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Global Compensation for Oil Pollution Damages: The Innovations of the American Oil Pollution Act
RFF Feature
September 2004

Concern over the environmental and economic costs of oil pollution and the 11-million-gallon Exxon Valdez spill in 1989 led the U.S. Congress to enact the U.S. Oil Pollution Act (OPA) in 1990.

In a new discussion paper, Global Compensation for Oil Pollution Damages: The Innovations of the American Oil Pollution Act, Senior Fellow James Boyd outlines why certain provisions of this act should be emulated by other countries.

The United States regulatory system already exerts significant influence over worldwide marine safety standards, largely through OPA. But several aspects of U.S. law deserve wider international consideration and adoption.

Boyd discusses two of them: the act’s natural resource damage provisions and relatively strict financial requirements imposed on marine transporters designed to ensure that polluters, rather than the public, pay if damage is caused.

Natural resource damages (NRDs) are a novel and challenging aspect of compensation law that requires regulators to determine the social loss associated with damages to resources that are not privately owned or traded in markets. Boyd supports liability for damages to public natural resources, but takes care to explore the difficulties associated with damage estimation and the risks NRDs pose for the private sector.

Link to RFF Discussion Paper
Global Compensation for Oil Pollution Damages:
The Innovations of the American Oil Pollution Act

Discussion Paper 04-36

Another distinctive aspect of OPA mentioned in the paper is its approach to funding cleanup and restoration. The act requires financial assurance as a precondition for vessel operation, in the same vein as mandatory auto insurance for drivers. This is designed to ensure that responsible parties have the funds necessary to pay for any damages they might incur. Most obviously, this means that funds are available cleanup. It also leads potential polluters to be more careful in ship design, maintenance, and operation: knowing that they will bear the full financial burden of marine accidents.

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