Consumer Price Index Adjustments of Oil Pollution Act of 1990 Limits of Liability-Vessels, Deepwater Ports and Onshore Facilities, 49205-49220 [2014-19314]
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Vol. 79
Tuesday,
No. 160
August 19, 2014
Part III
Department of Homeland Security
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Coast Guard
33 CFR Part 138
Consumer Price Index Adjustments of Oil Pollution Act of 1990 Limits of
Liability—Vessels, Deepwater Ports and Onshore Facilities; Proposed Rule
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below for instructions on submitting
comments.
DEPARTMENT OF HOMELAND
SECURITY
33 CFR Parts 138, Subpart B
[Docket No. USCG–2013–1006]
RIN 1625–AC14
Consumer Price Index Adjustments of
Oil Pollution Act of 1990 Limits of
Liability—Vessels, Deepwater Ports
and Onshore Facilities
Coast Guard, DHS.
ACTION: Notice of proposed rulemaking.
AGENCY:
The Coast Guard proposes to
increase the limits of liability for
vessels, deepwater ports, and onshore
facilities, under the Oil Pollution Act of
1990, as amended (OPA 90), to reflect
significant increases in the Consumer
Price Index (CPI). We also propose a
simplified regulatory procedure for the
Coast Guard to make future required
periodic CPI increases to the OPA 90
limits of liability for vessels, deepwater
ports, and onshore facilities. These
regulatory inflation increases to the
limits of liability are required by OPA
90, and are necessary to preserve the
deterrent effect and ‘‘polluter pays’’
principle embodied in OPA 90. Finally,
we propose language to clarify
applicability of the OPA 90 vessel limits
of liability to two categories of tank
vessels, edible oil cargo tank vessels and
tank vessels designated as oil spill
response vessels. This clarification to
the existing regulatory text is needed for
consistency with OPA 90.
DATES: Comments and related material
must be submitted on or before October
20, 2014.
ADDRESSES: You may submit comments
identified by Docket No. USCG–2013–
1006 using any one of the following
methods:
(1) Online: http://
www.regulations.gov.
(2) Fax: 202–493–2251.
(3) Mail: Docket Management Facility
(M–30), U.S. Department of
Transportation, West Building Ground
Floor, Room W12–140, 1200 New Jersey
Avenue SE., Washington, DC 20590–
0001.
(4) Hand delivery: Same as mail
address above, between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays. The telephone number
is 202–366–9329.
To avoid duplication, please use only
one of these four methods. See the
‘‘Public Participation and Request for
Comments’’ portion of the
SUPPLEMENTARY INFORMATION section
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SUMMARY:
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For
information about this document call or
email Benjamin White, Coast Guard;
telephone 703–872–6066, email
Benjamin.H.White@uscg.mil. For
information about viewing or submitting
material to the docket, call Cheryl
Collins, Program Manager, Docket
Operations, telephone 202–366–9826,
toll free 1–800–647–5527.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
Coast Guard
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Table of Contents for Preamble
I. Public Participation and Request for
Comments
A. Submitting Comments
B. Viewing Comments and Documents
C. Privacy Act
D. Public Meeting
II. Abbreviations
III. Basis and Purpose
IV. Background and Regulatory History
A. Creation of 33 CFR Part 138, Subpart B
B. Prior Regulatory Inflation Adjustments
to the OPA 90 Limits of Liability in 33
CFR Part 138, Subpart B
C. Statutory and Regulatory History
Respecting the OPA 90 Edible Oil Cargo
Tank Vessel and Oil Spill Response
Vessel Exceptions
V. Discussion of Proposed Rule
A. Regulatory Inflation Adjustments and
Statutory Updates to the Limits of
Liability for Vessels, Deepwater Ports
and Onshore Facilities
B. Clarifying Amendments Respecting
Edible Oil Cargo Tank Vessels and Oil
Spill Response Vessels
C. Section-by-Section Discussion
VI. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates Reform Act
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment
I. Public Participation and Request for
Comments
We encourage you to participate in
this rulemaking by submitting
comments and related materials using
the instructions below. All comments
received will be posted without change
to http://www.regulations.gov and will
include any personal information you
have provided.
A. Submitting Comments
If you submit a comment, please
include the docket number for this
rulemaking (USCG–2013–1006),
indicate the specific section of this
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document to which each comment
applies, and provide a reason for each
suggestion or recommendation. You
may submit your comments and
material online or by fax, mail, or hand
delivery, but please use only one of
these means. We recommend that you
include your name and a mailing
address, an email address, or a phone
number in the body of your document
so that we can contact you if we have
questions regarding your submission.
To submit your comment online, go to
http://www.regulations.gov, and follow
the instructions of that Web site. If you
submit your comments by mail or hand
delivery, submit them in an unbound
format, no larger than 81⁄2 by 11 inches,
suitable for copying and electronic
filing. If you submit comments by mail
and would like to know that they
reached the Facility, please enclose a
stamped, self-addressed postcard or
envelope.
We will consider all comments and
material received during the comment
period and may change this proposed
rule based on your comments.
B. Viewing Comments and Documents
To view comments, as well as
documents mentioned in this preamble
as being available in the docket, go to
http://www.regulations.gov, and follow
the instructions on that Web site. If you
do not have access to the internet, you
may view the docket online by visiting
the Docket Management Facility in
Room W12–140 on the ground floor of
the Department of Transportation West
Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays. We have an
agreement with the Department of
Transportation to use the Docket
Management Facility.
C. Privacy Act
Anyone can search the electronic
form of comments received into any of
our dockets by the name of the
individual submitting the comment (or
signing the comment, if submitted on
behalf of an association, business, labor
union, etc.). You may review a Privacy
Act notice regarding our public dockets
in the January 17, 2008, issue of the
Federal Register (73 FR 3316).
D. Public Meeting
We do not now plan to hold a public
meeting. But, you may submit a request
for one to the docket using one of the
methods specified under ADDRESSES. In
your request, explain why you believe a
public meeting would be beneficial. If
we decide to hold a public meeting, we
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will announce its time and place in a
later notice in the Federal Register.
II. Abbreviations
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Annual CPI–U The Annual ‘‘Consumer
Price Index—All Urban Consumers, Not
Seasonally Adjusted, U.S. City Average,
All Items, 1982–84=100’’
CPI–1 Rule The Coast Guard’s first
rulemaking amending 33 CFR part 138,
subpart B, to adjust the OPA 90 limits of
liability for vessels and deepwater ports for
inflation as required by 33 U.S.C.
2704(d)(4) and establishing the Coast
Guard’s procedure for future required
inflation adjustments to the limits of
liability (Docket No. USCG–2008–0007).
See 73 FR 54997 (Sep. 24, 2008) [CPI–1
NPRM]; 74 FR 31357 (July 1, 2009) [CPI–
1 Interim Rule]; 75 FR 750 (January 6,
2010) [CPI–1 Final Rule].
BLS U.S. Department of Labor, Bureau of
Labor Statistics
CFR Code of Federal Regulations
COFR Certificate of Financial
Responsibility
COFR Rule The Coast Guard rule at 33 CFR
part 138, subpart A, implementing the OPA
90 requirement under 33 U.S.C. 2716 for
vessel responsible parties to establish and
maintain evidence of financial
responsibility sufficient to meet their limits
of liability as adjusted over time for
inflation
CPI Consumer Price Index
DHS U.S. Department of Homeland
Security
DOI U.S. Department of the Interior
DPA Deepwater Port Act of 1974, as
amended (33 U.S.C. 1501–1524)
DRPA The Delaware River Protection Act of
2006, Title VI of the Coast Guard and
Maritime Transportation Act of 2006,
Public Law 109–241, July 11, 2006, 120
Stat. 516
E.O. Executive Order
FR Federal Register
Fund The Oil Spill Liability Trust Fund
created by 26 U.S.C. 9509
IRFA Initial Regulatory Flexibility Analysis
LNG Liquefied natural gas
LOOP Louisiana Offshore Oil Port
NPFC National Pollution Funds Center
NPRM Notice of proposed rulemaking
OMB U.S. Office of Management and
Budget
OPA 90 The Oil Pollution Act of 1990, as
amended (33 U.S.C. 2701, et seq.)
SBA U.S. Small Business Administration
§ Section symbol
U.S. United States
U.S.C. United States Code
III. Basis and Purpose
In general, under Title I of the Oil
Pollution Act of 1990, as amended (OPA
90) (33 U.S.C. 2701, et seq.), the
responsible parties for any vessel (other
than a public vessel) 1 or facility
(including any deepwater port or
onshore facility) from which oil is
1 See
33 U.S.C. 2701(29) and (37) (definitions of
public vessel and vessel) and 33 U.S.C. 2702(c)(2)
(public vessel exclusion).
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discharged, or which poses a substantial
threat of discharge of oil, into or upon
the navigable waters or the adjoining
shorelines or the exclusive economic
zone of the United States, are strictly
liable, jointly and severally, for the
removal costs and damages that result
from such incident (‘‘OPA 90 removal
costs and damages’’), as provided in 33
U.S.C. 2702. Under 33 U.S.C. 2704,
however, the responsible parties’ OPA
90 liability with respect to any one
incident is limited (with certain
exceptions) to a specified dollar
amount.
In instances when a limit of liability
applies, the responsible parties may, but
are not required to, incur direct removal
costs or reimburse third-party claims for
OPA 90 removal costs and damages in
excess of the applicable limit of
liability. The responsible parties may,
moreover, seek reimbursement from the
Oil Spill Liability Trust Fund (Fund) of
the OPA 90 removal costs and damages
they incur in excess of the applicable
limit of liability.2 This Fund is managed
by the Coast Guard’s National Pollution
Funds Center (NPFC).
To prevent the real value of the OPA
90 limits of liability from depreciating
over time as a result of inflation and
preserve the ‘‘polluter pays’’ principle
embodied in OPA 90, 33 U.S.C.
2704(d)(4) requires that the OPA 90
limits of liability be adjusted ‘‘by
regulations issued not later than 3 years
after July 11, 2006, and not less than
every 3 years thereafter,’’ to reflect
significant increases in the CPI. The
President delegated this regulatory
authority to the Secretary of the
department in which the Coast Guard is
operating in respect to the limits of
liability for vessels, deepwater ports
subject to the Deepwater Port Act of
1974 (DPA), as amended (33 U.S.C.
1501, et seq.) (‘‘deepwater ports’’), and
the limit of liability for onshore
facilities in 33 U.S.C. 2704(a)(4).3 The
Secretary of Homeland Security further
delegated this authority to the Coast
Guard in Department of Homeland
Security (DHS) Delegation 5110,
Revision 01.
In this notice of proposed rulemaking
(NPRM) the Coast Guard proposes to
carry out the statutorily-required
inflation adjustments to the OPA 90
2 See 33 U.S.C. 2708. A more comprehensive
description of the Fund can be found in the Coast
Guard’s May 12, 2005, ‘‘Report on Implementation
of the Oil Pollution Act of 1990’’, which is available
in the docket.
3 Executive Order (E.O.) 12777, Sec. 4, 3 CFR,
1991 Comp., p. 351, as amended by E.O. 13638 of
March 15, 2013, Sec. 1 (78 FR 17589, Thursday,
March 21, 2013). See further discussion of the
delegations below, under Background and
Regulatory History.
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limits of liability. This NPRM also
proposes to clarify applicability of the
OPA 90 vessel limits of liability to
edible oil cargo tank vessels and to tank
vessels designated in their certificates of
inspection as oil spill response vessels.
This clarification to the existing
regulatory text is needed for consistency
with OPA 90 (33 U.S.C. 2704(c)(4)).
IV. Background and Regulatory History
A. Creation of 33 CFR Part 138,
Subpart B
In 2008, the Coast Guard promulgated
33 CFR part 138, subpart B, setting forth
the OPA 90 limits of liability for vessels
and deepwater ports. (See Docket No.
USCG–2005–21780.) This was done in
anticipation of the Coast Guard
implementing the periodic inflation
adjustments to the limits of liability
required by 33 U.S.C. 2704(d)(4), and to
ensure that the applicable amounts of
financial responsibility that must be
demonstrated by vessel and deepwater
port responsible parties as required by
OPA 90 (33 U.S.C. 2716) and 33 CFR
part 138, subpart A (COFR Rule), would
always equal the applicable OPA 90
limit of liability as adjusted over time.
B. Prior Regulatory Inflation
Adjustments to the OPA 90 Limits of
Liability in 33 CFR Part 138, Subpart B
The Coast Guard published an NPRM
on September 24, 2008 (73 FR 54997)
(CPI–1 NPRM), and an interim rule with
request for comments on July 1, 2009
(74 FR 31357) (CPI–1 Interim Rule),
timely adjusting the vessel and
deepwater port limits of liability at 33
CFR part 138, subpart B, to reflect
significant increases in the CPI as
required by OPA 90 (33 U.S.C.
2704(d)(4)). The CPI–1 Interim Rule also
established the Coast Guard’s
procedures and methodology for
adjusting the OPA 90 limits of liability
for inflation over time. There were no
adverse public comments on the CPI–1
Interim Rule. On January 6, 2010, the
Coast Guard therefore published a final
rule (CPI–1 Final Rule), adopting the
CPI–1 Interim Rule amendments to 33
CFR part 138, subpart B, without change
(75 FR 750).4
The CPI–1 Rule was the first set of
inflation adjustments to the OPA 90
limits of liability for vessels and
deepwater ports. The CPI–1 Rule,
however, deferred adjusting the
statutory limit of liability in 33 U.S.C.
2704(a)(4) for onshore facilities.
4 All Federal Register notices, comments and
other materials related to the CPI–1 Rule are
available in the public docket for that rulemaking
(Docket No. USCG–2008–0007).
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As explained in the Federal Register
notices for the CPI–1 Rule, the decision
to defer adjusting the onshore facility
limit of liability was made because E.O.
12777, Sec. 4, and its implementing redelegations vested the President’s
responsibility to adjust the OPA 90
limits of liability (including the limit of
liability for onshore facilities) in
multiple agencies based on the agencies’
traditional regulatory jurisdiction.
Specifically, the delegations vested the
President’s limit of liability adjustment
authorities in the Commandant of the
Coast Guard for vessels, deepwater ports
and marine transportation-related
onshore facilities, in the Secretary of the
Department of Transportation for nonmarine transportation-related onshore
facilities, in the Administrator of the
Environmental Protection Agency for
non-transportation-related onshore
facilities, and in the Secretary of the
Department of the Interior (DOI) for
offshore facilities.5
This division of responsibilities
complicated the CPI adjustment
rulemaking requirement, particularly in
respect to the three sub-categories of
onshore facilities. Interagency
coordination was, therefore, needed to
avoid inconsistent regulatory treatment.
The decision to defer adjusting the
onshore facility statutory limit of
liability for inflation also permitted the
Coast Guard to complete the required
first set of inflation increases to the
vessel and deepwater port limits of
liability by the statutory deadline, and
to establish the Coast Guard’s CPI
increase adjustment procedure at
§ 138.240. There were no adverse public
comments on the decision to defer
adjusting the onshore facility limit of
liability for inflation.
On March 15, 2013, the President
signed E.O. 13638, restating and
simplifying the delegations in E.O.
12777, Sec. 4, and vesting the authority
to make CPI adjustments to the onshore
facility statutory limit of liability (33
U.S.C. 2704(a)(4)) in ‘‘the Secretary of
the Department in which the Coast
Guard is operating’’. (See E.O. 13638 of
March 15, 2013, Sec. 1, amending E.O.
12777, Sec. 4, at 78 FR 17589, Thursday,
March 21, 2013.) The restated
delegations also require interagency
coordination, but otherwise preserve the
earlier delegations, including the
delegated authorities to promulgate CPI
adjustments to the limits of liability for
vessels and deepwater ports.6
5 E.O. 12777, Sec. 4, also delegated various other
liability limit adjustment and reporting authorities
in 33 U.S.C. 2704.
6 Similarly, the authority to make CPI adjustments
to the limit of liability for offshore facilities in 33
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On July 10, 2013, the Secretary of
Homeland Security re-delegated these
authorities to the Commandant of the
Coast Guard. (See DHS Delegation
Number 5110, Revision 01.) This NPRM,
therefore, proposes to adjust the vessel,
deepwater port and onshore facility
limits of liability to reflect significant
increases in the CPI.
C. Statutory and Regulatory History
Respecting the OPA 90 Edible Oil Cargo
Tank Vessel and Oil Spill Response
Vessel Exceptions
Section 2(d) of the 1995 Edible Oil
Regulatory Reform Act, Public Law 104–
55, Nov. 20, 1995, 109 Stat. 546,
amended OPA 90 (33 U.S.C. 2704(a)(1)
and 33 U.S.C. 2716(a)), excepting tank
vessels on which the only oil carried as
cargo is an animal fat or vegetable oil
(‘‘edible oil tank vessels’’) from the OPA
90 tank vessel limits of liability in 33
U.S.C. 2704(a)(1). The effect of the
exception was to classify edible oil tank
vessels as a matter of law to the ‘‘any
other vessel’’ limit of liability category
in OPA 90 (33 U.S.C. 2704(a)(2)). In
addition, edible oil tank vessels were, as
of that date, subject to the lower OPA 90
(33 U.S.C. 2716) evidence of financial
responsibility requirements applicable
to the ‘‘any other vessel’’ category.
The Coast Guard Authorization Act of
1998, Public Law 105–383, title IV,
section 406, Nov. 13, 1998, 112 Stat.
3429, further amended OPA 90 (33
U.S.C. 2704), moving the edible oil tank
vessel exception from 33 U.S.C.
2704(a)(1) to new 33 U.S.C.
2704(c)(4)(A), and adding an additional
exception at 33 U.S.C. 2704(c)(4)(B) for
tank vessels designated in their
certificates of inspection as oil spill
response vessels that are used solely for
removal (‘‘oil spill response vessels’’).
Oil spill response vessels are,
therefore, also classified as a matter of
law to the ‘‘any other vessel’’ category
in 33 U.S.C. 2704(a)(2), and subject to
the resulting lower OPA 90 limit of
liability and evidence of financial
responsibility requirements.
The special treatment accorded by
OPA 90 to edible oil tank vessels and oil
spill response vessels is not reflected in
the current regulatory text of 33 CFR
part 138. The Coast Guard, therefore,
believes that a clarification to the
regulatory text would reduce regulatory
uncertainty.
U.S.C. 2704(a)(3) remains with the Secretary of the
Interior (see, e.g., 79 FR 10056, Monday, February
24, 2014; 79 FR 15275, Wednesday, March 19,
2014).
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V. Discussion of Proposed Rule
A. Regulatory Inflation Adjustments and
Statutory Updates to the Limits of
Liability for Vessels, Deepwater Ports
and Onshore Facilities
In accordance with 33 U.S.C.
2704(d)(4) and 33 CFR part 138, subpart
B, we propose to increase the OPA 90
limits of liability for vessels and
deepwater ports, set forth in
§ 138.230(a) and (b), respectively, to
reflect significant increases in the CPI
since we last adjusted them for
inflation. This would be the second set
of inflation adjustments to the vessel
and deepwater port limits of liability.
We also propose increasing the OPA
90 limit of liability for onshore facilities
in 33 U.S.C. 2704(a)(4) for inflation.
This would be the first inflation
increase to the onshore facility limit of
liability. The inflation-adjusted onshore
facility limit of liability would be set
forth in § 138.230(c), which was
expressly reserved by the CPI–1 Rule for
that purpose.
1. What formula will be used to adjust
the vessel, deepwater port and onshore
facility limits of liability for inflation?
The proposed limit of liability
adjustments have been calculated using
the inflation adjustment methodology
established by the CPI–1 Rule, set forth
in § 138.240.7 Specifically, the Director,
NPFC, calculates the cumulative percent
change in the Annual CPI–U from the
year the limit of liability was
established or last adjusted by statute or
regulation, whichever is later (i.e., the
previous period), to the most recently
published Annual CPI–U (i.e., the
current period), using the formula in
§ 138.240(b). The Director, NPFC, then
calculates inflation adjustments to the
limits of liability based on that
cumulative percent change in the
Annual CPI–U, as provided in
§ 138.240(d). Both the cumulative
percent change formula and the limit of
liability adjustment formula are based
on the U.S. Department of Labor, Bureau
of Labor Statistics (BLS) escalation
formula, which can be viewed at http://
www.bls.gov/cpi/cpi1998d.htm.8
7 A detailed discussion of the Coast Guard’s
inflation adjustment methodology, and how it was
developed, can be found in the preambles for the
CPI–1 NPRM, 73 FR 54997, and the CPI–1 Interim
Rule, 74 FR 31357.
8 See also 33 CFR 138.240(a) (proposed 33 CFR
138.240(b)).
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2. What current period values would be
used for this set of inflation adjustments
to the vessel, deepwater port and
onshore facility limits of liability?
To keep the limits of liability current,
the inflation adjustment methodology
established by the CPI–1 Rule, at
§ 138.240, requires that we use the
Annual CPI–U that has been most
recently published by the BLS as the
current period value. For purposes of
this NPRM, the Coast Guard is therefore
estimating the inflation adjusted limits
of liability using the 2013 Annual CPI–
U, published by BLS on January 16,
2014, as the current period value.9 This
is the Annual CPI–U that has been most
recently published by the BLS.
In the final rule stage of this
rulemaking we will calculate the
adjustments using the most recently
published Annual CPI–U available at
that time. Therefore, if the 2014 Annual
CPI–U or another more recent Annual
CPI–U is available for calculating the
current period value when we are at the
final rule stage of this rulemaking, the
limit of liability values would change
marginally from those proposed today.
3. What previous period values would
be used for this set of inflation
adjustments to the vessel, deepwater
port and onshore facility limits of
liability?
Applying the inflation adjustment
methodology at § 138.240, we propose
adjusting the vessel and deepwater port
limits of liability to reflect significant
increases in the Annual CPI–U since
those limits were last adjusted for
inflation by the CPI–1 Rule. We,
therefore, propose using the 2008
Annual CPI–U, or 215.3, as the previous
period value for this cycle of
adjustments to the vessel and deepwater
port limits of liability. This was the
current period value we used for the
CPI–1 Rule inflation adjustments to the
vessel and deepwater port limits of
liability.10
For onshore facilities, we propose
adjusting the OPA 90 statutory limit of
liability in 33 U.S.C. 2704(a)(4) to reflect
significant increases in the Annual CPI–
U since 2006. This is the baseline year,
or previous period, established by the
CPI–1 Rule for calculating the first
inflation adjustments to the statutory
limits of liability in 33 U.S.C. 2704(a),
including the statutory limit of liability
for onshore facilities.11
As explained during the CPI–1 Rule
development,12 we proposed using 2006
as the previous period date for the first
set of adjustments to the OPA 90
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§ 138.230 (a) Vessels
(1) For a single-hull tank vessel greater than 3,000 gross tons,
other than a vessel excluded under 33 U.S.C. 2704(c)(4) (i.e.,
an edible oil tank vessel or oil spill response vessel).
(2) For a tank vessel greater than 3,000 gross tons, other than a
vessel referred to in (a)(1) or a vessel excluded under 33
U.S.C. 2704(c)(4) (i.e., an edible oil tank vessel or oil spill response vessel).
(3) For a single-hull tank vessel less than or equal to 3,000 gross
tons, other than a vessel excluded under 33 U.S.C. 2704(c)(4)
(i.e., an edible oil tank vessel or oil spill response vessel).
(4) For a tank vessel less than or equal to 3,000 gross tons, other
than a vessel referred to in (3) or a vessel excluded under 33
U.S.C. 2704(c)(4) (i.e., an edible oil tank vessel or oil spill response vessel).
(5) For any other vessel, including any edible oil tank vessel and
any oil spill response vessel.
§ 138.230 (b) Deepwater ports that are subject to the DPA
(1) For a deepwater port that is subject to the DPA, other than the
Louisiana Offshore Oil Port (LOOP).
(2) For LOOP ...................................................................................
§ 138.230 (c) Onshore facilities ............................................................
9 See Table 24 on page 68 of the BLS document
‘‘CPI Detailed Report—Data for March 2014’’, which
is available at the following link: http://
www.bls.gov/cpi/cpid1403.pdf.
10 The 2008 Annual CPI–U was used as the
current period value for the CPI–1 inflation
adjustments because of the time lag for BLS
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statutory limits of liability for all source
categories. There were no adverse
comments on that approach. We,
therefore, established the 2006 Annual
CPI–U value of 201.6 as the previous
period value for adjusting the statutory
limits of liability for all source
categories delegated to the Coast Guard
(i.e., vessels, deepwater ports and
onshore facilities). We are, therefore,
using that baseline for the adjustments
we are proposing today to the statutory
limit of liability for onshore facilities.
We are, however, considering whether
to use the 1990 Annual CPI–U previous
period value to adjust the onshore
facility limit of liability, and whether to
also recalculate the CPI–1 Rule
adjustment to the deepwater port
general limit of liability using a 1990
previous period value.13 This issue is
discussed further in subsection 5,
below.
4. What would the adjusted limits of
liability be?
Inserting the estimated percent
changes in the Annual CPI–U into the
adjustment formula would result in the
following proposed new limits of
liability for vessels and deepwater ports
(using the 2008 Annual CPI–U previous
period), and onshore facilities (using the
2006 Annual CPI–U previous period),
and rounding all limits of liability to the
closest $100:
Previous limit of
liability
Proposed new limit of liability
the greater of $3,200 per gross
ton or $23,496,000.
the greater of $3,500 per gross
ton or $25,422,700.
the greater of $2,000 per gross
ton or $17,088,000.
the greater of $2,200 per gross
ton or $18,489,200.
the greater of $3,200 per gross
ton or $6,408,000.
the greater of $3,500 per gross
ton or $6,933,500.
the greater of $2,000 per gross
ton or $4,272,000.
the greater of $2,200 per gross
ton or $4,622,300.
the greater of $1,000 per gross
ton or $854,400.
the greater of $1,100 per gross
ton or $924,500.
$373,800,000 .................................
$404,451,600.
$87,606,000 ...................................
$350,000,000 .................................
$94,789,700.
$404,600,000.
Source category
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publication of the Annual CPI–U and the time it
takes to promulgate regulations.
11 See 74 FR at 31361.
12 See 73 FR at 55000–55001; 74 FR at 31361.
13 We are not revisiting the CPI–1 Rule
adjustments to the vessel and LOOP limits of
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liability. This is because the 2006 and 1995
‘‘Previous Periods’’ used, respectively, for those
adjustments were based on the date the vessel
statutory limits of liability were amended by DRPA
and the date LOOP’s facility-specific limit of
liability was established by regulation under OPA
90 (33 U.S.C. 2704(d)(2)(C)).
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These values would change
marginally if the 2014 Annual CPI–U or
another more recent Annual CPI–U is
used as the current period value when
we are at the final rule stage of this
rulemaking.
5. What would the estimated adjusted
limit of liability for onshore facilities
and deepwater ports generally be using
a 1990 previous period?
As mentioned in subsection 3, above,
we are considering whether to use a
1990 previous period to adjust the
onshore facility limit of liability, and
whether to recalculate the CPI–1 Rule
adjustment to the deepwater port
general limit of liability using a 1990
previous period value. There are several
reasons why we are considering doing
this:
• First, in respect to the onshore
facility limit of liability, Coast Guard
data indicate that one onshore facility
incident occurred following publication
of the CPI–1 Rule—the 2010 Enbridge
Pipeline spill to the Kalamazoo River—
that may result in OPA 90 removal costs
and damages in excess of the onshore
facility limit of liability.14 This recent
experience warrants revisiting whether
to use the 2006 previous period
established by the CPI–1 Rule for the
first inflation adjustment to the onshore
facility statutory limit of liability.
• In addition, DOI is proposing a rule
that would adjust the offshore facility
limit of liability for inflation since OPA
90 was enacted, because there have not
been intervening adjustments to that
limit of liability (as compared to the
vessel limits of liability, which have
been adjusted both by statute and
regulation), and because the damages in
the 2010 Deepwater Horizon spill of
national significance have far exceeded
the offshore facility limit of liability.15
• Moreover, DRPA did not change or
expressly address the onshore facility
and deepwater port statutory limit of
liability at 33 U.S.C. 2704(a)(4).16
Therefore, although onshore facility
spills have not historically (with the one
exception previously mentioned)
exceeded the statutory limit of liability
in 33 U.S.C. 2704(a)(4) and there
currently are no deepwater ports in
operation that are subject to the
generally-applicable limit of liability for
deepwater ports, we believe that the
Nation’s recent experience with costly
oil spills—although exceptional—
warrants revisiting whether to use the
1990 Annual CPI–U as the previous
period (instead of the 2006 previous
period established by the CPI–1 Rule)
for the first inflation adjustment to the
statutory limit of liability in 33 U.S.C.
2704(a)(4), which applies to both
onshore facilities and deepwater ports.
Considering whether to use a different
previous period for adjusting the
onshore facility limit of liability is
appropriate because the CPI–1 Rule did
not adjust the onshore facility limit of
liability for inflation. In addition,
although deepwater ports may pose a
very low risk of discharge as compared
to other modes of oil transportation,17
reconsidering our use of the 2006
previous period for the CPI–1 Rule’s
deepwater port limit of liability
adjustment is appropriate given our
better understanding of the potential
costs arising from oil spill incidents in
offshore areas. We, therefore, invite the
public to comment on this issue.
If we were to adopt a 1990 previous
period, we would adjust the onshore
facility and deepwater port statutory
limit of liability in 33 U.S.C. 2704(a)(4)
using the 1990 Annual CPI–U value of
130.7 as the previous period. This
would be instead of the 2006 Annual
CPI–U previous period value of 201.6
and the 2008 Annual CPI–U previous
period value of 215.3, used to calculate,
respectively, the adjusted limit of
liability values for onshore facilities and
deepwater ports reflected in the
regulatory text of this proposal.
If, after considering any public
comment on this NPRM, we decide to
adjust the onshore facility and
deepwater port generally-applicable
limit of liability using the 1990 Annual
CPI–U of 130.7 as the previous period
value (i.e., instead of the 2006 Annual
CPI–U value of 201.6 for onshore
facilities, and the 2008 Annual CPI–U
value of 215.3 for deepwater ports), the
estimated percent change in the Annual
CPI–U would be 78.2 percent. Inserting
this estimated percent change in the
Annual CPI–U into the adjustment
formula would result in the following
new limits of liability for onshore
facilities and deepwater ports generally,
after rounding the limits of liability to
the closest $100:
Statutory
previous limit
of liability
Source category
§ 138.230(b)(1) For a deepwater port that is subject to the DPA, other than LOOP .....................................
§ 138.230(c) For onshore facilities ..................................................................................................................
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These values would also change
marginally if the 2014 Annual CPI–U or
another more recent Annual CPI–U is
used as the current period value when
we are at the final rule stage of this
rulemaking.
6. How does the Coast Guard propose to
notify the public when the limits of
liability for vessels, deepwater ports and
onshore facilities are adjusted in the
future for inflation or if the rule is
amended to reflect amendments to the
statute?
We are proposing a simplified
regulatory procedure at proposed new
paragraph § 138.240(a) for making future
14 On July 26, 2010, Enbridge Energy Partners LLP
(Enbridge) reported a 30-inch pipeline rupture, near
Marshall, Michigan. The resulting oil discharge,
with volume estimates ranging from 843,000 gallons
to over a million gallons, entered Talmadge Creek
and flowed into the Kalamazoo River, a Lake
Michigan tributary. Heavy rains caused the river to
overtop existing dams and carried oil 35 miles
downstream on the Kalamazoo River. On July 28,
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2010, the spill was contained approximately 80
river miles from Lake Michigan. This incident
involved tar sand oil, which is particularly difficult
and costly to clean up, and is the most expensive
onshore facility spill in U.S. history.
15 79 FR at 10059. The DOI otherwise plans to
adopt a methodology for future adjustments similar
to § 138.240.
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$350,000,000
350,000,000
Alternative new
limit of liability
(1990 previous
period)
$623,700,000
623,700,000
inflation updates to the OPA 90 limits
of liability for vessels, deepwater ports
and onshore facilities, in § 138.230(a),
(b), and (c) respectively. This simplified
regulatory approach is based on a
similar procedure used by the Federal
Energy Regulatory Commission to make
routine cost adjustments to its fees (see
18 CFR 381.104(a) and (d)), and would
help ensure regular, timely inflation
16 OPA 90 (33 U.S.C. 2704(a)(4)) sets forth a
common statutory limit of liability for onshore
facilities and deepwater ports of $350,000,000.
17 See 1993 Deepwater Ports Study and Report to
Congress under OPA 90 Section 1004(d)(2),
analyzing the relative operational risks of the
principal modes of crude oil transportation to the
United States.
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adjustments to the limits of liability as
required by statute. The approach is also
an appropriate and helpful efficiency
measure given the mandatory and
routine nature of the CPI adjustments.
Under this proposed procedure, the
Director, NPFC, would continue to
determine future inflation adjustments
to the limits of liability using the
significance threshold and adjustment
methodology in § 138.240, and the most
current CPI values published by the
BLS. The Director, NPFC, would,
however, publish the inflation-adjusted
limits of liability in the Federal Register
as final rule amendments to § 138.230.18
The new inflation-adjusted limits of
liability would appear in the next
publication of the CFR.
Because the adjustment methodology
was established by the CPI–1 Rule, and
the simplified procedure will be
established by this rulemaking,
publication of an NPRM would not be
necessary for these future mandated
inflation adjustments. The public
would, however, be able to contact the
person listed in the FOR FURTHER
INFORMATION CONTACT section of the
Federal Register notice amending the
limits of liability. Therefore, in the
event a member of the public identifies
a mathematical or other technical error
in the Coast Guard’s application of the
adjustment methodology and contacted
the Coast Guard, the Coast Guard would
publish a correction notice in the
Federal Register.
Under this simplified procedure,
unless otherwise specified in the
Federal Register, the new CPI-adjusted
limits of liability would become
effective on the 90th day after their
publication in the Federal Register,
including (as provided in the COFR
Rule at § 138.85) for purposes of the
requirement for responsible parties to
establish and maintain the applicable
amounts of OPA 90 financial
responsibility required for vessels and
deepwater ports under 33 U.S.C. 2716
and § 138.80(f)(1). This will ensure
efficient and timely implementation of
this recurring, though routine,
regulatory mandate.
The Director would use this
simplified regulatory procedure to
update § 138.230 to reflect statutory
changes to the OPA 90 limits of liability.
This will ensure that the limits of
liability set forth in subpart B remain
consistent with the statutory limits of
liability if they are amended. Thereafter,
as discussed in the CPI–1 Interim Rule,
18 As provided in § 138.240(b) (§ 138.240(c) of the
proposed rule), if the significance threshold were
not met, the Director, NPFC, would publish a notice
of no inflation adjustment.
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the new statutory limit of liability
would be adjusted by regulation for
inflation on the same inflationadjustment cycle used for the other
source categories. We note that, as a
result, a limit of liability could change
more frequently than once every three
years, if it was changed by statute and
then adjusted by regulation for inflation
on the regular inflation-adjustment
cycle.
Because any new statutory limits of
liability normally would supersede the
prior regulatory limits of liability, any
such new limits of liability would take
effect for purposes of determining a
responsible party’s liability in the event
of an incident on the date of enactment
unless another effective date is specified
in the amending law. As provided in
§ 138.85 of the COFR Rule, however, the
deadline for vessel and deepwater port
responsible parties to establish evidence
of financial responsibility in the new
amounts would be the 90th day after the
effective date of the Coast Guard’s final
rule amending the CFR to reflect the
new statutory limits of liability, unless
another date is required by statute or
specified in the Federal Register notice
amending the regulation. (See, 33 U.S.C.
2716 and § 138.80(f)(1).)
The simplified regulatory procedure
described in proposed § 138.240(a)
would not be used for other adjustments
to the limits of liability, such as those
authorized for classes and categories of
onshore facilities under 33 U.S.C.
2704(d)(1) and for deepwater ports
under 33 U.S.C. 2704(d)(2).
B. Clarifying Amendments Respecting
Edible Oil Cargo Tank Vessels and Oil
Spill Response Vessels
The Coast Guard is also proposing
amendments to the vessel limits of
liability in § 138.230(a) for consistency
with 33 U.S.C. 2704(c)(4). (See
Regulatory History discussion, above at
IV.C.) Specifically, the proposed
amendments to § 138.230(a) would
clarify that edible oil cargo tank vessels
and oil spill response vessels (defined
as proposed in § 138.220(b)) are subject
to the lower limits of liability set forth
in current § 138.230(a)(5) (proposed new
§ 138.230(a)(2)) applicable to the ‘‘any
other vessel’’ category under 33 U.S.C.
2704(a)(2). The Coast Guard believes
that adding clarifying language in the
regulatory text will be helpful to the
public.
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49211
C. Section-by-Section Discussion 19
Heading. The heading for 33 CFR part
138 would be amended by adding the
words ‘‘ONSHORE FACILITY’’.
Authorities. We propose to update the
authorities citations for part 138 to
reflect the amendments to the
delegations in E.O. 12777, Sec. 4, by
E.O. 13638 of March 15, 2013, the
resulting agency-level re-delegations,
and for editorial purposes.
§ 138.200 Scope. We propose to
amend § 138.200 to add that subpart B
sets forth the OPA 90 limit of liability
for onshore facilities, in addition to the
OPA 90 limits of liability for vessels and
deepwater ports. We also propose to
amend the scope section to specify that
subpart B includes the procedure for
making future inflation adjustments, by
regulation, to the limits of liability for
vessels, deepwater ports and onshore
facilities, and for updating the limits
when they are amended by statute.
Finally, we propose to amend the scope
section to specify that subpart B also
cross-references DOI’s proposed
regulation at 30 CFR 553.702, setting
forth the OPA 90 limit of liability
applicable to offshore facilities,
including offshore pipelines, as adjusted
by DOI for inflation under OPA 90 (33
U.S.C. 2704(d)(4)). This cross-reference
is being added for the convenience of
the public.
§ 138.210 Applicability. We propose
amending § 138.210 to add that subpart
B applies to you if you are a responsible
party for an onshore facility, except (as
is the case under the current rule for
vessel and deepwater port responsible
parties) to the extent your liability is
unlimited under OPA 90 (33 U.S.C.
2704(c)).
§ 138.220 Definitions. We are
proposing to amend § 138.220(a) of the
definitions to cross-reference the OPA
90 definitions of facility, offshore
facility and onshore facility. In addition,
we propose to amend § 138.220(b) by
revising the definition of Director,
NPFC, in § 138.220(b), to conform to
how that term is defined in other rules
implemented by NPFC, and by adding
definitions for current period and
previous period as DOI has done in its
proposal to amend the offshore facility
limit of liability (79 FR at 10063). These
definitions clarify the CPI escalation
formula. Finally, we propose to add
definitions for edible oil tank vessel and
oil spill response vessel to mean,
19 The Coast Guard has included the complete
regulatory text of 33 CFR part 138, subpart B in this
NPRM to facilitate the public’s understanding of the
changes proposed to the current text of subpart B.
The changes proposed to the existing regulatory text
are, however, limited to those specifically
mentioned in this section-by-section discussion.
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respectively, a tank vessel referred to in
OPA 90 (33 U.S.C. 2704(c)(4)(A) or (B)).
These definitions are needed to clarify
applicability of the limits of liability
proposed in § 138.230.
§ 138.230 Limits of liability. We
propose to increase the limits of liability
for vessels and deepwater ports,
including LOOP, from those set forth in
current § 138.230, to reflect significant
increases in the CPI. We also propose to
amend § 138.230(a) to expressly provide
and clarify that the ‘‘other vessel’’ limits
of liability in § 138.230(a)(2) apply to
edible oil tank vessels and oil spill
response vessels. Additionally, we
propose adding an inflation-adjusted
limit of liability for onshore facilities in
§ 138.230(c).
As discussed in section V.A.2, the
limits of liability proposed in § 138.230
of this NPRM are estimates, calculated
using the 2013 Annual CPI–U as the
current value. The updated limit of
liability values that will appear in the
final rule of this rulemaking will be
calculated using the most recent Annual
CPI–U available at the time of
publication of the final rule, and may
therefore be marginally different than
the estimates in this NPRM.
In addition, as discussed above in
section V.A.3 and 5, the new limit of
liability for deepwater ports and
onshore facilities generally may differ
from the amounts shown in
§ 138.230(b)(1) and (c) of the proposed
regulatory text if, after considering any
public comments on this NPRM, we
decide to calculate the CPI adjustments
to the statutory limit of liability for
these two source categories using the
1990 Annual CPI–U value of 130.7 as
the previous period. This would be
instead of using the 2006 Annual CPI–
U value of 201.6 to adjust the onshore
facility limit of liability and the 2008
Annual CPI–U value of 215.3 to adjust
the deepwater port generally-applicable
limit of liability, as we have done for
purposes of this proposal.
Finally, we have added new
subsection § 138.230(d). Paragraph (d)
will cross-reference the offshore facility
limit of liability, which DOI has
proposed to adjust for inflation and set
forth at 30 CFR 553.702 (see 79 FR at
10063). Our proposal reflects DOI’s
proposal. If the section numbering of
that regulation changes in DOI’s final
rule, we will change our regulatory text
accordingly.
§ 138.240 Procedure for updating
limits of liability to reflect significant
increases in the Consumer Price Index
(Annual CPI–U) and statutory changes.
We propose adding new § 138.240(a),
and re-designating the subsections that
follow accordingly. Proposed new
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subsection (a) would establish the
simplified regulatory procedure the
Coast Guard proposes to use to amend
the limits of liability contained in
proposed § 138.230 to reflect significant
increases in the CPI and when the limits
of liability are amended by statute. As
discussed above in section V.A.6, the
wording in proposed § 138.240(a) is
based on a similar procedure used by
the Federal Energy Regulatory
Commission to adjust its fees for
inflation (see 18 CFR 381.104(a) and
(d)), and would help ensure regular,
timely inflation adjustments to the OPA
90 limits of liability as intended by
Congress. The approach is also an
appropriate and helpful efficiency
measure given the mandatory and
routine nature of the CPI adjustments.
We also propose editorial revisions,
such as dividing § 138.240(b) into
subparagraphs, adding a cross reference
to § 138.240(a) in § 138.240(c), and
changing the title of § 138.240 to read
‘‘Procedure for updating limits of
liability to reflect significant increases
in the Consumer Price Index (Annual
CPI–U) and statutory changes.’’ No other
changes are being proposed to
§ 138.240.
VI. Regulatory Analyses
We developed this proposed rule after
considering numerous statutes and
executive orders (E.O.s) related to
rulemaking. Below we summarize our
analyses based on these statutes or
E.O.s.
A. Regulatory Planning and Review
Executive Orders 12866 (‘‘Regulatory
Planning and Review’’) and 13563
(‘‘Improving Regulation and Regulatory
Review’’) direct agencies to assess the
costs and benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility.
This proposed rule is not a significant
regulatory action under section 3(f) of
E.O. 12866 as supplemented by E.O.
13563, and does not require an
assessment of potential costs and
benefits under section 6(a)(3) of E.O.
12866. The Office of Management and
Budget (OMB) has not reviewed it under
E.O. 12866. Nonetheless, we developed
an analysis of the costs and benefits of
the proposed rule to ascertain its
probable impacts on industry. We
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consider all estimates and analysis in
this Regulatory Analysis to be subject to
change in consideration of public
comments. A draft Regulatory
Assessment is available in the docket
and a summary follows.
1. Regulatory Costs
There are two regulatory costs that are
expected from this proposed rule.
Regulatory Cost 1: Increased Cost of
Liability. Regulatory Cost 2: Increased
cost of establishing vessel evidence of
financial responsibility.20
a. Discussion of Regulatory Cost
This proposed rule could increase the
dollar amount of OPA 90 removal costs
and damages a responsible party of a
vessel (other than a public vessel),21
deepwater port, or onshore facility must
pay in the event of a discharge, or
substantial threat of discharge, of oil
into or upon the navigable waters or
adjoining shorelines or the exclusive
economic zone of the United States
(‘‘OPA 90 incident’’). This regulatory
cost, however, would only be incurred
by a responsible party if an OPA 90
incident resulted in OPA 90 removal
costs and damages that exceeded the
applicable vessel, deepwater port, or
onshore facility previous limit of
liability. In any such case, assuming as
we do in this analysis that the
responsible party is entitled to a limit of
liability (i.e., none of the exceptions in
33 U.S.C. 2704(c) apply), the difference
between the previous limit of liability
amount and the proposed new limit of
liability amount is the maximum
increased cost to the responsible party.
Incident costs above this value would
not be borne by the responsible parties,
but rather by the Fund.
i. Affected Population—Vessels
Coast Guard data, as of May 2013,
indicate that for the years 1991 through
2012, 62 OPA 90 vessel incidents (i.e.,
an average of approximately 3 OPA 90
vessel incidents per year) resulted in
OPA 90 removal costs and damages in
20 It should be noted that from an economic
perspective, CPI adjustments are actually neutral in
that they maintain the cost and benefit impacts of
the limits of liability constant in real dollar terms.
Not adjusting the limits of liability would, by
comparison, allow inflation to erode the value of
the limits of liability in real terms.
21 See footnote 1. According to Coast Guard’s
MISLE database, there are over 200,000 vessels of
various types in the vessel population that are not
public vessels or used exclusively for recreational
use. Examples of vessel types include, but are not
limited to: fish processing vessel, freight barge,
freight ship, industrial vessel, mobile offshore
drilling unit, offshore supply vessel, oil recovery
vessel, passenger vessel, commercial fishing vessel,
passenger barge, research vessel, school ship, tank
barge, tank ship, and towing vessel.
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excess of the previous limits of liability.
For the purpose of this analysis, we
have therefore assumed that three OPA
90 vessel incidents with costs exceeding
the previous limits of liability would
continue to occur each year throughout
the 10-year analysis period (2014–2023).
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ii. Affected Population—Deepwater
Ports
This proposed rule could affect the
responsible parties of any port licensed
under the DPA that is subject to OPA 90
(i.e., any such port, including its
associated pipelines, that meets the
OPA 90 definition of ‘‘facility’’).22
Currently there are two ports in
operation that are licensed under the
DPA—LOOP and Northeast Gateway.
Northeast Gateway, however, is a
liquefied natural gas (LNG) port and, as
currently designed and operated, it does
not meet the OPA 90 definition of
‘‘facility’’. Therefore—although a vessel
visiting or servicing Northeast Gateway
could become the source of a discharge,
or substantial threat of discharge, of oil
for which the vessel responsible parties
would be liable under OPA 90—it is
highly unlikely that Northeast Gateway
or any similarly-designed and operated
LNG port would be the source of an oil
discharge, or substantial threat of
discharge.23 We therefore, do not
include LNG ports in this analysis.
To date, LOOP (the only port licensed
under the DPA that is in operation and
meets the OPA 90 definitions of
‘‘deepwater port’’ and ‘‘facility’’) has not
had an OPA 90 incident that resulted in
removal costs and damages in excess of
LOOP’s previous limit of liability of
$87,606,000. However, for the purposes
of this analysis, we show the cost of one
22 33 U.S.C. 2701(6) defines ‘‘deepwater port’’ as
‘‘a facility licensed under the Deepwater Port Act
of 1974 (33 U.S.C. 1501–1524)’’ [emphasis added].
33 U.S.C. 2701(9) defines ‘‘facility’’ to mean ‘‘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[.]’’
23 Several other LNG ports were mentioned in the
regulatory analysis for the CPI–1 Rule. But they
have either not become operational, or are no longer
in operation. For example, on July 17, 2013, the
Maritime Administrator approved a request by Suez
Neptune LNG, LLC, for a temporary five-year
suspension of its deepwater port license. In
addition, on June 28, 2013 the Maritime
Administrator cleared decommissioning of the Gulf
Gateway Energy Bridge, and approved termination
of its license. These LNG ports, therefore, are not
included in this analysis. A fifth LNG port licensed
under the DPA, Port Dolphin Energy LLC
Deepwater Port (Port Dolphin), is not yet
operational. Port Dolphin, moreover, has the same
design as Northeast Gateway and, therefore, also
would not meet the OPA 90 definition of ‘‘facility’’.
It, therefore, is not included in this analysis.
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OPA 90 incident occurring at LOOP
over the 10-year analysis period (2014–
2023), with OPA 90 removal costs and
damages in excess of the previous limit
of liability for LOOP, as the potential for
such a spill exists.
iii. Affected Population—Onshore
Facilities
This proposed rule could affect any
responsible party for an onshore facility
(including onshore pipelines). The
impact would, however, only occur if
the incident resulted in OPA 90 removal
costs and damages in excess of the
previous limit of liability.
Because of the large number and
diversity of onshore facilities, it is not
possible to predict which specific types
or sizes of onshore facilities might be
affected by this proposed rule. Coast
Guard data, as of May 2013, however,
indicate that since the enactment of
OPA 90 through May 1, 2013, only one
onshore facility incident—the 2010
Enbridge Pipeline spill in Michigan—
may have resulted in OPA 90 removal
costs and damages that exceeded the
onshore facility previous limit of
liability of $350,000,000.24
The Enbridge Pipeline incident
indicates that the previous limit of
liability for an onshore facility, although
high, can still be exceeded by a low
frequency, but high consequence oil
spill. Therefore, for the purposes of this
analysis, we assume one onshore facility
incident would occur over the 10-year
analysis time period that would result
in OPA 90 removal costs and damages
in excess of the onshore facility
previous limit of liability.
iv. Cost Summary Regulatory Cost 1
(a) Vessels
We estimate the greatest cost to a
vessel responsible party entitled to a
limit of liability under OPA 90, for
purposes of this analysis, by assuming
that the average annual cost from the
historical incidents analyzed would
remain constant throughout the analysis
period (2014–2023). The average annual
increased cost of liability for the
analysis time period (2013–2024) is
estimated by calculating the difference
between the previous limit of liability
and the proposed new limit of liability
for each of the 62 historical incidents.
These values were totaled and then
divided by the number of years of data
(22 years). The average annual cost
resulting from the three estimated vessel
incidents per year is estimated to be
$2,544,000 (non-discounted dollars).
Dividing this value by the three
hypothetical vessel incidents per year
24 See
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49213
equals $848,000 for the average annual
cost per vessel.
(b) Deepwater Ports
We estimate the greatest cost to a
deepwater port responsible party
entitled to a limit of liability under OPA
90, for purposes of this analysis, by
assuming that the cost of the incident
would be equal to the proposed new
limit of liability. As mentioned above,
LOOP has never had an incident with
OPA 90 removal costs and damages in
excess of its limit of liability. Therefore,
given the lack of any deepwater port
historical data, we rely on the historical
data available for vessel incidents with
costs in excess of LOOP’s previous limit
of liability of $87,606,000.
Specifically, we assume that the
LOOP responsible parties would make
OPA 90 removal cost and damage
payments for the one hypothetical
incident, over the course of 10 years
after the incident date.25 In addition, for
the purposes of this analysis, we assume
that the payments would be spread out
in equal annual amounts over the 10year analysis period (2014–2023).
Applying these assumptions, the
average annual cost resulting from the
one hypothetical LOOP OPA 90
incident is estimated to be $718,400
(non-discounted dollars).26
There would be no increase to
Regulatory Cost 1 resulting from the
proposed adjustment to the generallyapplicable deepwater port limit of
liability adjustment, including if, after
considering any public comment, we
decide to re-calculate the CPI
adjustment to the deepwater port
statutory limit of liability in 33 U.S.C.
2704(a)(4), using the 1990 Annual CPI–
U value of 130.7 as the previous period,
instead of the 2008 Annual CPI–U value
of 215.3 that we have used for purposes
of this proposal. This is because, as
previously mentioned, there are no
deepwater ports in operation that are
25 Based on Coast Guard subject matter expert
experience, we have made the assumption that a
LOOP incident with costs above its Previous Limit
of Liability of $87,606,000 would be analogous to
a vessel incident with respect to the duration of
responsible party payments until the completion
date. The per-incident duration of payments was
determined by comparing the incident date and the
completion date for each vessel incident occurring
since enactment of OPA 90 with incident removal
costs and damages (in 2013 dollars) above LOOP’s
‘‘Previous Limit of Liability’’ of $87,606,000. There
were 6 incidents fitting this criteria, 3 are ongoing
incidents, 3 are completed. The average duration for
the 3 completed incidents, was approximately 10
years.
26 The only deepwater port affected by this
rulemaking, LOOP, has a facility-specific limit of
liability first established in 1995 under 33 U.S.C.
2704(d)(2)(C), and adjusted for inflation by the CPI–
1 Rule.
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subject to the generally-applicable OPA
90 limit of liability for deepwater ports.
(c) Onshore Facilities
We estimate the greatest cost to an
onshore facility responsible party
entitled to a limit of liability under OPA
90, for purposes of this analysis, by
assuming that the cost of the incident
would be equal to the proposed new
limit of liability. Based on NPFC’s
experience with onshore facility
incidents, we assume that the onshore
facility responsible parties would be
making OPA 90 removal cost and
damage payments for the one estimated
incident, over the course of 10 years
after the incident date.27 We further
assume that the payments would be
spread out in equal annual amounts
over the 10-year analysis period (2014–
2023).28 Applying these assumptions,
the average annual cost resulting from
the one estimated onshore facility OPA
90 incident over 10 years is estimated to
be $5,460,000 (non-discounted dollars).
If, after considering any public
comment, we decide to calculate the CPI
adjustments to the onshore facility limit
of liability using the 1990 Annual CPI–
U value of 130.7 as the previous period
(i.e., instead of the 2006 Annual CPI–U
value of 201.6, established by the CPI–
1 rule that we have used for purposes
of this proposal), the average annual
cost resulting from the one estimated
onshore facility OPA 90 incident over
10 years would be $27,370,000 (nondiscounted dollars).
v. Present Value of Regulatory Cost 1
tkelley on DSK3SPTVN1PROD with PROPOSALS2
The 10-year present value of
Regulatory Cost 1, at a 3 percent
discount rate, is estimated to be $74.4
million.29 The 10-year present value of
Regulatory Cost 1, at a 7 percent
discount rate, is estimated to be $61.3
27 The per-incident duration of payments was
determined by comparing the incident date and the
completion date of each onshore facility incident
occurring since enactment of OPA 90 with incident
removal costs and damages (in 2013 dollars) greater
than or equal to $5 million. There were 21 incidents
fitting this criteria, 9 are ongoing incidents, 12 are
completed. The average duration for the 12
completed incidents, was approximately 10 years.
28 Based on Coast Guard subject matter expert
experience, we have assumed that the payments
would be spread out equally over the 10 year
analysis period. This realistically models the long
duration of OPA 90 removal actions (particularly in
the case of an onshore facility incident resulting in
OPA 90 removal costs and damages exceeding the
limit of liability), the time lag in billings and
payments and, if applicable, associated claim
submissions, claims payments and litigation.
29 The sum of the annual costs for the three
source categories over the ten-year analysis period
(i.e., $2.5 million per year for vessels, $0.7 million
per year for deepwater ports, and $5.5 million per
year for onshore facilities), discounted annually at
a 7% discount rate equals $71.4 million.
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million.30 The annualized discounted
cost of Regulatory Cost 1, at a 3 percent
discount rate, is estimated to be $8.7
million. The annualized discounted cost
of Regulatory Cost 1, at a 7 percent
discount rate, is estimated to be $8.7
million.
If, after considering any public
comment, we decide to calculate the CPI
adjustments to the onshore facility limit
of liability and the generally-applicable
limit of liability for deepwater ports
using the 1990 Annual CPI–U value of
130.7 as the previous period, the present
value estimates would be as follows.
The estimated 10-year present value of
Regulatory Cost 1, at a 3 percent
discount rate, would be $261.3
million.31 The estimated 10-year present
value of Regulatory Cost 1, at a 7
percent discount rate, would be $215.1
million.32 The estimated annualized
discounted cost of Regulatory Cost 1, at
a 3 percent discount rate, would be
$30.6 million. The estimated annualized
discounted cost of Regulatory Cost 1, at
a 7 percent discount rate, would be
$30.6 million.33
b. Discussion of Regulatory Cost 2
OPA 90 (33 U.S.C. 2716) requires that
the responsible parties for deepwater
ports and certain types and sizes of
vessels establish and maintain evidence
of financial responsibility to ensure that
they have the ability to pay for OPA 90
removal costs and damages, up to the
applicable limits of liability, in the
event of an OPA 90 incident.34
Therefore, because the regulatory
changes contemplated by this proposed
rule would increase those limits of
liability, vessel and deepwater port
30 The sum of the annual costs for the three
source categories over the ten-year analysis period
(i.e., $2.5 million per year for vessels, $0.7 million
per year for deepwater ports, and $5.5 million per
year for onshore facilities), discounted annually at
a 7% discount rate equals $61.3 million.
31 The sum of the annual costs for the three
source categories over the ten-year analysis period
($2.5 million per year for vessels, $0.7 million per
year for deepwater ports, and $27.4 million per year
for onshore facilities), discounted annually at a 3%
discount rate equals $261.3 million.
32 The sum of the annual costs for the three
source categories over the ten-year analysis period
($2.5 million per year for vessels, $0.7 million per
year for deepwater ports, and $27.4 million per year
for onshore facilities), discounted annually at a 7%
discount rate equals $215.1 million.
33 As previously mentioned, there are no
deepwater ports in operation that are subject to the
generally-applicable limit of liability for deepwater
ports. Therefore, re-calculating the CPI adjustment
to the deepwater port statutory limit of liability in
33 U.S.C. 2704(a)(4), using the 1990 Annual CPI–
U value of 130.7 as the previous period, instead of
the 2008 Annual CPI–U value of 215.3 used for
purposes of this proposal, would not result in any
Regulatory Cost 1 impacts.
34 OPA 90 does not impose evidence of financial
responsibility requirements on onshore facilities.
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responsible parties may incur additional
costs establishing and maintaining
evidence of financial responsibility as a
result of this rulemaking.
Specifically, the proposed rule could
increase the cost to vessel and
deepwater port responsible parties
associated with establishing OPA 90
evidence of financial responsibility in
two ways:
D Responsible parties using Insurance
as their method of demonstrating
financial responsibility could incur
higher Insurance premiums.
D Some responsible parties currently
using the Self-Insurance or Financial
Guaranty methods of demonstrating
financial responsibility might need to
acquire Insurance, and would thereby
incur new Insurance premium costs.
This would only be the case if the
financial conditions (working capital
and net worth) of Self-Insuring
responsible parties or Financial
Guarantors no longer qualified them to
provide OPA 90 evidence of financial
responsibility.
i. Affected Population—Vessels
Vessel responsible parties may
establish evidence of financial
responsibility using any of the following
methods: Insurance, Self-Insurance,
Financial Guaranty, Surety Bonds, or
any other method approved by the
Director, NPFC.35 This proposed rule
could affect the cost to vessel
responsible parties of establishing and
maintaining evidence of financial
responsibility using the Insurance, SelfInsurance or Financial Guaranty
methods of financial responsibility. As
of 18 October 2011, the NPFC’s
certificate of financial responsibility
(COFR) database contained 21,077
vessels using Insurance, 957 vessels
using Self-Insurance and 2,530 vessels
using Financial Guaranties.
ii. Affected Population—Deepwater
Ports
As previously discussed (see Affected
Population—Deepwater Ports, above
under Regulatory Cost 1), LOOP is the
only operating deepwater port that
would be affected by this proposed rule.
Currently LOOP uses a Directorapproved method of establishing
35 See 33 CFR 138.80(b). Currently, however,
there are no vessel responsible parties using the
Surety Bond method of financial responsibility,
and, based on historical experience, NPFC does not
expect any responsible parties will use this method
during the analysis period (2014–2023). In addition,
there currently are no vessel responsible parties
using other methods of demonstrating financial
responsibility approved by Director, NPFC, and,
based on historical experience, NPFC does not
expect any responsible parties will use any other
method during the analysis period (2014–2023).
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financial responsibility. Specifically, the
Director, NPFC, accepts the following
documentation as evidence of financial
responsibility for LOOP:
• LOOP’s insurance policy issued by
Oil Insurance Limited (OIL) of Bermuda
with coverage up to $150 million per
OPA 90 incident and a $225 million
annual aggregate,
• Documentation that LOOP operates
with a net worth of at least $50 million,
and
• Documentation that the total value
of the OIL policy aggregate plus LOOP’s
working capital does not fall below $100
million.
iii. Affected Population—Onshore
Facilities
None. Onshore facilities are not
required to establish and maintain
evidence of financial responsibility
under 33 U.S.C. 2716.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
iv. Cost Summary Regulatory Cost 2
(a) Vessels
Increases to Vessel Insurance
Premiums. The calculation of Insurance
premium rates are dependent on many
constantly changing factors, including:
market forces, interest rates and
investment opportunities for the
premium income, the terms and
conditions of the policy, and
underwriting criteria such as vessel age,
loss history, construction, classification
details, and management history. As
calculated above, the proposed percent
change in the limits of liability for
vessels is 8.2%. Based on estimates
received from Insurance companies,36 it
is assumed that an 8.2% increase in the
limits of liability would cause, on
average, a 6.0% increase in Insurance
premiums charged across all vessel
types.
Estimated costs were calculated by
multiplying the number of vessels by
vessel category for each year of the
analysis period (2014–2023) by the
Expected Average Increase in Premium
for that particular vessel type. The
annual cost associated with increased
Insurance premiums is estimated to be
between $6.6 million and $6.7 million
(non-discounted dollars).
Migration of vessel responsible parties
currently using the Self-Insurance and
Financial Guaranty Methods of
Financial Responsibility to the
Insurance Market.
36 Data was requested from 9 of a possible 14
Insurance companies. Four responded with their
current premium rates and their best estimates of
the increase in premium rates resulting from the
proposed regulatory change. These four Insurance
companies represent approximately 93% of vessels
that use the Insurance method of financial
responsibility.
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Based on the financial documentation
received from vessel responsible parties
using the Self-Insurance or Financial
Guaranty methods, the Coast Guard
estimates that the responsible parties for
2% of the vessels that have COFRs
based on those methods might need to
migrate to the Insurance method of
financial responsibility. The cost
estimates for vessel responsible parties
migrating to the Insurance method of
financial responsibility were calculated
by first multiplying the number of
vessels using Self Insurance or Financial
Guaranty by vessel category for each
year of the analysis period (2014–2023)
by the presumed percent of impacted
vessels (2%) and then multiplying the
product by the estimated Expected
Average Annual Premium for that
particular vessel type. The annual cost
associated with vessel responsible
parties migrating to Insurance is
estimated to be between $326,000 and
$334,000 (non-discounted dollars).
(b) LOOP
An increase in the LOOP limit of
liability of the magnitude proposed by
this rulemaking is not expected to
increase the cost to the LOOP
responsible parties associated with
establishing and maintaining LOOP’s
evidence of financial responsibility.
This is because the LOOP responsible
parties provide evidence of financial
responsibility to the Coast Guard at a
level that exceeds both LOOP’s previous
limit of liability and the proposed new
limit of liability of $93,388,000.
The Coast Guard, therefore, does not
expect this action to change the terms of
the OIL policy, to result in an increased
premium for the OIL policy, or to
require LOOP to have higher minimum
net worth or working capital
requirements.
v. Present Value of Regulatory Cost 2
The 10-year present value, at a 3
percent discount rate, is estimated to be
$59.1 million. The 10-year present
value, at a 7 percent discount rate, is
estimated to be $48.7 million.37 The
annualized discounted cost, at a 3
percent discount rate, is estimated to be
$6.9 million.38 The annualized
37 The
sum of the annual costs for the two
subcategories of Regulatory Cost 2 over the ten-year
analysis period (ranging from $6.6 million per year
to $6.7 million per year for increased vessel
insurance premiums, and from $0.326 million to
$0.334 million per year for migration of some
vessels to the Insurance method of financial
responsibility), discounted annually at a 3%
discount rate equals $59.1 million.
38 The sum of the annual costs for the two
subcategories of Regulatory Cost 2 over the ten-year
analysis period (ranging from $6.6 million per year
to $6.7 million per year for increased vessel
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49215
discounted cost, at a 7 percent discount
rate, is estimated to be $6.9 million.
Present Value of Total Cost = Regulatory
Cost 1 + Regulatory Cost 2
The 10-year present value, at a 3
percent discount rate, is estimated to be
$133.5 million.39 The 10-year present
value, at a 7 percent discount rate, is
estimated to be $110.0 million.40 The
annualized discounted cost, at a 3
percent discount rate, is estimated to be
$14.3 million. The annualized
discounted cost, at a 7 percent discount
rate, is estimated to be $14.3 million.
If, after considering any public
comment, we decide to calculate the CPI
adjustments to the onshore facility limit
of liability and the generally-applicable
limit of liability for deepwater ports
using the 1990 Annual CPI–U value of
130.7 as the previous period, the present
value estimates would be as follows.
The estimated 10-year present value, at
a 3 percent discount rate, would be
$320.4 million.41 The estimated 10-year
present value, at a 7 percent discount
rate, would be $263.8 million.42 The
estimated annualized discounted cost,
at a 3 percent discount rate, would be
$37.6 million. The estimated annualized
discounted cost, at a 7 percent discount
rate, would be $37.6 million.
2. Regulatory Benefits
a. Regulatory Benefit 1: Ensure that
the OPA 90 limits of liability keep pace
with inflation.
OPA 90 (33 U.S.C. 2704(d)(4))
mandates that limits of liability be
updated periodically to reflect
significant increases in the CPI to
account for inflation. The intent of this
requirement is to ensure that the real
values of the limits of liability do not
decline over time. Absent CPI
adjustments, the responsible parties
ultimately benefit because they pay a
reduced percentage of the total incident
costs they would be required to pay
with inflation incorporated into the
determination of their limit of liability.
Requiring responsible parties to
internalize costs by adjusting their
limits of liability for inflation ensures
that the appropriate amount of cleanup,
insurance premiums, and from $0.326 million to
$0.334 million per year for migration of some
vessels to the Insurance method of financial
responsibility), discounted annually at a 7%
discount rate equals $48.7 million.
39 This is the sum of Regulatory Cost 1 ($74.4
million) and Regulatory Cost 2 ($59.1 million).
40 This is the sum of Regulatory Cost 1 ($61.3
million) and Regulatory Cost 2 ($48.7 million).
41 This is the sum of Regulatory Cost 1 ($261
million) and Regulatory Cost 2 ($59.1 million).
42 This is the sum of Regulatory Cost 1 ($215.1
million) and Regulatory Cost 2 ($48.7 million). The
amounts do not add up due to rounding.
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response and damage costs are borne by
the responsible party.
b. Regulatory Benefit 2: Ensure that
the responsible party is held
accountable.
Increasing the limits of liability to
account for inflation ensures that the
appropriate amount of removal costs
and damages are borne by the
responsible party and that liability risk
is not shifted away from the responsible
party to the Fund. This helps preserve
the ‘‘polluter pays’’ principle as
intended by Congress and preserves the
Fund for its other authorized uses.
Failing to adjust the limits of liability
for inflation, by comparison, shifts those
costs to the public and the Fund.
c. Regulatory Benefit 3: Reduce and
deter substandard shipping and oil
handling practices.
Increasing the limits of liability serves
to reduce the number of substandard
ships in U.S. waters and ports because
insurers are less likely to provide
Insurance to, and Financial Guarantors
are less likely to guaranty, substandard
vessels at the new levels of OPA 90
liability. Maintaining the limits of
liability also helps preserve the
deterrent effect of the OPA 90 liability
provisions for Self Insurers.
With respect to oil handling practices,
the higher the responsible parties’ limits
of liability are, the greater the incentive
for them to operate in the safest and
most risk-averse manner possible.
Conversely, the lower the limits of
liability, the lower the incentive is for
responsible parties to spend money on
capital improvements and operation and
maintenance systems that will protect
against oil spills.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
B. Small Entities
Under the Regulatory Flexibility Act,
5 U.S.C. 601–612, we have considered
whether this proposed rule would have
a significant economic impact on a
substantial number of small entities.
The term ‘‘small entities’’ comprises
small businesses, not-for-profit
organizations that are independently
owned and operated and are not
dominant in their fields, and
governmental jurisdictions with
populations of less than 50,000.
An Initial Regulatory Flexibility
Analysis (IRFA) discussing the impact
of this proposed rule on small entities
is included in the Regulatory Analysis
that is available in the docket. A
summary of the IRFA follows.
There are two potential economic
impacts to small entities that would
result from this proposed rule:
Regulatory Cost 1. Increased Cost of
Liability
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Regulatory Cost 2. Increased Cost of
Establishing Evidence of Financial
Responsibility.
1. Regulatory Cost 1: Increased Cost of
Liability
As explained in Part IV.A. of this
preamble and in the Regulatory
Analysis for this proposed rule,
Regulatory Cost 1 would only occur if
there was an OPA 90 incident that had
removal costs and damages in excess of
the existing limits of liability.
a. Vessels
This proposed rule could affect the
responsible parties of any vessel, other
than a public vessel,43 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 of the United States.
Coast Guard data indicate that, since the
enactment of OPA 90 through May 1,
2013, there were 62 OPA 90 vessel
incidents (i.e., an average of
approximately three OPA 90 vessel
incidents per year) that resulted in OPA
90 removal costs and damages in excess
of the previous limits of liability. For
the purpose of this analysis, we have
therefore assumed that three OPA 90
vessel incidents would continue to
occur each year throughout the 10-year
analysis period (2014–2023).
The vessel population encompasses
dozens of North American Industry
Classification System (NAICS) codes. It,
therefore, would not be practical to
predict which specific type or size of
vessel might be involved in the three
hypothetical incidents assumed to occur
per year, or whether they would involve
small entities.
Incident cost data show that the
average cost of an incident that exceeds
the current limit of liability is
approximately $848,000. Therefore, in
the event that a small entity had a vessel
incident with OPA 90 removal costs and
damages of this magnitude, it would
likely have a significant economic
impact.
43 See 33 U.S.C. 2701(29) and (37) (definitions of
public vessel and vessel) and 33 U.S.C. 2702(c)(2)
(public vessel exclusion). According to Coast
Guard’s MISLE database, there are over 200,000
vessels of various types in the vessel population
that are not public vessels or used exclusively for
recreational use. Examples of vessel types include,
but are not limited to: fish processing vessel, freight
barge, freight ship, industrial vessel, mobile
offshore drilling unit, offshore supply vessel, oil
recovery vessel, passenger vessel, commercial
fishing vessel, passenger barge, research vessel,
school ship, tank barge, tank ship, and towing
vessel.
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b. Deepwater Ports
As discussed in Part IV.A. of this
preamble, and in the Regulatory
Analysis for this rulemaking, the only
deepwater port affected by this
proposed rule is LOOP. LOOP, however,
does not meet the Small Business
Administration (SBA) criteria to be
categorized as a small entity.44
c. Onshore Facilities
As discussed in Part IV.A., of this
preamble, and in the Regulatory
Analysis for this rulemaking, this
proposed rule could affect any
responsible party for an onshore
facility.45 Since the enactment of OPA
90, however, the 2010 Enbridge Pipeline
spill in Michigan may well be the only
onshore facility incident resulting in
removal costs and damages that exceed
the $350 million onshore facility limit
of liability; 46 and this onshore facility is
not a small entity. Nevertheless, in the
Regulatory Analysis for this proposed
rule, we assume that there would be one
onshore facility incident occurring over
the 10 year analysis period with OPA 90
removal costs and damages exceeding
the existing limit of liability.
The onshore facility population
encompasses dozens of NAICS codes
representing diverse industries.47 It,
therefore, would not be practical to
predict which specific type or size of
onshore facility might be involved in
the one hypothetical incident assumed
to occur over the 10-year analysis
period, or whether it would involve a
small entity. However, in the event a
small entity onshore facility was to have
an incident with OPA 90 removal costs
and damages of this magnitude, it
44 LOOP is a limited liability corporation (NAICS
Code: 48691001) owned by three major oil
companies: Marathon Oil Company, Murphy Oil
Corporation, and Shell Oil Company. None of these
companies are small entities.
45 OPA 90 (33 U.S.C. 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’’.
OPA 90 (33 U.S.C. 2701(24)) defines an ‘‘onshore
facility’’ as ‘‘any facility (including but not limited
to, motor vehicles and rolling stock) of any kind
located in, on, or under, any land within the United
States other than submerged land.’’
46 Reliable supporting estimates of the OPA 90
removal costs and damages resulting from incident
are not currently available.
47 Examples of onshore facilities include, but are
not limited to: onshore pipelines; rail; motor
carriers; petroleum bulk stations and terminals;
petroleum refineries; government installations; oil
production facilities; electrical utility plants;
mobile facilities; marinas, marine fuel stations and
related facilities; farms; fuel oil dealers; and
gasoline stations.
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would likely have a significant
economic impact.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
2. Regulatory Cost 2—Increased Cost of
Establishing Evidence of Financial
Responsibility
i. Vessels
Regulatory Cost 2 would only apply to
vessel responsible parties required to
provide evidence of financial
responsibility under OPA 90 (33 U.S.C.
2716) and 33 CFR part 138, subpart A.
As of July 3, 2013, there were 1,744
unique entities in the Coast Guard’s
COFR database that could be affected by
this proposed rulemaking. Because of
the large number of entities, we
determined the statistically significant
sample size necessary to represent the
population. The appropriate statistical
sample size for the population, at a 95%
confidence level and a 5% confidence
interval, is 315 entities. This means we
are 95% certain that the characteristics
of the sample reflect the characteristics
of the entire population within a margin
of error of + or¥5%.
Using a random number generator, we
then randomly selected the 315 entities
from the population for analysis. Of the
sample, 309 were businesses, 0 were
not-for-profit organizations, and 6 were
governmental jurisdictions.
For each business entity, we next
determined the number of employees,
annual revenue, and NAICS Code to the
extent possible using public and
proprietary business databases. The
SBA’s publication ‘‘U.S. Small Business
Administration Table of Small Business
Size Standards Matched to North
American Industry Classification
System codes effective January 22,
2014’’ 48 was then used to determine
whether an entity is a small entity. For
governmental jurisdictions, we
determined whether they had
populations of less than 50,000 as per
the criteria in the Regulatory Flexibility
Act.
Of the sampled population, 220
would be considered small entities
using the SBA criteria, 72 would not be
small entities, and no data was found
for the remaining 23 entities.49 If we
assume that the entities where no
revenue or employee data was found are
small entities, then small entities make
up 77 percent of the sample.50 We can
then extrapolate the entire population of
entities from the sample using the
following formula, where ‘‘X’’ is the
48 http://www.sba.gov/sites/default/files/files/
Size_Standards_Table.pdf.
49 The 6 governmental jurisdictions were a subset
of the 23 entities where no data was found.
50 The data show that small entities are often
responsible parties for multiple vessels.
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number of small entities within the total
population.
(X small entities in the total population
divided by 1,744 total entities in the
population) = (243 small entities in
the sample/315 total entities in the
sample)
Solving for X, X equals 1,345 small
entities within the total population.
As discussed in the Regulatory
Analysis, the proposed rule could
increase the cost to vessel responsible
parties associated with establishing
OPA 90 evidence of financial
responsibility in two ways:
(1) Responsible parties using the
Insurance method of financial
responsibility could incur higher
Insurance premiums.
(2) Some responsible parties currently
using the Self-Insurance or Financial
Guaranty method of establishing
evidence financial responsibility might
need to acquire Insurance for their
vessels. This would only be the case if
the Self-Insuring responsible parties or
financial guarantors’ financial condition
(working capital and net worth) no
longer qualified them to provide OPA
90 evidence of financial responsibility.
As calculated in the Regulatory
Analysis, the average annual per vessel
increase in Insurance premium for
responsible parties using the Insurance
method of establishing evidence of
financial responsibility is $480. The
average annual cost per vessel migrating
from the Self-insurance/Financial
Guaranty methods to the Insurance
method is $8,240 per vessel.
Based on review of financial data of
entities using the Self-Insurance or
Financial Guaranty method for
establishing evidence of financial
responsibility, Coast Guard subject
matter experts estimate that responsible
parties for 2% of vessels using those two
methods would not have the requisite
working capital and net worth necessary
to qualify for these methods as a result
of this proposed rule. In those cases,
they would have to use the Insurance
method to establish and maintain
evidence of financial responsibility.
The increased cost of establishing
evidence of financial responsibility for
each small entity is calculated by:
1. Multiplying the number of vessels
using the Insurance Method by the
Average Increase in Premium ($480),
and
2. Adding the product of the number
of vessels using the Self-Insurance and
Financial Guaranty methods multiplied
by the Average Annual Premium
($8,240), multiplied by 2%.
For example, for a hypothetical small
entity using the Insurance Method for
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49217
three vessels and having to change from
the Self-Insurance or Financial Guaranty
Method to the insurance method for two
vessels (i.e., both vessels falling within
the 2%), the calculation would be as
follows:
(3 vessels using Insurance Method ×
$480/year) + (100 vessels using SelfInsurance or Financial Guaranty
Method × 2% of vessels expected to
migrate from Self-Insurance or
Financial Guaranty Method to the
Insurance Method × $8,240/year) =
$17,950/year
This calculation was conducted for
each small entity and the value was
then divided by the annual revenue for
the small entity and then multiplied by
100 to determine the percent impact of
this proposed rule on the small entities’
annual revenue. The figure below shows
the economic impact to vessel small
entities of Regulatory Cost 2.
ECONOMIC IMPACT TO VESSEL SMALL
ENTITIES—REGULATORY COST 2
Percent of
annual
revenue
1 to 2 ........
<1 ..............
Extrapolated
number of
small entities
Percent of
small entities
54
1,291
4
96
ii. Deepwater Ports
Because there are no small entity
deepwater ports, there would be no
Regulatory Cost 2 small entity impacts
to Deepwater Ports.
iii. Onshore Facilities
As stated in the Regulatory Analysis
for this rulemaking, onshore facilities
are not required to establish and
maintain evidence of financial
responsibility under 33 U.S.C. 2716.
There would therefore be no Regulatory
Cost 2 small entity impacts to Onshore
Facilities.
If you think your business,
organization, or governmental
jurisdiction qualifies as a small entity
and that this rule would have a
significant economic impact on it,
please submit a comment to the Docket
Management Facility at the address
under ADDRESSES. In your comment,
explain why you think it qualifies and
how and to what degree this rule would
economically affect it.
C. Assistance for Small Entities
Under section 213(a) of the Small
Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104–
121, we want to assist small entities in
understanding this proposed rule so that
they can better evaluate its effects on
them and participate in the rulemaking.
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If the proposed rule would affect your
small business, organization, or
governmental jurisdiction and you have
questions concerning its provisions or
options for compliance, please consult
Benjamin White, National Pollution
Funds Center, Coast Guard, telephone
703–872–6066. The Coast Guard will
not retaliate against small entities that
question or complain about this rule or
any policy or action of the Coast Guard.
Small businesses may send comments
on the actions of Federal employees
who enforce, or otherwise determine
compliance with, Federal regulations to
the Small Business and Agriculture
Regulatory Enforcement Ombudsman
and the Regional Small Business
Regulatory Fairness Boards. The
Ombudsman evaluates these actions
annually and rates each agency’s
responsiveness to small business. If you
wish to comment on actions by
employees of the Coast Guard, call 1–
888–REG–FAIR (1–888–734–3247).
tkelley on DSK3SPTVN1PROD with PROPOSALS2
D. Collection of Information
This proposed rule would call for no
new collection of information under the
Paperwork Reduction Act of 1995, 44
U.S.C. 3501–3520.
E. Federalism
A rule has implications for federalism
under E.O. 13132 (‘‘Federalism’’) if it
has a substantial direct effect on the
States, on the relationship between the
national government and the States, or
on the distribution of power and
responsibilities among the various
levels of government. We have analyzed
this proposed rule under that Order and
have determined that it is consistent
with the fundamental federalism
principles and preemption requirements
described in E.O. 13132. This proposed
rule makes necessary adjustments to the
OPA 90 limits of liability to reflect
significant increases in the CPI,
establishes a framework for such future
CPI increases, and clarifies the OPA 90
limits of liability for certain vessels.
Nothing in this proposed rule would
affect the preservation of State
authorities under 33 U.S.C. 2718,
including the authority of any State to
impose additional liability or financial
responsibility requirements with respect
to discharges of oil within such State.
Therefore, it has no implications for
federalism.
The Coast Guard recognizes the key
role that State and local governments
may have in making regulatory
determinations. Additionally, for rules
with federalism implications and
preemptive effect, E.O. 13132
specifically directs agencies to consult
with State and local governments during
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the rulemaking process. If you believe
this rule has implications for federalism
under E.O. 13132, please contact the
person listed in the FOR FURTHER
INFORMATION CONTACT section of this
preamble.
F. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act
of 1995, 2 U.S.C. 1531–1538, requires
Federal agencies to assess the effects of
their discretionary regulatory actions. In
particular, the Act addresses actions
that may result in the expenditure by a
State, local, or tribal government, in the
aggregate, or by the private sector of
$100,000,000 (adjusted for inflation) or
more in any one year. Though this
proposed rule would not result in such
an expenditure, we do discuss the
effects of this rule elsewhere in this
preamble.
G. Taking of Private Property
This proposed rule would not cause a
taking of private property or otherwise
have taking implications under
Executive Order 12630 (‘‘Governmental
Actions and Interference with
Constitutionally Protected Property
Rights’’).
H. Civil Justice Reform
This proposed rule meets applicable
standards in sections 3(a) and 3(b)(2) of
Executive Order 12988 (‘‘Civil Justice
Reform’’), to minimize litigation,
eliminate ambiguity, and reduce
burden.
I. Protection of Children
We have analyzed this proposed rule
under Executive Order 13045
(‘‘Protection of Children from
Environmental Health Risks and Safety
Risks’’). This rule is not an
economically significant rule and would
not create an environmental risk to
health or risk to safety that might
disproportionately affect children.
J. Indian Tribal Governments
This proposed rule does not have
tribal implications under Executive
Order 13175 (‘‘Consultation and
Coordination with Indian Tribal
Governments’’), because it would not
have a substantial direct effect on one or
more Indian tribes, on the relationship
between the Federal Government and
Indian tribes, or on the distribution of
power and responsibilities between the
Federal Government and Indian tribes.
K. Energy Effects
We have analyzed this proposed rule
under Executive Order 13211 (‘‘Actions
Concerning Regulations That
Significantly Affect Energy Supply,
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Fmt 4701
Sfmt 4702
Distribution, or Use’’). We have
determined that it is not a ‘‘significant
energy action’’ under that order because
it is not a ‘‘significant regulatory action’’
under Executive Order 12866 and is not
likely to have a significant adverse effect
on the supply, distribution, or use of
energy.
L. Technical Standards
The National Technology Transfer
and Advancement Act, codified as a
note to 15 U.S.C. 272 directs agencies to
use voluntary consensus standards in
their regulatory activities unless the
agency provides Congress, through
OMB, with an explanation of why using
these standards would be inconsistent
with applicable law or otherwise
impractical. Voluntary consensus
standards are technical standards (e.g.,
specifications of materials, performance,
design, or operation; test methods;
sampling procedures; and related
management systems practices) that are
developed or adopted by voluntary
consensus standards bodies.
This proposed rule does not use
technical standards. Therefore, we did
not consider the use of voluntary
consensus standards.
M. Environment
We have analyzed this proposed rule
under Department of Homeland
Security Management Directive 023–01
and Commandant Instruction
M16475.lD, which guide the Coast
Guard in complying with the National
Environmental Policy Act of 1969, 42
U.S.C. 4321–4370f, and have made a
preliminary determination that this
action is one of a category of actions that
do not individually or cumulatively
have a significant effect on the human
environment. A preliminary
environmental analysis checklist
supporting this determination is
available in the docket where indicated
under the ‘‘Public Participation and
Request for Comments’’ section of this
preamble. This proposed rule would
increase the OPA 90 limits of liability
for vessels, deepwater ports, and
onshore facilities to reflect significant
increases in the CPI using the
methodology established in the CPI–1
Rule. This proposed rule is expected to
be categorically excluded under
paragraph 34(a), of the current
instruction, from further environmental
documentation, in accordance with
Section 2.B.2. and Figure 2–1 of the
national Environmental Policy Act
Implementing Procedures and Policy for
Considering Environmental Impacts,
COMDTINST M16475.1D. We seek any
comments or information that may lead
to the discovery of a significant
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environmental impact from this
proposed rule.
List of Subjects in 33 CFR Part 138
Hazardous materials transportation,
Financial responsibility, Guarantors,
Insurance, Limits of liability, Oil
pollution, Reporting and recordkeeping
requirements, Surety bonds, Water
pollution control.
For the reasons discussed in the
preamble, the Coast Guard proposes to
amend 33 CFR part 138 as follows:
PART 138—FINANCIAL
RESPONSIBILITY FOR WATER
POLLUTION (VESSELS) AND OPA 90
LIMITS OF LIABILITY (VESSELS,
DEEPWATER PORTS AND ONSHORE
FACILITIES)
1. The authorities citation for part 138
is revised to read as follows:
■
Authority: 33 U.S.C. 2704, 2716, 2716a; 42
U.S.C. 9608, 9609; 6 U.S.C. 552; E.O. 12580,
Sec. 7(b), 3 CFR, 1987 Comp., p. 193; E.O.
12777, Sec. 4, as amended by E.O. 13638 of
March 15, 2013, Sec. 1 (78 FR 17589,
Thursday, March 21, 2013); E.O. 12777, Sec.
5, 3 CFR, 1991 Comp., p. 351, as amended
by E.O. 13286, Sec. 89, 3 CFR, 2004 Comp.,
p. 166; Department of Homeland Security
Delegation Nos. 0170.1 and 5110, Revision
01. Section 138.30 also issued under the
authority of 46 U.S.C. 2103 and 14302.
2. Revise the heading to part 138 to
read as set forth above.
■ 3. Revise Subpart B to read as follows:
■
Subpart B—OPA 90 Limits of Liability
(Vessels, Deepwater Ports and Onshore
Facilities)
Sec.
138.200 Scope.
138.210 Applicability.
138.220 Definitions.
138.230 Limits of liability.
138.240 Procedure for updating limits of
liability to reflect significant increases in
the Consumer Price Index (Annual CPI–
U) and statutory changes.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 138.200
Scope.
This subpart sets forth the limits of
liability under Title I of the Oil
Pollution Act of 1990, as amended (33
U.S.C. 2701, et seq.) (OPA 90) for
vessels, deepwater ports, and onshore
facilities, as adjusted under OPA 90 (33
U.S.C. 2704(d)). This subpart also sets
forth the method and procedure the
Coast Guard uses to periodically adjust
the OPA 90 limits of liability by
regulation under OPA 90 (33 U.S.C.
2704(d)(4)), to reflect significant
increases in the Consumer Price Index
(CPI), and to update the limits of
liability when they are amended by
statute. In addition, this subpart crossreferences the U.S. Department of the
Interior regulation setting forth the OPA
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90 limit of liability applicable to
offshore facilities, including offshore
pipelines, as adjusted under OPA 90 (33
U.S.C. 2704(d)(4)) to reflect significant
increases in the CPI.
§ 138.210
Applicability.
This subpart applies to you if you are
a responsible party for a vessel, a
deepwater port, or an onshore facility,
unless your liability is unlimited under
OPA 90 (33 U.S.C. 2704(c)).
§ 138.220
Definitions.
(a) As used in this subpart, the
following terms have the meanings set
forth in OPA 90 (33 U.S.C. 2701):
deepwater port, facility, gross ton,
liability, oil, offshore facility, onshore
facility, responsible party, tank vessel,
and vessel.
(b) As used in this subpart—
Annual CPI–U means the annual
‘‘Consumer Price Index—All Urban
Consumers, Not Seasonally Adjusted,
U.S. City Average, All items, 1982–
84=100’’, published by the U.S.
Department of Labor, Bureau of Labor
Statistics.
Current period means the year in
which the Annual CPI–U was most
recently published by the U.S.
Department of Labor, Bureau of Labor
Statistics.
Director, NPFC means the person in
charge of the U.S. Coast Guard, National
Pollution Funds Center (NPFC), or that
person’s authorized representative.
Edible oil tank vessel means a tank
vessel referred to in OPA 90 (33 U.S.C.
2704(c)(4)(A)).
Oil spill response vessel means a tank
vessel referred to in OPA 90 (33 U.S.C.
2704(c)(4)(B)).
Previous period means the year in
which the previous limit of liability was
established, or last adjusted by statute or
regulation, whichever is later.
Single-hull means the hull of a tank
vessel that is constructed or adapted to
carry, or that carries, oil in bulk as cargo
or cargo residue, that is not a double
hull as defined in 33 CFR part 157.
Single-hull includes the hull of any such
tank vessel that is fitted with double
sides only or a double bottom only.
§ 138.230
Limits of liability.
(a) Vessels. The OPA 90 limits of
liability for vessels are—
(1) Limits of liability for tank vessels,
other than edible oil tank vessels and oil
spill response vessels.
(i) For a single-hull tank vessel greater
than 3,000 gross tons, the greater of
$3,500 per gross ton or $25,422,700;
(ii) For a tank vessel greater than
3,000 gross tons, other than a single-hull
tank vessel, the greater of $2,200 per
gross ton or $18,489,200.
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49219
(iii) For a single-hull tank vessel less
than or equal to 3,000 gross tons, the
greater of $3,500 per gross ton or
$6,933,500.
(iv) For a tank vessel less than or
equal to 3,000 gross tons, other than a
single-hull tank vessel, the greater of
$2,200 per gross ton or $4,622,300.
(2) Limits of liability for any other
vessels. For any other vessel, including
an edible oil tank vessel or an oil spill
response vessel, the greater of $1,100
per gross ton or $924,500.
(b) Deepwater ports. The OPA 90
limits of liability for deepwater ports
are—
(1) For deepwater ports generally, and
except as set forth in paragraph (b)(2) of
this section, $404,451,600;
(2) For deepwater ports with limits of
liability established by regulation under
OPA 90 (33 U.S.C. 2704(d)(2)):
(i) For the Louisiana Offshore Oil Port
(LOOP), $94,789,700; and
(ii) [Reserved].
(c) Onshore facilities. The OPA 90
limit of liability for onshore facilities,
$404,600,000;
(d) Offshore facilities. The OPA 90
limit of liability for offshore facilities,
including any offshore pipeline, is set
forth at 30 CFR 553.702.
§ 138.240 Procedure for updating limits of
liability to reflect significant increases in
the Consumer Price Index (Annual CPI–U)
and statutory changes.
(a) Update and publication. The
Director, NPFC, will periodically adjust
the limits of liability set forth in
§ 138.230(a) through (c) to reflect
significant increases in the Annual CPI–
U, according to the procedure for
calculating limit of liability inflation
adjustments set forth in paragraphs (b)–
(d) of this section, and will publish the
inflation-adjusted limits of liability and
any statutory amendments to those
limits of liability in the Federal Register
as amendments to § 138.230. Updates to
the limits of liability under this section
are effective on the 90th day after
publication in the Federal Register of
the amendments to § 138.230, unless
otherwise specified by statute (in the
event of a statutory amendment to the
limits of liability) or in the Federal
Register notice amending § 138.230.
(b) Formula for calculating a
cumulative percent change in the
Annual CPI–U. (1) The Director, NPFC,
calculates the cumulative percent
change in the Annual CPI–U from the
year the limit of liability was
established, or last adjusted by statute or
regulation, whichever is later (i.e., the
previous period), to the most recently
published Annual CPI–U (i.e., the
current period), using the following
escalation formula:
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Percent change in the Annual CPI–U =
[(Annual CPI–U for Current Period ¥
Annual CPI–U for Previous Period) ÷
Annual CPI–U for Previous Period] ×
100.
(2) This cumulative percent change
value is rounded to one decimal place.
(c) Significance threshold. Not later
than every three years from the year the
limits of liability were last adjusted for
inflation, the Director, NPFC, will
evaluate whether the cumulative
percent change in the Annual CPI–U
since that date has reached a
significance threshold of 3 percent or
greater. For any three-year period in
which the cumulative percent change in
the Annual CPI–U is less than 3 percent,
the Director, NPFC, will publish a
notice of no inflation adjustment to the
limits of liability in the Federal
Register. If this occurs, the Director,
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NPFC, will recalculate the cumulative
percent change in the Annual CPI–U
since the year in which the limits of
liability were last adjusted for inflation
each year thereafter until the cumulative
percent change equals or exceeds the
threshold amount of 3 percent. Once the
3-percent threshold is reached, the
Director, NPFC, will increase the limits
of liability, by regulation using the
procedure set forth in paragraph (a) of
this section, for all source categories
(including any new limit of liability
established by statute or regulation
since the last time the limits of liability
were adjusted for inflation) by an
amount equal to the cumulative percent
change in the Annual CPI–U from the
year each limit was established, or last
adjusted by statute or regulation,
whichever is later. Nothing in this
paragraph shall prevent the Director,
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NPFC, in the Director’s sole discretion,
from adjusting the limits of liability for
inflation by regulation issued more
frequently than every three years.
(d) Formula for calculating inflation
adjustments. The Director, NPFC,
calculates adjustments to the limits of
liability in § 138.230 of this part for
inflation using the following formula:
New limit of liability = Previous limit of
liability + (Previous limit of liability
× percent change in the Annual CPI–
U calculated under paragraph (b) of
this section), then rounded to the
closest $100.
Dated: August 11, 2014.
William R. Grawe,
Acting Director, National Pollution Funds
Center, United States Coast Guard.
[FR Doc. 2014–19314 Filed 8–18–14; 8:45 am]
BILLING CODE 9110–04–P
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]]>Agencies
[Federal Register Volume 79, Number 160 (Tuesday, August 19, 2014)]
[Proposed Rules]
[Pages 49205-49220]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19314]
[[Page 49205]]
Vol. 79
Tuesday,
No. 160
August 19, 2014
Part III
Department of Homeland Security
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Coast Guard
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33 CFR Part 138
Consumer Price Index Adjustments of Oil Pollution Act of 1990 Limits
of Liability--Vessels, Deepwater Ports and Onshore Facilities; Proposed
Rule
Federal Register / Vol. 79, No. 160 / Tuesday, August 19, 2014 /
Proposed Rules
[[Page 49206]]
-----------------------------------------------------------------------
DEPARTMENT OF HOMELAND SECURITY
Coast Guard
33 CFR Parts 138, Subpart B
[Docket No. USCG-2013-1006]
RIN 1625-AC14
Consumer Price Index Adjustments of Oil Pollution Act of 1990
Limits of Liability--Vessels, Deepwater Ports and Onshore Facilities
AGENCY: Coast Guard, DHS.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Coast Guard proposes to increase the limits of liability
for vessels, deepwater ports, and onshore facilities, under the Oil
Pollution Act of 1990, as amended (OPA 90), to reflect significant
increases in the Consumer Price Index (CPI). We also propose a
simplified regulatory procedure for the Coast Guard to make future
required periodic CPI increases to the OPA 90 limits of liability for
vessels, deepwater ports, and onshore facilities. These regulatory
inflation increases to the limits of liability are required by OPA 90,
and are necessary to preserve the deterrent effect and ``polluter
pays'' principle embodied in OPA 90. Finally, we propose language to
clarify applicability of the OPA 90 vessel limits of liability to two
categories of tank vessels, edible oil cargo tank vessels and tank
vessels designated as oil spill response vessels. This clarification to
the existing regulatory text is needed for consistency with OPA 90.
DATES: Comments and related material must be submitted on or before
October 20, 2014.
ADDRESSES: You may submit comments identified by Docket No. USCG-2013-
1006 using any one of the following methods:
(1) Online: http://www.regulations.gov.
(2) Fax: 202-493-2251.
(3) Mail: Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590-0001.
(4) Hand delivery: Same as mail address above, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The telephone
number is 202-366-9329.
To avoid duplication, please use only one of these four methods.
See the ``Public Participation and Request for Comments'' portion of
the SUPPLEMENTARY INFORMATION section below for instructions on
submitting comments.
FOR FURTHER INFORMATION CONTACT: For information about this document
call or email Benjamin White, Coast Guard; telephone 703-872-6066,
email Benjamin.H.White@uscg.mil. For information about viewing or
submitting material to the docket, call Cheryl Collins, Program
Manager, Docket Operations, telephone 202-366-9826, toll free 1-800-
647-5527.
SUPPLEMENTARY INFORMATION:
Table of Contents for Preamble
I. Public Participation and Request for Comments
A. Submitting Comments
B. Viewing Comments and Documents
C. Privacy Act
D. Public Meeting
II. Abbreviations
III. Basis and Purpose
IV. Background and Regulatory History
A. Creation of 33 CFR Part 138, Subpart B
B. Prior Regulatory Inflation Adjustments to the OPA 90 Limits
of Liability in 33 CFR Part 138, Subpart B
C. Statutory and Regulatory History Respecting the OPA 90 Edible
Oil Cargo Tank Vessel and Oil Spill Response Vessel Exceptions
V. Discussion of Proposed Rule
A. Regulatory Inflation Adjustments and Statutory Updates to the
Limits of Liability for Vessels, Deepwater Ports and Onshore
Facilities
B. Clarifying Amendments Respecting Edible Oil Cargo Tank
Vessels and Oil Spill Response Vessels
C. Section-by-Section Discussion
VI. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates Reform Act
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment
I. Public Participation and Request for Comments
We encourage you to participate in this rulemaking by submitting
comments and related materials using the instructions below. All
comments received will be posted without change to http://www.regulations.gov and will include any personal information you have
provided.
A. Submitting Comments
If you submit a comment, please include the docket number for this
rulemaking (USCG-2013-1006), indicate the specific section of this
document to which each comment applies, and provide a reason for each
suggestion or recommendation. You may submit your comments and material
online or by fax, mail, or hand delivery, but please use only one of
these means. We recommend that you include your name and a mailing
address, an email address, or a phone number in the body of your
document so that we can contact you if we have questions regarding your
submission.
To submit your comment online, go to http://www.regulations.gov,
and follow the instructions of that Web site. If you submit your
comments by mail or hand delivery, submit them in an unbound format, no
larger than 8\1/2\ by 11 inches, suitable for copying and electronic
filing. If you submit comments by mail and would like to know that they
reached the Facility, please enclose a stamped, self-addressed postcard
or envelope.
We will consider all comments and material received during the
comment period and may change this proposed rule based on your
comments.
B. Viewing Comments and Documents
To view comments, as well as documents mentioned in this preamble
as being available in the docket, go to http://www.regulations.gov, and
follow the instructions on that Web site. If you do not have access to
the internet, you may view the docket online by visiting the Docket
Management Facility in Room W12-140 on the ground floor of the
Department of Transportation West Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. We have an agreement with the Department of
Transportation to use the Docket Management Facility.
C. Privacy Act
Anyone can search the electronic form of comments received into any
of our dockets by the name of the individual submitting the comment (or
signing the comment, if submitted on behalf of an association,
business, labor union, etc.). You may review a Privacy Act notice
regarding our public dockets in the January 17, 2008, issue of the
Federal Register (73 FR 3316).
D. Public Meeting
We do not now plan to hold a public meeting. But, you may submit a
request for one to the docket using one of the methods specified under
ADDRESSES. In your request, explain why you believe a public meeting
would be beneficial. If we decide to hold a public meeting, we
[[Page 49207]]
will announce its time and place in a later notice in the Federal
Register.
II. Abbreviations
Annual CPI-U The Annual ``Consumer Price Index--All Urban Consumers,
Not Seasonally Adjusted, U.S. City Average, All Items, 1982-84=100''
CPI-1 Rule The Coast Guard's first rulemaking amending 33 CFR part
138, subpart B, to adjust the OPA 90 limits of liability for vessels
and deepwater ports for inflation as required by 33 U.S.C.
2704(d)(4) and establishing the Coast Guard's procedure for future
required inflation adjustments to the limits of liability (Docket
No. USCG-2008-0007). See 73 FR 54997 (Sep. 24, 2008) [CPI-1 NPRM];
74 FR 31357 (July 1, 2009) [CPI-1 Interim Rule]; 75 FR 750 (January
6, 2010) [CPI-1 Final Rule].
BLS U.S. Department of Labor, Bureau of Labor Statistics
CFR Code of Federal Regulations
COFR Certificate of Financial Responsibility
COFR Rule The Coast Guard rule at 33 CFR part 138, subpart A,
implementing the OPA 90 requirement under 33 U.S.C. 2716 for vessel
responsible parties to establish and maintain evidence of financial
responsibility sufficient to meet their limits of liability as
adjusted over time for inflation
CPI Consumer Price Index
DHS U.S. Department of Homeland Security
DOI U.S. Department of the Interior
DPA Deepwater Port Act of 1974, as amended (33 U.S.C. 1501-1524)
DRPA The Delaware River Protection Act of 2006, Title VI of the
Coast Guard and Maritime Transportation Act of 2006, Public Law 109-
241, July 11, 2006, 120 Stat. 516
E.O. Executive Order
FR Federal Register
Fund The Oil Spill Liability Trust Fund created by 26 U.S.C. 9509
IRFA Initial Regulatory Flexibility Analysis
LNG Liquefied natural gas
LOOP Louisiana Offshore Oil Port
NPFC National Pollution Funds Center
NPRM Notice of proposed rulemaking
OMB U.S. Office of Management and Budget
OPA 90 The Oil Pollution Act of 1990, as amended (33 U.S.C. 2701, et
seq.)
SBA U.S. Small Business Administration
Sec. Section symbol
U.S. United States
U.S.C. United States Code
III. Basis and Purpose
In general, under Title I of the Oil Pollution Act of 1990, as
amended (OPA 90) (33 U.S.C. 2701, et seq.), the responsible parties for
any vessel (other than a public vessel) \1\ or facility (including any
deepwater port or onshore facility) from which oil is discharged, or
which poses a substantial threat of discharge of oil, into or upon the
navigable waters or the adjoining shorelines or the exclusive economic
zone of the United States, are strictly liable, jointly and severally,
for the removal costs and damages that result from such incident (``OPA
90 removal costs and damages''), as provided in 33 U.S.C. 2702. Under
33 U.S.C. 2704, however, the responsible parties' OPA 90 liability with
respect to any one incident is limited (with certain exceptions) to a
specified dollar amount.
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\1\ See 33 U.S.C. 2701(29) and (37) (definitions of public
vessel and vessel) and 33 U.S.C. 2702(c)(2) (public vessel
exclusion).
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In instances when a limit of liability applies, the responsible
parties may, but are not required to, incur direct removal costs or
reimburse third-party claims for OPA 90 removal costs and damages in
excess of the applicable limit of liability. The responsible parties
may, moreover, seek reimbursement from the Oil Spill Liability Trust
Fund (Fund) of the OPA 90 removal costs and damages they incur in
excess of the applicable limit of liability.\2\ This Fund is managed by
the Coast Guard's National Pollution Funds Center (NPFC).
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\2\ See 33 U.S.C. 2708. A more comprehensive description of the
Fund can be found in the Coast Guard's May 12, 2005, ``Report on
Implementation of the Oil Pollution Act of 1990'', which is
available in the docket.
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To prevent the real value of the OPA 90 limits of liability from
depreciating over time as a result of inflation and preserve the
``polluter pays'' principle embodied in OPA 90, 33 U.S.C. 2704(d)(4)
requires that the OPA 90 limits of liability be adjusted ``by
regulations issued not later than 3 years after July 11, 2006, and not
less than every 3 years thereafter,'' to reflect significant increases
in the CPI. The President delegated this regulatory authority to the
Secretary of the department in which the Coast Guard is operating in
respect to the limits of liability for vessels, deepwater ports subject
to the Deepwater Port Act of 1974 (DPA), as amended (33 U.S.C. 1501, et
seq.) (``deepwater ports''), and the limit of liability for onshore
facilities in 33 U.S.C. 2704(a)(4).\3\ The Secretary of Homeland
Security further delegated this authority to the Coast Guard in
Department of Homeland Security (DHS) Delegation 5110, Revision 01.
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\3\ Executive Order (E.O.) 12777, Sec. 4, 3 CFR, 1991 Comp., p.
351, as amended by E.O. 13638 of March 15, 2013, Sec. 1 (78 FR
17589, Thursday, March 21, 2013). See further discussion of the
delegations below, under Background and Regulatory History.
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In this notice of proposed rulemaking (NPRM) the Coast Guard
proposes to carry out the statutorily-required inflation adjustments to
the OPA 90 limits of liability. This NPRM also proposes to clarify
applicability of the OPA 90 vessel limits of liability to edible oil
cargo tank vessels and to tank vessels designated in their certificates
of inspection as oil spill response vessels. This clarification to the
existing regulatory text is needed for consistency with OPA 90 (33
U.S.C. 2704(c)(4)).
IV. Background and Regulatory History
A. Creation of 33 CFR Part 138, Subpart B
In 2008, the Coast Guard promulgated 33 CFR part 138, subpart B,
setting forth the OPA 90 limits of liability for vessels and deepwater
ports. (See Docket No. USCG-2005-21780.) This was done in anticipation
of the Coast Guard implementing the periodic inflation adjustments to
the limits of liability required by 33 U.S.C. 2704(d)(4), and to ensure
that the applicable amounts of financial responsibility that must be
demonstrated by vessel and deepwater port responsible parties as
required by OPA 90 (33 U.S.C. 2716) and 33 CFR part 138, subpart A
(COFR Rule), would always equal the applicable OPA 90 limit of
liability as adjusted over time.
B. Prior Regulatory Inflation Adjustments to the OPA 90 Limits of
Liability in 33 CFR Part 138, Subpart B
The Coast Guard published an NPRM on September 24, 2008 (73 FR
54997) (CPI-1 NPRM), and an interim rule with request for comments on
July 1, 2009 (74 FR 31357) (CPI-1 Interim Rule), timely adjusting the
vessel and deepwater port limits of liability at 33 CFR part 138,
subpart B, to reflect significant increases in the CPI as required by
OPA 90 (33 U.S.C. 2704(d)(4)). The CPI-1 Interim Rule also established
the Coast Guard's procedures and methodology for adjusting the OPA 90
limits of liability for inflation over time. There were no adverse
public comments on the CPI-1 Interim Rule. On January 6, 2010, the
Coast Guard therefore published a final rule (CPI-1 Final Rule),
adopting the CPI-1 Interim Rule amendments to 33 CFR part 138, subpart
B, without change (75 FR 750).\4\
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\4\ All Federal Register notices, comments and other materials
related to the CPI-1 Rule are available in the public docket for
that rulemaking (Docket No. USCG-2008-0007).
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The CPI-1 Rule was the first set of inflation adjustments to the
OPA 90 limits of liability for vessels and deepwater ports. The CPI-1
Rule, however, deferred adjusting the statutory limit of liability in
33 U.S.C. 2704(a)(4) for onshore facilities.
[[Page 49208]]
As explained in the Federal Register notices for the CPI-1 Rule,
the decision to defer adjusting the onshore facility limit of liability
was made because E.O. 12777, Sec. 4, and its implementing re-
delegations vested the President's responsibility to adjust the OPA 90
limits of liability (including the limit of liability for onshore
facilities) in multiple agencies based on the agencies' traditional
regulatory jurisdiction. Specifically, the delegations vested the
President's limit of liability adjustment authorities in the Commandant
of the Coast Guard for vessels, deepwater ports and marine
transportation-related onshore facilities, in the Secretary of the
Department of Transportation for non-marine transportation-related
onshore facilities, in the Administrator of the Environmental
Protection Agency for non-transportation-related onshore facilities,
and in the Secretary of the Department of the Interior (DOI) for
offshore facilities.\5\
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\5\ E.O. 12777, Sec. 4, also delegated various other liability
limit adjustment and reporting authorities in 33 U.S.C. 2704.
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This division of responsibilities complicated the CPI adjustment
rulemaking requirement, particularly in respect to the three sub-
categories of onshore facilities. Interagency coordination was,
therefore, needed to avoid inconsistent regulatory treatment.
The decision to defer adjusting the onshore facility statutory
limit of liability for inflation also permitted the Coast Guard to
complete the required first set of inflation increases to the vessel
and deepwater port limits of liability by the statutory deadline, and
to establish the Coast Guard's CPI increase adjustment procedure at
Sec. 138.240. There were no adverse public comments on the decision to
defer adjusting the onshore facility limit of liability for inflation.
On March 15, 2013, the President signed E.O. 13638, restating and
simplifying the delegations in E.O. 12777, Sec. 4, and vesting the
authority to make CPI adjustments to the onshore facility statutory
limit of liability (33 U.S.C. 2704(a)(4)) in ``the Secretary of the
Department in which the Coast Guard is operating''. (See E.O. 13638 of
March 15, 2013, Sec. 1, amending E.O. 12777, Sec. 4, at 78 FR 17589,
Thursday, March 21, 2013.) The restated delegations also require
interagency coordination, but otherwise preserve the earlier
delegations, including the delegated authorities to promulgate CPI
adjustments to the limits of liability for vessels and deepwater
ports.\6\
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\6\ Similarly, the authority to make CPI adjustments to the
limit of liability for offshore facilities in 33 U.S.C. 2704(a)(3)
remains with the Secretary of the Interior (see, e.g., 79 FR 10056,
Monday, February 24, 2014; 79 FR 15275, Wednesday, March 19, 2014).
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On July 10, 2013, the Secretary of Homeland Security re-delegated
these authorities to the Commandant of the Coast Guard. (See DHS
Delegation Number 5110, Revision 01.) This NPRM, therefore, proposes to
adjust the vessel, deepwater port and onshore facility limits of
liability to reflect significant increases in the CPI.
C. Statutory and Regulatory History Respecting the OPA 90 Edible Oil
Cargo Tank Vessel and Oil Spill Response Vessel Exceptions
Section 2(d) of the 1995 Edible Oil Regulatory Reform Act, Public
Law 104-55, Nov. 20, 1995, 109 Stat. 546, amended OPA 90 (33 U.S.C.
2704(a)(1) and 33 U.S.C. 2716(a)), excepting tank vessels on which the
only oil carried as cargo is an animal fat or vegetable oil (``edible
oil tank vessels'') from the OPA 90 tank vessel limits of liability in
33 U.S.C. 2704(a)(1). The effect of the exception was to classify
edible oil tank vessels as a matter of law to the ``any other vessel''
limit of liability category in OPA 90 (33 U.S.C. 2704(a)(2)). In
addition, edible oil tank vessels were, as of that date, subject to the
lower OPA 90 (33 U.S.C. 2716) evidence of financial responsibility
requirements applicable to the ``any other vessel'' category.
The Coast Guard Authorization Act of 1998, Public Law 105-383,
title IV, section 406, Nov. 13, 1998, 112 Stat. 3429, further amended
OPA 90 (33 U.S.C. 2704), moving the edible oil tank vessel exception
from 33 U.S.C. 2704(a)(1) to new 33 U.S.C. 2704(c)(4)(A), and adding an
additional exception at 33 U.S.C. 2704(c)(4)(B) for tank vessels
designated in their certificates of inspection as oil spill response
vessels that are used solely for removal (``oil spill response
vessels'').
Oil spill response vessels are, therefore, also classified as a
matter of law to the ``any other vessel'' category in 33 U.S.C.
2704(a)(2), and subject to the resulting lower OPA 90 limit of
liability and evidence of financial responsibility requirements.
The special treatment accorded by OPA 90 to edible oil tank vessels
and oil spill response vessels is not reflected in the current
regulatory text of 33 CFR part 138. The Coast Guard, therefore,
believes that a clarification to the regulatory text would reduce
regulatory uncertainty.
V. Discussion of Proposed Rule
A. Regulatory Inflation Adjustments and Statutory Updates to the Limits
of Liability for Vessels, Deepwater Ports and Onshore Facilities
In accordance with 33 U.S.C. 2704(d)(4) and 33 CFR part 138,
subpart B, we propose to increase the OPA 90 limits of liability for
vessels and deepwater ports, set forth in Sec. 138.230(a) and (b),
respectively, to reflect significant increases in the CPI since we last
adjusted them for inflation. This would be the second set of inflation
adjustments to the vessel and deepwater port limits of liability.
We also propose increasing the OPA 90 limit of liability for
onshore facilities in 33 U.S.C. 2704(a)(4) for inflation. This would be
the first inflation increase to the onshore facility limit of
liability. The inflation-adjusted onshore facility limit of liability
would be set forth in Sec. 138.230(c), which was expressly reserved by
the CPI-1 Rule for that purpose.
1. What formula will be used to adjust the vessel, deepwater port and
onshore facility limits of liability for inflation?
The proposed limit of liability adjustments have been calculated
using the inflation adjustment methodology established by the CPI-1
Rule, set forth in Sec. 138.240.\7\ Specifically, the Director, NPFC,
calculates the cumulative percent change in the Annual CPI-U from the
year the limit of liability was established or last adjusted by statute
or regulation, whichever is later (i.e., the previous period), to the
most recently published Annual CPI-U (i.e., the current period), using
the formula in Sec. 138.240(b). The Director, NPFC, then calculates
inflation adjustments to the limits of liability based on that
cumulative percent change in the Annual CPI-U, as provided in Sec.
138.240(d). Both the cumulative percent change formula and the limit of
liability adjustment formula are based on the U.S. Department of Labor,
Bureau of Labor Statistics (BLS) escalation formula, which can be
viewed at http://www.bls.gov/cpi/cpi1998d.htm.\8\
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\7\ A detailed discussion of the Coast Guard's inflation
adjustment methodology, and how it was developed, can be found in
the preambles for the CPI-1 NPRM, 73 FR 54997, and the CPI-1 Interim
Rule, 74 FR 31357.
\8\ See also 33 CFR 138.240(a) (proposed 33 CFR 138.240(b)).
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[[Page 49209]]
2. What current period values would be used for this set of inflation
adjustments to the vessel, deepwater port and onshore facility limits
of liability?
To keep the limits of liability current, the inflation adjustment
methodology established by the CPI-1 Rule, at Sec. 138.240, requires
that we use the Annual CPI-U that has been most recently published by
the BLS as the current period value. For purposes of this NPRM, the
Coast Guard is therefore estimating the inflation adjusted limits of
liability using the 2013 Annual CPI-U, published by BLS on January 16,
2014, as the current period value.\9\ This is the Annual CPI-U that has
been most recently published by the BLS.
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\9\ See Table 24 on page 68 of the BLS document ``CPI Detailed
Report--Data for March 2014'', which is available at the following
link: http://www.bls.gov/cpi/cpid1403.pdf.
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In the final rule stage of this rulemaking we will calculate the
adjustments using the most recently published Annual CPI-U available at
that time. Therefore, if the 2014 Annual CPI-U or another more recent
Annual CPI-U is available for calculating the current period value when
we are at the final rule stage of this rulemaking, the limit of
liability values would change marginally from those proposed today.
3. What previous period values would be used for this set of inflation
adjustments to the vessel, deepwater port and onshore facility limits
of liability?
Applying the inflation adjustment methodology at Sec. 138.240, we
propose adjusting the vessel and deepwater port limits of liability to
reflect significant increases in the Annual CPI-U since those limits
were last adjusted for inflation by the CPI-1 Rule. We, therefore,
propose using the 2008 Annual CPI-U, or 215.3, as the previous period
value for this cycle of adjustments to the vessel and deepwater port
limits of liability. This was the current period value we used for the
CPI-1 Rule inflation adjustments to the vessel and deepwater port
limits of liability.\10\
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\10\ The 2008 Annual CPI-U was used as the current period value
for the CPI-1 inflation adjustments because of the time lag for BLS
publication of the Annual CPI-U and the time it takes to promulgate
regulations.
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For onshore facilities, we propose adjusting the OPA 90 statutory
limit of liability in 33 U.S.C. 2704(a)(4) to reflect significant
increases in the Annual CPI-U since 2006. This is the baseline year, or
previous period, established by the CPI-1 Rule for calculating the
first inflation adjustments to the statutory limits of liability in 33
U.S.C. 2704(a), including the statutory limit of liability for onshore
facilities.\11\
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\11\ See 74 FR at 31361.
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As explained during the CPI-1 Rule development,\12\ we proposed
using 2006 as the previous period date for the first set of adjustments
to the OPA 90 statutory limits of liability for all source categories.
There were no adverse comments on that approach. We, therefore,
established the 2006 Annual CPI-U value of 201.6 as the previous period
value for adjusting the statutory limits of liability for all source
categories delegated to the Coast Guard (i.e., vessels, deepwater ports
and onshore facilities). We are, therefore, using that baseline for the
adjustments we are proposing today to the statutory limit of liability
for onshore facilities.
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\12\ See 73 FR at 55000-55001; 74 FR at 31361.
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We are, however, considering whether to use the 1990 Annual CPI-U
previous period value to adjust the onshore facility limit of
liability, and whether to also recalculate the CPI-1 Rule adjustment to
the deepwater port general limit of liability using a 1990 previous
period value.\13\ This issue is discussed further in subsection 5,
below.
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\13\ We are not revisiting the CPI-1 Rule adjustments to the
vessel and LOOP limits of liability. This is because the 2006 and
1995 ``Previous Periods'' used, respectively, for those adjustments
were based on the date the vessel statutory limits of liability were
amended by DRPA and the date LOOP's facility-specific limit of
liability was established by regulation under OPA 90 (33 U.S.C.
2704(d)(2)(C)).
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4. What would the adjusted limits of liability be?
Inserting the estimated percent changes in the Annual CPI-U into
the adjustment formula would result in the following proposed new
limits of liability for vessels and deepwater ports (using the 2008
Annual CPI-U previous period), and onshore facilities (using the 2006
Annual CPI-U previous period), and rounding all limits of liability to
the closest $100:
------------------------------------------------------------------------
Previous limit of Proposed new limit
Source category liability of liability
------------------------------------------------------------------------
Sec. 138.230 (a) Vessels
(1) For a single-hull tank the greater of the greater of
vessel greater than 3,000 $3,200 per gross $3,500 per gross
gross tons, other than a ton or ton or
vessel excluded under 33 $23,496,000. $25,422,700.
U.S.C. 2704(c)(4) (i.e., an
edible oil tank vessel or
oil spill response vessel).
(2) For a tank vessel the greater of the greater of
greater than 3,000 gross $2,000 per gross $2,200 per gross
tons, other than a vessel ton or ton or
referred to in (a)(1) or a $17,088,000. $18,489,200.
vessel excluded under 33
U.S.C. 2704(c)(4) (i.e., an
edible oil tank vessel or
oil spill response vessel).
(3) For a single-hull tank the greater of the greater of
vessel less than or equal $3,200 per gross $3,500 per gross
to 3,000 gross tons, other ton or $6,408,000. ton or
than a vessel excluded $6,933,500.
under 33 U.S.C. 2704(c)(4)
(i.e., an edible oil tank
vessel or oil spill
response vessel).
(4) For a tank vessel less the greater of the greater of
than or equal to 3,000 $2,000 per gross $2,200 per gross
gross tons, other than a ton or $4,272,000. ton or
vessel referred to in (3) $4,622,300.
or a vessel excluded under
33 U.S.C. 2704(c)(4) (i.e.,
an edible oil tank vessel
or oil spill response
vessel).
(5) For any other vessel, the greater of the greater of
including any edible oil $1,000 per gross $1,100 per gross
tank vessel and any oil ton or $854,400. ton or $924,500.
spill response vessel.
Sec. 138.230 (b) Deepwater
ports that are subject to the
DPA
(1) For a deepwater port $373,800,000...... $404,451,600.
that is subject to the DPA,
other than the Louisiana
Offshore Oil Port (LOOP).
(2) For LOOP................ $87,606,000....... $94,789,700.
Sec. 138.230 (c) Onshore $350,000,000...... $404,600,000.
facilities.
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[[Page 49210]]
These values would change marginally if the 2014 Annual CPI-U or
another more recent Annual CPI-U is used as the current period value
when we are at the final rule stage of this rulemaking.
5. What would the estimated adjusted limit of liability for onshore
facilities and deepwater ports generally be using a 1990 previous
period?
As mentioned in subsection 3, above, we are considering whether to
use a 1990 previous period to adjust the onshore facility limit of
liability, and whether to recalculate the CPI-1 Rule adjustment to the
deepwater port general limit of liability using a 1990 previous period
value. There are several reasons why we are considering doing this:
First, in respect to the onshore facility limit of
liability, Coast Guard data indicate that one onshore facility incident
occurred following publication of the CPI-1 Rule--the 2010 Enbridge
Pipeline spill to the Kalamazoo River--that may result in OPA 90
removal costs and damages in excess of the onshore facility limit of
liability.\14\ This recent experience warrants revisiting whether to
use the 2006 previous period established by the CPI-1 Rule for the
first inflation adjustment to the onshore facility statutory limit of
liability.
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\14\ On July 26, 2010, Enbridge Energy Partners LLP (Enbridge)
reported a 30-inch pipeline rupture, near Marshall, Michigan. The
resulting oil discharge, with volume estimates ranging from 843,000
gallons to over a million gallons, entered Talmadge Creek and flowed
into the Kalamazoo River, a Lake Michigan tributary. Heavy rains
caused the river to overtop existing dams and carried oil 35 miles
downstream on the Kalamazoo River. On July 28, 2010, the spill was
contained approximately 80 river miles from Lake Michigan. This
incident involved tar sand oil, which is particularly difficult and
costly to clean up, and is the most expensive onshore facility spill
in U.S. history.
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In addition, DOI is proposing a rule that would adjust the
offshore facility limit of liability for inflation since OPA 90 was
enacted, because there have not been intervening adjustments to that
limit of liability (as compared to the vessel limits of liability,
which have been adjusted both by statute and regulation), and because
the damages in the 2010 Deepwater Horizon spill of national
significance have far exceeded the offshore facility limit of
liability.\15\
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\15\ 79 FR at 10059. The DOI otherwise plans to adopt a
methodology for future adjustments similar to Sec. 138.240.
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Moreover, DRPA did not change or expressly address the
onshore facility and deepwater port statutory limit of liability at 33
U.S.C. 2704(a)(4).\16\
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\16\ OPA 90 (33 U.S.C. 2704(a)(4)) sets forth a common statutory
limit of liability for onshore facilities and deepwater ports of
$350,000,000.
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Therefore, although onshore facility spills have not historically
(with the one exception previously mentioned) exceeded the statutory
limit of liability in 33 U.S.C. 2704(a)(4) and there currently are no
deepwater ports in operation that are subject to the generally-
applicable limit of liability for deepwater ports, we believe that the
Nation's recent experience with costly oil spills--although
exceptional--warrants revisiting whether to use the 1990 Annual CPI-U
as the previous period (instead of the 2006 previous period established
by the CPI-1 Rule) for the first inflation adjustment to the statutory
limit of liability in 33 U.S.C. 2704(a)(4), which applies to both
onshore facilities and deepwater ports.
Considering whether to use a different previous period for
adjusting the onshore facility limit of liability is appropriate
because the CPI-1 Rule did not adjust the onshore facility limit of
liability for inflation. In addition, although deepwater ports may pose
a very low risk of discharge as compared to other modes of oil
transportation,\17\ reconsidering our use of the 2006 previous period
for the CPI-1 Rule's deepwater port limit of liability adjustment is
appropriate given our better understanding of the potential costs
arising from oil spill incidents in offshore areas. We, therefore,
invite the public to comment on this issue.
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\17\ See 1993 Deepwater Ports Study and Report to Congress under
OPA 90 Section 1004(d)(2), analyzing the relative operational risks
of the principal modes of crude oil transportation to the United
States.
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If we were to adopt a 1990 previous period, we would adjust the
onshore facility and deepwater port statutory limit of liability in 33
U.S.C. 2704(a)(4) using the 1990 Annual CPI-U value of 130.7 as the
previous period. This would be instead of the 2006 Annual CPI-U
previous period value of 201.6 and the 2008 Annual CPI-U previous
period value of 215.3, used to calculate, respectively, the adjusted
limit of liability values for onshore facilities and deepwater ports
reflected in the regulatory text of this proposal.
If, after considering any public comment on this NPRM, we decide to
adjust the onshore facility and deepwater port generally-applicable
limit of liability using the 1990 Annual CPI-U of 130.7 as the previous
period value (i.e., instead of the 2006 Annual CPI-U value of 201.6 for
onshore facilities, and the 2008 Annual CPI-U value of 215.3 for
deepwater ports), the estimated percent change in the Annual CPI-U
would be 78.2 percent. Inserting this estimated percent change in the
Annual CPI-U into the adjustment formula would result in the following
new limits of liability for onshore facilities and deepwater ports
generally, after rounding the limits of liability to the closest $100:
------------------------------------------------------------------------
Alternative new
Statutory limit of
Source category previous limit liability (1990
of liability previous period)
------------------------------------------------------------------------
Sec. 138.230(b)(1) For a deepwater $350,000,000 $623,700,000
port that is subject to the DPA,
other than LOOP....................
Sec. 138.230(c) For onshore 350,000,000 623,700,000
facilities.........................
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These values would also change marginally if the 2014 Annual CPI-U
or another more recent Annual CPI-U is used as the current period value
when we are at the final rule stage of this rulemaking.
6. How does the Coast Guard propose to notify the public when the
limits of liability for vessels, deepwater ports and onshore facilities
are adjusted in the future for inflation or if the rule is amended to
reflect amendments to the statute?
We are proposing a simplified regulatory procedure at proposed new
paragraph Sec. 138.240(a) for making future inflation updates to the
OPA 90 limits of liability for vessels, deepwater ports and onshore
facilities, in Sec. 138.230(a), (b), and (c) respectively. This
simplified regulatory approach is based on a similar procedure used by
the Federal Energy Regulatory Commission to make routine cost
adjustments to its fees (see 18 CFR 381.104(a) and (d)), and would help
ensure regular, timely inflation
[[Page 49211]]
adjustments to the limits of liability as required by statute. The
approach is also an appropriate and helpful efficiency measure given
the mandatory and routine nature of the CPI adjustments.
Under this proposed procedure, the Director, NPFC, would continue
to determine future inflation adjustments to the limits of liability
using the significance threshold and adjustment methodology in Sec.
138.240, and the most current CPI values published by the BLS. The
Director, NPFC, would, however, publish the inflation-adjusted limits
of liability in the Federal Register as final rule amendments to Sec.
138.230.\18\ The new inflation-adjusted limits of liability would
appear in the next publication of the CFR.
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\18\ As provided in Sec. 138.240(b) (Sec. 138.240(c) of the
proposed rule), if the significance threshold were not met, the
Director, NPFC, would publish a notice of no inflation adjustment.
---------------------------------------------------------------------------
Because the adjustment methodology was established by the CPI-1
Rule, and the simplified procedure will be established by this
rulemaking, publication of an NPRM would not be necessary for these
future mandated inflation adjustments. The public would, however, be
able to contact the person listed in the FOR FURTHER INFORMATION
CONTACT section of the Federal Register notice amending the limits of
liability. Therefore, in the event a member of the public identifies a
mathematical or other technical error in the Coast Guard's application
of the adjustment methodology and contacted the Coast Guard, the Coast
Guard would publish a correction notice in the Federal Register.
Under this simplified procedure, unless otherwise specified in the
Federal Register, the new CPI-adjusted limits of liability would become
effective on the 90th day after their publication in the Federal
Register, including (as provided in the COFR Rule at Sec. 138.85) for
purposes of the requirement for responsible parties to establish and
maintain the applicable amounts of OPA 90 financial responsibility
required for vessels and deepwater ports under 33 U.S.C. 2716 and Sec.
138.80(f)(1). This will ensure efficient and timely implementation of
this recurring, though routine, regulatory mandate.
The Director would use this simplified regulatory procedure to
update Sec. 138.230 to reflect statutory changes to the OPA 90 limits
of liability. This will ensure that the limits of liability set forth
in subpart B remain consistent with the statutory limits of liability
if they are amended. Thereafter, as discussed in the CPI-1 Interim
Rule, the new statutory limit of liability would be adjusted by
regulation for inflation on the same inflation-adjustment cycle used
for the other source categories. We note that, as a result, a limit of
liability could change more frequently than once every three years, if
it was changed by statute and then adjusted by regulation for inflation
on the regular inflation-adjustment cycle.
Because any new statutory limits of liability normally would
supersede the prior regulatory limits of liability, any such new limits
of liability would take effect for purposes of determining a
responsible party's liability in the event of an incident on the date
of enactment unless another effective date is specified in the amending
law. As provided in Sec. 138.85 of the COFR Rule, however, the
deadline for vessel and deepwater port responsible parties to establish
evidence of financial responsibility in the new amounts would be the
90th day after the effective date of the Coast Guard's final rule
amending the CFR to reflect the new statutory limits of liability,
unless another date is required by statute or specified in the Federal
Register notice amending the regulation. (See, 33 U.S.C. 2716 and Sec.
138.80(f)(1).)
The simplified regulatory procedure described in proposed Sec.
138.240(a) would not be used for other adjustments to the limits of
liability, such as those authorized for classes and categories of
onshore facilities under 33 U.S.C. 2704(d)(1) and for deepwater ports
under 33 U.S.C. 2704(d)(2).
B. Clarifying Amendments Respecting Edible Oil Cargo Tank Vessels and
Oil Spill Response Vessels
The Coast Guard is also proposing amendments to the vessel limits
of liability in Sec. 138.230(a) for consistency with 33 U.S.C.
2704(c)(4). (See Regulatory History discussion, above at IV.C.)
Specifically, the proposed amendments to Sec. 138.230(a) would clarify
that edible oil cargo tank vessels and oil spill response vessels
(defined as proposed in Sec. 138.220(b)) are subject to the lower
limits of liability set forth in current Sec. 138.230(a)(5) (proposed
new Sec. 138.230(a)(2)) applicable to the ``any other vessel''
category under 33 U.S.C. 2704(a)(2). The Coast Guard believes that
adding clarifying language in the regulatory text will be helpful to
the public.
C. Section-by-Section Discussion 19
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\19\ The Coast Guard has included the complete regulatory text
of 33 CFR part 138, subpart B in this NPRM to facilitate the
public's understanding of the changes proposed to the current text
of subpart B. The changes proposed to the existing regulatory text
are, however, limited to those specifically mentioned in this
section-by-section discussion.
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Heading. The heading for 33 CFR part 138 would be amended by adding
the words ``ONSHORE FACILITY''.
Authorities. We propose to update the authorities citations for
part 138 to reflect the amendments to the delegations in E.O. 12777,
Sec. 4, by E.O. 13638 of March 15, 2013, the resulting agency-level re-
delegations, and for editorial purposes.
Sec. 138.200 Scope. We propose to amend Sec. 138.200 to add that
subpart B sets forth the OPA 90 limit of liability for onshore
facilities, in addition to the OPA 90 limits of liability for vessels
and deepwater ports. We also propose to amend the scope section to
specify that subpart B includes the procedure for making future
inflation adjustments, by regulation, to the limits of liability for
vessels, deepwater ports and onshore facilities, and for updating the
limits when they are amended by statute. Finally, we propose to amend
the scope section to specify that subpart B also cross-references DOI's
proposed regulation at 30 CFR 553.702, setting forth the OPA 90 limit
of liability applicable to offshore facilities, including offshore
pipelines, as adjusted by DOI for inflation under OPA 90 (33 U.S.C.
2704(d)(4)). This cross-reference is being added for the convenience of
the public.
Sec. 138.210 Applicability. We propose amending Sec. 138.210 to
add that subpart B applies to you if you are a responsible party for an
onshore facility, except (as is the case under the current rule for
vessel and deepwater port responsible parties) to the extent your
liability is unlimited under OPA 90 (33 U.S.C. 2704(c)).
Sec. 138.220 Definitions. We are proposing to amend Sec.
138.220(a) of the definitions to cross-reference the OPA 90 definitions
of facility, offshore facility and onshore facility. In addition, we
propose to amend Sec. 138.220(b) by revising the definition of
Director, NPFC, in Sec. 138.220(b), to conform to how that term is
defined in other rules implemented by NPFC, and by adding definitions
for current period and previous period as DOI has done in its proposal
to amend the offshore facility limit of liability (79 FR at 10063).
These definitions clarify the CPI escalation formula. Finally, we
propose to add definitions for edible oil tank vessel and oil spill
response vessel to mean,
[[Page 49212]]
respectively, a tank vessel referred to in OPA 90 (33 U.S.C.
2704(c)(4)(A) or (B)). These definitions are needed to clarify
applicability of the limits of liability proposed in Sec. 138.230.
Sec. 138.230 Limits of liability. We propose to increase the
limits of liability for vessels and deepwater ports, including LOOP,
from those set forth in current Sec. 138.230, to reflect significant
increases in the CPI. We also propose to amend Sec. 138.230(a) to
expressly provide and clarify that the ``other vessel'' limits of
liability in Sec. 138.230(a)(2) apply to edible oil tank vessels and
oil spill response vessels. Additionally, we propose adding an
inflation-adjusted limit of liability for onshore facilities in Sec.
138.230(c).
As discussed in section V.A.2, the limits of liability proposed in
Sec. 138.230 of this NPRM are estimates, calculated using the 2013
Annual CPI-U as the current value. The updated limit of liability
values that will appear in the final rule of this rulemaking will be
calculated using the most recent Annual CPI-U available at the time of
publication of the final rule, and may therefore be marginally
different than the estimates in this NPRM.
In addition, as discussed above in section V.A.3 and 5, the new
limit of liability for deepwater ports and onshore facilities generally
may differ from the amounts shown in Sec. 138.230(b)(1) and (c) of the
proposed regulatory text if, after considering any public comments on
this NPRM, we decide to calculate the CPI adjustments to the statutory
limit of liability for these two source categories using the 1990
Annual CPI-U value of 130.7 as the previous period. This would be
instead of using the 2006 Annual CPI-U value of 201.6 to adjust the
onshore facility limit of liability and the 2008 Annual CPI-U value of
215.3 to adjust the deepwater port generally-applicable limit of
liability, as we have done for purposes of this proposal.
Finally, we have added new subsection Sec. 138.230(d). Paragraph
(d) will cross-reference the offshore facility limit of liability,
which DOI has proposed to adjust for inflation and set forth at 30 CFR
553.702 (see 79 FR at 10063). Our proposal reflects DOI's proposal. If
the section numbering of that regulation changes in DOI's final rule,
we will change our regulatory text accordingly.
Sec. 138.240 Procedure for updating limits of liability to reflect
significant increases in the Consumer Price Index (Annual CPI-U) and
statutory changes. We propose adding new Sec. 138.240(a), and re-
designating the subsections that follow accordingly. Proposed new
subsection (a) would establish the simplified regulatory procedure the
Coast Guard proposes to use to amend the limits of liability contained
in proposed Sec. 138.230 to reflect significant increases in the CPI
and when the limits of liability are amended by statute. As discussed
above in section V.A.6, the wording in proposed Sec. 138.240(a) is
based on a similar procedure used by the Federal Energy Regulatory
Commission to adjust its fees for inflation (see 18 CFR 381.104(a) and
(d)), and would help ensure regular, timely inflation adjustments to
the OPA 90 limits of liability as intended by Congress. The approach is
also an appropriate and helpful efficiency measure given the mandatory
and routine nature of the CPI adjustments.
We also propose editorial revisions, such as dividing Sec.
138.240(b) into subparagraphs, adding a cross reference to Sec.
138.240(a) in Sec. 138.240(c), and changing the title of Sec. 138.240
to read ``Procedure for updating limits of liability to reflect
significant increases in the Consumer Price Index (Annual CPI-U) and
statutory changes.'' No other changes are being proposed to Sec.
138.240.
VI. Regulatory Analyses
We developed this proposed rule after considering numerous statutes
and executive orders (E.O.s) related to rulemaking. Below we summarize
our analyses based on these statutes or E.O.s.
A. Regulatory Planning and Review
Executive Orders 12866 (``Regulatory Planning and Review'') and
13563 (``Improving Regulation and Regulatory Review'') direct agencies
to assess the costs and benefits of available regulatory alternatives
and, if regulation is necessary, to select regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility.
This proposed rule is not a significant regulatory action under
section 3(f) of E.O. 12866 as supplemented by E.O. 13563, and does not
require an assessment of potential costs and benefits under section
6(a)(3) of E.O. 12866. The Office of Management and Budget (OMB) has
not reviewed it under E.O. 12866. Nonetheless, we developed an analysis
of the costs and benefits of the proposed rule to ascertain its
probable impacts on industry. We consider all estimates and analysis in
this Regulatory Analysis to be subject to change in consideration of
public comments. A draft Regulatory Assessment is available in the
docket and a summary follows.
1. Regulatory Costs
There are two regulatory costs that are expected from this proposed
rule. Regulatory Cost 1: Increased Cost of Liability. Regulatory Cost
2: Increased cost of establishing vessel evidence of financial
responsibility.\20\
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\20\ It should be noted that from an economic perspective, CPI
adjustments are actually neutral in that they maintain the cost and
benefit impacts of the limits of liability constant in real dollar
terms. Not adjusting the limits of liability would, by comparison,
allow inflation to erode the value of the limits of liability in
real terms.
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a. Discussion of Regulatory Cost
This proposed rule could increase the dollar amount of OPA 90
removal costs and damages a responsible party of a vessel (other than a
public vessel),\21\ deepwater port, or onshore facility must pay in the
event of a discharge, or substantial threat of discharge, of oil into
or upon the navigable waters or adjoining shorelines or the exclusive
economic zone of the United States (``OPA 90 incident''). This
regulatory cost, however, would only be incurred by a responsible party
if an OPA 90 incident resulted in OPA 90 removal costs and damages that
exceeded the applicable vessel, deepwater port, or onshore facility
previous limit of liability. In any such case, assuming as we do in
this analysis that the responsible party is entitled to a limit of
liability (i.e., none of the exceptions in 33 U.S.C. 2704(c) apply),
the difference between the previous limit of liability amount and the
proposed new limit of liability amount is the maximum increased cost to
the responsible party. Incident costs above this value would not be
borne by the responsible parties, but rather by the Fund.
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\21\ See footnote 1. According to Coast Guard's MISLE database,
there are over 200,000 vessels of various types in the vessel
population that are not public vessels or used exclusively for
recreational use. Examples of vessel types include, but are not
limited to: fish processing vessel, freight barge, freight ship,
industrial vessel, mobile offshore drilling unit, offshore supply
vessel, oil recovery vessel, passenger vessel, commercial fishing
vessel, passenger barge, research vessel, school ship, tank barge,
tank ship, and towing vessel.
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i. Affected Population--Vessels
Coast Guard data, as of May 2013, indicate that for the years 1991
through 2012, 62 OPA 90 vessel incidents (i.e., an average of
approximately 3 OPA 90 vessel incidents per year) resulted in OPA 90
removal costs and damages in
[[Page 49213]]
excess of the previous limits of liability. For the purpose of this
analysis, we have therefore assumed that three OPA 90 vessel incidents
with costs exceeding the previous limits of liability would continue to
occur each year throughout the 10-year analysis period (2014-2023).
ii. Affected Population--Deepwater Ports
This proposed rule could affect the responsible parties of any port
licensed under the DPA that is subject to OPA 90 (i.e., any such port,
including its associated pipelines, that meets the OPA 90 definition of
``facility'').\22\ Currently there are two ports in operation that are
licensed under the DPA--LOOP and Northeast Gateway. Northeast Gateway,
however, is a liquefied natural gas (LNG) port and, as currently
designed and operated, it does not meet the OPA 90 definition of
``facility''. Therefore--although a vessel visiting or servicing
Northeast Gateway could become the source of a discharge, or
substantial threat of discharge, of oil for which the vessel
responsible parties would be liable under OPA 90--it is highly unlikely
that Northeast Gateway or any similarly-designed and operated LNG port
would be the source of an oil discharge, or substantial threat of
discharge.\23\ We therefore, do not include LNG ports in this analysis.
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\22\ 33 U.S.C. 2701(6) defines ``deepwater port'' as ``a
facility licensed under the Deepwater Port Act of 1974 (33 U.S.C.
1501-1524)'' [emphasis added]. 33 U.S.C. 2701(9) defines
``facility'' to mean ``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[.]''
\23\ Several other LNG ports were mentioned in the regulatory
analysis for the CPI-1 Rule. But they have either not become
operational, or are no longer in operation. For example, on July 17,
2013, the Maritime Administrator approved a request by Suez Neptune
LNG, LLC, for a temporary five-year suspension of its deepwater port
license. In addition, on June 28, 2013 the Maritime Administrator
cleared decommissioning of the Gulf Gateway Energy Bridge, and
approved termination of its license. These LNG ports, therefore, are
not included in this analysis. A fifth LNG port licensed under the
DPA, Port Dolphin Energy LLC Deepwater Port (Port Dolphin), is not
yet operational. Port Dolphin, moreover, has the same design as
Northeast Gateway and, therefore, also would not meet the OPA 90
definition of ``facility''. It, therefore, is not included in this
analysis.
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To date, LOOP (the only port licensed under the DPA that is in
operation and meets the OPA 90 definitions of ``deepwater port'' and
``facility'') has not had an OPA 90 incident that resulted in removal
costs and damages in excess of LOOP's previous limit of liability of
$87,606,000. However, for the purposes of this analysis, we show the
cost of one OPA 90 incident occurring at LOOP over the 10-year analysis
period (2014-2023), with OPA 90 removal costs and damages in excess of
the previous limit of liability for LOOP, as the potential for such a
spill exists.
iii. Affected Population--Onshore Facilities
This proposed rule could affect any responsible party for an
onshore facility (including onshore pipelines). The impact would,
however, only occur if the incident resulted in OPA 90 removal costs
and damages in excess of the previous limit of liability.
Because of the large number and diversity of onshore facilities, it
is not possible to predict which specific types or sizes of onshore
facilities might be affected by this proposed rule. Coast Guard data,
as of May 2013, however, indicate that since the enactment of OPA 90
through May 1, 2013, only one onshore facility incident--the 2010
Enbridge Pipeline spill in Michigan--may have resulted in OPA 90
removal costs and damages that exceeded the onshore facility previous
limit of liability of $350,000,000.\24\
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\24\ See footnote 12.
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The Enbridge Pipeline incident indicates that the previous limit of
liability for an onshore facility, although high, can still be exceeded
by a low frequency, but high consequence oil spill. Therefore, for the
purposes of this analysis, we assume one onshore facility incident
would occur over the 10-year analysis time period that would result in
OPA 90 removal costs and damages in excess of the onshore facility
previous limit of liability.
iv. Cost Summary Regulatory Cost 1
(a) Vessels
We estimate the greatest cost to a vessel responsible party
entitled to a limit of liability under OPA 90, for purposes of this
analysis, by assuming that the average annual cost from the historical
incidents analyzed would remain constant throughout the analysis period
(2014-2023). The average annual increased cost of liability for the
analysis time period (2013-2024) is estimated by calculating the
difference between the previous limit of liability and the proposed new
limit of liability for each of the 62 historical incidents. These
values were totaled and then divided by the number of years of data (22
years). The average annual cost resulting from the three estimated
vessel incidents per year is estimated to be $2,544,000 (non-discounted
dollars). Dividing this value by the three hypothetical vessel
incidents per year equals $848,000 for the average annual cost per
vessel.
(b) Deepwater Ports
We estimate the greatest cost to a deepwater port responsible party
entitled to a limit of liability under OPA 90, for purposes of this
analysis, by assuming that the cost of the incident would be equal to
the proposed new limit of liability. As mentioned above, LOOP has never
had an incident with OPA 90 removal costs and damages in excess of its
limit of liability. Therefore, given the lack of any deepwater port
historical data, we rely on the historical data available for vessel
incidents with costs in excess of LOOP's previous limit of liability of
$87,606,000.
Specifically, we assume that the LOOP responsible parties would
make OPA 90 removal cost and damage payments for the one hypothetical
incident, over the course of 10 years after the incident date.\25\ In
addition, for the purposes of this analysis, we assume that the
payments would be spread out in equal annual amounts over the 10-year
analysis period (2014-2023). Applying these assumptions, the average
annual cost resulting from the one hypothetical LOOP OPA 90 incident is
estimated to be $718,400 (non-discounted dollars).\26\
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\25\ Based on Coast Guard subject matter expert experience, we
have made the assumption that a LOOP incident with costs above its
Previous Limit of Liability of $87,606,000 would be analogous to a
vessel incident with respect to the duration of responsible party
payments until the completion date. The per-incident duration of
payments was determined by comparing the incident date and the
completion date for each vessel incident occurring since enactment
of OPA 90 with incident removal costs and damages (in 2013 dollars)
above LOOP's ``Previous Limit of Liability'' of $87,606,000. There
were 6 incidents fitting this criteria, 3 are ongoing incidents, 3
are completed. The average duration for the 3 completed incidents,
was approximately 10 years.
\26\ The only deepwater port affected by this rulemaking, LOOP,
has a facility-specific limit of liability first established in 1995
under 33 U.S.C. 2704(d)(2)(C), and adjusted for inflation by the
CPI-1 Rule.
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There would be no increase to Regulatory Cost 1 resulting from the
proposed adjustment to the generally-applicable deepwater port limit of
liability adjustment, including if, after considering any public
comment, we decide to re-calculate the CPI adjustment to the deepwater
port statutory limit of liability in 33 U.S.C. 2704(a)(4), using the
1990 Annual CPI-U value of 130.7 as the previous period, instead of the
2008 Annual CPI-U value of 215.3 that we have used for purposes of this
proposal. This is because, as previously mentioned, there are no
deepwater ports in operation that are
[[Page 49214]]
subject to the generally-applicable OPA 90 limit of liability for
deepwater ports.
(c) Onshore Facilities
We estimate the greatest cost to an onshore facility responsible
party entitled to a limit of liability under OPA 90, for purposes of
this analysis, by assuming that the cost of the incident would be equal
to the proposed new limit of liability. Based on NPFC's experience with
onshore facility incidents, we assume that the onshore facility
responsible parties would be making OPA 90 removal cost and damage
payments for the one estimated incident, over the course of 10 years
after the incident date.\27\ We further assume that the payments would
be spread out in equal annual amounts over the 10-year analysis period
(2014-2023).\28\ Applying these assumptions, the average annual cost
resulting from the one estimated onshore facility OPA 90 incident over
10 years is estimated to be $5,460,000 (non-discounted dollars).
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\27\ The per-incident duration of payments was determined by
comparing the incident date and the completion date of each onshore
facility incident occurring since enactment of OPA 90 with incident
removal costs and damages (in 2013 dollars) greater than or equal to
$5 million. There were 21 incidents fitting this criteria, 9 are
ongoing incidents, 12 are completed. The average duration for the 12
completed incidents, was approximately 10 years.
\28\ Based on Coast Guard subject matter expert experience, we
have assumed that the payments would be spread out equally over the
10 year analysis period. This realistically models the long duration
of OPA 90 removal actions (particularly in the case of an onshore
facility incident resulting in OPA 90 removal costs and damages
exceeding the limit of liability), the time lag in billings and
payments and, if applicable, associated claim submissions, claims
payments and litigation.
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If, after considering any public comment, we decide to calculate
the CPI adjustments to the onshore facility limit of liability using
the 1990 Annual CPI-U value of 130.7 as the previous period (i.e.,
instead of the 2006 Annual CPI-U value of 201.6, established by the
CPI-1 rule that we have used for purposes of this proposal), the
average annual cost resulting from the one estimated onshore facility
OPA 90 incident over 10 years would be $27,370,000 (non-discounted
dollars).
v. Present Value of Regulatory Cost 1
The 10-year present value of Regulatory Cost 1, at a 3 percent
discount rate, is estimated to be $74.4 million.\29\ The 10-year
present value of Regulatory Cost 1, at a 7 percent discount rate, is
estimated to be $61.3 million.\30\ The annualized discounted cost of
Regulatory Cost 1, at a 3 percent discount rate, is estimated to be
$8.7 million. The annualized discounted cost of Regulatory Cost 1, at a
7 percent discount rate, is estimated to be $8.7 million.
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\29\ The sum of the annual costs for the three source categories
over the ten-year analysis period (i.e., $2.5 million per year for
vessels, $0.7 million per year for deepwater ports, and $5.5 million
per year for onshore facilities), discounted annually at a 7%
discount rate equals $71.4 million.
\30\ The sum of the annual costs for the three source categories
over the ten-year analysis period (i.e., $2.5 million per year for
vessels, $0.7 million per year for deepwater ports, and $5.5 million
per year for onshore facilities), discounted annually at a 7%
discount rate equals $61.3 million.
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If, after considering any public comment, we decide to calculate
the CPI adjustments to the onshore facility limit of liability and the
generally-applicable limit of liability for deepwater ports using the
1990 Annual CPI-U value of 130.7 as the previous period, the present
value estimates would be as follows. The estimated 10-year present
value of Regulatory Cost 1, at a 3 percent discount rate, would be
$261.3 million.\31\ The estimated 10-year present value of Regulatory
Cost 1, at a 7 percent discount rate, would be $215.1 million.\32\ The
estimated annualized discounted cost of Regulatory Cost 1, at a 3
percent discount rate, would be $30.6 million. The estimated annualized
discounted cost of Regulatory Cost 1, at a 7 percent discount rate,
would be $30.6 million.\33\
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\31\ The sum of the annual costs for the three source categories
over the ten-year analysis period ($2.5 million per year for
vessels, $0.7 million per year for deepwater ports, and $27.4
million per year for onshore facilities), discounted annually at a
3% discount rate equals $261.3 million.
\32\ The sum of the annual costs for the three source categories
over the ten-year analysis period ($2.5 million per year for
vessels, $0.7 million per year for deepwater ports, and $27.4
million per year for onshore facilities), discounted annually at a
7% discount rate equals $215.1 million.
\33\ As previously mentioned, there are no deepwater ports in
operation that are subject to the generally-applicable limit of
liability for deepwater ports. Therefore, re-calculating the CPI
adjustment to the deepwater port statutory limit of liability in 33
U.S.C. 2704(a)(4), using the 1990 Annual CPI-U value of 130.7 as the
previous period, instead of the 2008 Annual CPI-U value of 215.3
used for purposes of this proposal, would not result in any
Regulatory Cost 1 impacts.
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b. Discussion of Regulatory Cost 2
OPA 90 (33 U.S.C. 2716) requires that the responsible parties for
deepwater ports and certain types and sizes of vessels establish and
maintain evidence of financial responsibility to ensure that they have
the ability to pay for OPA 90 removal costs and damages, up to the
applicable limits of liability, in the event of an OPA 90 incident.\34\
Therefore, because the regulatory changes contemplated by this proposed
rule would increase those limits of liability, vessel and deepwater
port responsible parties may incur additional costs establishing and
maintaining evidence of financial responsibility as a result of this
rulemaking.
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\34\ OPA 90 does not impose evidence of financial responsibility
requirements on onshore facilities.
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Specifically, the proposed rule could increase the cost to vessel
and deepwater port responsible parties associated with establishing OPA
90 evidence of financial responsibility in two ways:
[ssquf] Responsible parties using Insurance as their method of
demonstrating financial responsibility could incur higher Insurance
premiums.
[ssquf] Some responsible parties currently using the Self-Insurance
or Financial Guaranty methods of demonstrating financial responsibility
might need to acquire Insurance, and would thereby incur new Insurance
premium costs. This would only be the case if the financial conditions
(working capital and net worth) of Self-Insuring responsible parties or
Financial Guarantors no longer qualified them to provide OPA 90
evidence of financial responsibility.
i. Affected Population--Vessels
Vessel responsible parties may establish evidence of financial
responsibility using any of the following methods: Insurance, Self-
Insurance, Financial Guaranty, Surety Bonds, or any other method
approved by the Director, NPFC.\35\ This proposed rule could affect the
cost to vessel responsible parties of establishing and maintaining
evidence of financial responsibility using the Insurance, Self-
Insurance or Financial Guaranty methods of financial responsibility. As
of 18 October 2011, the NPFC's certificate of financial responsibility
(COFR) database contained 21,077 vessels using Insurance, 957 vessels
using Self-Insurance and 2,530 vessels using Financial Guaranties.
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\35\ See 33 CFR 138.80(b). Currently, however, there are no
vessel responsible parties using the Surety Bond method of financial
responsibility, and, based on historical experience, NPFC does not
expect any responsible parties will use this method during the
analysis period (2014-2023). In addition, there currently are no
vessel responsible parties using other methods of demonstrating
financial responsibility approved by Director, NPFC, and, based on
historical experience, NPFC does not expect any responsible parties
will use any other method during the analysis period (2014-2023).
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ii. Affected Population--Deepwater Ports
As previously discussed (see Affected Population--Deepwater Ports,
above under Regulatory Cost 1), LOOP is the only operating deepwater
port that would be affected by this proposed rule. Currently LOOP uses
a Director-approved method of establishing
[[Page 49215]]
financial responsibility. Specifically, the Director, NPFC, accepts the
following documentation as evidence of financial responsibility for
LOOP:
LOOP's insurance policy issued by Oil Insurance Limited
(OIL) of Bermuda with coverage up to $150 million per OPA 90 incident
and a $225 million annual aggregate,
Documentation that LOOP operates with a net worth of at
least $50 million, and
Documentation that the total value of the OIL policy
aggregate plus LOOP's working capital does not fall below $100 million.
iii. Affected Population--Onshore Facilities
None. Onshore facilities are not required to establish and maintain
evidence of financial responsibility under 33 U.S.C. 2716.
iv. Cost Summary Regulatory Cost 2
(a) Vessels
Increases to Vessel Insurance Premiums. The calculation of
Insurance premium rates are dependent on many constantly changing
factors, including: market forces, interest rates and investment
opportunities for the premium income, the terms and conditions of the
policy, and underwriting criteria such as vessel age, loss history,
construction, classification details, and management history. As
calculated above, the proposed percent change in the limits of
liability for vessels is 8.2%. Based on estimates received from
Insurance companies,\36\ it is assumed that an 8.2% increase in the
limits of liability would cause, on average, a 6.0% increase in
Insurance premiums charged across all vessel types.
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\36\ Data was requested from 9 of a possible 14 Insurance
companies. Four responded with their current premium rates and their
best estimates of the increase in premium rates resulting from the
proposed regulatory change. These four Insurance companies represent
approximately 93% of vessels that use the Insurance method of
financial responsibility.
---------------------------------------------------------------------------
Estimated costs were calculated by multiplying the number of
vessels by vessel category for each year of the analysis period (2014-
2023) by the Expected Average Increase in Premium for that particular
vessel type. The annual cost associated with increased Insurance
premiums is estimated to be between $6.6 million and $6.7 million (non-
discounted dollars).
Migration of vessel responsible parties currently using the Self-
Insurance and Financial Guaranty Methods of Financial Responsibility to
the Insurance Market.
Based on the financial documentation received from vessel
responsible parties using the Self-Insurance or Financial Guaranty
methods, the Coast Guard estimates that the responsible parties for 2%
of the vessels that have COFRs based on those methods might need to
migrate to the Insurance method of financial responsibility. The cost
estimates for vessel responsible parties migrating to the Insurance
method of financial responsibility were calculated by first multiplying
the number of vessels using Self Insurance or Financial Guaranty by
vessel category for each year of the analysis period (2014-2023) by the
presumed percent of impacted vessels (2%) and then multiplying the
product by the estimated Expected Average Annual Premium for that
particular vessel type. The annual cost associated with vessel
responsible parties migrating to Insurance is estimated to be between
$326,000 and $334,000 (non-discounted dollars).
(b) LOOP
An increase in the LOOP limit of liability of the magnitude
proposed by this rulemaking is not expected to increase the cost to the
LOOP responsible parties associated with establishing and maintaining
LOOP's evidence of financial responsibility. This is because the LOOP
responsible parties provide evidence of financial responsibility to the
Coast Guard at a level that exceeds both LOOP's previous limit of
liability and the proposed new limit of liability of $93,388,000.
The Coast Guard, therefore, does not expect this action to change
the terms of the OIL policy, to result in an increased premium for the
OIL policy, or to require LOOP to have higher minimum net worth or
working capital requirements.
v. Present Value of Regulatory Cost 2
The 10-year present value, at a 3 percent discount rate, is
estimated to be $59.1 million. The 10-year present value, at a 7
percent discount rate, is estimated to be $48.7 million.\37\ The
annualized discounted cost, at a 3 percent discount rate, is estimated
to be $6.9 million.\38\ The annualized discounted cost, at a 7 percent
discount rate, is estimated to be $6.9 million.
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\37\ The sum of the annual costs for the two subcategories of
Regulatory Cost 2 over the ten-year analysis period (ranging from
$6.6 million per year to $6.7 million per year for increased vessel
insurance premiums, and from $0.326 million to $0.334 million per
year for migration of some vessels to the Insurance method of
financial responsibility), discounted annually at a 3% discount rate
equals $59.1 million.
\38\ The sum of the annual costs for the two subcategories of
Regulatory Cost 2 over the ten-year analysis period (ranging from
$6.6 million per year to $6.7 million per year for increased vessel
insurance premiums, and from $0.326 million to $0.334 million per
year for migration of some vessels to the Insurance method of
financial responsibility), discounted annually at a 7% discount rate
equals $48.7 million.
---------------------------------------------------------------------------
Present Value of Total Cost = Regulatory Cost 1 + Regulatory Cost 2
The 10-year present value, at a 3 percent discount rate, is
estimated to be $133.5 million.\39\ The 10-year present value, at a 7
percent discount rate, is estimated to be $110.0 million.\40\ The
annualized discounted cost, at a 3 percent discount rate, is estimated
to be $14.3 million. The annualized discounted cost, at a 7 percent
discount rate, is estimated to be $14.3 million.
---------------------------------------------------------------------------
\39\ This is the sum of Regulatory Cost 1 ($74.4 million) and
Regulatory Cost 2 ($59.1 million).
\40\ This is the sum of Regulatory Cost 1 ($61.3 million) and
Regulatory Cost 2 ($48.7 million).
---------------------------------------------------------------------------
If, after considering any public comment, we decide to calculate
the CPI adjustments to the onshore facility limit of liability and the
generally-applicable limit of liability for deepwater ports using the
1990 Annual CPI-U value of 130.7 as the previous period, the present
value estimates would be as follows. The estimated 10-year present
value, at a 3 percent discount rate, would be $320.4 million.\41\ The
estimated 10-year present value, at a 7 percent discount rate, would be
$263.8 million.\42\ The estimated annualized discounted cost, at a 3
percent discount rate, would be $37.6 million. The estimated annualized
discounted cost, at a 7 percent discount rate, would be $37.6 million.
---------------------------------------------------------------------------
\41\ This is the sum of Regulatory Cost 1 ($261 million) and
Regulatory Cost 2 ($59.1 million).
\42\ This is the sum of Regulatory Cost 1 ($215.1 million) and
Regulatory Cost 2 ($48.7 million). The amounts do not add up due to
rounding.
---------------------------------------------------------------------------
2. Regulatory Benefits
a. Regulatory Benefit 1: Ensure that the OPA 90 limits of liability
keep pace with inflation.
OPA 90 (33 U.S.C. 2704(d)(4)) mandates that limits of liability be
updated periodically to reflect significant increases in the CPI to
account for inflation. The intent of this requirement is to ensure that
the real values of the limits of liability do not decline over time.
Absent CPI adjustments, the responsible parties ultimately benefit
because they pay a reduced percentage of the total incident costs they
would be required to pay with inflation incorporated into the
determination of their limit of liability. Requiring responsible
parties to internalize costs by adjusting their limits of liability for
inflation ensures that the appropriate amount of cleanup,
[[Page 49216]]
response and damage costs are borne by the responsible party.
b. Regulatory Benefit 2: Ensure that the responsible party is held
accountable.
Increasing the limits of liability to account for inflation ensures
that the appropriate amount of removal costs and damages are borne by
the responsible party and that liability risk is not shifted away from
the responsible party to the Fund. This helps preserve the ``polluter
pays'' principle as intended by Congress and preserves the Fund for its
other authorized uses. Failing to adjust the limits of liability for
inflation, by comparison, shifts those costs to the public and the
Fund.
c. Regulatory Benefit 3: Reduce and deter substandard shipping and
oil handling practices.
Increasing the limits of liability serves to reduce the number of
substandard ships in U.S. waters and ports because insurers are less
likely to provide Insurance to, and Financial Guarantors are less
likely to guaranty, substandard vessels at the new levels of OPA 90
liability. Maintaining the limits of liability also helps preserve the
deterrent effect of the OPA 90 liability provisions for Self Insurers.
With respect to oil handling practices, the higher the responsible
parties' limits of liability are, the greater the incentive for them to
operate in the safest and most risk-averse manner possible. Conversely,
the lower the limits of liability, the lower the incentive is for
responsible parties to spend money on capital improvements and
operation and maintenance systems that will protect against oil spills.
B. Small Entities
Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, we have
considered whether this proposed rule would have a significant economic
impact on a substantial number of small entities. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000.
An Initial Regulatory Flexibility Analysis (IRFA) discussing the
impact of this proposed rule on small entities is included in the
Regulatory Analysis that is available in the docket. A summary of the
IRFA follows.
There are two potential economic impacts to small entities that
would result from this proposed rule:
Regulatory Cost 1. Increased Cost of Liability
Regulatory Cost 2. Increased Cost of Establishing Evidence of
Financial Responsibility.
1. Regulatory Cost 1: Increased Cost of Liability
As explained in Part IV.A. of this preamble and in the Regulatory
Analysis for this proposed rule, Regulatory Cost 1 would only occur if
there was an OPA 90 incident that had removal costs and damages in
excess of the existing limits of liability.
a. Vessels
This proposed rule could affect the responsible parties of any
vessel, other than a public vessel,\43\ 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 of the United States. Coast Guard data indicate that,
since the enactment of OPA 90 through May 1, 2013, there were 62 OPA 90
vessel incidents (i.e., an average of approximately three OPA 90 vessel
incidents per year) that resulted in OPA 90 removal costs and damages
in excess of the previous limits of liability. For the purpose of this
analysis, we have therefore assumed that three OPA 90 vessel incidents
would continue to occur each year throughout the 10-year analysis
period (2014-2023).
---------------------------------------------------------------------------
\43\ See 33 U.S.C. 2701(29) and (37) (definitions of public
vessel and vessel) and 33 U.S.C. 2702(c)(2) (public vessel
exclusion). According to Coast Guard's MISLE database, there are
over 200,000 vessels of various types in the vessel population that
are not public vessels or used exclusively for recreational use.
Examples of vessel types include, but are not limited to: fish
processing vessel, freight barge, freight ship, industrial vessel,
mobile offshore drilling unit, offshore supply vessel, oil recovery
vessel, passenger vessel, commercial fishing vessel, passenger
barge, research vessel, school ship, tank barge, tank ship, and
towing vessel.
---------------------------------------------------------------------------
The vessel population encompasses dozens of North American Industry
Classification System (NAICS) codes. It, therefore, would not be
practical to predict which specific type or size of vessel might be
involved in the three hypothetical incidents assumed to occur per year,
or whether they would involve small entities.
Incident cost data show that the average cost of an incident that
exceeds the current limit of liability is approximately $848,000.
Therefore, in the event that a small entity had a vessel incident with
OPA 90 removal costs and damages of this magnitude, it would likely
have a significant economic impact.
b. Deepwater Ports
As discussed in Part IV.A. of this preamble, and in the Regulatory
Analysis for this rulemaking, the only deepwater port affected by this
proposed rule is LOOP. LOOP, however, does not meet the Small Business
Administration (SBA) criteria to be categorized as a small entity.\44\
---------------------------------------------------------------------------
\44\ LOOP is a limited liability corporation (NAICS Code:
48691001) owned by three major oil companies: Marathon Oil Company,
Murphy Oil Corporation, and Shell Oil Company. None of these
companies are small entities.
---------------------------------------------------------------------------
c. Onshore Facilities
As discussed in Part IV.A., of this preamble, and in the Regulatory
Analysis for this rulemaking, this proposed rule could affect any
responsible party for an onshore facility.\45\ Since the enactment of
OPA 90, however, the 2010 Enbridge Pipeline spill in Michigan may well
be the only onshore facility incident resulting in removal costs and
damages that exceed the $350 million onshore facility limit of
liability; \46\ and this onshore facility is not a small entity.
Nevertheless, in the Regulatory Analysis for this proposed rule, we
assume that there would be one onshore facility incident occurring over
the 10 year analysis period with OPA 90 removal costs and damages
exceeding the existing limit of liability.
---------------------------------------------------------------------------
\45\ OPA 90 (33 U.S.C. 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''. OPA 90 (33 U.S.C. 2701(24)) defines an
``onshore facility'' as ``any facility (including but not limited
to, motor vehicles and rolling stock) of any kind located in, on, or
under, any land within the United States other than submerged
land.''
\46\ Reliable supporting estimates of the OPA 90 removal costs
and damages resulting from incident are not currently available.
---------------------------------------------------------------------------
The onshore facility population encompasses dozens of NAICS codes
representing diverse industries.\47\ It, therefore, would not be
practical to predict which specific type or size of onshore facility
might be involved in the one hypothetical incident assumed to occur
over the 10-year analysis period, or whether it would involve a small
entity. However, in the event a small entity onshore facility was to
have an incident with OPA 90 removal costs and damages of this
magnitude, it
[[Page 49217]]
would likely have a significant economic impact.
---------------------------------------------------------------------------
\47\ Examples of onshore facilities include, but are not limited
to: onshore pipelines; rail; motor carriers; petroleum bulk stations
and terminals; petroleum refineries; government installations; oil
production facilities; electrical utility plants; mobile facilities;
marinas, marine fuel stations and related facilities; farms; fuel
oil dealers; and gasoline stations.
---------------------------------------------------------------------------
2. Regulatory Cost 2--Increased Cost of Establishing Evidence of
Financial Responsibility
i. Vessels
Regulatory Cost 2 would only apply to vessel responsible parties
required to provide evidence of financial responsibility under OPA 90
(33 U.S.C. 2716) and 33 CFR part 138, subpart A. As of July 3, 2013,
there were 1,744 unique entities in the Coast Guard's COFR database
that could be affected by this proposed rulemaking. Because of the
large number of entities, we determined the statistically significant
sample size necessary to represent the population. The appropriate
statistical sample size for the population, at a 95% confidence level
and a 5% confidence interval, is 315 entities. This means we are 95%
certain that the characteristics of the sample reflect the
characteristics of the entire population within a margin of error of +
or-5%.
Using a random number generator, we then randomly selected the 315
entities from the population for analysis. Of the sample, 309 were
businesses, 0 were not-for-profit organizations, and 6 were
governmental jurisdictions.
For each business entity, we next determined the number of
employees, annual revenue, and NAICS Code to the extent possible using
public and proprietary business databases. The SBA's publication ``U.S.
Small Business Administration Table of Small Business Size Standards
Matched to North American Industry Classification System codes
effective January 22, 2014'' \48\ was then used to determine whether an
entity is a small entity. For governmental jurisdictions, we determined
whether they had populations of less than 50,000 as per the criteria in
the Regulatory Flexibility Act.
---------------------------------------------------------------------------
\48\ http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
---------------------------------------------------------------------------
Of the sampled population, 220 would be considered small entities
using the SBA criteria, 72 would not be small entities, and no data was
found for the remaining 23 entities.\49\ If we assume that the entities
where no revenue or employee data was found are small entities, then
small entities make up 77 percent of the sample.\50\ We can then
extrapolate the entire population of entities from the sample using the
following formula, where ``X'' is the number of small entities within
the total population.
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\49\ The 6 governmental jurisdictions were a subset of the 23
entities where no data was found.
\50\ The data show that small entities are often responsible
parties for multiple vessels.
(X small entities in the total population divided by 1,744 total
entities in the population) = (243 small entities in the sample/315
---------------------------------------------------------------------------
total entities in the sample)
Solving for X, X equals 1,345 small entities within the total
population.
As discussed in the Regulatory Analysis, the proposed rule could
increase the cost to vessel responsible parties associated with
establishing OPA 90 evidence of financial responsibility in two ways:
(1) Responsible parties using the Insurance method of financial
responsibility could incur higher Insurance premiums.
(2) Some responsible parties currently using the Self-Insurance or
Financial Guaranty method of establishing evidence financial
responsibility might need to acquire Insurance for their vessels. This
would only be the case if the Self-Insuring responsible parties or
financial guarantors' financial condition (working capital and net
worth) no longer qualified them to provide OPA 90 evidence of financial
responsibility.
As calculated in the Regulatory Analysis, the average annual per
vessel increase in Insurance premium for responsible parties using the
Insurance method of establishing evidence of financial responsibility
is $480. The average annual cost per vessel migrating from the Self-
insurance/Financial Guaranty methods to the Insurance method is $8,240
per vessel.
Based on review of financial data of entities using the Self-
Insurance or Financial Guaranty method for establishing evidence of
financial responsibility, Coast Guard subject matter experts estimate
that responsible parties for 2% of vessels using those two methods
would not have the requisite working capital and net worth necessary to
qualify for these methods as a result of this proposed rule. In those
cases, they would have to use the Insurance method to establish and
maintain evidence of financial responsibility.
The increased cost of establishing evidence of financial
responsibility for each small entity is calculated by:
1. Multiplying the number of vessels using the Insurance Method by
the Average Increase in Premium ($480), and
2. Adding the product of the number of vessels using the Self-
Insurance and Financial Guaranty methods multiplied by the Average
Annual Premium ($8,240), multiplied by 2%.
For example, for a hypothetical small entity using the Insurance
Method for three vessels and having to change from the Self-Insurance
or Financial Guaranty Method to the insurance method for two vessels
(i.e., both vessels falling within the 2%), the calculation would be as
follows:
(3 vessels using Insurance Method x $480/year) + (100 vessels using
Self-Insurance or Financial Guaranty Method x 2% of vessels expected to
migrate from Self-Insurance or Financial Guaranty Method to the
Insurance Method x $8,240/year) = $17,950/year
This calculation was conducted for each small entity and the value
was then divided by the annual revenue for the small entity and then
multiplied by 100 to determine the percent impact of this proposed rule
on the small entities' annual revenue. The figure below shows the
economic impact to vessel small entities of Regulatory Cost 2.
Economic Impact to Vessel Small Entities--Regulatory Cost 2
------------------------------------------------------------------------
Extrapolated
Percent of annual revenue number of Percent of
small entities small entities
------------------------------------------------------------------------
1 to 2.................................. 54 4
<1...................................... 1,291 96
------------------------------------------------------------------------
ii. Deepwater Ports
Because there are no small entity deepwater ports, there would be
no Regulatory Cost 2 small entity impacts to Deepwater Ports.
iii. Onshore Facilities
As stated in the Regulatory Analysis for this rulemaking, onshore
facilities are not required to establish and maintain evidence of
financial responsibility under 33 U.S.C. 2716. There would therefore be
no Regulatory Cost 2 small entity impacts to Onshore Facilities.
If you think your business, organization, or governmental
jurisdiction qualifies as a small entity and that this rule would have
a significant economic impact on it, please submit a comment to the
Docket Management Facility at the address under ADDRESSES. In your
comment, explain why you think it qualifies and how and to what degree
this rule would economically affect it.
C. Assistance for Small Entities
Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104-121, we want to assist small
entities in understanding this proposed rule so that they can better
evaluate its effects on them and participate in the rulemaking.
[[Page 49218]]
If the proposed rule would affect your small business, organization, or
governmental jurisdiction and you have questions concerning its
provisions or options for compliance, please consult Benjamin White,
National Pollution Funds Center, Coast Guard, telephone 703-872-6066.
The Coast Guard will not retaliate against small entities that question
or complain about this rule or any policy or action of the Coast Guard.
Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247).
D. Collection of Information
This proposed rule would call for no new collection of information
under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520.
E. Federalism
A rule has implications for federalism under E.O. 13132
(``Federalism'') if it has a substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. We have analyzed this proposed rule under that
Order and have determined that it is consistent with the fundamental
federalism principles and preemption requirements described in E.O.
13132. This proposed rule makes necessary adjustments to the OPA 90
limits of liability to reflect significant increases in the CPI,
establishes a framework for such future CPI increases, and clarifies
the OPA 90 limits of liability for certain vessels. Nothing in this
proposed rule would affect the preservation of State authorities under
33 U.S.C. 2718, including the authority of any State to impose
additional liability or financial responsibility requirements with
respect to discharges of oil within such State. Therefore, it has no
implications for federalism.
The Coast Guard recognizes the key role that State and local
governments may have in making regulatory determinations. Additionally,
for rules with federalism implications and preemptive effect, E.O.
13132 specifically directs agencies to consult with State and local
governments during the rulemaking process. If you believe this rule has
implications for federalism under E.O. 13132, please contact the person
listed in the FOR FURTHER INFORMATION CONTACT section of this preamble.
F. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538,
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this proposed rule would not
result in such an expenditure, we do discuss the effects of this rule
elsewhere in this preamble.
G. Taking of Private Property
This proposed rule would not cause a taking of private property or
otherwise have taking implications under Executive Order 12630
(``Governmental Actions and Interference with Constitutionally
Protected Property Rights'').
H. Civil Justice Reform
This proposed rule meets applicable standards in sections 3(a) and
3(b)(2) of Executive Order 12988 (``Civil Justice Reform''), to
minimize litigation, eliminate ambiguity, and reduce burden.
I. Protection of Children
We have analyzed this proposed rule under Executive Order 13045
(``Protection of Children from Environmental Health Risks and Safety
Risks''). This rule is not an economically significant rule and would
not create an environmental risk to health or risk to safety that might
disproportionately affect children.
J. Indian Tribal Governments
This proposed rule does not have tribal implications under
Executive Order 13175 (``Consultation and Coordination with Indian
Tribal Governments''), because it would not have a substantial direct
effect on one or more Indian tribes, on the relationship between the
Federal Government and Indian tribes, or on the distribution of power
and responsibilities between the Federal Government and Indian tribes.
K. Energy Effects
We have analyzed this proposed rule under Executive Order 13211
(``Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use''). We have determined that it is not a
``significant energy action'' under that order because it is not a
``significant regulatory action'' under Executive Order 12866 and is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy.
L. Technical Standards
The National Technology Transfer and Advancement Act, codified as a
note to 15 U.S.C. 272 directs agencies to use voluntary consensus
standards in their regulatory activities unless the agency provides
Congress, through OMB, with an explanation of why using these standards
would be inconsistent with applicable law or otherwise impractical.
Voluntary consensus standards are technical standards (e.g.,
specifications of materials, performance, design, or operation; test
methods; sampling procedures; and related management systems practices)
that are developed or adopted by voluntary consensus standards bodies.
This proposed rule does not use technical standards. Therefore, we
did not consider the use of voluntary consensus standards.
M. Environment
We have analyzed this proposed rule under Department of Homeland
Security Management Directive 023-01 and Commandant Instruction
M16475.lD, which guide the Coast Guard in complying with the National
Environmental Policy Act of 1969, 42 U.S.C. 4321-4370f, and have made a
preliminary determination that this action is one of a category of
actions that do not individually or cumulatively have a significant
effect on the human environment. A preliminary environmental analysis
checklist supporting this determination is available in the docket
where indicated under the ``Public Participation and Request for
Comments'' section of this preamble. This proposed rule would increase
the OPA 90 limits of liability for vessels, deepwater ports, and
onshore facilities to reflect significant increases in the CPI using
the methodology established in the CPI-1 Rule. This proposed rule is
expected to be categorically excluded under paragraph 34(a), of the
current instruction, from further environmental documentation, in
accordance with Section 2.B.2. and Figure 2-1 of the national
Environmental Policy Act Implementing Procedures and Policy for
Considering Environmental Impacts, COMDTINST M16475.1D. We seek any
comments or information that may lead to the discovery of a significant
[[Page 49219]]
environmental impact from this proposed rule.
List of Subjects in 33 CFR Part 138
Hazardous materials transportation, Financial responsibility,
Guarantors, Insurance, Limits of liability, Oil pollution, Reporting
and recordkeeping requirements, Surety bonds, Water pollution control.
For the reasons discussed in the preamble, the Coast Guard proposes
to amend 33 CFR part 138 as follows:
PART 138--FINANCIAL RESPONSIBILITY FOR WATER POLLUTION (VESSELS)
AND OPA 90 LIMITS OF LIABILITY (VESSELS, DEEPWATER PORTS AND
ONSHORE FACILITIES)
0
1. The authorities citation for part 138 is revised to read as follows:
Authority: 33 U.S.C. 2704, 2716, 2716a; 42 U.S.C. 9608, 9609; 6
U.S.C. 552; E.O. 12580, Sec. 7(b), 3 CFR, 1987 Comp., p. 193; E.O.
12777, Sec. 4, as amended by E.O. 13638 of March 15, 2013, Sec. 1
(78 FR 17589, Thursday, March 21, 2013); E.O. 12777, Sec. 5, 3 CFR,
1991 Comp., p. 351, as amended by E.O. 13286, Sec. 89, 3 CFR, 2004
Comp., p. 166; Department of Homeland Security Delegation Nos.
0170.1 and 5110, Revision 01. Section 138.30 also issued under the
authority of 46 U.S.C. 2103 and 14302.
0
2. Revise the heading to part 138 to read as set forth above.
0
3. Revise Subpart B to read as follows:
Subpart B--OPA 90 Limits of Liability (Vessels, Deepwater Ports and
Onshore Facilities)
Sec.
138.200 Scope.
138.210 Applicability.
138.220 Definitions.
138.230 Limits of liability.
138.240 Procedure for updating limits of liability to reflect
significant increases in the Consumer Price Index (Annual CPI-U) and
statutory changes.
Sec. 138.200 Scope.
This subpart sets forth the limits of liability under Title I of
the Oil Pollution Act of 1990, as amended (33 U.S.C. 2701, et seq.)
(OPA 90) for vessels, deepwater ports, and onshore facilities, as
adjusted under OPA 90 (33 U.S.C. 2704(d)). This subpart also sets forth
the method and procedure the Coast Guard uses to periodically adjust
the OPA 90 limits of liability by regulation under OPA 90 (33 U.S.C.
2704(d)(4)), to reflect significant increases in the Consumer Price
Index (CPI), and to update the limits of liability when they are
amended by statute. In addition, this subpart cross-references the U.S.
Department of the Interior regulation setting forth the OPA 90 limit of
liability applicable to offshore facilities, including offshore
pipelines, as adjusted under OPA 90 (33 U.S.C. 2704(d)(4)) to reflect
significant increases in the CPI.
Sec. 138.210 Applicability.
This subpart applies to you if you are a responsible party for a
vessel, a deepwater port, or an onshore facility, unless your liability
is unlimited under OPA 90 (33 U.S.C. 2704(c)).
Sec. 138.220 Definitions.
(a) As used in this subpart, the following terms have the meanings
set forth in OPA 90 (33 U.S.C. 2701): deepwater port, facility, gross
ton, liability, oil, offshore facility, onshore facility, responsible
party, tank vessel, and vessel.
(b) As used in this subpart--
Annual CPI-U means the annual ``Consumer Price Index--All Urban
Consumers, Not Seasonally Adjusted, U.S. City Average, All items, 1982-
84=100'', published by the U.S. Department of Labor, Bureau of Labor
Statistics.
Current period means the year in which the Annual CPI-U was most
recently published by the U.S. Department of Labor, Bureau of Labor
Statistics.
Director, NPFC means the person in charge of the U.S. Coast Guard,
National Pollution Funds Center (NPFC), or that person's authorized
representative.
Edible oil tank vessel means a tank vessel referred to in OPA 90
(33 U.S.C. 2704(c)(4)(A)).
Oil spill response vessel means a tank vessel referred to in OPA 90
(33 U.S.C. 2704(c)(4)(B)).
Previous period means the year in which the previous limit of
liability was established, or last adjusted by statute or regulation,
whichever is later.
Single-hull means the hull of a tank vessel that is constructed or
adapted to carry, or that carries, oil in bulk as cargo or cargo
residue, that is not a double hull as defined in 33 CFR part 157.
Single-hull includes the hull of any such tank vessel that is fitted
with double sides only or a double bottom only.
Sec. 138.230 Limits of liability.
(a) Vessels. The OPA 90 limits of liability for vessels are--
(1) Limits of liability for tank vessels, other than edible oil
tank vessels and oil spill response vessels.
(i) For a single-hull tank vessel greater than 3,000 gross tons,
the greater of $3,500 per gross ton or $25,422,700;
(ii) For a tank vessel greater than 3,000 gross tons, other than a
single-hull tank vessel, the greater of $2,200 per gross ton or
$18,489,200.
(iii) For a single-hull tank vessel less than or equal to 3,000
gross tons, the greater of $3,500 per gross ton or $6,933,500.
(iv) For a tank vessel less than or equal to 3,000 gross tons,
other than a single-hull tank vessel, the greater of $2,200 per gross
ton or $4,622,300.
(2) Limits of liability for any other vessels. For any other
vessel, including an edible oil tank vessel or an oil spill response
vessel, the greater of $1,100 per gross ton or $924,500.
(b) Deepwater ports. The OPA 90 limits of liability for deepwater
ports are--
(1) For deepwater ports generally, and except as set forth in
paragraph (b)(2) of this section, $404,451,600;
(2) For deepwater ports with limits of liability established by
regulation under OPA 90 (33 U.S.C. 2704(d)(2)):
(i) For the Louisiana Offshore Oil Port (LOOP), $94,789,700; and
(ii) [Reserved].
(c) Onshore facilities. The OPA 90 limit of liability for onshore
facilities, $404,600,000;
(d) Offshore facilities. The OPA 90 limit of liability for offshore
facilities, including any offshore pipeline, is set forth at 30 CFR
553.702.
Sec. 138.240 Procedure for updating limits of liability to reflect
significant increases in the Consumer Price Index (Annual CPI-U) and
statutory changes.
(a) Update and publication. The Director, NPFC, will periodically
adjust the limits of liability set forth in Sec. 138.230(a) through
(c) to reflect significant increases in the Annual CPI-U, according to
the procedure for calculating limit of liability inflation adjustments
set forth in paragraphs (b)-(d) of this section, and will publish the
inflation-adjusted limits of liability and any statutory amendments to
those limits of liability in the Federal Register as amendments to
Sec. 138.230. Updates to the limits of liability under this section
are effective on the 90th day after publication in the Federal Register
of the amendments to Sec. 138.230, unless otherwise specified by
statute (in the event of a statutory amendment to the limits of
liability) or in the Federal Register notice amending Sec. 138.230.
(b) Formula for calculating a cumulative percent change in the
Annual CPI-U. (1) The Director, NPFC, calculates the cumulative percent
change in the Annual CPI-U from the year the limit of liability was
established, or last adjusted by statute or regulation, whichever is
later (i.e., the previous period), to the most recently published
Annual CPI-U (i.e., the current period), using the following escalation
formula:
[[Page 49220]]
Percent change in the Annual CPI-U = [(Annual CPI-U for Current Period
- Annual CPI-U for Previous Period) / Annual CPI-U for Previous Period]
x 100.
(2) This cumulative percent change value is rounded to one decimal
place.
(c) Significance threshold. Not later than every three years from
the year the limits of liability were last adjusted for inflation, the
Director, NPFC, will evaluate whether the cumulative percent change in
the Annual CPI-U since that date has reached a significance threshold
of 3 percent or greater. For any three-year period in which the
cumulative percent change in the Annual CPI-U is less than 3 percent,
the Director, NPFC, will publish a notice of no inflation adjustment to
the limits of liability in the Federal Register. If this occurs, the
Director, NPFC, will recalculate the cumulative percent change in the
Annual CPI-U since the year in which the limits of liability were last
adjusted for inflation each year thereafter until the cumulative
percent change equals or exceeds the threshold amount of 3 percent.
Once the 3-percent threshold is reached, the Director, NPFC, will
increase the limits of liability, by regulation using the procedure set
forth in paragraph (a) of this section, for all source categories
(including any new limit of liability established by statute or
regulation since the last time the limits of liability were adjusted
for inflation) by an amount equal to the cumulative percent change in
the Annual CPI-U from the year each limit was established, or last
adjusted by statute or regulation, whichever is later. Nothing in this
paragraph shall prevent the Director, NPFC, in the Director's sole
discretion, from adjusting the limits of liability for inflation by
regulation issued more frequently than every three years.
(d) Formula for calculating inflation adjustments. The Director,
NPFC, calculates adjustments to the limits of liability in Sec.
138.230 of this part for inflation using the following formula:
New limit of liability = Previous limit of liability + (Previous limit
of liability x percent change in the Annual CPI-U calculated under
paragraph (b) of this section), then rounded to the closest $100.
Dated: August 11, 2014.
William R. Grawe,
Acting Director, National Pollution Funds Center, United States Coast
Guard.
[FR Doc. 2014-19314 Filed 8-18-14; 8:45 am]
BILLING CODE 9110-04-P
