study to explore the feasibility of creating a fund to ...study to explore the feasibility of...

>>

By:

Maite Martínez-Granado (Naider)

Overview of existing funds

In collaboration with

Study to explore the feasibility of creating a fund to cover

environmental liability and losses occurring from industrial

accidents

Workshop

European Commission

DG Environment

7 November 2012

http://www.stevens-bolton.com/index.php

2

2

1

EXISTING FUNDS

1 INTRODUCTION

OVERVIEW OF EXISTING FUNDS

Workshop “Study to explore the feasibility of creating a fund to cover environmental liability and

losses occurring from industrial accidents”, 7 November 2012

3

1

Operators in the EU:

•Have available environmental insurance policies that

provide cover for environmental damage from industrial

accidents involving pollution;

•No insurance policy or no operator is going to provide

unlimited funding to pay costs arising from major

industrial accidents involving pollution


1 INTRODUCTION



4

1

Different financial mechanisms other than liability insurance

can be used to guarantee the recovery of the government

response cost:

• securities based on the assets of the liable party himself or a

third party guarantor

• loss spreading mechanisms that lead to cost recovery in the

case of insolvency of an operator

• loss spreading mechanisms that allow to satisfy financial

security requirements and that also cover the operator against

losses environmental liabilities

• mechanisms (funds) that provide compensation or allow

remedial measures in cases where liability does not provide a

remedy because the source of the environmental damage is

unknown or because the damage exceeds the financial limits

of the liability (in many cases account for the possible

insolvency of an operator).


1 INTRODUCTION



What can we

learn from

the existing

examples?

5

2

1

EXISTING FUNDS

1 INTRODUCTION




6

1

2




EXISTING FUNDS

Overview of existing funds (international or

domestic) that provide compensation or allow

remedial measures being taken in cases where

liability does not provide a remedy because of

the unknown origin of the damage or the

exceeding of the financial limits of the

liability.

They usually cover also the event of insolvency

of the operator.

7

Aspects to consider:

1. Type of fund: private/public; regional/national/international;

2. Coverage

3. Structure

4. Finance

5. Liability limits

6. Does the fund respects the polluter pays principle?

7. Implementation form: grants? Loans?

1

2




EXISTING FUNDS

8

Funds analysed:

1. US Oil Spill Liability Trust Fund (OSLTF)

2. International Oil Pollution Compensation Funds

3. US Superfund Trust Fund

4. Funding for compensation under the Paris Convention

5. Funding fro compensation under the US Price Anderson Act

6. Other

a) Philippines Environmental Guarantee Fund

b) Canadian Environmental Damages Fund

c) Belgian Toxic Waste Guarantee Fund

1

2




EXISTING FUNDS

9

1

2




EXISTING FUNDS

US Oil Spill Liability Trust Fund (OSLTF)

Established by the United States Oil Pollution Act (OPA) in 1990.

The OSLTF had been created by the United States Congress in

1986 but did not authorise the collection of revenues for it or

payments from it until the OPA became law in 1990 (after the Exxon

Valdez tragedy)

TYPE OF FUND

National (for the US) 1 billion fund administered by the National

Pollution Funds Centre.

10

1

2




EXISTING FUNDS


COVERAGE:

The OPA covers spills of oil of every kind and in any form; imposes

strict liability without fault on all responsible parties for a vessel or

facility (onshore or offshore; pipeline owners or operators, licensees

of a deepwater port) which oil is discharged or threatened to be

discharged.

It authorises recovery for the following types of damages:

•Removal costs incurred by the Coast Guard and EPA

•State access for removal activities;

•Payments to federal, state, and Indian tribe trustees to conduct

natural resource damage assessments and restorations;

•Payment of claims for uncompensated removal costs and

damages;

•Research and development; and

•Other specific appropriations.

11

1

2




EXISTING FUNDS


COVERAGE:

Claims:

• response, prevention and cleanup

• damages to property and consequential damages

• certain losses of earnings (distinctive the lost governmental

revenues or the increased cost of governmental services).

The claims have to be presented first to the responsible parties.

12

1

2




EXISTING FUNDS


STRUCTURE

The OSLTF has two major components.

The Emergency Fund is available for Federal On-Scene

Coordinators (FOSCs) to respond to discharges and for federal

trustees to initiate natural resource damage assessments. The

Emergency Fund is a recurring $50 million available to the

President annually (it can be increased to $100 million).

The remaining Principal Fund balance is used to pay claims and

to fund appropriations by Congress to Federal agencies to

administer the provisions of OPA and support research and

development.

13

1

2




EXISTING FUNDS


FINANCE

Barrel Tax: per-barrel excise tax of 8 cents from 2009-2016 and to 9 cents

in 2017.

Transfers. from other existing pollution funds

Interest. on the Fund principal from U.S. Treasury investments. The

Department of the Treasury serves as the OSLTF’s investment manager.

Cost Recoveries. Another source is cost recoveries from responsible

parties (RPs); those responsible for oil incidents are liable for costs and

damages. NPFC bills RPs to recover costs expended by the Fund. As these

monies are recovered, they are deposited into the Fund.

Penalties. In addition to paying for clean-up costs, RPs may incur fines and

civil penalties under OPA, the Federal Water Pollution Control Act, the

Deepwater Port Act, and the Trans-Alaska Pipeline Authorization Act.

Penalty deposits into the OSLTF are generally between $4 million and $7

million per year.

14

1

2




EXISTING FUNDS


LIABILITY LIMITS

They depend on the type of vessel or facility (offshore, $75 M,

onshore or deepwater ports, $350 M). The Fund may be liable for

compensation above these amounts.

The limits do not apply if it is proved that the pollution incident was

caused by gross negligence or misconduct; when the responsible

parties can not pay or the payments are over the limits of liability

the OSLTF pays (up to $1 billion). Above this limit no more claims

are accepted.

Also the OPA 90 countains two clauses that allow potentially

unlimited liability.

DOES IT RESPECT THE POLLUTER PAYS PRINCIPLE?

Yes, through the tax component of the fund and through the cost

recovery and penalties.

15

1

2




EXISTING FUNDS In

tern

ati

on

al O

il P

oll

uti

on

Co

mp

en

sa

tio

n F

un

ds

International Oil Pollution Compensation Funds

Under de auspices of the International Maritime Organisation

(IMO) two treaties dealing with international civil liability for oil

pollution were concluded: the International Civil Liability

Convention (1969) that provides strict but limited liability for

pollution damage resulting from discharges from vessels

carrying oil; the International Convention on the Establishment

of an International Fund for Compensation of Oil Pollution

(1971) that creates a fund to pay oil pollution damage shifting

some of the ship-owners’ liability to cargo owners.

These treaties were strengthen by Protocols adopted in 1984

and 1992 (raise of the limits of liability; compulsory insurance

requirement; possibility of direct action against the insurer); the

1992 Protocols created a new regime known as the 1992 Civil

Liability and Fund Convention.

Further agreement on increase the liabilities were reached in

2000

16

1

2




EXISTING FUNDS In

tern

ati

on

al O

il P

oll

uti

on

Co

mp

en

sa

tio

n F

un

ds


TYPE OF FUND

The IOPC Funds are administered as a intergovernmental

organisations which provide compensation for oil pollution

damage resulting from spills of persistent oil from tankers:

•the 1971 Fund;

•the 1992 Fund ;and

•the Supplementary Fund.

COVERAGE

The IOPC Funds are part of an international regime of liability

and compensation under which the owner of a tanker is liable

to pay compensation up to a certain limit for oil pollution

damage following a persistent oil spill.

If that amount does not cover all the admissible claims, further

compensation is available from the 1992 Fund or the

Supplementary Fund if the damage occurred in member

countries of these funds.

17

1

2




EXISTING FUNDS In

tern

ati

on

al O

il P

oll

uti

on

Co

mp

en

sa

tio

n F

un

ds


COVERAGE

Claims:

• response, prevention and cleanup

• damages to property and consequential damages

• certain losses of earnings (no lost of governmental revenues

or the increased cost of governmental services).

Anyone who has suffered pollution damage in a member

country of an IOPC fund may make a claim for compensation.

The claims must be presented to the ship-owner and the

insurer and to the Funds if they are to be involved.

Usually out-of-court processes.

18

1

2




EXISTING FUNDS In

tern

ati

on

al O

il P

oll

uti

on

Co

mp

en

sa

tio

n F

un

ds


FINANCE

The IOPC Funds are financed by levies on certain types of oil

carried by sea. The levies are paid by entities which receive oil

after sea transport, and normally not by States.

LIABILITY LIMITS

A maximum of approximately $135 Million. The Fund may be

liable for compensation above these amounts with a cap by

incident of around $300 Million.

Above that amount all the claims are reduced proportionally

19

1

2




EXISTING FUNDS In

tern

ati

on

al O

il P

oll

uti

on

Co

mp

en

sa

tio

n F

un

ds



Yes, through the tax component of the fund.

20

1

2




EXISTING FUNDS

US Hazardous Substance Response Trust Fund

(Superfund Trust Fund)

In 1980, the Comprehensive Environmental Response,

Compensation, and Liability Act (CERCLA) created the

Superfund program to clean up the nation’s worst hazardous

waste sites.

The EPA prepared at that moment a National Priorities List to

identify sites

TYPE OF FUND

National (for the US). It was established at a 1.6 billion USD for

five years. The fund was reauthorized several times until 1995.

21

1

2




EXISTING FUNDS



STRUCTURE

The CERCLA dis not establish a liability system.

In a majority of the cases (70%), Superfund clean-ups are paid

for by potentially responsible parties, that are usually current or

previous opetators of the site. In the rest of the cases (30%)

eiter the EPA cannot locate the potentially responsible parties

or these do not have financial resources to assist with the

cleanup, so the trust fund pays for it.

22

1

2




EXISTING FUNDS



COVERAGE

National Priorities List.

Claims of bodily injury, property damage or economic loss have

to be brought under the common law of the various States.

FINANCE

• Until 1995:

exice tax per barrel of crude

a chemical feedstocks and imported derivatives excise

tax

an environmental corporate tax

cost recoveries, fines and penalties, interests on

investments

general revenues

23

1

2




EXISTING FUNDS



FINANCE

• After 1995:

cost recoveries, fines and penalties, interests on

investments

general revenues

LIABILITY LIMITS

No information


To the extend that potentially responsible parties are liable of

paying the clean up, yes; in the sense of who contributes to the

fund, no (general revenues).

24

1

2




EXISTING FUNDS

Funding for compensation under the Paris Convention

The Paris Convention, adopted under the auspices of the

OECD Nuclear Energy Agency, establishes a special

international regime for nuclear third party liability. It covers

most Western European countries.

It stablishes that a nuclear installation is strictly liable for bodily

injury and property damage case by a nuclear incident up to a

fixed liability limit.

The limit of liability, as well as the time for claiming damages

and their scope have been increased through the 2004

Protocol

25

1

2




EXISTING FUNDS


COVERAGE

Nuclear Damage is defined to include:

• economic loss from injury or damage

• loss of income derived from environmental damage

• costs of measures of reinstatement of the impaired

environment

• costs of preventive measures

In general, the courts of the state where the nuclear incident

ocurred deal with compensation claims

26

1

2




EXISTING FUNDS


STRUCTURE

Three tier system of compensation:

• 1st tier: the operator of a nuclear installation is required to

have an insurance or other means to cover its potential liability

up to 5 million SDRs (aprox. $7.5M)

• 2nd tier: the government for the State in which the nuclear

installation is located pays any claims from this amount up to

175 million SDRs (arpox. $262M)

• 3rd tier: for claims above the previous figures, a third tier of

125 million SDRs (aprox. $187M) may be paid jointly by funds

contributed by contracting parties to the Brussels

Supplementary Convention.

27

1

2




EXISTING FUNDS


STRUCTURE

Three tier system of compensation:

• 1st tier: the operator of a nuclear installation is required to

have an insurance or other means to cover its potential liability

up to a minimum of 5 million SDRs (aprox. $7.5M) [maximum

of 15 million SDRs and recommended amount of 150 million

SDRs; it will increase with the ratification of the 2004 Protocol]

• 2nd tier: the government for the State in which the nuclear

installation is located pays any claims from this amount up to

175 million SDRs (aprox. $262M)

• 3rd tier: for claims above the previous figures, a third tier of

125 million SDRs (aprox. $187M) may be paid jointly by funds

contributed by contracting parties to the Brussels

Supplementary Convention.

28

1

2




EXISTING FUNDS


FINANCE

Insurance provided by insurance pools. 2nd and 3rd tier funds:

public.

LIABILITY LIMITS

Yes, 300 Million SDRs but to be increased (to 1.5 billion Euros)


The 2nd and 3rd tier funds come from public budgets, no.

29

1

2




EXISTING FUNDS

Funding fro compensation under the US Price Anderson Act

The Price-Anderson Act was enacted into la in 1957 and has been

revised several times.

Its main purpose is to ensure the availability of a large pool of

funds to provide prompt and orderly compensation of members of

the public who incur damages from a nuclear or radiological

incident no matter who might be liable.

TYPE OF FUND

Public.

COVERAGE

Bodily injury and property damage from a nuclear accident.

30

1

2




EXISTING FUNDS


STRUCTURE

Two tier system:

1st tier: compulsory insurance for each installation with a maximum

liability of $375 million.

2nd tier: if compensation claims exceed the previous amount a

fund will be collected among the other licensed nuclear

installations (104 in 2011); each one will contribute to the fund with

$111.9 million each

If the second tier is exhausted, the Congress would determine

whether to provide additional disaster relief.

31

1

2




EXISTING FUNDS


FINANCE

Only American Nuclear Insurers, a pool of insurers, underwrites

nuclear insurance.

The fund is not paid into unless an accident occurs. Actual

payments in the event of an accident are of $17.5 million per year

and installation until a claim has been met or the individual liability

reached

LIABILITY LIMITS

Yes for the installations (at most $11.6 billion); not if considering

public funds.


Yes, under the liability limits.

>>



study to explore the feasibility of creating a fund to ...study to explore the feasibility of...

Documents