actions under the Limitation Act of 1851 are designed to shield vesselbuilders and operators from large claims that would deter investment in marine shipping • Court addressed 3 key preliminary issues

  7. Perceived Flaws with OPA: Background • Issue 1: can you move to dismiss or transfer Limitation Action without first filing a claim or an answer to the limitation complaint? • Court held transfer motions seeking an alternative venue in which to assert claims do not challenge exoneration or limitation claims and are thus not governed by FRCP F(5) • Court held nonetheless the “non-party” movantsmust demonstrate Article III standing • Court held demonstrated because “non-parties” are affected by Court’s limitation action injunction enjoining further prosecution of any action against petitioner regarding any claim subject to the limitation proceeding.

  8. Perceived Flaws with OPA: Background • Court required “non-party” movants to prove necessary personal stake by refilling their motions attaching copies of complaints against Transocean filed elsewhere or declarations that such claim was intended to be filed. • Issue 2: How should the Court rule on properly filed motions to transfer and motions for expedited discovery re death and personal injury claims? • Court held: would be deferred to allow JPML to rule on most appropriate place to try case • any earlier ruling, given number of actions filed across 5 Gulf states and elsewhere, would create potential for turmoil of conflicting court rulings; JPML in best position to select best location.

  9. Perceived Flaws with OPA: Background • early discovery would undermine very purpose of a maritime concursus– i.e., all claims handled together to ensure prompt and economical disposition of all controversies involving a multitude of claimants. • Issue 3: Motions to Dismiss the Limitation Action entirely? • Court would not dismiss limitation action based on movants’ assertion that there was plenty of evidence of negligence and privity in public record (Congress and media) • too early in this 1 month old fact intensive claims-driven process • claims were still being filed and no discovery had occurred.

  10. Perceived Flaws: Subject Matter of Limitation Action • In re Triton Asset Leasing GMBH, 2010 WL 2541825 (S.D. Tex 2010) • Limitation Action Plaintiff Transocean sought protective order re US subpoena requiring delivery of 50 ft section of riser cut from top of Deepwater Horizon BOP and all recovered debris in connection with CG and MMS Marine Board of Investigation into explosion of MODU Deepwater Horizon • Recognizing importance of not impeding government investigation, Court nonetheless took jurisdiction because subpoenaed debris from the sunken vessel is the very asset of central importance to Limitation Action • Based on Government assurance it would only conduct non-destructive testing on the debris and on condition the Court be informed in advance if Government proposed to conduct invasive testing on these assets of central importance to the Limitation Action, Court declined to issue an order limiting the type of testing that could be conducted.

  11. Perceived Flaws: Multiple Deepwater Horizon Lawsuits Removed & Stayed Pending JPML • Nguyen v. BP Exploration & Production, Inc. 2010 WL 3169316 (S.D. Tex. Aug. 9, 2010) • State lawsuit removed to federal court • BP then moved to stay pending JPML decision • citing as of that time 78 scheduled actions and 135 tag-along actions relating to Deepwater Horizon disaster potentially subject to transfer and consolidation in MDL. • Relying on its inherent power to stay based on a balancing of competing interests and hardships and considerations of judicial efficiency, Court granted temporary stay.

  12. Perceived Flaws: JPML • Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, April 20, 2010, 2010 WL 3166434 (US Judicial Panel Multidistrict Litigation August 10, 2010) • 77 actions considered: 31 in ED La, 23 SD Ala, 10 in ND Fla, 8 in SD Miss, 2 in WD La, 2 in SD Tex, 1 in ND Ala • Court held centralizing the litigation will allow consistent handling of common factual issues relating to cause of the explosion and fire and the role of each defendant, eliminate duplicative discovery, prevent inconsistent pre-trial rulings (e.g., on class certification), and conserve resources.

  13. Perceived Flaws: JPML • Personal injury/wrongful death actions should be included due to the factual overlap • individualized discovery needs different from economic damages claims found to be manageable through separate discovery and motion practice tracks to maximize efficiency. • Found no strong reason for separate treatment of OPA claims – leaving individual actions in different jurisdictions risked inconsistent rulings on presentation of claims requirement. • S.D. Tex limitation action was identified as a potential tag along action and was ordered to be conditionally transferred • transferred subject to parties’ right to seek some different treatment by motion to new court.

  14. Perceived Flaws: JPML • Selected Judge Carl J. Barbier based on his maritime experience, MDL experience, and immersion in many DH claims to date. • a recusal motion had recently been rejected for mandamus appeal by 5th Circuit. • Best to transfer to one judge and have judge draw upon additional resources like magistrate judges and ability to appoint special masters and other case management tools identified in the Manual for Complex Litigation.

  15. Perceived Flaws: Who is a RP? • In re Settoon Towing, LLC, 2010 WL 2545270 (E.D.La June 16, 2010) • M/V Cathy M. Settoon while pushing a barge struck ExPert Oil’s oil well in Bayou Perot. While oil well was owned and operated by ExPert, it was on a state lease held by Alpine Explorations,Co. Alpine subsequently assigned the lease to ExPert and others retroactive to a date before the spill. • Essence of OPA liability - Section 2702(a): • “Notwithstanding any other provision or rule of law, and subject to the provisions of this Act, each responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages specified in subsection (b) of this section that result from such incident.”

  16. Perceived Flaws: Who is a RP? • Responsible Party is defined by Section 2701(32): • In the case of a vessel, any person owning, operating or demise chartering the vessel • In the case of an onshore facility …any person owning or operating the facility, except a Federal agency, State, municipality, commission, or political subdivision of a State, or any interstate body, that as the owner transfers possession and right to use the property to another person by lease, assignment or permit. • In the case of an offshore facility … the lessee or permittee of the area in which the facility is located or the holder of a right of use and easement granted under applicable State law or the Outer Continental Shelf Lands Act for the area in which the facility is located (if the holder is a different person than the lessee or permittee), except a Federal agency, State, municipality, commission, or political subdivision of a State, or any interstate body, that as the owner transfers possession and right to use the property to another person by lease, assignment or permit.

  17. Perceived Flaws: Who is a RP? • Definition of Responsible Party Cont’d: • In the case of a deepwater port licensed under the Deepwater Port Act of 1974, the licensee. • In the case of a pipeline, any person owning or operating the pipeline. • In the case of an abandoned vessel, onshore facility, deepwater port, pipeline, or offshore facility, the persons who would have been responsible parties immediately prior to the abandonment of the vessel or facility. • What about former owners/operators? Arrangers for disposal? Causers, contributors & exacerbators?

  18. Perceived Flaws: Who is a RP? • In Re Settoon: “offshore facility” RPs defined by Section 2701(32)(A) as: • “lessee or permittee of the area in which the facility is located … • At the time of spill Alpine was lessee of the area in which the offshore facility from which the oil leaked was located. • Court held: there can be more than one RP under OPA & when there is, liability is joint and several. • Alpine could be adjudicated an additional RP: • Section 2702(a) liability for removal costs and damages extends to “each responsible party” • While OPA Section 2710 permits indemnity agreements it prohibits them from transferring liability from one person to another.

  19. Perceived Flaws: Who is a RP? • A non RP Third Party can be treated as the RP for purposes of OPA liability when a RP establishes Third Party is the Sole Cause • Gabarick v. Laurin Maritime (America) Inc., 2010 WL 147216 (E.D. La. Jan. 11, 2010) • M/V Tintomara heading down river on the Mississippi in New Orleans Harbor collided with the tank barge DM-932 being pushed by tug M/V Mel Oliver. • Owner of tug M/V Mel Oliver was designated RP by CG • Tug owner asserted claims against owners of M/V Tintomara under OPA

  20. Perceived Flaws: Who is the RP? • Owners of M/V Tintomara moved to dismiss on the basis that as a non discharging party (in the collision the oil leaked from the oil barge DM-932) it was not an RP and thus had no OPA liability (for direct cost recovery (2702) or contribution (2709)) • Court held that a non-discharging party that was not a defined RP could only be held liable as an RP under OPA under a provision for substitution of a third party causing the discharge as the RP • Section 2702(d)(1)(A) provides “… in any case in which a responsible party establishes that a discharge … and the resulting removal costs and damages were caused solely by an act or omission of one or more third parties … the third party or parties shall be treated as the responsible party or parties for purposes of determining liability under this subchapter.”

  21. Perceived Flaws: Who is the RP? • Court reasoned M/V Tintomara entitled to summary judgment because at least some fault was attributable to the owner or operator of the tug • because of the contract between the owner of the tug and the owners of the discharging oil barge • undisputed evidence from tug steersman pushing the barge reflecting that at least some fault attributable to tug • M/V Tintomara could not be “solely” at fault and as such there was no basis for it being an OPA RP. • Court said don’t worry, pursue them under GML or state contribution remedy.

  22. Perceived Flaws: Who is the RP? • “Facilities” Subject to OPA Liability are structures or devices for managing oil and “onshore facilities” are defined differently from “offshore facilities” • US v. Viking Resources, Inc., 607 F.Supp.2d 808 (S.D.Tex. 2009) • Oil leaked from a land-based tank battery (collection of tanks used to store oil) into a wetland in Galveston County and then into Highland Bayou, a navigable tributary to Galveston Bay in December 2004 • CG funded all costs from OSLTF

  23. Perceived Flaws: Who is the RP? • Brought cost recovery action against Viking & Chambers • last known lessee and operator of a subdivided portion of a leasehold underlying the land containing the old tank battery • president, sole officer, sole director and sole owner of Viking. • First element of OPA liability is that defendant must be a responsible party for the “facility” or “vessel” • Court noted that viewed in isolation, the definition of “facility” supported an expansive aggregate definition

  24. Perceived Flaws: Who is the RP? • Section 2701(9) defines “facility” as “any structure, group of structures, equipment, or device (other than a vessel) which is used for one or more of the following purposes: exploring for, drilling for, producing, storing, handling, transferring, processing, or transporting oil. This term includes any motor vehicle, rolling stock, or pipeline used for one or more of these purposes.” • Court however looked to the definition of RP and the distinction in definition of “onshore” versus “offshore” facilities to adopt narrow view that “facility” was the tank battery from which the oil discharged

  25. Perceived Flaws: Who is the RP? • Court rejected an aggregate definition of “facility” • RP of an Abandoned Onshore Facility is the Person Who Would Have Been the RP immediately prior to Abandonment – Intensely Factual Inquiry • US v. Viking Resources, Inc., 607 F.Supp.2d 808 (S.D.Tex. 2009) • Viking and Chambers sought summary judgment on ground that US could not prove they ever owned the old tank battery • US’s position was they became owners by virtue of the assignment of the lease to extract oil

  26. Perceived Flaws: Who is the RP? • Dispute turned on the meaning of an undefined term in the assignment • Transfering the “Lease” (defined) and the “Property” (undefined). • US came up with plausible factual information to suggest that before Viking’s new tanks were installed, Defendants continued to use the old tank battery for production of oil • for perhaps up to four years before the new tanks were installed. • No Summary Judgment for Defendants

  27. Perceived Flaws: Claim must be Presented to RP • Gabarick v. Laurin Mar. (Am.) Inc., 2009 WL 1022549 (E.D. La. 2009) (M/V Tintomaracollision + oil barge DM-932) • Motion to dismiss claims based on failure to meet 33 USC 2713’s claims presentation requirements • Section 2713(a): “Except as provided in subsection (b) of this section, all claims for removal costs or damages shall be presented first to the responsible party or guarantor of the source designated under section 2714(a) …” • Claimant has an election between claim in court or to OSLTF when: • Person to whom claim presented denies all liability, or • Claim is not settled by payment within 90 days of presentation. 33 USC 2713(c).

  28. Perceived Flaws: Claim must be Presented to RP • One claimant was held to have failed to present a claim by tendering an invoice of costs incurred because: • Did not satisfy the 33 USC 2701(2) definition of a “claim” as “a sum certain for damages or removal costs resulting from an incident” when invoice did not describe manner in which oil spill impacted it; and • Other claimants could not rely on language of RP’s limitation complaint declaring it was not at fault and had valid defenses as necessary denial of liability. • Relying prior cases, court held the claim presentation requirement is jurisdictional warranting dismissal without prejudice rather than a stay to allow presentation. • But see Arbaughv. Y & H Corp., 546 U.S. 500, 516 (2006) (bright line)

  29. Perceived Flaws: Claim must be Presented to RP • Similar result to Gabarickin Russo v. M/V Dubai Star, 2010 WL 1753187 (N.D. Cal. April 29, 2010) • Claim by commercial fishermen and a seafood processor on behalf of putative class of fishermen, vessel owners, seafood processors and commercial boat charterers • Release of Bunker C fuel during fueling the Dubai Star in San Francisco Bay which plaintiffs alleged was caused by the negligence of the owners, operators or crew of the Dubai Star • Presentation requirement held jurisdictional & unmet.

  30. Perceived Flaws: Claim must be Presented to RP • There was no discussion if the Dubai Star was “designated” the RP by CG, as is required for applicability of the presentation requirement • Court rejected an argument based on a letter from Dubai Star’s counsel that it would not set up the required claims processing system [a requirement an otherwise designated RP must satisfy] because • Inappropriate to consider it on a motion to dismiss • Waiver of requirement argument of no avail relating to a subject matter jurisdiction matter (*3 fn3) • No discussion of Arbaughv. Y & H Corp., 546 U.S. 500, 516 (2006) (Congress must declare a limitation “jurisdictional”)

  31. Perceived Flaws: Claim must be Presented to RP • No Presentation Requirement, However, When the Claim is For Removal Costs • United States v. M/V CoscoBusan, 557 F.Supp.2d 1058 (N.D. Cal. May 9, 2008) • November 7, 2007 CoscoBusanallided with the Bay Bridge, San Francisco Bay discharging more than 50,000 gallons into the Bay • Government sued the vessel, owner, operator and pilot • Defendants claimed failure to satisfy the claim presentation requirements was fatal to government’s claims • Court held, Section 2717 trumps Section 2713

  32. Perceived Flaws: Claim must be Presented to RP • Section 2717: Except as otherwise provided in this paragraph, an action may be commended under this subchapter for recovery of removal costs at any time after such costs have been incurred.” 33 USC 2717(f) (emphasis added) • Defendants’ claims of nullification of statutory requirement of presentation of “all claims” were wrong because Section 2717(f)(2) only applies to “removal costs referred to in Section 2702(b)(1)” and such removal costs are limited to “removal costs incurred by the United States, a State, an Indian tribe, or a person acting pursuant to the National Contingency Plan.” 33 USC 2702(b)(1) • Damages claims still presented

  33. Perceived Flaws: Claim must be Presented to RP • Specificity of 2717 trumps generality of 2713 • Congress likely recognized need for flexibility for recovering removal costs versus other damages claims • One can imagine situations when size of the spill and scope of cleanup and complexity of the legal issues or intransigence of RPs makes it preferable to proceed directly to court to seek removal costs. • Simpler claims can be handled through presentation process • This harmonizes with Congressional notion that OPA is intended “to eliminate to the extent possible, the need for an injured person to seek recourse through the litigation process.”

  34. Perceived Flaws: What Claims are Left? • General Maritime Law is Unavailable for the Recovery of Removal Costs or Damages Covered by OPA • In re Settoon Towing, 2009 WL 4730971 (E.D. La. 2009) • M/V Cathy M. Settoon towing a barge struck an oil well owned and operated by ExPert Oil & Gas causing uncontrolled spray of crude oil into Bayou Perot, Jefferson Parish, La • Settoon moved for summary judgment on grounds OPA preempts general maritime claims for recovery of removal costs • 33 USCA 2751 states: “[e]xcept as otherwise provided in this Act, this Act does not affect … admiralty and maritime law …”

  35. Perceived Flaws: What Claims are Left? • Court nonetheless found GML claims preempted by OPA: • GML applies only in the absence of a relevant federal statute – East River SS Corp. v. Transamerica Delaval, 106 S.Ct. 2295, 2298-99 (1986) • OPA 1990 provides a comprehensive damages remedy in 33 USC 2702 • Such remedy is preemptive through its operative language “[n]otwithstanding any other provision or rule of law, and subject to the provisions of this Act” • Following E.D. La. authorities such as Gabarick v. Laurin Mar. (Am.) Inc., 623 F.Supp.2d 741, 746 (E.D. La. 2009)

  36. Perceived Flaws: What Claims are Left? • Preemption intended by language of modifier to the applicability of admiralty and maritime law: • “[e]xcept as otherwise provided in this Act,” 33 USCA 2751 • In addition, 33 USC 2718(a)’s language • “[n]othing in this Act … shall in any way affect, or be construed to affect, the authority of the United States … (1) to impose additional liability or additional requirements … relating to the discharge, or substantial threat of discharge, of oil” • not change outcome because GML claim did not seek to impose liability additive to the damages liability sought under OPA • both claims sought recovery of the identical damages.

  37. Perceived Flaws: What Claims are Left? • State Claims are Available: Russo v. M/V Dubai Star, 2010 WL 1753187 (N.D. Cal. April 29, 2010) • Dubai Star also argued existence of OPA claims preempted ability to rely on state law claims for damages re discharge of oil, e.g., public nuisance • OPA has not one but two requirements regarding discharge of oil or oil removal activities: • Section 2718(a): “Nothing in this Act … shall (1) affect, or be construed or interpreted as preempting, the authority of any State or political subdivision thereof from imposing any additional liability or requirements with respect to (A) the discharge of oil or other pollution by oil within such State; or (B) any removal activities in connection with such a discharge ….”

  38. Perceived Flaws: What Claims are Left? • Section 2718(c): “Nothing in this Act … shall in any way affect, or be construed to affect, the authority of the United States or any State or political subdivision thereof (1) to impose additional liability or additional requirements; or (2) to impose, or to determine the amount of, any fine or penalty (whether criminal or civil in nature) for an violation of law; relating to the discharge, or substantial threat of discharge, of oil.” • Taken together these non-preemption provisions mean that nothing in OPA prevents a state or political subdivision imposing additional liability or requirements regarding a substantial threat of oil discharge, an oil discharge or other pollution from oil. • Thus plaintiffs could bring state law statutory or common law claims against Dubai Star regarding the Bunker C discharge • Note: non OPA state law remedies are severely constrained by the Economic Loss Rule (economic loss unrecoverable without physical property damage) • Similar: United States v. M/V CoscoBusan, 557 F.Supp.2d 1058 (N.D. Cal. May 9, 2008) (US remedies)

  39. Recent Legislative Developments • Coast Guard Authorization Act of 2010, HR 3619 • < http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3619eah.txt.pdf> • Sent to President for Signature – October 4 • TITLE VII—OIL POLLUTION PREVENTION • Sec. 701. Rulemakings. • Sec. 702. Oil transfers from vessels. • Sec. 703. Improvements to reduce human error and near miss incidents. • Sec. 704. Olympic Coast National Marine Sanctuary. • Sec. 705. Prevention of small oil spills. • Sec. 706. Improved coordination with tribal governments. • Sec. 707. Report on availability of technology to detect the loss of oil. • Sec. 708. Use of oil spill liability trust fund. • Sec. 709. International efforts on enforcement. • Sec. 710. Higher volume port area regulatory definition change. • Sec. 711. Tug escorts for laden oil tankers. • Sec. 712. Extension of financial responsibility. • Sec. 713. Liability for use of single-hull vessels.

  40. Legislative Developments – Additions • SEC. 708. USE OF OIL SPILL LIABILITY TRUST FUND. (a) IN GENERAL.—Section 1012(a)(5) of the Oil Pollution Act of 1990 (33 U.S.C. 2712(a)(5)) is amended— (1) by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D), respectively; and (2) by inserting after subparagraph (A) the following: “‘(B) not more than $15,000,000 in each fiscal year shall be available to the Under Secretary of Commerce for Oceans and Atmosphere for expenses incurred by, and activities related to, response and damage assessment capabilities of the National Oceanic and Atmospheric Administration;’’.

  41. Legislative Developments – Additions • SEC. 712. EXTENSION OF FINANCIAL RESPONSIBILITY. • Section 1016(a) of the Oil Pollution Act of 1990 (33 U.S.C. 2716(a)) is amended—(1) by striking ‘‘or’’ after the semicolon in paragraph (1); (2) by inserting ‘‘or’’ after the semicolon in paragraph (2); and (3) by inserting after paragraph (2) the following:‘‘(3) any tank vessel over 100 gross tons using any place subject to the jurisdiction of the United States;’’.

  42. Legislative Developments – Additions • SEC. 713. LIABILITY FOR USE OF SINGLE-HULL VESSELS. • Section 1001(32)(A) of the Oil Pollution Act of 1990 (33 U.S.C. 2701(32)(A)) is amended by inserting ‘‘In the case of a vessel, the term ‘responsible party’ also includes the owner of oil being transported in a tank vessel with a single hull after December 31, 2010 (other than a vessel described in section 3703a(b)(3) of title 46, United States Code).’’ after ‘‘vessel.’’.

  43. Conclusions • Limitation Actions are hugely frustrating in mass tort situations like Deepwater Horizon • OPA remedies are very different from CERCLA and some State law remedies for pollution • There is tremendous variability in the case law and the district where the incident happens to occur is very important • E.D. La appears to be protective of its maritime stakeholders • Battle will continue in Congress

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