The spill began after an explosion last month on the Deepwater Horizon oil rig. When well-insured companies have a spill, the government can try to recover the money spent from a reserve fund.
WASHINGTON — The federal government has a large rainy day fund on hand to help mitigate the expanding damage on the Gulf Coast, generated by a tax on oil for use in cases like the Deepwater Horizon spill.
Up to $1 billion of the $1.6 billion reserve could be used to compensate for losses from the accident, as much as half of it for what is sometimes a major category of costs: damage to natural resources like fisheries and other wildlife habitats.
Under the law that established the reserve, called the Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than $75 million in liability for the damages that might be claimed by individuals, companies or the government.
The fund was set up by Congress in 1986 but not financed until after the Exxon Valdez ran aground in Alaska in 1989. In exchange for the limits on liability, the Oil Pollution Act of 1990 imposed a tax on oil companies, currently 8 cents for every barrel they produce in this country or import.
The tax adds roughly one tenth of a percent to the price of oil. Another source of revenue is fines and civil penalties from companies that spill oil.
The result is a rainy-day fund, which over the years has been used mostly for spills that exceed the liability caps by relatively small amounts. But the trust fund managers have warned that a single big spill could make a sizable dent in the reserve.
The money is also used to prepare for spills, including anticipatory measures like stockpiling oil containment booms. And Congress can use money from the fund to reimburse the Coast Guard and the National Oceanic and Atmospheric Administration for their spill-related expenses.
“The idea behind creating it was that we wouldn’t have to wait on money to clean up an oil spill,” said Michael C. LeVine, the Pacific senior counsel for Oceana, an environmental group.
A federal supervisor at the scene of a spill can authorize states to spend up to a quarter-million dollars on the spot.
The president can authorize up to $50 million a year without Congressional approval.
When a rich and well-insured company like BP is responsible for the spill, the government will seek reimbursement of what it spends on cleanup from the company and its insurers.
Experts say the fund is invaluable in spills involving smaller companies, which may not have money for cleanup, or in cases where the identity of the responsible party is not instantly clear.
But damages in oil spills can run to big money.
“One billion dollars sounds like a lot of money, but it really might not be,” said Mr. LeVine, who is based in Juneau, Alaska.
Companies that lose business — fishermen who cannot fish, or hotel owners who cannot rent out rooms — can seek damages. So can governments that see tax revenues decline.
A count made by the Department of Homeland Security last August found that since 1991, there had been 51 instances in which liability exceeded caps.
In most years it was a handful; in 1999 there were 11, because of a typhoon in American Samoa that wrecked eight fishing vessels that spilled oil.
Numerically, cargo vessels and fishing vessels are the biggest culprits, but oil tankers and barges cause the most dollar damage.
The fund’s single largest expense so far came after a tanker in the Delaware River, the Athos I, spilled tens of thousands of gallons of crude oil in 2004.
Money can be sought by the states for expenses like restoration of a damaged wetland or compensation for loss of use of a resource.
Payments are limited by the amount actually on hand in the fund; if this spill depletes the trust fund, it might take time to replenish it for future use.
The balance was projected to rise to about $1.9 billion from the current $1.6 billion — but that was before the spill.
This article has been revised to reflect the following correction:
Correction: May 4, 2010
An article on Saturday about the response by BP America and the federal government to an oil spill in the Gulf of Mexico misstated a provision in a pollution law passed a year after the 1989 Exxon Valdez disaster. The law, the Oil Pollution Act of 1990, stipulates that “each responsible party for a vessel or a facility from which oil is discharged” is liable for cleanup costs. It does not state that the owner of a rig or a vessel is automatically responsible for the costs. An article on Sunday about an oil tax fund that helps pay for damages from oil spills repeated the error about the cleanup costs and it misstated part of the name of a federal agency responsible for coastal and deep ocean waters. It is the National Oceanic and Atmospheric Administration, not the National Oceanographic and Atmospheric Administration.
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