ELR Citation: ELR 20605
No(s). 97-2079 (4th Cir. Mar 2, 1999)

The court holds that an oil company is not entitled to compensation from the Oil Spill Liability Trust Fund (the Fund) for all of the recovery costs and damages it incurred from an oil spill and an ensuing fire that was caused by a third party. The court first holds that under Oil Pollution Act (OPA) §1002(a), the removal costs and damages that are compensable are those that result from a discharge of oil or from a substantial threat of a discharge of oil into navigable waters or the adjacent shoreline. The court next holds that on remand, the district court should determine whether the Fund director's allowance of compensation was reasonable. The company is entitled to full compensation from the Fund for removal costs that the federal coordinator determined were consistent with the national contingency plan (NCP) and for costs resulting from actions he directed. The company is also entitled to full compensation for loss of earnings and earning capacity caused by the necessity to carry out the directions of the federal coordinator. Furthermore, the underlying findings of the federal coordinator must not be arbitrary, capricious, or an abuse of discretion. As a matter of law, however, the company cannot recover for the fire damage because the evidence did not establish that the fire caused the discharge of oil into navigable waters or posed a substantial threat to do so.

The court then holds that the Fund is not liable for the company's expenditures that were directed by North Carolina authorities. The company has not shown any request by the governor of North Carolina or an agreement between the governor and the president as required by OPA §1012(d)(1). Moreover, the company did not introduce any evidence showing compliance with either the OPA or with North Carolina cleanup regulations. Also, the company has not proved that the contamination of the soil and groundwater posed a substantial threat of a discharge of oil into navigable waters. In addition, the federal coordinator did not determine that the cleanup ordered by North Carolina authorities was consistent with the NCP, and he did not direct the company to comply with North Carolina directives.

The court also holds that the company is not entitled to an award of interest against the United States. The no-interest rule prohibits an award of interest against the government in the absence of an express waiver of sovereign immunity from an award of interest, and express waiver of immunity from interest is not found in the OPA.

A judge dissenting in part and concurring in part would hold that the third party's opening of an oil storage tank spigot and setting fire to the oil is an incident for which the company would be entitled to both its removal costs and its damages. The judge concurs with the majority's opinion that the company is not entitled to an award of interest against the United States.

Counsel for Plaintiff
Donna P. Walker
Walker, Walker, Wendlandt & Osowski
550 W. 7th Ave., Ste. 1850, Anchorage AK 99501
Unlisted

Counsel for Defendants
Joan M. Pepin
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Before Motz, J., with Niemeyer, J., dissenting in part