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Oil Tax for Federal Spill Fund Lapsed with New Year

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Oil Tax for Federal Spill Fund Lapsed with New Year

Oil and Oil Sands Pay No Federal Taxes Despite Potentially Huge Cleanup Costs

Washington, DC —The federal government is not the only recent shutdown. The excise tax that is the principal source of revenue for the federal Oil Spill Liability Trust Fund expired at the end of 2018, with no legislation pending to renew it. As a result, America’s ability to help avert and contain a major oil spill is significantly compromised, according to Public Employees for Environmental Responsibility (PEER).

The 9-cent per barrel excise tax on all oil at U.S. refineries sunset on December 31st. It generates approximately half a billion dollars a year. The U.S. Coast Guard, which administers the Trust Fund, estimates that its current balance is approximately $6.7 billion. Without renewal of the excise tax, the Trust Fund begins a spiral toward exhaustion.

Even when fully funded, however, the Government Accountability Office warns the Trust Fund could be outstripped by a single major spill – especially if no responsible party with deep pockets defrays costs.

Enacted in the wake of the massive Exxon Valdez spill in Alaska’s Prince William Sound, the Oil Pollution Act of 1990 places liability, up to specified limits, on the responsible party. The Oil Spill Liability Trust Fund pays for costs incurred beyond those limits, as well as costs from responsible operators who declare bankruptcy or when no responsible party can be found. It also reimburses spill-related expenses for the Coast Guard and other federal agencies, state restoration costs and lost tax revenue, as well as losses claimed by businesses, such as fishing fleets.

“With the Trump administration pushing to expand offshore drilling, this is absolutely the wrong time to let the Oil Spill Liability Trust Fund run aground,” said Rick Steiner, a retired University of Alaska professor and PEER board member. “This Trust Fund is our Superfund of the Seas and it needs to be fully funded so that we can do everything possible to prevent and respond quickly to a major spill without having to wait for Congress and White House to agree on new legislation on an emergency basis– an increasingly iffy proposition.”

At the same time, reliance on oil sands has more than doubled, accounting for nearly one-quarter of U.S. imports. Yet, oil derived from oil sands is not subject to the federal excise tax even when it was in effect. Recent major pipeline spills include the 2010 Enbridge spill in Michigan and the 2013 ExxonMobil spill in Arkansas. If the Keystone XL pipeline is built, oil sands volume will grow even larger.

“Oil is enjoying an unjustified free ride from federal taxpayers,” stated PEER Executive Director Jeff Ruch, pointing to proposals to increase the excise tax, raise liability limits, and expand eligible reimbursements to include spill prevention, among other related expenses. “The oil industry should be financial responsible for all its environmental costs, not just spills.”

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Look at current balance in the Oil Spill Liability Trust Fund

View history and scope of the Oil Spill Liability Trust Fund

See GAO warning of catastrophic spill threat to Trust Fund viability

Examine oil sand exemption from oil excise tax

Read the Prince William Sound Regional Citizens’ Advisory Council resolution