[Senate Hearing 105-943]
[From the U.S. Government Publishing Office]
S. Hrg. 105-943
OVERSIGHT OF THE OIL SPILL LIABILITY
TRUST FUND
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HEARING
BEFORE THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
DECEMBER 10, 1998--NARRAGANSETT, RHODE ISLAND
__________
Printed for the use of the Committee on Environment and Public Works
U.S. GOVERNMENT PRINTING OFFICE
53-119cc WASHINGTON : 1999
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For sale by the U.S. Government Printing Office
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred fifth congress
JOHN H. CHAFEE, Rhode Island, Chairman
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
ROBERT SMITH, New Hampshire DANIEL PATRICK MOYNIHAN, New York
DIRK KEMPTHORNE, Idaho FRANK R. LAUTENBERG, New Jersey
JAMES M. INHOFE, Oklahoma HARRY REID, Nevada
CRAIG THOMAS, Wyoming BOB GRAHAM, Florida
CHRISTOPHER S. BOND, Missouri JOSEPH I. LIEBERMAN, Connecticut
TIM HUTCHINSON, Arkansas BARBARA BOXER, California
WAYNE ALLARD, Colorado RON WYDEN, Oregon
JEFF SESSIONS, Alabama
Jimmie Powell, Staff Director
J. Thomas Sliter, Minority Staff Director
(ii)
C O N T E N T S
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Page
DECEMBER 10, 1998--NARRAGANSETT, RHODE ISLAND
OPENING STATEMENT
Chafee, Hon. John H., U.S. Senator from the State of Rhode Island 1
WITNESSES
Christopher, Albert B., West Kingston, RI........................ 19
Prepared statement........................................... 48
Morin, Stephen, Assistant to the Director, Rhode Island
Department of Environmental Management......................... 7
Prepared statement........................................... 46
O'Connor, Craig, Deputy General Counsel, National Oceanic and
Atmospheric Administration..................................... 6
Prepared statement........................................... 43
Sheehan, Daniel, Director, National Pollution Funds Center, U.S.
Coast Guard, Department of Transportation...................... 4
Prepared statement........................................... 36
Response to additional questions from Senator Chafee......... 40-43
Sorlein, John, President, Rhode Island Lobstermen's Association.. 21
Prepared statement........................................... 51
ADDITIONAL MATERIAL
Articles:
Block Island Fishing Areas Remain Shut....................... 57
Fishing Ban Based in Area Polluted by Oil Spill Between Pt.
Judith and Block Island.................................... 60
Fishing Ban Tangled in Bureaucracy........................... 57
Fishing Industry Slammed by Spill............................ 54
Plan Drafted for Reopening Contaminated Fishing Areas........ 55
Claims forms....................................................93, 164
Claims documents.......................................113-120, 123-132
Claims summary documents, NPFC...............................94, 98-110
Letters:
Department of Environmental Management, Rhode Island......... 112
Hull and Cargo Surveyors, Inc................................ 84-92
John P. Kelly & Associates 148, 154, 161, 162, 166, 174-176, 178, 179
K70, 80, 83-88, 90, 91, 111, 121, 133, 155, 159, 161, 162, 172, 177
National Pollution Funds Center, Coast Guard 41, 80, 82, 96, 144, 160
RGL Gallagher, LLP.........................................150, 168
Turnaboat Services, Ltd...................................... 158
Press release, North Cape Claims, National Pollution Funds Center 64
Statements:
Blount, Frank, for Gail Frances, Inc......................... 61
Harsch, William W., Esq...................................... 62
Hartman, Barry M., Kirkpatrick & Patrick, LLP................ 68
Kopf, Bruce F................................................ 52
Nally, Raymond............................................... 63
National Pollution Fund Center............................... 65
OVERSIGHT OF THE OIL SPILL LIABILITY TRUST FUND
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THURSDAY, DECEMBER 10, 1998
U.S. Senate,
Committee on Environment and Public Works,
Narragansett, Rhode Island.
The committee met, pursuant to notice, at 4 p.m. at the
University of Rhode Island Graduate School of Oceanography,
Narragansett Bay Campus, Coastal Institute Auditorium, Ferry
Road, Narragansett, Rhode Island, Hon. John H. Chafee (chairman
of the committee) presiding.
Present: Senator Chafee.
OPENING STATEMENT OF HON. JOHN H. CHAFEE,
U.S. SENATOR FROM THE STATE OF RHODE ISLAND
Senator Chafee. Our first panel consists of Mr. Daniel
Sheehan, Director of the National Pollution Fund Center, US
Coast Guard, is our key witness. Mr. Craig O'Connor, Deputy
General Counsel, National Oceanic and Atmospheric
Administration; Mr. Steve Morin, assistant to the Director of
the Rhode Island Department of DEM.
First, I want to thank everybody for coming this afternoon,
and especially I want to thank our Washington-based witnesses
from NOAA and the Coast Guard who have taken the trouble to be
with us.
Now, the purpose of this hearing is to examine how well the
Oil Pollution Act claims process is working. The focus of the
hearing is on those claims that are presented to the Government
for payment. The Oil Pollution Act provides that a private
party or a Federal, State or tribal natural resource trustee
may present its claim to the Government for payments if
negotiations with the party that caused the RP, the responsible
party, caused--if the negotiations with the responsible party
failed, in other words, if you're not getting satisfaction from
the responsible party, then under the Oil Pollution Act the
private party can present its claim to the Federal Government.
Today we'll hear from two panels regarding two different
types of claims against the Oil Spill Liabilities Trust Fund.
The first panel will address claims by natural resource
trustees against the fund. Until recently, the opinion of the
Comptroller General was that the managers of the Fund, the
Coast Guard's National Pollution Fund Center, could not pay,
now this is very important, could not pay any claims for
natural resource damage without Congress's approval. The
Justice Department reversed that and so the National Pollution
Funds Center is staffing a new office to process these claims.
Now, how the National Pollution Funds Center will dispose
of natural resource claims is extremely important here. Craig
O'Connor, Mr. O'Connor, Deputy General Counsel of NOAA, will
testify that the State and Federal trustees at NOAA and the
Department of Interior recently completed the very first
natural resource damage assessment and restoration plan under
the new 1996 regulations required by the Oil Pollution Act, so
we're working under some relatively new regulations here.
Though this restoration plan is still open for public comment
for a few days, it may become the first joint Federal/State
natural resource damage claim presented to the claims fund for
payment that complies with NOAA regulations. In other words,
this may--the plan they've got here, this State may be the
first one. Unlike some 1,800 other State trustee claims pending
before the Pollution Control Fund, the Rhode Island claim will
enjoy deference because of a so-called rebuttable presumption
that Congress provided in the Oil Pollution Act for claims
prepared in accordance with NOAA regulations.
Mr. Dan Sheehan is of the Coast Guard's National Pollution
Fund Center, this is really a tongue twister, they call it
NPFC, but for short I'll call it the Pollution Fund Center.
That saves one word, apparently. He's going to explain how his
organization plans to handle these trustee funds. Does
everybody understand that the trustee funds are funds not
presented on behalf of an individual fisherman, for example,
they're presented on behalf of, in this case it will be the
State, and for damage done to natural resources. Trustees'
claims raised some novel legal issues, and the Pollution Fund
Center, along with the Justice Department, the Federal trustees
are working how to resolve these. Mr. Sheehan will testify
about recently completed guidance documents that spells out the
claims process. I'm glad the Federal agencies were able to move
forward with this, though the State trustees are only now
receiving the document. I understand the pollution fund will
consider revising the document in response to the feedback they
got from this and other hearings.
Mr. Steve Morin, Assistant to the Director of the
Department of DEM, will provide the prospective of the State
Natural Resource Trustee.
OK, so the first panel deals with the recoveries for
injuries to public resources. The second panel will address the
very real economic losses suffered by individuals, so there's
two separate things. In the two-and-a-half years since the
North Cape spill, nearly 3 years, parties injured by the spill
sought compensation from the responsible party and its insurer,
from the trust fund, by making claims to the pollution fund.
It's fair to say that many Rhode Islanders who suffered
economic damages due to the spill are frustrated with the
claims process, and I think that will probably come out pretty
clearly. Parties injured by the spill, particularly commercial
fishermen, have voiced serious concerns about the speed with
which their claims are processed and the adequacy of the
settlements offered by the pollution fund. Individual fishermen
and the Rhode Island Lobstermen's Association feel the Funds
Center is seeking unreasonable and unavailable evidence to
prove the losses they claim they've suffered. On the other
hand, the Funds Center claims it's attempted to pay proven
losses as quickly as it can, while at the same time discharging
its fiduciary duty to protect the Fund against poorly
documented losses, and, obviously, they do have a
responsibility.
Mr. Sheehan will explain the claims process and review the
Fund's experience with the North Cape claims. Mr. Sheehan will
also discuss a new approach that may help resolve the claims
for lost profits suffered by the lobstermen.
We'll hear from the Rhode Island Lobstermen's Association,
individual fishermen, seafood processor and charter boat
operator about their experience and concerns.
As I say, there's two witness panels this afternoon. After
we hear from the second, there will be an opportunity for
members in the audience, if somebody wants to offer some
remarks, we'll give that person a chance, it will be for 2
minutes, but, nonetheless, we want to hear what you've got to
say. Anyone desiring to make remarks should sign up with John
Goodman. Where is John. That will help us get some idea on the
time that we want to allot for this, and they can be on, of
course, we want it to be pertinent to what the hearing's all
about; namely, claims for cost, damages and the time it's taken
and so forth.
I look forward to hearing from our witnesses and we'll
start with Mr. Sheehan.
Mr. Sheehan, as I mentioned, is the Director of the
National Pollution Funds Center, U.S. Coast Guard and based in
Washington.
So, Mr. Sheehan, if you'd proceed, we would be grateful.
Thank you.
[The prepared statement of Senator Chafee follows:]
Statement of Hon. John H. Chafee, U.S. Senator from the State of Rhode
Island
Good evening, and thank you all for attending. In addition to our
Rhode Island witnesses, I wish to thank our Washington-based witnesses
from the Coast Guard and National Oceanographic and Atmospheric
Administration for traveling to Rhode Island.
The purpose of this hearing is to examine how well the Oil
Pollution Act claims process is working. The focus of the hearing is on
those claims that are presented to the Government for payment. The Oil
Pollution Act provides that a private party or a Federal, State or
tribal natural resource trustee may present its claim to the Government
for payment if negotiations with the party that caused the oil spill
fail.
Tonight, we will hear from two witness panels regarding two
different types of claims against the Oil Spill Liability Trust Fund.
The first panel will address claims by natural resource trustees
against the Fund. Until recently, the opinion of the Comptroller
General was that the managers of the Fund, the Coast Guard's National
Pollution Funds Center (``NPFC''), could not pay any claims for natural
resource damages without a Congressional appropriation. The Justice
Department has reversed that position, and the NPFC is now staffing a
new office to process those claims.
How the NPFC will dispose of natural resource damages claims is
extremely important to Rhode Island. Craig O'Connor, Deputy General
Counsel of NOAA, will testify that the State and Federal trustees at
NOAA and the Department of Interior recently completed the very first
natural resource damage assessment and restoration plan under the new
1996 regulations required by the Oil Pollution Act. Though this
restoration plan is still open for public comment for a few days, it
may become the very first joint Federal-State natural resource damage
claim presented to NPFC for payment that complies with NOAA regulation.
Unlike some 1,800 other State trustee claims pending at NPFC, the Rhode
Island claim would enjoy deference because of the so-called
``rebuttable presumption'' that Congress provided in the Oil Pollution
Act for claims prepared in accordance with the NOAA regulations.
Mr. Dan Sheehan of Coast Guard's National Pollution Funds Center
will testify about how his organization plans to handle trustee claims.
Trustee claims raise some novel legal issues, and the NPFC along with
the Justice Department and the Federal trustees have been working to
resolve many of these issues. Mr. Sheehan will testify about a recently
completed guidance document that spells out the claims process. I am
glad that the Federal agencies were able to move forward on this,
though the State trustees are only now reviewing the document. I
understand that NPFC will consider revising the document in response to
the feedback they will receive from Rhode Island and other State and
tribal trustees. Mr. Andrew McLeod, Director of Rhode Island's
Department of Environmental Management, and Mr. Stephen Morin,
Assistant to the Director, will provide the perspective of a State
natural resource trustee on the claims process.
While the first panel deals with recovery for injuries to public
resources, the second panel will address the very real economic losses
suffered by individuals. In the nearly 3 years since the January 1996,
North Cape spill, parties injured by the spill have sought compensation
from the responsible party and its insurer, and from the Trust Fund by
making claims to the NPFC. It is fair to say that many Rhode Islanders
who suffered economic damages due to the spill are very frustrated with
the claims process.
Parties injured by the spill, particularly commercial fishermen,
have voiced serious concerns about the speed with which their claims
are processed and the adequacy of the settlements offered by the NPFC.
Individual fishermen, and the Rhode Island Lobstermen's Association,
feel that the Funds Center is seeking unreasonable or unavailable
evidence to prove the losses they claim to have suffered due to the
spill. For its part, the Funds Center claims it has attempted to pay
proven losses as quickly as it can, while at the same time discharging
its fiduciary duty to protect the Trust Fund against poorly documented
losses.
Mr. Sheehan of the NPFC will explain the claims process and review
NPFC's experience with the North Cape claims. Mr. Sheehan will also
discuss a new approach that may help to resolve the claims for lost
profits suffered by the lobstermen. We will also hear from the Rhode
Island Lobstermen's Association, individual fishermen, a seafood
processor, and a charter boat operator about their experience and
concerns.
After we hear from the second witness panel, there will be an
opportunity for members of the audience to offer remarks for 2 minutes.
Anyone desiring to make remarks should sign up with John Goodman of my
staff--lohn, would you please identify yourself? I also ask that
remarks be limited to the subject matter of this hearing--claims for
costs or damages that are made to the National Pollution Funds Center.
I look forward to hearing from our witnesses. We will start with
(Director McLeod, if attending) then Mr. Sheehan, Mr. O'Connor and Mr.
Morin.
STATEMENT OF DANIEL SHEEHAN, DIRECTOR, NATIONAL POLLUTION FUNDS
CENTER, U.S. COAST GUARD, DEPARTMENT OF TRANSPORTATION
Mr. Sheehan. Thank you, Mr. Chairman. I truly appreciate
the opportunity to appear before you today. To my mind, the
communication, the open dialog in a forum like this, where we
get to hear and we get to be heard in terms of our processes,
both for the natural resource damage claims as well as the
third-party claims, are the ones which are very, very important
to us. As you noted, I do have the privilege of running the
Coast Guard's National Pollution Funds Center and our
assistance was a direct result of another catastrophic oil
spill, the Exxon Valdez, which resulted in the Oil Pollution
Act of 1990.
One of the major provisions of that Act----
Senator Chafee. Maybe you can pull that microphone a little
bit closer, would you, Mr. Sheehan.
Mr. Sheehan. I would be glad to.
One of the provisions of the Oil Pollution Act of 1990 is
to provide the parties damaged by an oil spill will be
compensated either by the responsible party or from the Oil
Spill Liability Trust Fund. Since I'm also on the second panel
today, which concerns compensation of claims in general, in
this first panel I'm going to limit my remarks to a more
specialized type of claim, that of natural resource damage
claims.
Senator Chafee. That's right, then we'll do the individuals
in the second round.
Mr. Sheehan. An unfortunate consequence of many oil spills
is the damage that occurs to natural resources impacted by the
spill. OPA-90 specified that there were four categories of
natural resource trustees, there were Federal trustees, State
trustees, Indian tribe trustees, and in some rare instances
foreign trustees, and in some cases, in its first three, there
are some overlapping jurisdictional issues, but these trustees
are permitted by law to submit claims to the Oil Spill
Liability Trust Fund for not only the cost of implementing a
restoration plan, but also for the cost of assessing the
damage.
As Senator Chafee pointed out, up until October of last
year my organization was prevented from paying these claims
because of a ruling by the Comptroller General. The Department
of Justice's Office of Legal Counsel basically ruled in a
different manner and gave us an interpretation which now
permits us to entertain that type of claim. After the decision
was made we took very quick action to convene a group, an
informal group of Federal trustees to assist the Funds Center
in understanding the natural resource damage assessment
methods, certainly including the NOAA assessment regulations,
which my colleague, Craig O'Connor, is going to describe today,
as well as to help us scope out and define our resource needs
to be able to adjudicate this type of claim.
Mr. Chairman, we anticipate being able to begin
adjudication of these claims in the late spring of next year.
We currently have over 2,000 claims in State trustees. Now,
while most of these claims are relatively small, they are still
large in number. To assist all of the trustees, the three
categories that we mentioned, in submitting claims, we've
prepared a Natural Resource Damage Claimant's Information
Guide. We have copies of that guide which we have provided
outside, we announced on the 23 November that it was available
on our Web site, we are making it available by letter and in
hard copy to all of the State trustees. Just a few moments ago
I gave to Mr. Steve Morin the very first letter to the State
trustees, giving him a copy of that guide.
In my written statement I've provided a brief overview of
how we would generally handle this type of claim, and while we
have attempted to anticipate many questions, if my experience
is any teacher, as the process matures, we're going to have to
make changes to this guide based on input, not only in hearings
such as this, but from direct input from the State trustees and
other trustees as well. It is of great assistance and will be
of great assistance to us to have as much input as possible and
we encourage that.
With that, Mr. Chairman, I will conclude my remarks and
will be pleased to answer your questions to the best of my
ability.
Senator Chafee. OK. What I thought I'd do is listen to the
three witnesses and then ask the panel some questions. Next is
Mr. Craig O'Connor, Deputy General Counsel of NOAA.
STATEMENT OF CRAIG O'CONNOR, DEPUTY GENERAL COUNSEL, NATIONAL
OCEANIC AND ATMOSPHERIC ADMINISTRATION
Mr. O'Connor. Thank you, Mr. Chairman. Thank you for the
opportunity to appear here today. I'm appearing on behalf of
not only NOAA, but the Department of Commerce, but also the
Department of the Interior. I'm really quite happy with the
opportunity to sit and talk to you about a process that was
brought to the public through the Oil Pollution Act, the
opportunity for us to have the full restoration of the natural
resources that may be damaged by an oil spill and the
opportunity to assure that that restoration occurs,
notwithstanding the fact that those parties responsible for the
oil spill may not choose to provide the compensation or be
unable to provide that compensation. The oil spill liability
trust fund is that indemnification on behalf of the people of
the United States and the people of Rhode Island with regard to
the North Cape oil spill to assure that your resources are
fully restored.
The issue of how those claims are presented and processed
by the National Pollution Funds Center is the subject of our
discussion today, and I would like to state, on behalf of both
NOAA and the Department of Interior, that we are very
appreciative of the opportunity to work closely with Dan
Sheehan and his folks in the development of the guidance and
the claims process. We feel comfortable that we have, as the
Federal Government, been successful in merging the
considerations that the natural resource trustees undertake in
the development of a restoration plan as spelled out in our
regulations with the claims process. We have worked closely
with Dan and his folks, and although along the way we had some
bumps and grinds that you usually have if you're trying to
merge different statutory authorities and programs, at this
point we feel comfortable. I also feel very comfortable that if
it becomes necessary to submit to the Funds Center the claim
that is presented by the restoration plan developed with
regards to the North Cape oil spill, that that plan and the
claim will be expeditiously processed and that we will be paid
in full, Dan, for that claim. I feel very comfortable, because
what we have been able to do, working with the State of Rhode
Island and the Department of Interior, is to develop what I
feel to be a very good and very solid natural resource
restoration plan. We presented that plan to the public in
September of this year, and it addresses fully, in our opinion,
the natural resources that were injured as a result of the
North Cape spill. Those resources included, as many of you
know, lobsters, quahog claims, many shellfish, sea birds,
including eiders and loons, damage to the salt ponds, damage to
the fish and wildlife reserve. We have been able to capture
through the work with Rhode Island, with the Department of
Interior, with the academic community right here at the
University of Rhode Island, what I feel to be a comprehensive,
very fair, very reasonable and a technically adequate and well-
supported restoration plan. The claims process is designed to
entertain such a claim. We did it in accordance with the
regulations that we promulgated in 1996, we tracked those
regulations, scripture and verse, we had the full participation
of the responsible parties and the public in the development of
that plan, and at this point, although I don't anticipate that
we're going to be able to settle that claim with the
responsible parties, I do anticipate that if that claim is
presented to the Funds Center, it has been prepared fully in
accord with their expectations and there will be no difficulty
in having that claim processed and no difficulty in us moving
forward in the spring with the restoration of those resources
in accordance with that restoration plan.
So it's with comfort that I sit here today and provide
testimony on behalf of the Federal trustees and say that we are
satisfied with the concerns that we have expressed to the Funds
Center, we are satisfied that they have exercised their
responsibilities in a judicious way and that we will be well
accorded at such time as the plan is presented to them for
compensation.
Senator Chafee. OK.
Now, Mr. Morin, Assistant to the Director of Rhode Island
DEM.
STATEMENT OF STEPHEN MORIN, ASSISTANT TO THE DIRECTOR, RHODE
ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT
Mr. Morin. Thank you, Mr. Chairman. I would like to offer
Director McLeod's apologies, he couldn't make it here this
afternoon, but he did send his greetings and indicate that
however he can be of assistance, he would be happy to render
that assistance to yourself and the committee.
I have been the State of Rhode Island's trustee
representative for the North Cape oil spill damage assessment
and restoration plan since the unfortunate incident in January
1996, and over that nearly 3 year period of time I've worked
with NOAA and the Department of Interior, scores of scientists
and able assistants to put together a, probably a five-foot
long administrative record which the trustee's counsel will
overview one more time after the close of the public comment
period in a few days, and at that point we will put forward the
restoration plan, the final restoration plan based on the
public comment that we received and the overview of that
administrative record.
We've been extraordinarily careful, as Craig as mentioned,
to follow all of the dictates of the NOAA NRDA regulations, for
a number of reasons. The primary one I think is that when we
looked at the Oil Pollution Act statute and the billion dollar
trust fund that was there, we recognized that, unlike many
Superfund cases, which may drag on for 10 or 15 years before a
resolution, that a billion dollar trust fund that Congress had
instituted was designed to speed that process along. I think
that, although 3 years seems a long time compared to other
natural resource restoration plans, I think that trustees for
the North Cape have done a remarkable speedy job. The next
place to go is to the responsible parties, and really we're not
the going to the responsible parties themselves, we're going to
the responsible parties' insurance company, and, absent the
fund, if we did not have the billion dollar trust fund behind
us, our only recourse would be litigation, which could take
two, five, seven, 10 years through the appellate process before
any restoration of the natural resources, the public trust
resources was undertaken. With the billion dollar trust fund,
it's like having our own insurance company. If the other guy
hits my car and he's not willing to pay for the repairs, I can
go to my insurance company and my insurance company will make
me whole, that's how we've been viewing the National Pollution
Funds Center, and so we've, as I said, we've spent a great deal
of time, we've been extraordinarily careful to follow all of
the NOAA guidelines, and for most of what the National
Pollution Funds Center guidance document says, I have very
little disagreement. We intend to undertake the restorations as
recommended in the guidance, we're going to take any money that
we get, put them in revolving funds, ensure that we properly
document how that's been spent so that the resources that were
injured can be restored. The one concern that I have, and in
looking through the guidance document, is the, I think the way
the fund seems to look at trustees, as if they were another
claimant, and that the trustees, although they're following
federally adopted and judicially vetted regulations, they are,
in the case of the North Cape at least, two of the trustees are
Federal agencies, we are following the Federal Administrative
Procedures Act and the National Environmental Policy Act, at
the end of the day we will have our administrative record, we
will close that and we will issue our final report, and we view
that, at least the State of Rhode Island views that, as the
final executive decision regarding the restoration, the trust
of the those natural resources. It's more than I think just a
presumption of correctness, it is, we think, we think it should
be viewed as the final decision in this matter, and that absent
a finding of arbitrary or capricious on behalf of the trustees,
that the Funds Center should be writing the check to the
trustees for those restorations so that we can begin
expeditiously putting back the trust resources that were lost
to the public, and so our concern is, as I said, the issue of
the finality that the guidance document, the Coast Guard's
guidance document seems to indicate, that if they choose, they
could deny, in whole or in part, the claim of a natural
resource trustee for restorations.
Now, I can understand that the 2,000 or so claims that may
be pending that were made prior to the adoption of the NOAA
regulations, I can understand their concerns relative to those,
but I think that there needs to be a distinction drawn between
those claims which were made under NRDA regulations that were
adopted and those that were made another mechanism, and that,
the review of the records that the claims center undertakes is
a very basic review, have we checked off the boxes that were
necessary in the regulations, and, if we have, then a check
issues. Beyond that, I don't think they need to review it,
because the trustees were the ones given that responsibility by
Congress, and if we have done our job, if we followed the
regulations, then our decisions need to be presumed correct.
Senator Chafee. Let me ask you a question here. As I
understand it, you first, as a trustee, and you represent the
State of Rhode Island, as a trustee, you came up with your
claim and you tried to conform to the regs that NOAA, I guess
as NOAA puts them out, didn't they?
Mr. Morin. Yes.
Senator Chafee. But I was a little surprised, you haven't
been to the responsible parties yet, is that right?
Mr. Morin. We have not been formally to the responsible
parties. The responsible party has been, as the regulations
require, a participant in the damage assessment, that is they
sat in on all of the work that we did in assessing the damage.
In the construction of the restoration plan, however, that's
left to the trustees alone, and the formal presentation of the
claim to the responsible parties will take place after the
closure of the public comment period; however, as in all
litigations, we are generally in some kind of negotiations with
the responsible parties' attorneys and insurance company right
from the beginning, so there's been a very, very strong back
and forth between the trustees and the responsible party
regarding an attempt to settle the case.
Senator Chafee. But NOAA or the Fund isn't going to pay
anything until they know that the responsible party has
declined, you fail, you struck out with the responsible party,
is that right?
Mr. Morin. Yes, Mr. Chairman. Ninety days later, 90 days
after we make the demand on the responsible parties, if they
have not paid, we would make the claim.
Senator Chafee. OK. So there's a time limit, that's very
important, otherwise this thing could drag on forever.
Mr. Morin. That's correct, Mr. Chairman.
Senator Chafee. So, obviously, you're dealing with the
insurance company, but we'll call it the responsible party.
Now, so here we are, 3 years after the, 3 years next month
after the accident, and so you're getting together your claim,
you're following the dictates of, the guidelines from NOAA, and
this thing is three feet long, or what did you say?
Mr. Morin. About five feet.
Senator Chafee. Five feet, OK. So now you're going to lug
it down to go before the responsible party and then they have
90 days?
Mr. Morin. That's correct.
Senator Chafee. When does the clock start running, when you
deliver it there?
Mr. Morin. When we deliver the final demand, and we're not
giving them the whole five feet, Mr. Chairman, we'll give them
a summation of that document there. They're aware of most of
the documents in the file.
Senator Chafee. Because they've sat in, as I understood it,
an awful lot. I mean, when a million lobsters were lost, or
whatever it was, baby lobsters, you sit down with them, you try
to figure, now what's the potential loss of these baby lobsters
and what's it going to mean in 5 years and so forth and so on,
you can figure that all out?
Mr. Morin. That's exactly what we did, Mr. Chairman. We had
University of Rhode Island scientists, in the case of lobsters,
University of Rhode Island scientists go out and sample the
area of the oil spill and the areas adjacent to the oil spill
and do a field study to say how many lobsters were out there,
how many lobsters should have been out there, and you subtract
one from the other, and, in fact, our estimation is that now
there were nine million lobsters of all sizes, mostly little
ones, that were killed, and that over time they would yield
some two-and-a-half million or two million adult lobsters to
the commercial shellfishermen, the lobstermen after they all
grew out, so that those nine million little guys need to be
replaced so that in time we have the adults, plus we have all
of the environmental services that those small lobsters who
don't make it to adult size, food for cod, for example, and all
the ecological services they provide are put back into the
process. The responsible parties sat with us in the
construction of those studies, and the outcome, although not
every single study is agreed to, the outcome is agreed to, at
least the responsible parties understand how the studies were
done and they understand the system that was going on, many of
the studies are the responsible parties' studies. A great deal
of what's in the administrative record will be back and forth
between the trustees and the responsible parties' investigators
on interpretations of what science might be this way or that
way.
Senator Chafee. It seems to me the attitude of the
responsible parties would be, well, why the heck should we pay
this, all they've got to do is wait 90 days and then you go
collect from the Federal Government. Now, I suppose that the
downside of that is that once you collect from the Federal
Government, the Federal Government is segregated, would come on
in and sue the responsible party, or could, is that--what's the
encouragement for the responsible party to settle?
Mr. Morin. See, I think that is the encouragement, Mr.
Chairman. The claim is subrogated to the Fund, the Fund then
sues the responsible parties to get back its money that its
paid to the trustees to do the restoration, and the incentive
then is that not only, and I don't want to speak for the Fund,
but, as I understand it, not only do they have to pay the cost
of the restoration, but they'll have to pay the administrative
cost to the Fund on top of that, and so you're going to----
Senator Chafee. I presume they don't want the Federal
Government suing them particularly?
Mr. Sheehan. People generally don't like that.
Senator Chafee. It must be extremely difficult to quantify
the cost in something like this. I mean, I can see in the next
panel we're going to have the individuals, and an individual
with some definite, knows what he made last year and what's
happened, what he's making this year and the losses and so
forth, but with these, in effect, natural resource damages,
it's--I don't know how you quantify it.
Mr. Morin. What we did, and that's the, I think this is the
difference between how natural resource damage claims were done
before OPA-90 and done after OPA-90.
Before, a monetary figure was arrived at, money changed
hands and then trustees tried to do something that was
generally associated with what the damage was, but in many
cases we did not have that case, and in the World Prodigy is a
perfect example. There is an ongoing--in fact, yesterday they
opened up shellfish grounds that were transplanted, that was
paid for by the World Prodigy damage assessment, but there were
no clams killed during the World Prodigy oil spill. Now what we
do is restore the resources which were injured, and we don't
look at the cost of doing that until right at the end, what we
find are technologically available mechanisms for restoring the
natural resource, we scale out that to ensure that the amount
that was killed is going to be restored on this hand, and at
that point we say, OK, well, how much will it cost to do this.
Senator Chafee. Well, take your nine million lobsters, now,
OK, you're going to restore that, how do you restore nine
million lobsters?
Mr. Morin. What we've determined is that the lobsters--we
have some fairly sophisticated biological models, and some
very, very good biologists, including Tom Gibson of our staff,
who broke down the lobsters into how many eggs would have made
nine million lobsters and how many eggs would have flowed from
those nine million lobsters, so that when it all grows out, you
get the two-and-a-half or two million adult lobsters. We then
say, OK, well, how do you increase egg production, and there's
a fairly old method which has never been used in Rhode Island,
but it's big in Maine, called V notching, where you take an
adult female lobster, you mark their tails, after they become
legal size, you mark their tails and you put them back in, then
you prohibit the landing of a marked lobster, that marked
lobster stays in the water as a legal size lobster but no
longer able to be caught for about two more malts, which would
be 2 or 3 years, essentially, and in that time period she will
produce another large clutch of eggs and those eggs will
replace the lobsters lost, and that's how we do it, and then
you go and count up the number of lobsters you need to do that
and how much that costs in the marketplace, how much it costs
to administer the program, and it works out in this case to be
about $10 million to do the restoration of the lobsters, and so
we didn't--but we didn't get to the money part until we've
gotten to all the rest of that. Had we found a way of restoring
the lobsters less expensive than ten million, which would have
had the same effect, we would have, by the regulations, would
have been obliged to use that, but at this point we found what
is the most economically viable mechanism for doing that and we
think that's going to work.
Senator Chafee. Mr. O'Connor, suppose the trustee went
against the responsible parties and had six different
categories of injuries and the responsible party is willing to
settle on three of those but won't negotiate in the other
three, now if the trustee takes a settlement of the first
three, can he still come after you for the remaining three or
does he have to go way back and, if he accepts anything from
the--is he inhibited from moving forward if he's accepted a
settlement of a partial part of his claim?
Mr. O'Connor. My anticipation is that if we are to enter
into a partial settlement with the responsible parties, that if
we have any expectation of going to the Fund for the balance of
the funding for that restoration plan, that we had better
carefully structure that settlement to assure that we are
preserving the remaining claims against the responsible party.
The concern that the Funds Center has evidenced in its guidance
is that, that the trustees in effecting a settlement not
jeopardize the position of the Funds Center in collecting
whatever moneys that they ultimately might pay for the trustees
for the balance of the claim. I have would see no reason, and
the guidance does not indicate that there would be a
prohibition from effecting a partial settlement, preserving
other portions for submission to the Funds Center, but, once
again, it would be with that proviso, that we not jeopardize
the interest of the Funds Center and collect from that.
Senator Chafee. It seems to me that it's terribly important
that the trustee, the tribe or the State or, I guess you
mentioned you have a foreign trustee, but I suppose in most
instances it would be, the State would be the trustee, wouldn't
it?
Mr. O'Connor. In most instances. The State is at least a
significant trustee.
Senator Chafee. So it seems to me it would be terribly
important that the trustee work extremely closely with you?
Mr. O'Connor. Yes, sir.
Senator Chafee. And so now, and then in preparation of
this--you're familiar with what they're doing, what the State's
doing?
Mr. O'Connor. We've been working hand in hand. I mean,
there's been a full partnership. It's the position of the
Federal Government that this restoration plan is a package, it
is not a bits and pieces kind of thing, and we are going to
maintain the partnership that we have with Rhode Island in
prosecuting this claim, and if we can't get it fully
compensated by the responsible parties, then our anticipation
is that we will go as partners to the Funds Center and have the
fund then provide that compensation.
Senator Chafee. You'll go to Mr. Sheehan then?
Mr. O'Connor. That's correct.
Senator Chafee. What it does, I mean, I'm all for speed and
admire speed, I must say 90 days is a short turnaround time for
the responsible parties to makeup its mind. Is the theory that
they've been in on it, they're in on it, too, judging from what
Mr. Morin said, that to a considerable extent in calculating
these costs? But 90 days, is that adequate time?
Mr. O'Connor. Oh, I think it's more than adequate time. If
the claim had been presented, prepared in isolation, without
the responsible parties being part of the process, then I think
that there would be an argument in favor of their having had an
opportunity for further review and evaluation of the claim, but
they have, in accordance with our regulations, been part of the
process, they fully understand it, there is nothing that is
going to be a surprise to them, and they had had more than
adequate opportunity to evaluate that claim.
Senator Chafee. I mean, for instance, they'd be in on--
suppose you lost some eelgrass or the lobster situation
described, they have their own calculations in all that, I
presume, they've been in on it?
Mr. O'Connor. I would suspect--well, they have presented
their own evaluations, their own calculations and their own
conclusion based on the studies that were done, but they
participated in the development and the implementation of those
studies, so nothing should be of surprise to them.
Senator Chafee. All right. Well, it sounds like, although
this has taken 3 years, in all fairness, there was a roadblock
there to start with, it seems like this damndest roadblock that
the, not the Justice Department, who was it originally said you
couldn't pay any claims out, what was the Fund for?
Mr. O'Connor. Well, that was an interesting question. I
mean, the Comptroller General had issued an opinion that the
Fund was not----
Senator Chafee. Well, that's really protecting a turf,
isn't it? We setup a billion dollar fund and the Comptroller
said nobody can be paid from it.
Mr. Sheehan. Well, if I can respond to that. The
Comptroller General, in his opinion----
Senator Chafee. Well, don't be too sturdy in his defense.
Mr. Sheehan. [continuing] . . . said the process that was
to be followed was to obtain funds for payment, you had to go
through the appropriations process. That, however, did not bar
the process that was made with respect to the assessment of the
natural resource damages, that proceeded independently.
Senator Chafee. Because of the theory that you might have
gone to Congress to get an appropriation?
Mr. Sheehan. Yes, sir.
Mr. O'Connor. We have prosecuted a number of oil spill
cases since OPA was passed in 1990 and have moved forward and
actually have settled almost all of those cases with the
responsible parties. It wasn't until 1997 when we found out,
that, in fact, the Fund will be there to indemnify us if we
weren't able to settle it on our own and to indemnify us
without the necessity of appropriation, going through the
appropriation process. We felt comfortable, much more
comfortable in prosecuting our claims.
Senator Chafee. Do you think the presence of the Fund
discourages the responsible party from settling?
Mr. O'Connor. Well, I would echo what Steve said on that
point. I think the fact that the Fund is there, the fact that
the trustees are going to be able to get the money necessary to
do the restoration and the fact that the Fund is going to
ultimately sue to collect that money, it's just putting off the
inevitable. I would think that, if I were a responsible party,
I would be more inclined to try to settle my case with the
trustees than to have to defend against the claim being filed
by the Funds Center because the standard of review may be
different and it may be an easier of standard of review
collecting the money on behalf of the Funds Center than it
would be if the trustees sued individually.
Senator Chafee. Plus, the whole weight of the Federal
Government on your back.
Mr. O'Connor. Yes, sir.
Senator Chafee. Do you have anything?
Mr. Gibson. I do, Senator. Mr. Sheehan, could you talk a
little bit about the staffing plans you have for this new
function of evaluating natural resource claims, you were not
previously staffed to perform that mission, when you'll be
ready to accomplish it and how you're going to clear the
backlog of 1,800 claims that have been presented to date?
Mr. Sheehan. Thank you. I will be glad to do that. We
basically have laid out, in consultation with the Federal
trustees, a game plan for putting together----
Senator Chafee. Steve, do you want to pull that a little
bit closer.
Mr. Sheehan. [continuing] . . . for putting together a
natural resource damage claim division. There will be
approximately, to begin with, seven folks in that, we will have
a division chief, we will have some economists and biologists
as well. We anticipate that we will be staffed up by late
spring and at that point in time we will be able to start
adjudicating these claims. The 2,000 claims that I mentioned
earlier, a great majority of those are from the State of
Florida, and we've already begun work with the State of Florida
to get them to group these claims so that they can come up with
a restoration plan, which is a necessary condition and
necessary part for consideration of payment of a claim, but we
should be ready by the time my colleagues to the left have gone
through their process with the responsible parties and then to
us.
Mr. Gibson. Let's say that the North Cape claim proceeds to
the process, is not settled, and was presented to you sometime
in mid-spring; what is the estimation of NOAA and NPFC on how
quickly that claim might be adjudicated? The statutory
requirement is 90 days, is that deadline reasonable?
Mr. Sheehan. Actually, there isn't a statutory requirement
for 90 days for us, but we would look at the administrative
record, we would be ready to review that claim when it came in,
we would be working with the trustees to see, if we needed
supplementary information for the administrative record, it is
difficult for us to say how long it will take since we've never
adjudicated one and it's difficult for them because they never
submitted one, but I can assure you that we're going to do this
as quickly as possible.
One of the differences between this type of claim and
third-party claims is that this goes through a stylized
process, according to a set of regulations, in anticipation of
submitting a claim, unfortunately, some third parties' claims
you don't anticipate you're going to have a loss, so you don't
necessarily have the records there all the time to bolster
that, so there is a difference between the time factor.
Mr. Gibson. Thank you.
Senator Chafee. Just running over the time schedule again,
and I appreciate that things can go wrong, but the anticipation
now is that, Mr. Morin, as the trustee, you believe you have
your claim in shape and ready to file, did I hear you say by
January?
Mr. Morin. Yes, Mr. Chairman, I think that that's, I was
saying early January, and the Federal trustees cautioned me not
to be overly optimistic, but in the month of January I think we
will have finished review of the public comments and our final
review, our final work on the plan, we will file a final plan
sometime in the month of January and it will immediately be
sent to the responsible parties for----
Senator Chafee. Start of the 90 days?
Mr. Morin. For the 90 day start, and at that point we would
then be prepared to, if no settlement or partial settlement is
reached, we would take the full claim, or the partial claim, to
the Funds Center sometime in late spring, and we are concerned
about the timing of the review process, and that was, the
reason why I kept mentioning the adjudication process that we
have gone through in following the NOAA regulations and over-
viewing this large administrative record, because I hear Mr.
Sheehan, and I see in the guidance the fact that the Funds
Center may want to review the administrative record and review,
and either augment the record or ask for additional
information, and our concern is that, in finally, in making a
final agency determination as to what is the damages, we think
that we sit in the place of the Government for that point,
because we are partners with the Federal Government right now,
NOAA and DOI are also co-trustees, so we will file that trustee
claim as both the State of Rhode Island and the Federal
Government, so it's the Federal Government, essentially, and
one of the States.
Senator Chafee. How did the Federal Government get in on
the claim?
Mr. Morin. They are co-trustees, Mr. Chairman.
Senator Chafee. Because some of their lands have been
effected?
Mr. Morin. Because, that's correct, Mr. Chairman, greater
than three miles from shore, NOAA's got trust interest as well
as, migrating fish and so forth that may go between State
waters and Federal waters and the bird issues or the land
issues for the Fish & Wildlife Service, U.S. Fish & Wildlife
Service, they're the trustees' migratory birds.
Senator Chafee. And the wildlife refuge?
Mr. Morin. And the wildlife refuge as well. And so we are
three trustees together filing a single claim rather than
simply the State of Rhode Island or simply the Federal
Government filing bits and pieces of a claim.
Senator Chafee. So you have the situation of the Federal
Government being in on a claim against the Federal Government?
Mr. Morin. That's correct, Mr. Chairman, and using Federal
regulations, and that's why I'm concerned about the notion that
biologists or economists might be reviewing the administrative
record and not having gone through the 3 years of back and
fourth and agony and so on and so forth, but at the end of the
process substituting, somehow substituting their judgment for
the judgment of the trustees. Well, the trustees by law, by
OPA-90, were the ones who were supposed to make the
determination on what is a restoration, what damage was done
and what restoration is necessary. I think that their job
should be very ministerial, and rather than biologists and
economists, I think there needs to be a clerk typist with a
checkbook at the end of the process for the, at least for the
Government claims, doing that work.
Senator Chafee. I'm anxious to get this thing settled and
Rhode Island get as much money, but, gee whiz, I have a little
trouble in thinking that you just submit a bill and they've got
to pay it?
Mr. Morin. And if it were, you know, out of the blue, I
would agree with you, Mr. Chairman, but because we are in the
place that we are, that is because we are together with the
Federal Government, we followed the rules that they've done,
we've followed the Federal Administrative Procedures Act and
the Federal National Environmental Policies Act as well as the
State law is involved, to make sure that we've touched all the
bases, at the end of the process we are left with an
administrative record, and it's interesting that the guidance
documents that the Coast Guard puts out indicates that its
findings, that its findings are final, they cannot be sued
except on the arbitrary and capricious standard of their
administrative record, and, yet, we have the same process, we
file it all under the same rules, the Federal EPA, the Federal
Environmental Protection Act, the National Environmental Policy
Act and the NOAA rules, and at the end of our record the
indication from the Fund is that they may be in there messing
around with how it was that we did that and did we count the
lobsters right, and we think that's a very dangerous sort of
precedent, because at the end of the process what gets
litigated is, I think, if the trustees have done their work,
should be held to that same standard of arbitrary and
capricious that the Coast Guard thinks it should be held.
Senator Chafee. You put up a good argument. What do you say
about that, Mr. Sheehan, you sit up there with a clerk typist
to type out the check and just send it along?
Mr. Sheehan. We're not going to do it, Mr. Chairman. Our
authorities and responsibility stem from OPA-90. There is
certainly deference which is given to the claimants that follow
the NOAA rules, we've stated that, we're going to do that. We
certainly need economists and biologists because we're going to
be dealing with all sorts of different claims, not only from
the Federal sector and ones that have gone through the NOAA
process, but ones that are done by States, not done in
accordance with that process. We are anticipating that we're
basically going to be looking at the administrative record,
looking at the rules which we have every confidence that that
you have followed very closely, going through that, if we have
questions about that, we'll go through the trustees. We expect
to do it in an expeditious manner. We want to see the natural
resources restored quickly and in a timely manner, and that's
my commitment, to do that, sir.
Senator Chafee. Well, also, we've had testimony here from
Mr. O'Connor that Mr. Morin and he have worked very, very
closely together. How much have you been in on all this, your
organization?
Mr. Sheehan. My organization has not been in on the plan
itself.
Senator Chafee. The claim.
Mr. Sheehan. We have not participated in that particular
process, basically because we do have a fiduciary
responsibility and an adjudicatory responsibility with respect
to the law itself, so we have not participated in the process.
We have been following it as much----
Senator Chafee. But, obviously, as you say, when the claim
comes in and you've got questions, you've got, I don't know
whether you've got biologists, but you've got people you've
turned to, you say to them how did you get this count,
presumably, won't you, quite likely, and ask them, and if they
are convincing, you take it?
Mr. Sheehan. Our primary role in that type of claim will be
to look and see that they have followed their own regulations,
and, other than that, having not seen a claim and having not
gone through that process at this point, I'm not sure of the
level of actual review that it's going to get, but we're going
to be basically going through and looking at it.
Senator Chafee. Now, he thought, Mr. Morin thought that by
late spring they'd come to the Federal fund, so that gets us up
to the Spring of 1999, late spring, how, you know, I'm not--
it's tough to figure these things, but you'll get to it, and
when do you think you might come to a conclusion?
Mr. Sheehan. I would say that it's going to depend on a
number of factors, one, whether they come to us with a whole or
whether they've settled it in part.
Senator Chafee. If they settle it in part, presumably that
would make it easier, wouldn't it?
Mr. Sheehan. Presumably that would make it easier. Well, as
soon as it arrives, we will start the process. We're not going
to sit on it.
Senator Chafee. OK, that's all. I'd like assurances from
you that you will go right to this thing.
Mr. Sheehan. Yes, sir, you have those.
Senator Chafee. This is 3 years already, and late spring
always seems to be later than early spring, heavy words for the
day, but. So, in any event, I urge you on. Do you have some
questions, Tom?
Mr. Gibson. I did have one more question. In the North Cape
claims situation, right now we have the Federal trustees and
the State trustees working together, and, hopefully, going to
go to the end of the process together, but what would happen if
the Federal trustee decided to settle a claim for a resource
that it shared trusteeship with the State, where would that
leave the United States, where would that leave the State if
litigation ensued?
Mr. Sheehan. I'll be honest with you, we've looked at that
and we would hope that we would be able to forge them back into
a consensus to come with a single claim, because it would be
very difficult from a precedential standpoint for this to
occur. We think that the partnership, which has, obviously,
been effected so far, is a good one, we would urge them to go
back to the negotiating table between themselves to come to us
with a unified claim.
Mr. Gibson. Mr. O'Connor.
Mr. O'Connor. I have no intention of terminating the
partnership.
Mr. Gibson. Well, let's talk about a hypothetical State,
that is Rhode Island, where a claim has been presented where
you did have a Federal trustee and a State trustee taking
adverse positions and one settling and one not and the other
seeking compensation from the fund, have you thought about that
situation?
Mr. O'Connor. Yes, we have thought about that situation,
and what that creates is the necessity to define the scope and
extent of the respective trusteeships between the State and
Federal Government, and as difficult as it is to count
lobsters, it is even more difficult to determine the line
between that trusteeship, particularly, as Steve mentioned,
with migratory species and so on, it would become a retractable
situation, it would be a situation, if we were not able to
negotiate it out with the Funds Center and reach some amicable
resolution with the Division of Trusteeship, it ultimately
might be an issue that we would have to litigate.
Mr. Gibson. So the prohibition under the statute for double
recovery means that one or the other trustee, the trustee that
is left in the lurch after the settlement is very much at risk,
at not being able to actually get its claim compensated because
it would have to prove at what its part had not been covered by
the settlement, it would be a difficult situation, it's a very
strong discouragement for trustees to split up, and we would
not, the Federal Government has no intent to do that. Mr.
Morin.
Mr. Morin. I would hope that we would not be in a position
of having to split up the team this late in the date, because I
agree with Craig, that we are--it is so difficult to decide
whose got which parts of the resource, you could do it
geographically, and for some resources that are less mobile,
that might be all right, but for the mobile resources,
particularly birds, we've got migratory birds that spend the
winter in Rhode Island and they spend the summer elsewhere, in
northern New England, and the Federal Fish & Wildlife Service
has been acting as trustee in that regard. That's why we've, I
think we've been very, very careful to try and work this thing
together. I would hope that if we could not, that if for some
reason someone wanted to settle this in a way that was not
protective of the whole trust resource, that is that the entire
public good was not taken into account, that one or the other
would either come to their senses or sue the other one to keep
them from doing that. One of the things, Mr. Chairman, that you
should know is that in addition to, my Attorney Claude Cote is
up there in the audience and he reminded me that not only do
all the trustees have their own attorney, but we have a Justice
Department attorney who sits in to make sure that we are
following all of the Federal rules, and that that makes for an
interesting discussion between the trustees and the center, if
there's a disagreement on the compensation, because who
defends, who defends the center if the trustees are angry at it
if the Justice Department is part of the trustee council.
Senator Chafee. Well, the Justice Department, both sides,
huh?
Mr. Morin. The Justice Department, at least in this
instance, the Justice Department is on our side so far, but
they represent the whole Federal Government. It's an
interesting argument, that what happens if there's a
disagreement between some parts of the Federal Government and
the other part's egged on by the State.
Senator Chafee. All right. Well, first, I want to thank
you. I'll be following this very closely because, one, I'm glad
you're cooperating so well, and you've indicated, you've given
us some kind of a time schedule here, and I'm deeply interested
in how all this comes along, so I will be following it with
great interest and urge you to keep going, and I commend the
close working relationship you and Mr. O'Connor formed, and now
get on with the submission, get the answer from the insurance,
from the responsible party and just move on. Thank you very
much. OK.
I think that Mr. Sheehan, you're staying, aren't you?
Mr. Sheehan. Yes, sir.
Senator Chafee. Now, the next panel, Mr. Brown is from
Peacedale. Mr. Christopher. OK. Now, in this panel we have Mr.
Christopher, owner of ABC Lobster Company in West Kingston. Mr.
Bruce Kopf, commercial fisherman in Narragansett. Bruce, is he
here?
Mr. Hartman. No, he's not. Somebody will be reading
something into the record for him, Mr. Chairman.
Senator Chafee. OK. John Sorlein, president of the Rhode
Island Lobstermen's Association. And do we have Mr. Nally here?
Mr. Hartman. No. We have his testimony, Your Honor. He,
unfortunately, was working and he couldn't get here.
Senator Chafee. Now let's get straightened out who we do
have. We've got Mr. Sheehan, Mr. Christopher, Mr. Sorlein.
Mr. Sorlein. Yes, sir.
Senator Chafee. Does that do it?
Mr. Hartman. Mr. Chairman, Mr. Blount is not here and Mr.
Nally couldn't be here because of work, but I did bring their
testimony with us.
Senator Chafee. And you are?
Mr. Hartman. I'm Barry Hartman, I'm their attorney.
Senator Chafee. So Mr. Kopf isn't here. OK.
Now, why don't we start with Mr. Christopher.
STATEMENT OF AL CHRISTOPHER, WEST KINGSTON, RHODE ISLAND
Mr. Christopher. Mr. Chairman, my name is Al Christopher
and I appreciate the opportunity to briefly address you today.
My testimony is presented as the former owner of ABC Lobster,
Inc., a seafood dealership that was located a 296 Great Island
Road in Narragansett, Rhode Island. ABC operated by purchasing
lobsters from inshore fishermen and then selling those lobsters
on the wholesale market to large exporters. ABC also sold some
fish and lobsters on the retail market to its walk-in
customers. ABC did not purchase fish or lobsters from offshore
fishermen because it was not profitable for it to sell such
fish and lobsters.
After ABC Lobsters started doing business in 1993, they
subsequently increased sales every year. In 1993, ABC had gross
sales in the amount of approximately one million dollars. In
1994, when ABC began selling lobsters on the wholesale market,
it purchased all new refrigerated lobster tanks and grossed
approximately one-and-a-half million dollars in sales. In 1995,
sales continued to increase, and by the year end, ABC had
grossed 2.1, approximately 2.1 million dollars.
1995 was a good year for lobstering, especially in the
spring. Many fishermen who typically did not fish in the winter
and spring were planning to gear up and fish hard during the
Winter and Spring of 1996. Accordingly, I expected our lobster
purchases and sales to increase and we bought four new lobster
tanks, which increased ABC's holding capacity dramatically.
Unfortunately, that increased demand for holding capacity never
happened because on January 19, 1996 the North Cape Barge ran
aground off Moonstone Beach and spilled over 800,000 gallons of
heating oil into Block Island sound.
In 1996, ABC gross sales were dramatically reduced as a
result of the spill. For example, from June 25, 1996 until
December 31st, 1996, ABC purchased only, approximately 300,000
pounds of lobsters. During this same period, in 1995, ABC had
purchased 465,000 pounds, in other words, my gross purchases
declined by about 36 percent during this same period. The
profitability of ABC declined accordingly. During this same
time period, ABC's retail sales by almost 34 percent.
My claim was first filed with Turnabout on May 31st, 1996
and was later amended to include the entire year of 1996 and a
filing date May 14, 1997. Since that amended filing, about 18
months have elapsed. That is way too long.
While waiting to be paid for my damages, business losses
have continued to mount, as the lobstermen delivering to ABC
continued to experience lower and lower catches due to the
decimation of the lobster stocks. In the face of these
continued losses with no end in sight, I sold my business in
1997 at a price considerably below its former market value. My
business is gone and my losses remain.
Having failed to get a reasonable offer from damages from
Turnabout, I filed my claim with the fund on September 16,
1997. Instead of obtaining a quick resolution of my claim, I
was forced to go through the process of delay and documentation
all over again. If you look at the correspondence file today,
you will see that first the Fund asked for information, then
after assigning my claim to Hull & Cargo in January 1998, Hull
& Cargo requested different information and then its accounting
subcontractor required even further layers of detail. When the
Fund finally came up with a settlement offer on June 18, 1998,
9 months had elapsed since the Fund had started its review.
Once again, this is way too long. Since the Fund settlement
offer was unreasonably low for the first half of my claim and
denied entirely the second half of my claim, I submitted a
request for reconsideration on August 14, 1998. In this request
for reconsideration I provided voluminous documentation to
support my claim, in particular the second half of my claim
which had been denied outright by the Fund. This documentation
included the complete claims of five of my largest suppliers
which were pending before Turnabout. These underlying claims of
my suppliers unequivocally bolster, improve my claim for
damages. In any event, despite the fact that the Fund should
have proposed their final offer of settlement within 90 days of
this final submittal, that deadline lapsed without explanation.
I have been told that I can take this inaction as a denial of
my request and then file suit. That makes no sense at all. I
could have filed suit anyway without wasting time and resources
by filing with the Fund. The fund has failed.
I finally received a letter dated November 20, 1998 from
the Fund. Instead of providing me with an offer on my claim,
the letter stated that the Fund had waited until October 26,
1998 before authorizing action by Hull & Cargo on my request
for reconsideration. In other words, they waited 90 days after
receiving my request for reconsideration before doing anything
at all. It is no wonder that I didn't receive their final offer
of settlement within the 90 day timeframe. Even more disturbing
in this letter was their statement that they still could not
tie my losses in the last half of 1996 to the oil spill. Why is
this so difficult? Don't they even read the reports of the
consultants who have documented the lobster losses for the
natural resource damage assessment. And, guess what, they asked
for more information to justify the losses of the lobstermen
who supplied me.
The Fund is adversarial claimants. If you will look at the
Fund settlement proposal of June 18, 1998, alongside the
request for reconsideration for ABC dated August 14, 1998,
certain facts are clear. The Fund does not recognize that the
North Cape oil spill produce any harmful effects other than to
force closures of certain areas for fishing up until the end of
June, 1996. Using their analysis, the effects of the spill
stopped by the end of July, 1996. They interpret an unexpected
increase in the lobster catch in August as being equivalent to
a full and complete recovery from the spill. That's absurd.
They just don't get the fact that the spill resulted in
enormous damage to the lobster population off the coast of
Rhode Island. Why doesn't the fund make any attempt to consult
the scientists involved with the natural resource damage
assessment studies, in effect, to understand the significance
of the spill. They would see that not only has there been great
damage, but that the effects of the spill will be felt in even
greater degrees over the next few years.
The Fund's analysis are designed to minimize damages. Great
pains were taken by Hull & Cargo to reduce my potential award
by selectively applying data, such as weather or the relocation
of fishermen from one shore facility to another, as factors to
lower my award. The Fund fails to understand that everything
changed after the spill, business plans were revised and the
factors that led to growth over previously years no longer had
relevance. The Fund and its adjusters used a standard of proof
consistent with insurance adjusting. Claimants are treated as
potential scam artists seeking to capitalize on an accident and
that is simply not the case. We did not ask for this spill and
we only want to be made whole. I thank you for this opportunity
to speak.
Senator Chafee. Thank you, Mr. Christopher, very much.
And now, Mr. Sorlein.
STATEMENT OF JOHN SORLEIN, PRESIDENT, RHODE ISLAND LOBSTERMEN'S
ASSOCIATION
Mr. Sorlein. Thank you, Mr. Chairman, and I appreciate the
support that you are showing for our industry by coming to this
community at this time to help us address this serious problem.
My name is John Sorlein and I'm the president of the Rhode
Island Lobstermen's Association. We are a nonprofit association
of individuals who are engaged primarily in the business of
fishing for lobsters. Several of our members also have onshore
businesses or related businesses that rely in large part on
lobstering for their livelihood. These businesses represent a
large portion of the lobstering industry off Point Judith,
Rhode Island, and the Rhode Island Lobstermen's Association has
put together a group of over 100 businesses that have developed
and continue to develop and document damage claims.
The fishing industry has contributed greatly to the local
and statewide economy. Millions of dollars have been pumped
back into the economy by way of direct and indirect business
resulting from the successful harvesting of Rhode Island's
pristine seafood beds. Many lobstermen have been fishing in
this area for years and the Lobster Association represents a
large portion of that total. Lobstering is mostly a small
business, each lobsterman owns a boat or two and each hires his
or her own crewmen to help.
We love what we do. We are independent and self-sufficient
and we are successful because of our willingness to put in an
honest day's work.
Point Judith is also one of the largest fishing ports on
the East Coast. Until January 1996, the lobsters caught in
Point Judith were world renown for the quality, and, in fact,
we absolutely think that they are the best lobsters caught, and
the range of the lobsters far better than Maine lobsters.
However, on January 19, 1996, the unthinkable happened, and
a barge, the North Cape, spilled over 800,000 gallons of highly
toxic Number 2 heating oil after running aground off of
Moonstone. We say this is unthinkable since no one had expected
this to ever happen. We had had an oil spill in 1989 with the
World Prodigy, and to think that this could happen again, it
was just unthinkable, but it did.
The immediate impact of the spill was disastrous, and the
only significance of dead lobsters, over 60,000 were measured
by weight from the sample areas located on the beach, and over
18,000 of these lobsters were studied to determine their sex,
size and reproductive status. That information was used to
project the loss of over 2.9 million lobsters, nearly three
million lobsters that washed up on the beaches as a result of
this spill, and this was only a small portion of the number of
dead lobsters that remained beneath the surface of the ocean.
When the spill happened, we were at a loss about what to
do. Few of us had ever had to make a claim for lost profits and
we didn't know how to do it. We immediately thought that we had
to file a lawsuit. We soon found out, however, that a new
procedure existed under the Oil Pollution Act of 1990, and
under that procedure we would be able to file individual claims
for losses without going to court and with a reasonable amount
of evidence we would be able to recover in a quick period of
time. That has not happened. Many of our members and others
have filed claims and submitted literally thousands of pages of
documents to establish our losses, but few of us have been
paid. We provide information and we are asked for more. We
provide more and are asked for still more. We prove a loss
under one standard and the responsible party or the fund
changes the rules. We simply don't understand why this is so
difficult. The barge owner was convicted of criminal offenses
that caused this spill, but rather than compensate us, the
Nature Conservancy was given over one million dollars. Rather
than compensate us, hundreds of thousands of dollars are going
to be spent to buy habitat preservation land in Maine. Why
haven't our claims been paid or even fairly considered? Why is
it that to despite our efforts, instead of the claims being
decided in 6 months by the responsible party or in 90 days by
the Fund, now almost three full years later few have been fully
decided? Why is it that the responsible party and the Fund are
only paying one dollar for every four dollars that have been
proven to have been lost? Why is it that the responsible party
has decided that no one that fished next to the closed area
could not possibly have lost more than 3 percent of his catch?
Many people that fished in the closed are had moved to other
areas so that there were more fishermen looking for few
lobsters, in other words, we were competing with ourselves for
a diminished resource. No one seems to understand that lobsters
don't standstill, they migrate. Yet, the claims adjusters are
assuming that no lobsters moved into or outside of the closed
area and they assume that fishermen don't move either. They
think that if you fished outside the closed area, you can't be
effected, but the fact is we are. It is no mystery when someone
has consistent catches every year for 5 years or more, or even
better still, increase catches for the 5 years previous to the
oil spill, and then suddenly, after January 19, 1996, the catch
is dramatically less. We don't fish anymore, we mitigate our
losses. It's a longstanding joke in my family. I have a 9-year-
old daughter who says ``daddy doesn't go fishing anymore, he
mitigates''. We travel further, we spend more money, we work
longer hours and catch few lobsters. The fun is gone and
there's no mystery here.
How can it be that the fancy study that was performed that
says there were 200,000 adult lobsters lost in 1996 and 1997,
but several of us alone caught over 400,000 less lobsters
during those years than before. The responsible party and the
Fund concocted theories of lost lobsters based on conjecture
and guess. We have shown actual losses, but those losses are
ignored.
At this point, many of us are fed up with this
administrative process. We are ready, we are willing and we are
able to go to court and sue these criminals for our actual
losses. Clearly, we cannot get a fair shake by the responsible
party or by the Fund, we are being forced to go to court, that
means the oil pollution process has failed us.
We sincerely hope that you can fix this for the next set of
victims, wherever they are. Thank you.
Senator Chafee. Thank you very much, John. Now, is somebody
making a presentation on behalf of--did you want to say
something?
Mr. Hartman. Mr. Chairman, there are two other witnesses
who are clients that have filed claims that couldn't be here
today.
Senator Chafee Do you to want to give a summation of what
they were going to say?
Mr. Hartman. Very briefly. One was for the Gail Frances.
The Gail Frances is a charter fishing boat business and they
have a tale to tell. They're now before the Fund, they've been
denied their claims, and to make a very long story short, it
comes down to this. The Fund, after somebody submits a claim
for hundreds of thousands of dollars, says, well, let's look at
the weather on that day that you say you would have gone out
but didn't, and if there were winds in greater than 25 miles an
hour, we're going to assume you wouldn't have gone out, even
though they went out on those days, and do you know what they
looked at, they looked at the wind speeds at midnight, and
based on the wind speed at midnight, they said you wouldn't
have gone out that day. It's nonsense. These people have
provided thousands of pages of documentation to the Fund to
show their losses. They had letters from customers saying, dear
Gail Frances, we're canceling because of the oil spill, and
what did the Fund do, they said, we want the phone numbers of
those people, you get them for us and give them to us, the
letter's not enough. We provided the tax returns that went to
the IRS, and what did they say, that copy of the tax return
that went to the IRS isn't good enough, we want you to take it
back and re-sign it in ink and then send it to us again. That's
nonsense, Mr. Chairman. We did it and they've backed off, they
don't require that anymore.
The bottom line is, after almost 3 years the Gail Frances
has yet to be paid for any lost income that they demonstrated.
The other individual that couldn't be here is Bruce Kopf.
Now, Bruce has a different situation. He's not in business
anymore. His bottom line was this, the area was shutdown, he
couldn't get out to fish, period, he couldn't get out to fish
and they said he didn't prove his losses. There's nothing else
that needs to be said. He provided his tax returns. That was
his only business. He provided his revenues, he provided his
cost, he provided his fuel, he provided the names of his crew,
he provided his salary. He couldn't go out that day, he was
prevented, and that's not good enough for the Fund.
One last thing, if I may. Well, that's all we'll say with
these particular claimants.
Now, Mr. Chairman, I must say we appreciate your support,
you're one of the few that have stood up for our clients, to
try to make this system work out, as has Mr. Gibson, and try to
see if OPA works, and I must say that I'm disappointed with how
OPA's worked. I don't hold this against Mr. Sheehan, he's the
safety net. I hold this against the responsible party, it's
their fault and their responsibility, but now we need the
safety net and that's all we need. Thank you.
Senator Chafee. Well, thank you. Now, Mr. Sheehan, you'll
get a chance to rebut. Let me just say this, Mr. Sheehan, it
keeps coming up in here that, and I think you contradicted
this, but there seems to be some confusion about 90 days before
you, if I understood the testimony correctly here, I think that
Mr. Sorlein and maybe Mr. Christopher indicated that, I think
they had a little longer period before the insurance company,
they suggested. Mr. Christopher, how long do you say you had
before?
Mr. Sheehan. Would you like me to layout the time for that?
Senator Chafee. Yes, why don't you lay out the times for
us. We know the 90 days before the responsible party.
Mr. Sheehan. The claimant first has to go to the
responsible party, if there is a responsible party. The
responsible party has 90 days to respond to that claim. If the
responsible party doesn't reply or gives an offer which isn't
satisfactory after those 90 days, or if they deny it in 30
days, they can come immediately to the Fund. There is no set
timeframe for the Fund to adjudicate a claim, but let's say
that we adjudicated Mr. Christopher's claim, and use his
process that he described, made him an offer, he asked for a
reconsideration, the reconsideration, by our regulations, we
have to respond to the reconsideration within 90 days or you
then have the option to then file suit, which is not the
purpose of OPA-90, OPA-90 does not want you to have to go
court, but you would have had that option at the end of 90
days.
Senator Chafee. Wait. I've got to get this clear in my
mind. You go before the responsible party with a claim, Mr.
Christopher would, that's a preliminary step that has to take
place before they go before you?
Mr. Sheehan. Before they come to us, yes, sir.
Senator Chafee. OK. And the responsible party has 90 days
to----
Mr. Sheehan. To either act on it, deny it, or if there is
no action in 90 days, they can then come to us.
Mr. Hartman. It's 90 days from when they consider the claim
to be complete.
Mr. Sorlein. That's a big problem.
Mr. Hartman. When they consider the claim to be complete.
Senator Chafee. When the responsible party considers?
Mr. Hartman. Yes, yes.
Senator Chafee. Then I suppose----
Mr. Sheehan. The responsible party is doing it wrong then,
because the responsible party, when you file your claim, that
starts the clock running, the 90 days.
Mr. Hartman. They don't take that position. I couldn't
agree with you more. Tell them.
Senator Chafee. And they keep asking you for more and more
information, we want a signed copy of the income tax and so on
and so forth.
Mr. Christopher. Yes.
Senator Chafee. All right. That is a big difference,
because whoever controls that can just delay forever.
Mr. Christopher. Mr. Chairman, that's exactly what they did
to us, and it was just constant, every time they asked for
something, we would give it to them and then they would ask for
something else and then it would just go on and on and on.
Senator Chafee. This is adjusters, Hull & Cargo?
Mr. Sheehan. Turnabout.
Senator Chafee. Turnabout.
Mr. Hartman. Now, let me tell you what happened, was that
they would say if you want us to consider this claim to be
complete, we will and we will adjudicate it but we think you
should give us more information. When I talked to people at the
Fund, they said to me, you'd better give whatever you want to
give to the responsible party first because we won't consider
new information, now that's what I was told, so we're betwixt
and between, either the 90 days doesn't start so we have to get
everything in to the responsible party, if we say forget it,
responsible party, make your decision based on what we have, we
don't like it and go to the Fund, the Fund tells me, well, you
didn't present that information to the responsible party.
Mr. Sheehan. Let me set the record straight. You file a
claim, 90 days, if you haven't gotten an answer or they haven't
responded to you, you can come to us. One of the things that,
if we adjudicate that claim and we have a request for
additional information, we require that that additional
information also be sent to the responsible party. That is
different than the process which you described.
Mr. Hartman. Well, with due respect, Mr. Sheehan, I'll get
you the name of the person that told me don't come to me with
new information if you didn't give it to the responsible party
first, that's what we were told.
Senator Chafee. Well, there's a big difference here. Now
there's a big difference, because under what Mr. Christopher is
saying and the attorney saying here is, if you don't get what
the responsible party asks for, you can't present it to Mr.
Sheehan, whereas, Mr. Sheehan is saying not at all.
Mr. Sheehan. That's not true.
Senator Chafee. It's 90 days from when you submit your
claim to the insurance company and to the responsible party,
and if I, Mr. Sheehan, want more information when you come to
me, then all we're saying is you send that to the responsible
party.
Mr. Sheehan. The responsible party as well.
Senator Chafee. OK. So that's a whale of a difference. But,
Mr. Sheehan, let's, OK, let's agree on that, so now they're
before you, but they indicate, and, you know, it's pretty
convincing testimony from Mr. Sorlein and Mr. Christopher, that
they just can't satisfy you people, you want more and more, and
I understand adjusters, and you've got fiduciary duty, but this
thing seems to, they're very valid complaints that they got
here.
Mr. Sheehan. I think that they are legitimate issues which
we are glad to hear. I think, sir, that one of the things, as
you indicated, Mr. Sorlein, is the first time you've ever done
a lost profit claim. Lost profit claims and business
interruption claims, which basically these are, are easily the
most complex claims to adjudicate that the entire insurance
industry has, and they're particularly difficult to adjudicate
in a fishing industry and a lobster industry.
Senator Chafee. But, you know, Mr. Sheehan, you've got to
take some people on faith. I mean, you're not dealing with
General Motors, trying to make their regulations, you're
dealing with John Sorlein, who knows what he did last year, who
knows what happened when January, 1996 came, knows the effects
of that, and can he rip you off, I suppose if he works hard at
it he can rip you off, but what's in it for him?
Mr. Sheehan. Sir, it's not my intention to even suggest
that the folks who come to us, that we look at them in that
manner. We do not. We have spent a, to put it in a bit of
perspective, we received out of the North Cape spill 33 claims.
Now, there have been many hundreds which have been settled by
the responsible party. We have 33 claims. We've settled two,
we've got, I think three were denied, we've got three offers
out, we've got seven which are currently being measured, which
are being looked at with the information that we've got, we've
got sufficient information to measure them, and we've got 18
which information has been requested, and sometimes as long ago
as May and we were told in July we were going to get all of
this information, we haven't heard anything from them. So part
of it is, part of it's in the claimant's court, part of it is
our fault, and in my statement, and I will say this publicly
today, that there have been delays in this whole thing, and I
apologize for those delays, some of it's due to our
contracting, I've instituted a new process whereby we can get
assistance faster for some of this, some of this has been to
put together an honest model of the lobster industry so that we
can adjudicate all of these claims. I've got that here today,
which we're going to pass-out and make available to all of the
potential claimants.
If I may, I've got a couple of other points to deal with
this.
Senator Chafee. Go right ahead.
Mr. Sheehan. One of the things that have been a concern to
us has been the issue of the statute of limitations. OPA-90 has
a 3-year statute of limitations from the time damages have
occurred or easily discoverable. One of the things that the
responsible party has, evidently, published and sent to the
Lobstermen's Association and to a series of other interested
parties is that they are going to be considering claims beyond
the 3-year statute of limitations, they're specified in OPA-90.
I have put together some information about that issue because
it is of concern to us, that if you have filed a claim past the
3-year statute of limitations with the responsible party and
you don't get satisfaction, we are prohibited by law for you to
come back to us. For example, let's say that you had a boat
which was oiled by the spill and that occurred a week after the
spill, which was in January 1996, and you had it cleaned, for
whatever reason you decided that you were going to wait, go to
the responsible party, and you went to the responsible party in
the middle of February, you didn't get satisfaction from him,
you're barred from coming to us because you've gone past that,
you knew when that damage occurred. What we've put together,
Mr. Chairman, is a document dealing with the statute of
limitations issue, because I really want to make sure that
nobody gets surprised by that and by the impact of that.
Senator Chafee. Could you do that illustration of the oil
again. I didn't get that. There's a 3-year statute of
limitations?
Mr. Sheehan. Yes, sir.
Senator Chafee. Give us the time.
Mr. Sheehan. It would have--the statute of limitations
would run out, let's say----
Senator Chafee. Take this spill, January 19.
Mr. Sheehan. January 19th. A week later you had a boat
which was oiled, you had it cleaned, that's a legitimate cost
for recovery.
Senator Chafee. Right.
Mr. Sheehan. For whatever reason you didn't file that with
the responsible party, but you waited until February 1999 to
file that with the responsible party, because the responsible
party has a letter out that says, I'm going to consider claims
after the statute of limitations. If the responsible party then
doesn't settle with you, you don't have recourse to come back
to me because the 3 years has gone by, no matter what the
responsible party has said. So we looked at this, we've written
a letter to the responsible party, telling them to include that
information to potential claimants, I've put together a press
release which went out today to the Providence Journal, to a
series of papers around here addressing that issue because
we're concerned about the fact that folks might get caught.
Senator Chafee. Because the 3 years is coming up.
Mr. Sheehan. Because the 3 years is coming up for at least
those things which are discoverable in the immediate aftermath
of a spill. Now, that doesn't say, for example, that potential
future losses on the lobster industry which aren't discoverable
until a time in the future.
Senator Chafee. I found Mr. Christopher's testimony very
convincing, and particularly, it seems to me, that you can
trace through his profits his gross sales year after year as he
documents it there, and then, obviously, things stop, and I
just have great trouble why he's had such a tough time trying
to get compensated. Now, I assume that the responsible party,
what, brushed you off in a lot of those, gave you some
settlement figures but nothing specific?
Mr. Christopher. Not at all, and then when we went to the
Fund. I mean, the second, they split it up into two parts, from
when the waters were reopened again until, as one part, and
then from there until the end of the year, and they denied the
second half completely, the Fund did, and that's why I said,
they just figured as though it was over, the spill didn't have
any effect after that, after they opened up the waters, that
was the end the spill. And, I mean, we sent in lobster slips
from the boats that were pending that and the whole works and
they can see comparing from 1 year to the next how the catches
were down and they just said, no, it doesn't effect it.
Mr. Hartman. If I may, I promised when Tom and I talked
about this we weren't going to try to make you the judge on
claims, because that's not fair, and we're not really trying to
do that, but I will say this----
Senator Chafee. No, but Mr. Christopher presented, I think,
a very interesting case, and one that seems to me to be quite
well documented. I mean, you know, you can't assume that
suddenly he's sitting at home on the sofa watching daytime
shows, he's trying to pursue his business, and you can see, his
document shows what his gross was and then it tails off. It
wasn't that he just sat at home. He's not going lobstering.
Mr. Christopher. He certainly didn't.
Senator Chafee. Go ahead.
Mr. Hartman. What I was going to say was, and I appreciate
Mr. Sheehan saying there's now a model out of some sort, which
is news to us, but I appreciate knowing that. The danger is
this, the reason why Mr. Christopher's claim has been denied
and the reason why we're having other difficulties is because
the Fund, I'm sure, acting in good faith, is making assumptions
about losses and saying to the individuals, we are making this
assumption, it applies to you and we don't care about your
facts, and the danger of any model and any rule, like the 3
percent rule I told you about once before that the responsible
party filed and you can only get 3 percent of your losses if
you fished outside the closed area, we don't care what your
real losses are, is that it ignores the facts, so all we're
asking is look at the two banker boxes of documents he
submitted, we know there was a loss out there, everybody knows
lobsters died, everybody knows it was shutdown, look at the two
boxes of financial documents he's provided, and based on the
language of the regulations that talk about reasonable
documentation and the legislative history that talk about let's
not make everybody go to court, make a reasonable decision
here, that's all we ask. That's all we ask.
I have never, and I've litigated these cases in court, I've
litigated lost profit cases, defending a lot more than I've
been a plaintiff's lawyer for, Mr. Sheehan, I've never seen
anybody require the level of documentation that's required here
by any court, and that's all we ask, just look at reasonable
documentation. If you think somebody is lying, say so; if you
don't, assume they're honest business people and make a
decision, that's all we ask.
Senator Chafee. Mr. Sorlein, did you have a comment?
Mr. Sorlein. Yes. You made a comment about a basic level of
trust, Mr. Chairman, and at some point you have to have faith
in an individual, that he's not out to cheat and get something
that he doesn't deserve, and I talked earlier about mitigation,
and it's interesting, when I think of the possibilities of
people making an assumption, the Fund or the responsible party
making an assumption that I'm out to cheat them, when I
actually think about what I've done in the last 3 years to
mitigate my damages, which is required by law, I believe, that
I must do what is within reason, within reason of what I can
possibly do to mitigate my losses, in other words, I can't sit
around and watch soap operas and just pileup the losses, and,
in fact, what I have done is I've burned more fuel on my
lobster boat, spent more hours on, taken my pots further to try
to get away from, not only the impact area where the lobsters
were wiped out, but also to move further away from the areas
adjoining the so-called impact area where lobstermen have
migrated out with their own traps, in essence, helping me to
catch my lobsters in some other location and going beyond that,
to the point now where I am 60 miles offshore in an inshore
lobster boat, which is not a good place to go in the interim
time, because that's the only way I'm going to put food on my
table and pay my bills. What I've done by doing that is I've
removed my traps from this so-called closed area, this impact
area they like to talk about, and by doing that and following
through with the responsible party's philosophy of 3 percent
outside a certain line, I have destroyed my chances of a claim,
so it's a catch 22. I've worked to mitigate my damages. By
mitigating my damages, I've eliminated myself from the claims
process.
Senator Chafee. Why have you eliminated yourself from the,
because, when you use the word you've mitigated your damages,
you mean you've now moved your gross up to where it was before?
Mr. Sorlein. No. When I say mitigating my damages, I'm
working to my fullest capability, operating my business to make
as much money as I can, in other words, to find lobsters other
places.
Senator Chafee. Yes.
Mr. Sorlein. And by doing that and by removing my pots from
this impact area, the so-called impact area, where they draw
lines on a chart which are very arbitrary and they say inside
of here is where the oil spill killed the lobsters, but right
on the other side of that line nothing happened, so if you put
your pots over there, you have no claim.
Senator Chafee. Yes, I see. Instead of staying local,
you're going 60 miles out and taking more fuel and greater
expenses, greater danger, too.
Well, Mr. Sheehan, you're sort of on the hot spot here. You
know, right from the beginning I said I wasn't asking you to be
in a situation where you have to become clerk typist and just
type up a check for every claim that comes up, we're not asking
that, but we're also asking that, these are very legitimate
complaints, and I think you've got to take some people on
faith, and you yourself said that it isn't part of your
standard to figure that everybody's trying to cheat your
organization that submits a claim, and I certainly don't think
these gentlemen are trying to do that. I think they present
very good cases. One of the problems, apparently, that's come
up, is working with your evaluation contractors, and I think
you yourself said you've revised that, have you?
Mr. Sheehan. Well, one of the problems, Mr. Chairman, has
been the timeliness of getting our claims, commercial claims
adjudicators to respond to some of the claimants, like yours,
for example, and that was a contracting problem that we had
internally in the Coast Guard, we have fixed that, we can get
those folks to respond quicker at this point in time to the
claims as they come forward. The commercial claims adjudicators
that we've hired in this particular instance, Hull & Cargo,
have a long history of adjudicating maritime type of claims,
they are one of the best in the country, they basically follow
our guidance with respect to what type of information is
needed, they also use industry standards. One of the things
which we make absolutely clear to them is that we want them to
fairly adjudicate that claim because we end up finally signing
off on it, they get no credit from us for coming in with a low
ball offer, I think I made that statement in one of the
interviews I had, that is not part of the process at all. We
are not out to protect the Fund from future use. We're out to
pay claimants, but we do have a requirement that there are
certain standards of information that we need to pay folks.
Now, there have been a couple of cases where we have settled,
where we basically went in and worked with the claimants to
help reconstruct their books. We spent money for our
accountants to go in and help them do that because we
recognized--we don't want to have a requirement where you have
to custom tailor information to come to us. We are more than
happy to have our folks go out and help work with the claimants
to provide some of this information, and we're committed to
doing that. I think one of the problems has been that there
have been somewhat of a lack of communication back and forth.
In the press release I put some information about the
information that we needed and why we need it, because I think
that that's a legitimate concern. Lots of times you get asked
for information, if you're not told what it's for and why you
want it and how it plays into the adjudicational process, you
say, why do I need to do that, and I understand that, and
that's one of the things that we put in this document to help
with future claimants and to help with those that we've
currently got on our plates.
Senator Chafee. Well, I'd like to see some results here,
and I'm not just, and I'm not just speaking on behalf of these
two gentlemen here who I think have presented a very convincing
case, but there are others, too.
Mr. Sheehan. Yes, sir.
Senator Chafee. And I'll follow this and I'll just, have
your people take a look at these particular cases and the cases
that the attorneys have here and let's just get this thing
done. As Mr. Sorlein and Mr. Christopher said, you're going to
end up with--somebody is going to have to make a decision, it's
not going to be--the situation has got to be absolutely crystal
clear, but usually in these cases these people want a decision.
So I'll be staying in touch with you, Mr. Sheehan, on these,
and I will get the rest of the cases, that, obviously, I'm
intensely interested in the Rhode Islanders, but this is a
national problem, too, and I'm representing the claimants
nationally, likewise. Do you have any other questions?
Mr. Gibson. No, sir.
Senator Chafee. Let's see what we can do on all this. And,
now, you gentlemen have got to respond quickly if he wants
something more.
Mr. Hartman. Absolutely. And, Your Honor, with all due
respect to Mr. Sheehan, I don't know who he's talking about,
but I can show you the list of documentation, believe me,
there's no moss growing under this stone when we respond. It
goes quickly, very, very quickly.
Mr. Sheehan. I would like to say this, that I have letters
from, we have requests out to 18 claimants, many of which are
represented by my colleague over here, Mr. Hartman, from May
and July who we have not received the documentation, so if
that's not moss, I mean, I'm sorry.
Mr. Hartman. That's simply not true.
Senator Chafee. Let's not get back and forth. I think, you
know, some people just for wariness or despair give up and
don't respond, but I don't think we want it to be an endurance
course either on these folks.
Mr. Sheehan. We don't either. Please, accept my assurance
of that.
Senator Chafee. Sometimes, it seems inappropriate to say
that you've got to fish or cut bait here, but on these things a
decision has to be made and you're dealing with, these aren't
shysters, these aren't guys out to shaft you, these are people
who can, I think the income tax, it seems to me pretty that not
many people are going to take a chance of cheating on their
income tax to collect some more, and when they submit their
income tax, as Mr. Christopher, you can see the level of his
business going up, things going great and making purchases and
then down she goes. So, in any event, so I'll stay closely in
touch with you, Mr. Sheehan, and now you've got to do your
part.
Mr. Christopher. Absolutely.
Senator Chafee. And the others who aren't represented here,
likewise, I don't know whether the ones you represent and
members of your organization, Mr. Sorlein.
Mr. Sorlein. Certainly, certainly, sir, yes.
Senator Chafee. So we'll follow them along. Did anybody
else want to say anything? We have a chance for somebody to say
a couple of minutes.
Mr. Trager. I'm Bob Trager. I own a small lobster wholesale
business in Jerusalem. I'd like to ditto what Mr. Christopher
said because his business was similarly sized to mine, and
Barry's representing our business, but what I'm hearing is not
as encouraging as I'd like it to be because I don't know where
we stand right now, I'm going to have to talk to Barry
afterwards, because we haven't submitted this year's tax
returns, but all of the things that Al said about how the
insurance company has dealt with us when we put our short-term
claim in, stacks of papers like this. My wife--I don't know if
you know Skip's, I think you've been down to Skip's dock,
Senator?
Senator Chafee. Yes.
Mr. Trager. Well, anyway, we're the oldest continuous
running lobster wholesale business in the whole port, but we're
probably the smallest, too, but we're also one of the oldest
retail markets in the State of Rhode Island and it's in
jeopardy of surviving right now because of the way this whole
thing is transpiring. Right now my sons are down there, two of
them, that are running that business, unloading lobster boats.
I looked around here and I see what I think are a lot of
lawyers and a few fishermen, and that's from guessing, but one
of the reasons there aren't more fishermen here, and Mr.
Sorlein didn't mention it, is today, and he probably shouldn't
be here, because today is a calm day and practically everybody
went out fishing today because there's so few calm days, if the
wind is blowing, they won't fish, but they fish when they can,
so I think this place would be packed with people if it wasn't
a fishing day and the lobstermen could have been here.
I've seen a decline in our business very similar to what he
said. This year has been one of the slowest that I can
remember, and, like I said, there are many people that have
been in the business longer than me that are in Galilee, but
we're the oldest ones there, and in the last 12 or 13 years,
and I think with the 17 to 20 boats that sell to us, we've got
a pretty good feel of what's going on with lobsters in the
area, and, believe me, what's going on right now is not a
healthy situation, and not only that, but we also have to
contend with the regulations that are coming down with
lobstermen now, that some of them are so far out in left field
that the Government's playing around with that, that's a scary
issue, too. So the lobster, we got that, and this, and this
claims process, I wish I could describe my wife Ingrid to you a
little bit, but nobody, she is so honest that it's scary
sometimes, and, yet, we still couldn't get anywhere. It took us
forever to get what I didn't even think was a fair settlement
for that short-term claim. One of the things they would do, a
slip was missing, but one slip out of 5,000 slips. Well,
believe it or not, we ended up finding it, it was one that we
canceled out, you know, that's the kind of thing they would do
over and over again. We haven't even gotten the long claim. I
don't know what's going on with the long claim process, but I
know one thing, what's going on with my business and my two
sons that decided that this is what they're going to be doing
with their living for the rest of their lives, one of them has
two children, my other son is probably starting along those
lines pretty soon, and we don't fish. A lot of people, like
they were saying, there's some people that have fishing boats
and they have these businesses, all we do is serve the
lobstermen and we run a retail market and we run a wholesale
lobster business, we're on the other end of it, but whatever
happens to the lobstermen, we are damaged, our damages are
proportionate to whatever happens to them, and what's happening
to them is not good right now. I think that----
Senator Chafee. I think that----
Mr. Trager. I'm just afraid that, even though I heard all
this and I'm glad I came, I don't have a good feeling of
comfort when I hear about statute of limitations that's going
to come up in a few weeks, because my wife and I haven't done
some kind of manipulation of our books and whatever. We're
working down there, like Al's out of it, it's a good thing that
he is, but right now we're still doing it, we've been doing it
for a long time and we want to keep doing it. It's a hard job,
and it----
Senator Chafee. I also wonder whether the full effect
hasn't really been felt yet.
Mr. Sorlein. No, it has not.
Senator Chafee. If you take the 3 years--when did they
reach maturity, after about 3 or 4 years?
Mr. Sorlein. Seven.
Mr. Hartman. According to the draft assessment, the worst
years are going to be 1999, 2000, 2001.
Senator Chafee. Yes, that's what worries me, is that the
full hit will come then. And then I think, I thought it was
very interesting that the testimony was given about the others
that are all part of the food chain, that looks very--it's very
interesting.
Mr. Sorlein. Senator, I have one more thing. With respect
to some comments I believe that Mr. Sheehan was directing
toward the documentation still outstanding and possibly, and he
didn't say this, but possibly claimants that have not moved
into the Fund process yet, I can speak for myself in saying
that I have held back from asking my attorneys who represent me
to move my claim from the responsible party to the Fund for the
simple reason, and I call this the chicken and barbecue theory,
that how many pieces of chicken do you throw onto the grill
before you figure out that the coals aren't burning, and while
lobstermen are different in a lot of respects, but we're also
very similar, and when I see some of my colleagues with claims
going that are involved in the Fund and getting nowhere, and I
know that my claim is quite similar----
Senator Chafee. With the Fund, John, or with the----
Mr. Sorlein. With the Fund, sir.
Senator Chafee. In other words, they've gone through the
responsible party, the 90 days?
Mr. Sorlein. Right. And now you're saying that there's no
sense in my going, moving, going through the process of being
in the Fund, when I can look at five or six of my colleagues
who have claims that are identical to mine in all respects
except for the name at the top of the tax return and the
individual figures and the other supporting documentation, but
we are, essentially, identical, and we're getting nowhere, so
that it just makes little sense.
Senator Chafee. Before the responsible party?
Mr. Sorlein. Both the responsible party and the Fund.
Senator Chafee. The ground rules are that you got to go
first, you have to go through the responsible party?
Mr. Sorlein. Absolutely. I understand that, sir.
Senator Chafee. And I'm not quite sure that, you're saying
they've done that, then you see them go before the Fund and
they go nowhere and that discourages you, is that what you're
saying?
Mr. Sorlein. Exactly. What I'm trying to relate to you,
sir, is that from a personal standpoint, my own claim, I have
not pressed my claim to go forward into the Fund because I see
no reason to be there. I'm just trying to describe to you the
dismay that we have with the process that the Fund seems to be
presenting to us because of the inaction on the claims that are
similar to mine, and I see no sense in throwing yet another
piece of chicken on the grill when I can tell that there's no
fire there, so that's where I am.
Senator Chafee. Well, Mr. Sheehan said he'd look into these
and press these people along and get these things settled, is
that a fair statement, Mr. Sheehan?
Mr. Sheehan. Yes, sir, and I would like to make an offer,
that we would be pleased to come up and meet with the
Lobstermen's Association and sit down and go through this in
their setting, just to go through and layout and describe
whatever else you need. We will go through this process.
Senator Chafee. I would say not only describe it, but
arrive at some conclusions, in other words----
Mr. Sheehan. I think there's a communication problem that
needs to be addressed.
Mr. Sorlein. If Mr. Sheehan was going to bring that clerk
typist with him, we'd be more than happy to accommodate him.
Senator Chafee. OK. Do you understand that offer, John? I
should get your name.
Mr. Hartman. It's Barry Hartman. We had asked from March
5th, 1996, I sent the Freedom of Information Act request to Mr.
Sheehan, saying tell me all the criteria you need and want to
file these claims, and he said there were none. Give it to me,
I will pass it on, I will make sure that all our claims meet, I
will guaranty you that our claims meet every documentation
requirement that you have there and then some, I will guaranty
you that. I mean----
Senator Chafee. Let's not replay it. Mr. Sheehan made this
offer, I think it's a fine offer, that he or his people will
meet you and----
Mr. Hartman. Say the time and place.
Senator Chafee. Let's get this doggone thing settled.
Mr. Sheehan. If I can only make one other point, and
that's, again, I would urge you to take a look at that document
that we put together on the statute of limitations, it's out on
the table out there, and I don't mean to scare you, but it has
some implications.
Mr. Trager. You scared me, and I'm going to go look at it.
Mr. Hartman. We're quite familiar with that.
Senator Chafee. That's enough to scare anybody, the statute
of limitations. What was the date, the 19th?
Mr. Hartman. The 19th of January.
Senator Chafee. So that's enough to scare anybody. So time
is of the essence here.
Mr. Sheehan. For most folks that doesn't apply, but there
are some that it might, and I want to make sure that everyone
who has a loss has the opportunity to come to the Fund site.
Senator Chafee. All right. Now, the ball's in your court
over here, gentlemen, to work it out with Mr. Sheehan and----
Mr. Hartman. Give me a date and time and I'll be in your
office. I'll save you a trip to Rhode Island.
Senator Chafee. And I personally will follow this thing and
stay in touch with Mr. Sheehan as to how we're doing here in
getting these things done.
Mr. Hartman. I have to say something, Mr. Chairman, a
comment was made by the counsel of Mr. Sheehan saying they've
been asking to meet with claimants. That's simply not true. I
am willing to meet on behalf of 122 claimants, to take all the
information back to our claimants to put it together. These
people can't afford to meet with bureaucrats all the time,
that's what I'm there for. I'll give them the information. Tell
me when to be in your office. Let's cut through this. To say
that you want to meet with our claimants for the fifth time,
tell me when to be in your office and I will be in your office,
I'll do it.
Mr. Sheehan. I don't want to replay this, but I think our
dialog today has been very useful.
Mr. Hartman. Absolutely.
Senator Chafee. Well, I can understand, and I take it that
what we're saying is that, yes, they're glad to meet with the
lawyer, but what are you suggesting? You're the attorney for
Mr. Sheehan?
Mr. Sheehan. She's my deputy.
Senator Chafee. Deputy. And what are you saying, you want
to meet these fishermen face to face?
Ms. Lane. We frequently have questions that we need to pose
directly to the claimants. We deal with claimants on a day-to-
day basis.
Senator Chafee. Well, would you do that up here?
Mr. Sheehan. We will be glad to come up at your
convenience, not at our convenience.
Mr. Sorlein. Why can't those questions be posed to our
attorneys who are handling our cases? This is a very complex
process, Senator, and----
Mr. Hartman. If you put a hundred people in a room, you're
going to say, Mr. Smith, tell me about your claim.
Ms. Lane. You don't have to meet with everybody at the same
time, and sometimes questions can be answered in 2 seconds,
whereas, sometimes when you go through attorneys it takes 2
months to get.
Mr. Hartman. That is just simply not true. That's not true.
That has not been true.
Senator Chafee. I think there's considerable merit, and if
they're willing to come up here, and if the deputy or whoever
is going to interview these individuals and it's going to, if
they think it's going to move things along faster, I think
there's some merit in that.
Mr. Hartman. They're welcome to do it. I'm just trying to
be practical and move it as quickly as we can, because our
folks can't all be there.
Senator Chafee. Oh, obviously. I don't think you're
suggesting 120 call you.
Ms. Lane. No, even over the phone sometimes we can get
questions answered.
Mr. Hartman. Oh, we've offered that with the clients,
absolutely.
Senator Chafee. Now, is this thing settled now, is it
understood you're going to meet at a certain time up here?
Mr. Sheehan. We'll work it out with them, Mr. Chairman. We
will probably end up doing both and that will be fine with us.
Mr. Hartman. That's fine.
Senator Chafee. Now, just a concluding statement here.
Mr. Allen. My name is Dick Allen.
Senator Chafee. Dick, come on up front.
Mr. Allen. I just wanted to comment on one thing, you kind
of alluded to it, the frustration and making it an endurance
contest, and one thing that I've realized, that this is a
pretty heavy cost in pursuing your claim, not in just the
defense fees that the lawyers are going to get or things like
that, but, as someone mentioned, there are a lot of people who
aren't here because they have to be out fishing. If they had
given up the day, that's an additional loss. We put in a
tremendous amount of time gathering this information, putting
it in, and, as I understand the law, those kinds of things are
not compensable, you can't put in a claim for what you put in,
and so these continuing requests, people get to the point where
they say, you know, I'm just adding to my losses by continuing
to respond to these things, so I think it's a completely valid
argument that we can't just keep saying they want to talk to
you, they want to meet with you here, they want to meet with
you there, how many days can you give up, how many times can
you put in before you just say, hey, I'm starting to go
backward now, forget the whole thing, you know, take your
losses and you can go away.
Senator Chafee. OK. Well, I think you're right, you're not
going to be able to collect for the time you spent tabulating
your losses, but, well, I think we made some headway here, and
I'm very, very interested in this situation, so everybody put
their shoulder to the wheel now and try and reach settlements
on this, and, as I say, I'm going to make it my business to see
how these things all come along, but it's up to you folks now
to get together and work it out, and Mr. Sheehan has offered to
come up here, his people, there's one, if you want to take, and
when he comes, I'll get some conclusion.
All right. That settles that, folks, and that concludes our
hearing. I want to thank everybody for coming. You've all been
very helpful.
[Whereupon, at 6 p.m., the committee was adjourned, to
reconvene at the call of the Chair.]
[Additional statements submitted for the record follow:]
Statement of Daniel F. Sheehan, Director, National Pollution Funds
Center, U.S. Coast Guard, Department of Transportation
Good afternoon, Mr. Chairman and distinguished members of the
committee. I am Dan Sheehan, the Director of the National Pollution
Funds Center, responsible for the management of the Oil Spill Liability
Trust Fund. I want to thank you for giving me the opportunity to
testify concerning the claims process that resulted from implementation
of the Oil Pollution Act of 1990 (OPA-90). A primary objective of OPA-
90 is to provide compensation, subject to certain statutory
limitations, to those damaged by oil spills or threats to our navigable
waters. Polluters are strictly liable for a broad range of damages and,
if the polluter does not pay, the Oil Spill Liability Trust Fund
(OSLTF) is available to ensure appropriate compensation. The National
Pollution Funds Center (NPFC) is charged by Executive Order and
internal agency delegations to implement and administer procedures for
the payment of claims from the OSLTF for compensation of damages
discussed in OPA-90.
OPA-90 significantly broadened the scope of removal costs and
damages claimants can recover, specifically eliminating the traditional
admiralty ship owner's protection. If a responsible party does not pay
a claim for damages or removal costs, or if the responsible party (RP)
cannot be identified because the source of the spill is not known, a
claim may be submitted to the NPFC for consideration of payment for the
following categories:
Uncompensated removal costs;
Damages to real or personal property;
Loss of subsistence use of natural resources;
Net loss of certain government revenues by Federal or State
governments or political subdivisions thereof;
Loss of profit and earning capacity due to loss or injury to real
or personal property or natural resources;
Net costs for increased or additional public services during or
after removal activities by a State or a political subdivision of a
State; and
Natural resource damages and the cost of assessing those damages.
Prior to OPA-90 the only mechanism available for most non-Federal
claimants was to seek redress for damages directly from a negligent
responsible party. The scope and type of damages that were compensable
were narrowly defined and the existing case law basically stated that
in order to claim damage, individuals or their property had to be
physically impacted or touched by the oil. This did not account for the
myriad of real damages caused by oil spills. OPA-90 also provides a
two-step process whereby a claimant may seek compensation directly from
a strictly liable RP or a guarantor if a guarantor was required by OPA-
90. If the RP doesn't settle a claim within 90 days, the claimant can
either seek compensation through litigation against liable parties (the
RPs) or submit the claim to the NPFC for adjudication and payment from
the OSLTF. In the latter event, when the NPFC pays a claim, it becomes
subrogated to the rights the claimant had against the RP.
OPA-90 sought to provide a mechanism that prevented a claimant from
having to engage in potentially costly and lengthy litigation. Where an
RP is known, the two-step process does in fact facilitate that goal.
The North Cape spill serves to illustrate the achievement of the
broader goal of having the RP respond first and take care of the
claims, but also of giving claimants a second venue if they feel the RP
did not adjudicate claims properly.
By way of background, I would like to provide an overview of the
NPFC's role with respect to the North Cape spill. The NPFC has served
two roles in the aftermath of the North Cape incident. First was in
support of the response effort. During the operational response to the
North Cape incident, the NPFC served as ``banker'' for the government
costs. We provided the funding source to the Federal On Scene
Coordinator so that Federal response efforts could be initiated
immediately. The government spent $1,886,034.92 during the clean-up
phase of the incident. The NPFC also drafted the Notice of Designation
that was delivered to the RP. This Notice advised the RP of its
liabilities under OPA-90 and set out the requirements for advertising
for claims, including informing claimants of their rights to submit
claims to the OSLTF if unable to reach settlement with the RP. It is
our opinion and general observation that the implementation of OPA-90
and the requirement to inform claimants of the Fund's availability has
provided significant incentive to RPs to act responsibly toward
claimants.
The second NPFC role was in support of third party claims. During
the incident, an NPFC claims representative traveled to the site and
provided information to various public officials and others. We made
copies of the ``NPFC Claimant's Information Guide'' available during
the incident and have mailed others to claimants since. In the
immediate aftermath of the incident, we worked closely with
representatives of the congressional delegation of Rhode Island, the
Governor's Office, and the guarantor of the RP to implement a partial
payment and settlement process for claimants. This partial payment
policy had been in place for claims adjudicated at NPFC, but had not
been adopted universally by the marine insurance industry. Through a
cooperative and collaborative effort with that industry, and in
particular the Water Quality Insurance Syndicate, the partial payment
option was made available to claimants from the North Cape spill to
tide them over until final adjudication was completed. In the aftermath
of the incident you introduced legislation to make this a permanent
feature of OPA-90, another positive step in refining the claims
adjudication process.
Based on information provided by the North Cape representatives,
the RP received 1,460 claim inquiries from 1,180 claimants. Of these
1,460 claim inquiries, 579 are still outstanding; most of these are
phone inquiries following which the claimant has not pursued a written
claim. Of the remaining 881 claims, 125 have been withdrawn by the
claimants, and the RP has made partial settlements on 275 claims and
full settlements on 481 claims. To date, the NPFC has received 33
claims arising from the North Cape incident. All claims at the NPFC
fall within the categories of property damage or lost profits and
earning potential. These are claims for which either payment has been
denied by the RP or the claimant did not feel the offer made by the RP
was acceptable. As might be expected in the situation where claims have
been denied by the RP, there is generally a lack of evidence to support
the claims. In addition to this lack of documentation, there are two
factors that have impacted our ability to adjudicate these claims
expeditiously: claim complexity and delays resulting from government
contracting requirements.
The North Cape oil spill incident has presented the NPFC with some
of the most complex claims received to date, in particular those claims
of fishermen for loss of profits or earning capacity. We have hired
experts to assist us in adjudicating these claims. We have received
widely varying technical and scientific data and opinions on the impact
of the spill on fisheries resources. We have had to acquire catch data
and have spent a substantial amount of time helping claimants properly
document their damages. All of these factors have contributed to delays
in the processing of many of these claims. Many claimants submit their
own claims. Others choose to use legal counsel. In some instances,
claimant's counsel has been reluctant to provide information or to
arrange for the NPFC's representatives to deal directly with the
claimant, thereby also contributing to processing delays.
I would again point out that the claims we have received are not
all claims arising from this incident, but only those that were not
settled by the RP or its guarantor. Arguably, we have received the
claims that are more difficult to compensate because of a lack of
supporting documentation.
Some of the delays are our fault and I take responsibility for
those. We believe in continuously improving the process and in making
it more customer friendly. I have initiated a new technical support
contract mechanism which I believe will assist us in being more timely.
Additionally, I am reviewing the Claimant's Guide and our standard
supplemental information request documents to see if they can be
improved. We can speed up processing time if we can reduce the number
of times we have to go back to the claimant for additional information.
In support of that goal we have prepared a handout for the lobster
industry, available at the hearing today, which provides a list of the
specific documentation required, how we use the documentation, and the
methodology which will be used to measure their claim. We are hopeful
that this document and other supplemental guidance will clear up some
of the confusion about the NPFC's adjudication process.
I understand the frustration of individuals that believe they have
not been adequately compensated as a result of an oil pollution
incident through the claims regime established by OPA-90. And there is
nothing we would like better than to be able to compensate every
claimant to his or her complete satisfaction. However, our authority
and ability to provide relief is not unfettered.
First, there are statutory constraints, which limit any relief to
those seven categories of costs and damages mentioned previously, and
their respective classes of allowable claimants. The statute also
requires that, generally, claims must be presented first to the RP and
that the RP is allowed up to 90 days to settle the claim before the
claimant may come to the NPFC. Clearly the RP does need time to
consider claims, but I can understand the problem of an individual
facing financial responsibilities whose livelihood has been taken away
by a spill. In the aftermath of the North Cape spill, I wrote to every
guarantor and gave a speech at a maritime conference stressing the
absolute importance of timely claims adjudication to put money on the
table for just such individuals.
Second, as stewards of the public's money, we have a fiduciary
responsibility to ensure that where funds payments are made that it is
done equitably and that any payments from the OSLTF are based on
supporting documentation. We are subject to congressional oversight and
annual Inspector General financial audits. We are clearly, and
appropriately, accountable for the funds expended.
Lastly, one of our functions in administering the OSLTF is to
pursue cost recovery vigorously from RPs. These costs include
expenditures from the Fund for third party claims. We need to ensure
that we have adequate documentation to support claims payments that are
later billed back to the RP. That documentation is utilized in our
litigation proceedings.
I would now like to take the opportunity to give you a better
understanding of our claims process--what we do with the claim when we
receive it. Our basic approach is to first determine if the claim is
compensable under OPA, and then to measure the amount of compensation.
After we have determined the compensable amount, we offer 100 percent
of that amount. This point is also emphasized to any contractor we hire
in the adjudication process. Our contractors receive no bonus for
``saving money'' for the Fund.
The NPFC also insists that all claims be handled consistently. The
methods used by the NPFC to measure these damages are the standard
methods, where standard methods exist, that are used in the insurance
industry. All claimants are held to the same general requirements: they
must submit evidence to support their claim. 33 CFR 135.105. Claimants
requesting compensation for lost profits or earning capacity must
establish that property or natural resources were injured or lost as a
result of an oil spill and that the claimant lost income as a result.
The amount of the loss is established by income tax returns, financial
statements and similar documents. Saved expenses, mitigation, and
alternative employment or business factors are also relevant. 33 CFR
136.233.
To assist us with various aspects of the adjudication process, the
NPFC sometimes hires contractors with specialized expertise.
Contractors can provide technical expertise or surge capacity and also
ensure consistency for those incidents where we anticipate a high
volume of claims. For example, in handling the claims arising from the
North Cape, the NPFC hired a contractor to prepare a report on the
fishing bans imposed in the area, when and where the bans were imposed,
when they were lifted in the various areas impacted by the spill, and
how these bans generally impacted the seafood industry in that area. We
also required the claims adjudication contractor to hire an accounting
firm familiar with the New England lobster industry to assist with the
lost profits claims, and an expert on lobster population dynamics and
movements in southern New England. Although this has generally worked
well, it has not always resulted in as timely an adjudication as might
otherwise occur.
As mentioned previously, I am implementing a new contracting
process to allow us to hire the specialized expertise we require in a
more timely and responsive manner. Regardless of which vehicle is used
to obtain contracting services, the recommendation made by the
contractor is closely scrutinized by appropriate personnel at Coast
Guard Headquarters and the NPFC. Any claims adjudication recommendation
is reviewed by two NPFC claims professionals, who make the final
decision on disposition of the claim.
As of November 10, 1998, the status of the 33 claims submitted to
the NPFC are as follows: 2 have been settled; 3 have offers pending; 3
have been denied; 18 await information from the claimants; and 7 are in
the measurement process by our contractor.
With respect to natural resource damage (NRD) claims, it is clear
to anyone familiar with the North Cape oil spill that natural resources
were damaged as a result of the spill. Even though the NPFC has not
received an NRD claim from the various Natural Resource Trustees, I'd
like to take this opportunity to discuss the current status of these
claims in general at the NPFC. While the NPFC has provided (and will
continue to provide) limited funding to Trustees to initiate NRD
assessments, it has not previously paid NRD claims, relying on a
Comptroller General opinion, issued in late 1995, that OPA-90 provides
for payment of NRD from the OSLTF only by appropriation; OPA-90 allows
the NPFC to pay other damage and removal cost claims direct from the
OSLTF without appropriation. In late 1997, the Department of Justice
(DOJ), Office of Legal Counsel, interpreted OPA-90 to permit payment of
NRD from the OSLTF without further appropriation, like other damages
and removal costs.
Following the DOJ interpretation, the NPFC formed a Program
Implementation Team with members from the Coast Guard, National Oceanic
and Atmospheric Administration (NOAA), and Department of the Interior,
and with advice and assistance from the DOJ and other agencies as
needed. The NPFC had no experience with the science and economics of
NRD. The Program Implementation Team provided technical assistance to
the NPFC in determining the resources needed to carry out this program,
especially the qualifications of the personnel necessary to evaluate
these often complex claims. The Coast Guard is in the process of
approving additional personnel resources for the NPFC that will be
devoted to NRD claims processing. As soon as qualified staff is hired,
the NPFC will begin adjudicating NRD claims. We are hopeful that the
new staff will be in place by next spring.
The NPFC has developed an outreach document, a Trustee claimant
guide, that explains the process and general requirements for
adjudication of NRD claims by the NPFC. Essentially, the guide
summarizes certain OPA-90 provisions relevant to NRD, the general
claims regulations already in place, and certain aspects of the NOAA
damage assessment regulations. The guide is now available for the
information of all Trustees on the NPFC's Web Site (http://
www.uscg.mil/hq/npfc/npic.htm). I plan to send a letter notifying State
Governors, congressional delegations, and all Trustees (Federal, State,
and Indian Tribes) about the availability of the Guide. I will also
invite any comments they may have on the utility of the guide as an
information source.
Let me highlight a few OPA-90 NRD fundamentals that underlie the
Guide.
All Trustees have the same standing as claimants from the OSLTF.
There are no preferences or differing procedures or standards for any
particular Trustee or class of Trustees.
The interests of Trustees may often overlap, so the Trustees are
encouraged to coordinate their claims. NPFC cannot pay twice from the
OSLTF for the same damage.
A claim must be based on the cost of a plan to restore,
rehabilitate, replace or acquire the equivalent of the damaged natural
resources, the diminution in the value of those resources pending
restoration, and the reasonable cost of assessing damages.
Assessment or restoration plans must be made available to the
public for comment before they are finalized.
Any NRD claim must first be submitted to the responsible party. If
the responsible party does not settle within 90 days, the Trustee may
submit the claim to the NPFC.
The Trustee has the burden to support its claim. However, the
claims process comparable to an insurance adjustment process. It is not
intended to be a proceeding with opposing parties arguing alternative
evidence or law. Congress clearly intended that claims to the OSLTF be
an alternative to litigation, not litigation in another form.
Trustees may follow the NOAA damage assessment regulations in
preparing their claim, but are not required to do so.
Determinations or assessments made in accordance with the NOAA
damage assessment regulations are presumed to be correct. Any
presumption is subject to rebuttal. If the NPFC determines the rebuttal
evidence is of sufficient weight, a claimant may need to supplement its
record or claim with additional information.
Ultimately, the NPFC may pay a claim in full, but it also may deny
a claim in whole or part if it is not adequately supported.
Any amounts paid to Trustees from the OSLTF must be retained in a
revolving trust account and used only to reimburse and pay costs of
assessment and restoration of the damaged natural resources.
Regarding the North Cape incident, I understand that the Trustees
have released a draft restoration plan for public comment. Under OPA-
90, they must conduct public hearings prior to finalizing the plan and
then submit a claim for the cost of the final plan to the RP before
they may submit the same claim to the NPFC. If the RP does not settle
the claim, the Trustee claimants will determine whether and when to
submit a claim to the NPFC or litigate their claim against the RP.
In summary, Mr. Chairman, I would like to again thank you for the
opportunity to appear before you today; to provide insight into our
claims process; to let you know what steps we are taking to streamline
our process; and to reassure you and your constituents that we share
the goal of assuring that claimants are appropriately compensated for
damages caused by oil spills, and that the natural resources damaged
will be restored in a timely manner.
I will be happy to answer any questions you might have.
______
Responses of Daniel Sheehan to Additional Questions from Senator Chafee
time frames for handling claims
Question 1. There appears to be some confusion on the time frames
in which the responsible party (RP) and the National Pollution Funds
Center (NPFC) must act with respect to a claim. Can you clarify how
long the RP has to handle a claim, when the claimant may go to the
NPFC, and how long the NPFC then has to handle the claim?
Response. A claimant is required by law to first present the claim
to the RP. The RP has up to 90 days from presentment of claim to take
action concerning that claim before it can be submitted to the NPFC. If
the RP denies liability for the claim or the claim is not settled
within 90 days of the date it was presented, the Oil Pollution Act of
1990 provides that the claim may then be presented to the NPFC for
payment from the Oil Spill Liability Trust Fund. With respect to how
long NPFC has to handle the claim, there are no statutory or regulatory
requirements, however, we strive to adjudicate all claims as quickly
and efficiently as possible. All claims are not equal in their
complexity or documentation requirements and as a result, the time
needed for adjudication will vary from claim to claim. NPFC relies
heavily on contract support for the analysis of claims injuries and has
implemented improvements to make this process more timely.
statute of limitations for filing claims
Question 2. An announcement was made at the hearings concerning the
Statute of Limitations for the filing of claims under OPA. Could you
clarify this issue and its impact on the claimants in Rhode Island?
Response. The Oil Pollution Act of 1990 (OPA-90) has a 6-year
statute of limitations (SOL) for claiming removal costs, and a 3-year
SOL for other compensable OPA-90 oil spill damages. The question was
raised about when the 3-year clock starts. While the circumstances of
each claim will determine when the clock starts, the rule is that the
claimant must submit an OPA oil spill damage claim to the National
Pollution Funds Center (NPFC) within 3 years after: 1) the injury, and
2) its connection with the spill, were reasonably discoverable with the
exercise of due care. Loss-of-profit injuries, and their subsequent
claims, are often complex. As general guidance, NPFC believes that a
loss-of-profit injury is reasonably discoverable no later than when, in
the course of its normal business accounting practices, or otherwise as
required by law, the claimant determines, or is required to determine,
business loss for a given period. But if a business in fact discovers
it suffered a loss at an earlier date, that date will control. In the
absence of other information as to when a loss of profit was in fact
discovered, the NPFC may rely on the date of relevant income tax
filings to establish the date loss was reasonably discoverable.
When is the connection between the injury and the discharge
reasonably discoverable? Again, the circumstances of the claim will
determine when the connection was reasonably discoverable. In general,
the connection may be reasonably discoverable when the injury is
discovered or discoverable. In some circumstances the connection with
the discharge may be reasonably discoverable only at a later time
because, for example, information on the spill or its impact was not
available until a later time.
This focus on ``reasonably discoverable with the exercise of due
care'' is a recognition that some damages may not be apparent until
some time after an oil spill incident. Rather than start the clock for
all claims at the time of the incident, OPA provides a degree of
flexibility depending upon the circumstances. Although the
circumstances of each claim will vary in determining when the 3-year
period starts for that claim, some examples may be helpful to
claimants.
Example 1: Fisherman ``X'' observes an unexplained reduction in
catch for several months beginning in February 1994. X notes a
resulting loss of profits for those months when preparing quarterly tax
records. On January 15, 1996, State and Federal authorities announce,
and X learns, for the first time, that catchable fish stocks in the
area fished by X had been severely impacted by an oil spill in February
1994. The 3-year period for X's loss-of-profit claim would arguably
begin on January 15, 1996, which is the date the connection between the
loss of profits and the oil spill was reasonably discoverable.
Example 2: A charter fishing boat owner ``Y'' loses business for
the month of January 1995 because charterers cancel as a result of a
massive oil spill in the area. But business revives quickly after the
spill and Y does not bother to pursue a claim. In February 1998 the
responsible party for the spill places an ad in the local paper
offering to continue to consider and pay damage claims from the spill
even though the 3-year period may have passed. Y reconsiders and
decides to present a claim. The responsible party denies the claim. Y
then decides to present the claim to the NPFC for payment. The NPFC
cannot pay the claim despite its merits because it cannot, unlike the
responsible party, waive the 3-year period.
The purpose of raising this issue at the hearing was to highlight
our concerns with respect to potential claimants that have heretofore
not submitted claims. As indicated in the hearing, the RP notified
potential claimants that they would still consider claims even though
they were beyond the SOL. By law, the NPFC cannot waive the 3-year
limit for claims to the NPFC for payment from the Oil Spill Liability
Trust Fund. Because the circumstances of each claim will determine when
the 3-year period starts for that claim, the NPFC cannot provide a
single date to begin the 3-year period that will apply to any class of
claims. The only certainty is that the period begins no sooner than the
initial date of the spill; any claim submitted within 3 years after the
initial date of the spill will certainly be timely. Beyond that, the
best guidance NPFC can offer claimants is not to delay submitting a
claim for a period of years. Such delays will only increase the risk an
otherwise valid claim may be denied in whole or part solely because it
is submitted late. NPFC has taken steps with respect to the RP's public
notice concerning their acceptance of claims beyond the SOL. A copy of
NPFC's letter follows:
______
Department of Transportation,
U.S. Coast Guard, September 21, 1998.
Mr. Barry Hartman,
Kirkpatrick & Lockhart, LLP
1800 Massachusetts Avenue, NW,
Second Floor,
Washington, DC 20036-1800
Dear Mr. Hartman: The Director of the National Pollution Funds
Center asked that I respond to your 1 July 1998 letter. I have read it
very carefully, and would like to address your concerns. Because the
National Pollution Funds Center's (NPFC) mission requires that we deal
with oil spills on a daily basis, through our claims process in
particular, we are keenly aware of the consequences of oil pollution
incidents. I think our goal is the same. We both want to see that those
who hare been damaged as a result of incidents are made whole.
Accordingly, we can appreciate the frustration which your clients
feel. Our contractors began working on these claims in April 1998, and
requested additional information from your clients on May 15, 1998. I
was pleased to see the recent letter of July 24, 1998 from Mr. McIsaac
of your firm which appears to indicate that we have now overcome your
firm's initial unwillingness to our contractor's request for
information and personal meetings with individual claimants. In
preparation for those meetings, our contractors asked for
contemporaneous documentation that provides the number, location, and
monthly placement of traps as well as a monthly summary of catch pounds
and dollars for these locations for 1994 through 1996. This will allow
us to document each fisherman's efforts (measured by the number of
traps and pounds caught) before the spill, and then after the spill.
This is important as the latest inshore landing report for the Area 539
provided by Mr. Tom Angell of the Rhode Island DEM is very different
from the Table B you provided. (See enclosed schedule completed by our
contractor based upon the handwritten information provided by Mr.
Angell). After our contractor reviews the information, they have
requested meetings with you and your clients to review any questions
and issues, and to confirm a working understanding of each claimant's
particular business operation.
Your characterization of NPFC's approach to handling your clients
claims is inaccurate. First, you assert that NPFC is holding your
clients to the heightened standard of ``beyond a reasonable doubt.''
This is simply not true. The methods used by the NPFC to measure these
damages are the standard methods used in the insurance industry. All
claimants are held to the same standard of proof--they must submit
evidence to support their claim, 33 CFR 135.105(e)(6), and they must
submit proof that their income was reduced by damages stemming from the
oil spill, 33 CFR 136.233. Second, your description of the NPFC
Approach is not on point. You are of course correct in stating that the
one claim for which we have submitted an offer does refer to the
National Marine Fisheries Service (NMFS) total landings at Point Judith
for the claim period of August 1 through December 31, 1996 which
indicates an increase in lobster landings over 1995. However the
inference is that the claimant is a lobsterman. In facts the claimant
is a lobster wholesaler. Accordingly, using total Port Judith landings
is the proper threshold to examine the supply availability of lobster
in Port Judith. Our contractor clearly stated in the Claim Summary for
this claim that they would need to evaluate the individual claims of
fishermen who supplied this lobster wholesaler. I understand you
represent these fishermen and this information should be readily
available.
As far as actual lobstermen are concerned, I agree that total
landings is not the proper measure. This is precisely why we have been
requesting individual catch/landing records for each lobsterman. Ours
too is a straightforward approach. We project what the individual
income would have been based on effort and adjust for saved expenses,
actual income, mitigation or extra expense. Your methodology of merely
comparing income falls short. Although proof of loss of revenue is an
important threshold issue, loss of revenue alone is not proof of a
compensable claim. A claimant must also demonstrate that the loss of
revenue resulted from the incident, and that the claimant attempted to
mitigate damages to the extent that it was reasonable to do so; Thus,
our contractor has requested individual catch/landing records to
support your clients claim.
You also state that landings of lobster in Area 539 have decreased
drastically since the North Cape spill and cite Thomas E. Angell's
studies as authority. First, let me point out that the chart which you
attached to your letter as Exhibit A indicates that the total lobster
landings at Point Judith increased from 3.3 million pounds in 1995
(before the spill) to 3.9 million in 1996 (after the spill). Second,
Angell's data contains a tremendous margin of error. As I noted before,
Mr. Angell has revised his estimates since producing the chart you are
using. Attached you will find a schedule, based upon information
provided to Hull and Cargo by Mr. Angell, summarizing lobster landing
data for Area 539. This schedule shows the total landing for 1995 to be
somewhere between 2.6 million and 3.2 million pounds in 1993 and
between 2.1 million and 2.9 million pounds in 1996. The margin of error
between the high and low figures for 1996 is almost a million pounds.
The point to be taken from this is that the data does not clearly
support your assertion that Area 539 findings hare decreased
dramatically since the spill.
Finally, much of your letter deals with your frustration with the
responsible party (RP) and its claims adjusting representatives. Please
understand that I have no authority to regulate how the RP processes
claims. All I can do is to receive claims which have gone unresolved by
the RP and then to adjudicate those claims in accordance with our
regulations.
I want to assure you we arc committed to the efficient adjudication
of these claims, but we are also mindful of our fiduciary duty to
ensure that all claims paid are meritorious and properly measured. I
hope we can work together to achieve this mutual goal.
Sincerely,
Linda F. Burdette, Chief of Claims,
National Pollution Funds Center.
DEM Low Range Comparison
----------------------------------------------------------------------------------------------------------------
1996 to
Month 1995 1996 1995 Subtotals
----------------------------------------------------------------------------------------------------------------
January..................................................... 71,519 30,228 -41,291 ...........
February.................................................... 27,352 8,155 -19,197 ...........
March....................................................... 31,635 7,653 -23,932 ...........
April....................................................... 83,770 33,037 -30,733 ...........
May......................................................... 80,099 77,036 16,937 ...........
June........................................................ 289,714 100,758 -188,956 ...........
July........................................................ 885,788 421,837 -244,079 -531,301
August...................................................... 530,283 511,817 -18,486 ...........
September................................................... 262,838 327,114 84,276 ...........
October..................................................... 305,994 235,569 -70,425 ...........
November.................................................... 256,470 194,375 -62,005 ...........
December.................................................... 125,689 157,163 31,474 -55,238
TOTAL................................................... 2,693,124 2,106,588 -588,537 -586,537
----------------------------------------------------------------------------------------------------------------
DEM High Range Comparison
----------------------------------------------------------------------------------------------------------------
1996 to
Month 1995 1996 1995 Subtotals
----------------------------------------------------------------------------------------------------------------
January..................................................... 72,133 33,348 -38,285 ...........
February.................................................... 28,479 8,678 -19,801 ...........
March....................................................... 36,014 10,585 -25,429 ...........
April....................................................... 71,975 37,212 -34,753 ...........
May......................................................... 75,569 120,054 44,435 ...........
June........................................................ 323,182 114,563 -208,619 ...........
July........................................................ 778,979 493,671 -235,308 -587,720
August...................................................... 636,545 699,285 62,641 ...........
September................................................... 196,688 462,513 85,820 ...........
October..................................................... -54,158 377,223 -26,935 ...........
November.................................................... 290,834 251,886 -38,948 ...........
December.................................................... 144,197 358,211 214,014 276,596
Total................................................... 3,220,349 2,929,726 -291,124 -291,124
----------------------------------------------------------------------------------------------------------------
Data provided by Mr. Tom Angell of Rhode Island DEM on July 16, 1998.
claims regulations
Question 3. The natural resource damage claimant's information
guide states that, ``It is likely that the interim final claims
regulations will be finalized within the next several years.'' This
reference is the interim claims regulations at 33 CFR Part 136. Please
discuss in detail any plans that may exist for finalizing the interim
claims regulations.
Response. The National Pollution Funds Center (NPFC) plans to
submit a regulatory project workplan for internal Coast Guard approval
on or about October 1999. While the details of the plan have not been
finalized, we anticipate the plan will include substantial revision to
the current interim regulations, a notice of proposed rulemaking and
opportunity for comments prior to publication of a final rule. Our
target date for publication of the final rule is late 2000 or early
2001.
__________
Statement of Craig R. O'Connor, Deputy General Counsel for Atmospheric
& Ocean Research & Services, National Oceanic and Atmospheric
Administration
Good evening Mr. Chairman and members of the committee. I'm Craig
O'Connor, Deputy General Counsel for Atmospheric and Ocean Research and
Services at the Department of Commerce's National Oceanic and
Atmospheric Administration (NOAA). Thank you for inviting me to
participate in this discussion of damage claims submission to the Oil
Spill Liability Trust Fund (the Fund) by Federal, State and tribal
natural resource trustees. Under the Oil Pollution Act of 1990 (OPA),
trustees act on behalf of the public to restore natural resources when
they are injured by oil spills.
My testimony is being presented on behalf of NOAA and the
Department of the Interior and will provide a Federal trustee's
perspective on submitting damage claims to the Fund. I would like to
begin by commending the U.S. Coast Guard's National Pollution Funds
Center (NPFC) for the progress they have made in developing guidance
for processing damage claims submitted by natural resource trustees and
guidance for trustees regarding the claims process. In recognition of
NOAA and DOI's extensive experience with developing and pursuing
natural resource damage claims, the NPFC initiated early consultation
with these two Federal agencies. My agency and DOI worked closely with
the NPFC to increase their understanding of the restoration planning
process and the NOAA natural resource damage assessment regulations to
help them develop guidance useful to natural resource trustee
claimants. I can assure you that the NPFC is striving to expeditiously
establish an effective process for paying natural resource damage
claims from trustees.
When those who are responsible for oil pollution to navigable
waters do not or cannot provide compensation, OPA authorizes
compensation of qualified claimants for removal costs and damages.
Until recently, the NPFC relied on a Comptroller General opinion which
concluded that OPA provides for payment of natural resource damage
claims from the Fund only by appropriation. Then, in September 1997,
the Department of Justice concluded otherwise, determining that
uncompensated claims for natural resource damages, like other
uncompensated damages and removal costs, are payable from the Fund
without further appropriation. Since that decision, Federal trustees
have worked closely with the NPFC to develop guidance for processing
and considering natural resource damage claims to the Fund.
The NPFC has reached a general understanding with Federal trustees
about how damage claims will be treated. This understanding is
reflected in the Natural Resource Damage Claimant information Guide,
which began circulating on November 24, 1998. This Guide discusses how
trustee damage claims are presented to the Fund and how they are given
consideration, consistent with the NPFC's existing claims regulations
and the NOAA natural resource damage assessment regulations. The NPFC
has invited comments from users and other readers of the Guide and
expects to change the Guide content from time to time to improve its
informational value. We expect the NPFC to begin processing trustee
claims in the late spring of 1999.
The Federal trustees recognize that the NPFC must consider the
interest that trustees have to obtain compensation expeditiously to
support restoration needs, as well as the Fund's interest to ensure
that any claims paid are valid and properly supported. At the same
time, it is important to develop a consistent national approach to
damage assessment and restoration planning for oil spills. The Federal
regulations for conducting natural resource damage assessments under
OPA should serve as an important tool for ensuring consistent, high
quality restoration planning by trustees and the development of solid
restoration based claims. These regulations were promulgated by NOAA,
and became effective in February 1996. They represent a commitment by
natural resource trustees to focus on expeditiously restoring the
natural resources and services injured by oil spills. Assessments
performed in accordance with the NOAA regulations are entitled to OPA's
rebuttable presumption of correctness.
If a responsible party denies all liability or fails to settle a
claim presented by trustees within 90 calendar days after an OPA claim
is presented, trustees may either file a civil action in court against
the responsible party or present the claim to the Fund. Generally
speaking, like any other OPA claimant, a trustee bears the burden of
proving its damages to the NPFC. However, the Guide recognizes OPA's
intent that, when claims are prepared in accordance with the NOAA
regulations, those claims are statutorily presumed to be correct,
unless rebutted by sufficient evidence in the record of the assessment.
In reviewing claims, the NPFC will determine whether trustees have
complied with the regulations and met the burden of proof based upon
review of a comprehensive administrative record developed in accordance
with the NOAA regulations.
The State of Rhode Island is acutely interested in this issue
because of the January 1996 oil spill from the tank barge North Cape.
Before I proceed, I would like to recognize the significant
contributions of the State of Rhode Island and the Department of the
Interior in pursuing a natural resource damage claim in the wake of
this oil spill. Full restoration of the natural resources injured by
this oil spill would not be possible without the commitment and
cooperation of the Rhode Island Department of Environment Management
and DOI. While the trustees have been engaged in a cooperative damage
assessment with the responsible parties for this incident, there is a
strong possibility that the restoration plan for this oil spill could
be the first claim by a Federal trustee submitted to the Fund.
A Draft Restoration Plan and Environmental Assessment (Draft RP/EA)
for restoring the natural resources and associated services injured by
the barge North Cape oil spill was released on September 15, 1998. The
restoration activities in the plan are designed to return injured
natural resources and their services to their prespill conditions and
compensate for interim losses. The assessment and the Draft Restoration
Plan were developed in accordance with the NOAA regulations on an open,
public administrative record, so we fully expect that claim will be
afforded record review by the NPFC.
The trustees evaluated injuries to the following resources and
services: (1) the offshore marine environment, including lobsters; (2)
salt ponds; (3) birds; and (4) human uses. The responsible parties (RP)
for this incident, including Odin Maritime Corp., Thor Towing Corp.,
and Eklof Marine, were invited to participate in the injury assessment.
The trustees and RP designed, performed and funded many studies used in
determining the nature and extent of injuries to natural resources.
The trustees evaluated 25 restoration alternatives with the
potential to enhance the recovery of natural resources injured by the
spill (i.e., primary restoration) and to provide additional resources
to compensate for the losses pending recovery (i.e., compensatory
restoration). Based on analysis of these alternatives, the trustees are
proposing the following restoration actions:
Adult lobster restocking and protection project: To
compensate for the 9 million lobsters killed, the trustees are
proposing to purchase, ``v-notch,'' and release 1.25 million adult
female and 300,000 adult male lobsters into Block Island Sound over a
5-year period. ``V-notching'' describes the practice of cutting a small
v-shaped notch in the lobster's tail. Lobster harvesters will be
prohibited from possessing v-notched lobsters. The v-notch should last
about 2 years and give the lobsters at least one more opportunity to
reproduce before becoming commercially available.
Quahog restoration--To compensate for the loss of 1
million kg of shellfish and sea stars, the trustees are proposing a 5-
year quahog restoration project for the coastal salt ponds. The
trustees are proposing to purchase and plant 49 million, 20 millimeter-
long hatchery-reared quahog seed into several of the salt ponds.
Water quality improvement through land acquisition--To
compensate for 880,000 kg of finfish, crabs, benthic animals and other
organisms killed by the spill, the trustees are proposing to purchase
sufficient land within the watershed of the salt ponds to prevent the
development of 38 new houses. Acquiring these lands will prevent
additional nitrogen loadings to the ponds from these homes, thereby
preventing additional degradation of water quality and future losses of
eelgrass beds and their associated animal communities.
Piping plover protection--To compensate for the loss of
five to 10 piping plover chicks, a federally threatened shore bird, the
trustees propose a 5-year project to protect nesting sites on South
County and Block Island beaches. This project will be designed to
minimize predation and human disturbance on piping plover nesting pairs
and chicks through protection of nest sites.
Loon habitat protection--To compensate for the loss of
loons, an iconic animal to the northeast, the trustees are proposing to
purchase and protect loon nesting habitat in northern New England along
lake shoreline that is threatened with development. The trustees have
calculated that 33 nesting pairs and their associated nesting sites
need to be protected to fully restore the loss. The trustees have
identified potential acquisition sites, that would require purchasing
development rights for a 500 to 1,000 foot buffer zone around nesting
territories within a 25 mile stretch of lake shoreline and the purchase
of easement rights for a 500 foot buffer zone along a portion of 30
miles of privately owned shoreline.
Marine bird habitat protection--To compensate for the
loss of marine birds the trustees are proposing to purchase and protect
island acreage in the State of Maine to prevent future losses of
breeding eider populations due to development. The trustees have
calculated that 414 nesting eider pairs and--their nest sites need to
be protected to fully restore the loss of marine birds. The trustees
have estimated that approximately 31 acres of nesting habitat will need
to be acquired.
Recreational Fishing Enhancement--To compensate for
injuries to the recreational fishery caused by the spill the trustees
are proposing two projects:
Anadromous Fish restoration--fish passage improvements
will be implemented on two rivers that flow into the coastal salt ponds
to enhance populations of river herring to compensate for injuries to
recreational fishing. Possible sites for improvements include Factory
Brook, Cross Mills Dam, and Rum Pond/Smelt Brook.
Shore access--The trustees are proposing to improve
access to the shore for recreational anglers at Matunuck Point by
reconstructing a public stairway and walkway down a bluff to the shore.
The trustees are currently seeking public comment on the analyses
used to define and quantify natural resource injuries and the actions
proposed to restore injured natural resources or replace lost resource
services. The Draft RP/EA is available to the public for a 90-day
comment period and the trustees conducted a public meeting to solicit
additional comments. Written comments must be received by December 16,
1998 and will be reviewed before finalizing the document. If the
trustees determine that significant changes to the plan are required,
an additional opportunity for public review will be provided.
In addition to this draft restoration plan, the trustees have
compiled an administrative record containing documents considered in
planning and implementing assessment and restoration planning
activities. The record is available for the public to review at two
locations in Rhode Island as well as through the website for the Rhode
Island Department of Environmental Management. Additional material will
be included in the administrative record at a Later date, including
public comments received on the Draft RP/EA, the Final RP/EA and
restoration planning documents.
A Final Restoration Plan will be presented to the RP, either for
funding or for the RP to implement the restoration projects set forth
in the final plan. The natural resource trustees for the North Cape oil
spill would prefer that the responsible parties agree to implement the
restoration plan produced by this cooperative damage assessment
process. Nevertheless, if the responsible parties are nonresponsive,
the trustees are prepared to pursue their claim, either by presenting a
claim to the Fund or by litigation to ensure that the American public
is compensated for the losses from this oil spill. Restoring the
Nation's natural resource heritage is a responsibility shared among
many Federal, State and tribal agencies. The natural resource trustees
look forward to working with the NPFC to guarantee that we meet the
mandate to promptly restore natural resources for present as well as
future generations of Americans.
__________
Statement of Stephen G. Morin, Assistant to the Director, Rhode Island
Department of Environmental Management the Trustee for Natural
Resources of the State of Rhode Island and Providence Plantations
Good evening Mr. Chairman and members of the committee. I'm Stephen
G. Morin, Assistant to the Director, Rhode Island Department of
Environmental Management and the State's delegate to the North Cape Oil
Spill Trustee Council. Thank you for the invitation to participate in
tonight's hearing.
The State of Rhode Island has been the unfortunate victim of two
major oil spills in the last 10 years; the World Prodigy spill in 1989
and the North Cape spill in 1996. During the World Prodigy spill, State
and Federal responses operated from separate locations with harmonious
but loose coordination. Afterwards the State independently pursued
claims for natural resource damages and undertook separate restoration
actions from the Federal Government.
The Oil Pollution Act of 1990 (OPA) changed all of that. After
concluding that separate, conflicting or untimely responses could
exacerbate the damage from an oil spill, Congress directed the creation
of a system that required all of the parties responding to an oil spill
to work together. Most importantly, a Fund was created that allowed
government responders, both State and Federal, to take any and all
measures necessary to stop and clean up a spill.
During the North Cape spill the Coast Guard and the State of Rhode
Island implemented a preplanned response in which they and the
Responsible Party operated in a Unified Command at a pre-designated
command post. In another room the Federal and State Trustees began
working with the Responsible Party's representatives on a natural
resource damage assessment.
The Presidentially appointed Federal On-Scene Coordinator, USCG
Captain Barney Turlo, while having the ultimate say pursuant to OPA-90,
insured that all of the decisions were acceptable to the State. Most
importantly he made sure that we knew that the full resources of the
Oil Spill Liability Trust Fund (the Fund) were available to the State
of Rhode Island. As the Deputy State On-Scene Coordinator, I was
repeatedly asked to estimate the amount of money Rhode Island would
need to sustain the response. I was assured that, as a member of the
Unified Command, all of our response expenses were consistent with the
National Response Plan and eligible for immediate reimbursement by the
Fund.
So far the promise of OPA-90 was delivering 100 percent of its
advertised benefits. However once the response phase concluded we
switched our attention to the restoration of the substantial damage
done to our natural resources.
As in the response arena, Congress recognized that the speedy
restoration of damaged natural resources was an essential element of
the statutory reform. Experience showed that an absent or recalcitrant
Responsible Party would delay or deny the restoration of damaged
resources. Congress also recognized that the process of litigation,
with its delays, costs and uncertainty might still not yield a complete
or adequate restoration. The Fund was to be the remedy for these
problems. It would act as the guarantor of a swift and complete
restoration.
In this realm the promise of OPA-90 has not yet been fulfilled. On
February 5, 1996, during the North Cape oil spill, the final
regulations for conducting natural resource damage assessments under
OPA took effect. Since that time these rules have been challenged in
court and upheld. Although able to use other methods, the State and
Federal Trustees jointly decided to utilize these new rules. We agreed
to work cooperatively on the damage assessment and restoration plan and
to include, as required, the Responsible Party in the damage assessment
phase.
During the negotiations over OPA-90 the House of Representatives
wanted to make the Federal liability scheme and Fund the sole methods
of establishing liability and settling claims. The Senate, to your
credit, insisted that States should be able to set their own liability
laws and manage their own Trust Funds. The tradeoff for this however
was that should States elect to sue using their own legislative
authorities, outside of the OPA rules, they would not have guaranteed
access to the Fund. Within hours of the spill, Rhode Island elected to
follow the OPA path, giving up the ``home court advantage'' of trying a
damage case in the State system. The anticipated speed and certainty
offered by access to the Fund was too great an incentive to ignore.
When I joined the Trustee Council, the first difference from the
response operations that I noticed was the near complete absence of
support from the Fund. Enough money had been provided to allow the
Trustees to determine if there was damage to trust resources.
Thereafter the Trustees would either have to use their own resources to
undertake the assessment or they would have to rely on the Responsible
Party to fund the studies. The Fund, we were told, was not available to
fund either the Assessment or the Restorations. Despite the language of
the Act and the endless references to the contrary in the Congressional
Record, the Fund managers were told by the Comptroller General that
they could pay other damage claims but not Natural Resource claims.
As legislators, you know that few agencies have budgets with these
kind of contingency funds. So when I joined the Trustee Council I found
that the Responsible Party was funding the majority of the assessment
studies. Had it not been for the small NOAA Damage Assessment Center
budget the Responsible Party would have been completely in the driver's
seat. This clearly was not what you intended when you set the Fund's
ceiling at $1 billion.
In the ensuing 2 \1/2\ years, thankfully, the Justice Department
has reversed this position. The Fund can now be used to pay for Natural
Resource Restorations. For the North Cape Trustees it came just in the
nick of time. Our view was that with the Fund as our Insurance Company,
we would not be forced to bargain from a position of weakness with the
Responsible Party. Without the Fund we would have had no recourse other
than lengthy litigation and we probably would have had to settle for a
less than complete restoration in order to get back any of the lost
resources within the next decade.
In keeping with the requirements of OPA-90, Governor Almond
appointed the Director of the Department of Environmental Management as
the State's Natural Resource Trustee. He joined the Secretaries of
Commerce and Interior as the Presidentially appointed Trustees. The
Trustee Council, made up of the representatives of those three
agencies, then spent nearly 3 years pursuing damage assessment and
restoration planning under the new Federal NRDA regulations. We are now
in the public comment stage of our Draft Environmental Assessment and
Restoration Plan (the Plan).
We intend to finalize the Plan by January 1999, taking into account
the public comments, which we have received. In accordance with the
requirements of OPA-90, we will then submit it to the Responsible Party
for implementation or funding. After 90 days, if the Responsible Party
is unwilling to undertake or pay for the Restoration in whole or in
part it is our plan to submit a request to the Fund for the money
necessary to complete the restoration of the damaged Trust resources.
That sum would represent the amount that the Trustees have determined
is necessary to fully implement the projects that restore the lost
public resources as contained in the Plan. It would of necessity not
include the cost of any of the restoration projects that would be
performed or funded by the Responsible Party.
The Trustees believe that this is the only rational interpretation
of the language of OPA-90 and is consistent with the congressional
intent as reflected in the Record. As duly appointed representatives of
the Public Trust who followed properly adopted and judicially upheld
Federal regulations, our Restoration Plan Is the final executive
decision. As such it is entitled to immediate payment from the Fund to
undertake restoration of the injured public resources.
At a Conference on OPA-90 issues put on by Roger Williams Law
School, we were surprised to learn that the National Pollution Funds
Center (NPFC) does not necessarily share our view of the process. In
their view Natural Resource claims are little different than any other
claim.
Since then, we have heard arguments that the NPFC's first
obligation was to protect the fiscal integrity of the Fund. We also
heard that the NPFC wanted to understand the Responsible Party's view,
presumably to gauge the Fund's litigation risk when they sought
reimbursement from the RP. In our opinion neither consideration is
required by OPA-90 nor reflected in the Record. In fact the House
Report (101-242) states ``In promulgating regulations establishing
claims procedures under this legislation, the President shall observe
the following principles: The Fund is to provide compensation for
damage claims fully and promptly. While the Fund must require some
evidence of loss and the establishment of a causal connection with oil
pollution, it should not routinely contest or delay the settlement of
damage claims. The Fund will sometimes be providing compensation where
there is little chance of subrogation against the discharger. Even so,
litigation or lengthy adjudicatory proceedings over liability,
defenses, or the propriety of claims should be reserved for subrogation
actions against dischargers.'' The Senate Report (101-94) states that
``. . . the primary purpose of this Act is to guarantee that claimants
will receive rapid and equitable compensation for any economic loss
suffered as the result of an oil spill, the committee expects that the
claims settlement procedures established by the Secretary will be
formulated with this purpose in mind. Particular care should be taken
to avoid unnecessary procedural delays or overly complicated
bureaucratic processes.''
That is as explicit as can be. Especially in the case of the North
Cape, where the new NRDA regulations were first used, and where the
Trustees have followed the National Environmental Policy Act as well as
the Administrative Procedures Act. In pursuing this damage assessment
the Trustees have reviewed scores of scientific reports as part of a
voluminous Administrative Record. They will use these documents and the
public comments they have received to make their final determination.
There is no place for the Fund to review, re-work or second-guess the
Trustees decision. A decision of the Trustee Council should be viewed
as the decision of the executive branch of Government. The only
adjudication should be by the Judiciary. All this is not to say that
the NPFC should not exercise care when reviewing.
Having invested 3 years in the NOAA NRDA process, the State of
Rhode Island believes the Fund has a ministerial, non-discretionary
duty to pay for the Restoration Projects that were developed by the
duly delegated Natural Resource Trustees. Any adjudication the Fund
engages in should be with the RP in a cost recovery for subrogated
claims, which the Fund has already paid.
I have just received a copy of the NPFC's draft Natural Resource
Damage Claimant's Information Guide. The NPFC is, by their account, the
final decisionmaker on the validity of an NRDA Plan. The Guide says
that the NPFC will decide if a Restoration Plan is consistent with the
NOAA regulations, even one submitted by NOAA!-It also says that its
decision to deny a NRDA claim is final, ``subject to limited judicial
review of the NPFC administrative record under the Administrative
Procedures Act ``arbitrary and capricious standard.'' However two pages
later they say that they may ``. . . request that a claimant supplement
its administrative record. . .'' Not only is that an obvious double
standard but it truly undermines the administrative decisionmaking
process. The Trustees have an obligation to review the entirety of the
Administrative Record and then to use their best professional judgment
in crafting the Restoration Plan. The Trustees' decision is then
``subject to limited judicial review''.
It is clear that the NPFC is trying to take the NRDA regulations
and the process they require into account in this new type of claim.
But it is also clear that they are trying to force the private party
claims review process to serve in the NRDA arena. That is not what
Congress intended.
The Fund should allow the Trustees to begin restoring the injured
resources in the near future, rather than having to wait many years to
obtain a judgment against the Responsible Party in Federal court
litigation under OPA. We would ask that you re-convey this sentiment to
the Coast Guard National Pollution Funds Center in the strongest
possible fashion.
__________
Statement of Albert B. Christopher
My name is Al Christopher and I appreciate the opportunity to
briefly address you today. My testimony is presented as the former
owner of ABC Lobster, Inc.(``ABC'' or ``ABC Lobster''), a seafood
dealership that was located at 296 Great Island Road in Narragansett,
RI. ABC operated by purchasing lobsters from inshore fishermen and then
selling those lobsters on the wholesale market to large exporters. ABC
also sold some fish and lobsters on the retail market to walk-in
customers. ABC did not purchase fish or lobsters from offshore
fishermen because it was not profitable for it to sell such fish and
lobsters.
After ABC Lobster started doing business in 1993, it subsequently
increased sales every year. In 1993, ABC had gross sales in the amount
of $921,582.00. In 1994, when ABC began selling lobsters on the
wholesale market, it purchased all new refrigerated lobster tanks and
grossed $1,531,238.00 in sales. In 1995, sales continued to increase
and by the year-end ABC had grossed $2,120,605.00.
1995 was a good year for lobstering. Many fishermen who typically
did not fish in the winter and spring were planning to gear up and fish
hard during the winter and spring of 1996. Accordingly, I expected our
lobster purchases and sales to increase and we bought four new lobster
tanks which increased ABC's holding capacity dramatically.
Unfortunately, that increased demand for holding capacity never
happened, because on January 19, 1996, the North Cape Barge ran aground
off Moonstone Beach and spilled over 800,000 gallons of heating oil
into Block Island Sound (the ``Spill'').
After the Spill, about 250 square miles of Block Island Sound were
closed to fishing. All of the lobstermen that sold to ABC were unable
to fish. Soon after this closure, the Rhode Island Department of Health
ordered the removal of all lobster pots from the closed areas. When the
lobstermen who supplied ABC retrieved their gear from various closed
areas soon after the Spill, I purchased the few uncontaminated lobsters
that they found in an attempt to mitigate my damages.
ABC's retail sales were especially affected during this period. I
believe that the Spill created a stigma against Rhode Island seafood.
On February 12, 1996 I received a written offer of $525,000 from
the State of Rhode Island for the leasehold interest and one story
building housing ABC Lobster. It was the intention of the State to use
the property occupied by ABC for ferry parking purposes. Despite
receiving this offer after the Spill, I rejected it outright because
the business of ABC had been growing dramatically and was projected to
continue its healthy growth. One factor in my decision was the
downplaying of the Spill's effects that was presented in the media and
from government sources. As I have progressed through the claims
process that brings us here today, I have had ample opportunity to
regret my decision not to sell to the State.
In mid-April some of the closed areas were reopened to lobstering.
Many of the lobstermen that sold to ABC began the laborious process of
fixing and re-setting all their gear. At least another month elapsed
before the lobstermen had harvested lobsters that they could resume
selling to ABC. From the time the lobstermen's gear was initially
retrieved until the time the gear was re-set and able to be harvested,
ABC had almost no lobster purchases.
Various areas of prime lobster grounds remained closed, off and on,
until June 25, 1996. However, even after all of the closed areas had
been reopened to lobstering, ABC continued to experience a decrease in
wholesale and retail sales in comparison with 1995. This decrease is
entirely due to the lower catches experienced by the lobstermen who
supplied ABC. I believe that their reduced catches were entirely due to
the effects of the Spill. There is simply no other explanation.
In 1996, ABC's gross sales were dramatically reduced as a result of
the Spill. For example, from June 25, 1996 until December 31, 1996, ABC
purchased only 300,058 pounds of lobsters. During this same period in
1995, ABC had purchased 465,459 pounds. In other words, my gross
purchases declined by about 36 percent during this time period. The
profitability of ABC declined accordingly. During this same time
period, ABC's retail sales fell by almost 34 percent.
On May 31, 1996 and May 14, 1997, by and through its attorneys,
Kirkpatrick & Lockhart, LLP, ABC submitted to Turnaboat, Eklof Marine
Corp.'s (``Eklof'') insurance adjuster, a claims package seeking
compensation for losses from the Spill. This started the long process
that brings me here today.
My written testimony today includes copies of correspondence
documenting my attempts to seek compensation for my losses. I have not
included copies of the documents that I was forced to produce during
this process because it would require the submittal today of about 2
boxes of copies. Instead, let me tell you about what bothers me with
this claims process.
1. Too much documentation is required
When I first filed my claim I was under the impression that it
would be a simple process under the Oil Pollution Act (``OPA'') so that
I would not get the run around like those affected by the Exxon Valdez
catastrophe. I report today that that is plainly not the case. As you
can plainly see by looking at the copies of correspondence I have
included today, there has been request after request for additional
information. These requests were first from Turnaboat, and after that
process produced unfavorable results, the same redundant and
unnecessary requests were made by Hull & Cargo Surveyors, Inc. (``Hull
& Cargo'') the claims adjuster for the Fund.
I learned during these productions of documents that my sworn
statements as to the facts of my situation, as provided in affidavits,
had no real significance. It was always a case of ``document this'' or
``compile that'' in justifying my losses. The thing that most surprised
me was that even though Turnabout had requested a tremendous amount of
documentation the Fund required that I provide significantly more and
different documentation than Turnabout had bothered to ask for.
2. It takes too long to resolve a claim and get paid
My claim was first filed with Turnabout on May 31, 1996 and was
later amended to include the entire year of 1996 in a filing dated May
14, 1997. Since that amended filing, about 18 months have elapsed. That
is too long. While waiting to be paid for my damages, business losses
have continued to mount as the lobstermen delivering to ABC continued
to experience lower and lower catches due to the decimation of the
lobster stocks. In the face of these continuing losses with no end in
sight, I sold my business in 1997 at a price considerably below its
former market value. My business is gone and my losses remain.
Having failed to get a reasonable offer for damages from Turnaboat?
I filed my claim with the Fund on September 16, 1997. Instead of
obtaining a quick resolution of my claim, I was forced to go through
the process of delay and documentation all over again. If you look at
the correspondence filed today, you will see that first the Fund asked
for information, then, after assigning my claim to Hull & Cargo in
January 1998, Hull & Cargo requested different information and then its
accounting subcontractor required even further layers of detail.
When the Fund finally came up with its settlement offer on June 18,
1998, 9 months had elapsed since the Fund had started its review. Once
again, this is too long. Since the Fund's settlement offer was
unreasonably low for the first half of my claim, and denied entirely
the second half of my claim, I submitted a Request for Reconsideration
on August 14, 1998. In this Request for Reconsideration, I provided
voluminous documentation to support my claim, in particular the second
half of my claim which had been denied outright by the Fund. This
documentation included the complete claims of five of my largest
suppliers which were pending before Turnabout. These underlying claims
of my suppliers unequivocally bolster and prove my claim for damages.
In any event, despite the fact that the Fund should have proposed their
final offer of settlement within 90 days of this final submittal, that
deadline lapsed without explanation. I have been told that I can take
this inaction as a denial of my Request and then file suit. That makes
no sense at all. I could have filed suit anyway without wasting time
and resources by filing with the Fund. The Fund has failed me.
I finally received a letter dated November 20, 1998 from the Fund.
Instead of providing me with an offer on my claim, the letter stated
that the Fund had waited until October 26, 1998 before authorizing
action by Hull & Cargo on my Request For Reconsideration. In other
words, they waited 70 days after receiving my Request For
Reconsideration before doing anything at all. It is no wonder that I
didn't receive their final offer of settlement within the 90 day
timeframe.
Even more disturbing in this letter was their statement that they
still could not tie my losses in the last half of 1996 to the Oil
Spill. Why is this so difficult? Don't they even read the reports of
the consultants who have documented the lobster losses for the Natural
Resources Damage Assessment? And guess what? They asked for even more
information to justify the losses of the lobstermen who supplied me.
3. The Fund is adversarial to claimants
If you look at the Fund's settlement proposal of June 18, 1998
alongside the Request for Reconsideration for ABC dated August 14,
1998, certain facts are clear:
The does not recognize that the North Cape Oil Spill produced any
harmful effects other than the forced closures of certain areas to
fishing up until the end of June 1996. Using their analysis, the
effects of the Spill stopped by the end of July 1996. They interpret an
unexpected increase in the lobster catch in August as being equivalent
to a full and complete recovery from the Spill. That is absurd. They
just don't get the fact that the Spill resulted in enormous damage to
the lobster population off the coast of Rhode Island. Why doesn't the
Fund make any attempt to consult the scientists involved with the
Natural Resource Damage Assessment studies in an effort to understand
the significance of the Spill? They would see that not only has there
been great damage, but that the effects of the Spill will be felt in
ever greater degrees over the next few years.
For the second half of my claim, covering the period from August
through December, 1996 and amounting to $100,011, the Fund offered to
pay nothing---zero dollars--on the basis that they could not see the
connection between the Spill and the reduced lobster catches brought to
ABC by the lobstermen. This failure in understanding astounds me and I
invite you today to review the offer from the Fund and my Request for
Reconsideration so that you can see how the Fund has failed me in so
many different aspects.
The Fund's analyses are designed to minimize damages. Great pains
were taken by Hull & Cargo to reduce my potential award by selectively
applying data such as weather or the relocation of fishermen from one
shore facility to another as factors to lower my award. The Fund fails
to understand that everything changed after the Spill. Business plans
were revised and the factors that led to growth over previous years no
longer had relevance. The Fund and its adjusters use a standard a proof
consistent with insurance adjusting. Claimants are treated as potential
scam artists seeking to capitalize on an accident, and that is simply
not ask for this Spill and we only want to be made whole.
I thank you for this opportunity to speak.
__________
Statement of John Sorlein, Rhode Island Lobstermen's Association,
Wakefield, Rhode Island
Good evening. My name is John Sorlein and I am president of the
Rhode Island Lobstermen's Association (RILA). RILA is a non-profit
association of individuals who are engaged primarily in the business of
fishing for lobsters. Several of its members also have onshore
businesses or related businesses that rely in large part on lobstering
for their livelihood. These businesses represent a large portion of the
lobstering industry off Point Judith, Rhode Island. RILA has put
together a group of over 100 businesses that have developed and
continue to develop and document damage claims.
The fishing industry has contributed greatly to the local and
state-wide economy. Millions of dollars have been pumped back into the
economy by way of direct and indirect business resulting from the
successful harvesting of Rhode Island's pristine seafood beds. Many
lobstermen have been fishing in this area for years and RILA represents
a large portion of that total. Lobstering is mostly a small
businesses--each lobsterman owns a boat or two and each hires his or
her own crewmen to help. They love what they do. They are independent
and self sufficient. They are successful because of their willingness
to put in an honest day's hard work.
The Spill
Point Judith is the largest fishing port on the east coast. Until
January 19, 1996, the lobsters caught in Point Judith were world
renowned for their quality, in fact, we think they were the best
quality lobsters caught in this country. However, On January 19, 1996,
the unthinkable happened--a barge spilled over 800,000 gallons of
Number 2 heating oil (the most toxic to lobsters) after running aground
off Moonstone Beach. We say this was unthinkable since no one expected
this to happen at all. Nobody expected this because back in 1989 there
was a similar spill--The World Prodigy in Narragansett Bay, which is
just a few miles from Point Judith. No one thought that such an oil
spill could ever happen again, at least not in this neighborhood, but
it did.
The immediate impact of the spill was disastrous. In the only
significant count of dead lobsters, over 60,000 were measured by weight
from the sample areas located on the beach and over 18,000 of those
lobsters were studied to determine their size, sex and reproductive
status. That information was used to project a loss of over 2.9 million
lobsters that washed up on the beaches as a result of the Spill. And
that was only a portion of the total number of lobsters actually killed
by the Spill.
Additionally, as a result of the Spill a 250 square mile area was
closed to fishing and lobstering for an extended period of time. \1\
This closed region included the entire area leading into the Port of
Galilee, where many seafood processors are located. Not only were
lobsters not caught in this area, but also it was virtually impossible
to transport other shellfish catches (upon which onshore facilities
relied) into Point Judith.
---------------------------------------------------------------------------
\1\ Area closed intermittently from January 19 to June 25, 1996.
---------------------------------------------------------------------------
The purpose of these comments express our support and endorsement
of the comments by the other victims of this spill, and the comments
our attorneys. When the spill happened we were at a loss about what to
do. Few of us ever had to make claims for lost profits, and we didn't
know how to do it. We immediately thought we had to file a lawsuit. We
soon found out, however, that a new procedure existed under the Oil
Pollution Act of 1990. Under that procedure, we would be able to file
individual claims for losses without going to court, and with a
reasonable amount of evidence, would be able to recover in a quick
period of time.
That has not happened. Many of our members and others have filed
claims, and submitted literally thousands of pages of documents to
establish our loss. But few of us he been paid. We provide information,
and are asked for more. We provide more, and are asked for still more.
We prove a loss under one standard, and the responsible party of the
Fund changes the rules.
We simply don't understand why this is so difficult. The barge
owner was convicted of criminal offenses that caused the spill. But
rather than compensate us, the Nature Conservancy was given over one
million dollars. Rather than compensate us, hundreds of thousands of
dollars were spent to put loons in Maine. Why haven't our claims been
paid or even fairly considered?
Why is it that despite our efforts, instead of the claims being
decided in 6 months by the responsible party, or in 90 days by the
Fund, now, 3 years later, few have been fully decided.
Why is it that the responsible party and the Fund are only paying 1
dollar for every 4 dollars that are proven to have been lost? Why is it
that the responsible party has decided that no one she fished next tot
he closed area could not possibly have lost more than 3 percent of his
catch? Many people that fished in the closed area had to move to other
areas, so that there were more fisherman looking for fewer lobsters.
No one seems to understand that lobsters don't stand still. They
move. Yet the claims adjusters are assuming that the no lobsters moved
into or outside of the closed area. And they assume that fisherman
don't move either. They think if you fished outside the closed area,
you can't be affected. But the fact is we are. It is no mystery when
someone has consistent catches every year for 5 or more years before
the spill, then suddenly, after January 19, 1996, the catch is
dramatically less.
We don't fish anymore. We mitigate our losses. We travel further,
spend more money, work longer hours, and catch fewer lobsters. There is
no mystery here.
How can it be that the fancy study that was performed says there
were about 200,000 adult lobsters lost in 1996 and 197, but several of
us alone caught over 400,000 less during those hears than before?
The responsible party and the Fund concocted theories of lost
lobsters based on conjecture and guess. We have shown actual losses,
but those are ignored.
At this point, many of us are fed up with this administrative
process. We are ready willing and able to go to court and sue these
criminals for our actual losses. Clearly we cannot get a fair shake by
the responsible party or by the Fund. We are being forced to go to
court. That means the Oil Pollution Process has failed.
We sincerely hope that you fix this for the next victims.
__________
Statement of Bruce E. Kopf
My name is Bruce Kopf and I appreciate the opportunity to address
you today. My testimony is presented as the former owner and operator
of the Fishing Vessel Spartan. I will briefly describe my claim.
The F/V Spartan was an off-shore fishing vessel that used
circulating sea water to keep lobsters alive after capture. My fishing
grounds have been in an area about 80 miles south/southwest of Block
Island to just north of Hudson's Canyon. This is an area far removed
from the areas impacted by the North Cape Oil Spill (the ``Spill''). I
have fished this area for well over 10 years.
At the time of the Spill, my boat was in port at Point Judith ready
to sail as soon as the weather cleared. However, immediately after the
Spill, a large portion of Block Island Sound was closed to lobstering
due to the extensive environmental contamination. I was unable to fish
for lobsters offshore from January 19 through March 29, 1996 because my
vessel was unable to pass through the closed area. In addition, if I
had traversed the closed area and obtained my catch offshore, the sea
water in the closed area remained contaminated, so I would not have
been able to preserve my catch by using that circulating sea water. It
was really this simple: If I used any of the water from the closed
areas for my circulating system, Rhode Island authorities would have
classified my whole catch as contaminated.
Likewise, if I had instead elected to traverse the closed area with
closed circulation tanks and returned to Point Judith, this would have
resulted in freezing conditions for my catch. In my best professional
judgment, I would have lost all or most of my catch under these
conditions.
As I have fully explained and documented to the Fund, I was unable
to mitigate my damages by landing at other ports since I would have
either had to traverse the closed area to reach an alternative port, or
I would have had to land in a State in which I was not licensed to land
my catch, was not familiar with the dockside facilities, and for which
I had no prior arrangement to sell my catch. In addition, in the
aftermath of the Spill there were many reports in the media suggesting
that the opening of the fishing areas was imminent. I have included
copies of articles from the Providence Journal in the record today to
show what I and other fishermen were being told by the regulators.
Based upon this information and my own professional judgment, I elected
to stay in shore until the matter was resolved.
My $23,762 claim as presented to Turnaboat on March 26, 1997 and to
the Fund on January 30, 1998 was straightforward and simple: I asked to
be compensated for my losses during that 69-day interval from January
19, 1996 to March 29, 1996 when I could not fish because of the Spill.
My claim was based on my average income during that interval in the 3
years prior to the Spill. I should note here that my claim ends on
March 29 since that was the date that I sold my vessel. It had been my
intention to fish until the time when I transferred title to the new
owner of my boat. Turnaboat denied my claim on May 9, 1997 under the
theory that my fishing area was never closed and I could have landed my
catch in another State. The Fund has not presented a settlement offer
to date.
Please note that I have experienced two major difficulties with the
OPA claims process:
1. The resolution of my claim is taking too long
My claim was filed with the Fund on January 30, 1998. Approximately
10 months have elapsed since that filing. My claim is simple. Why is
there no resolution? Note that I have responded to all of the
information requests presented to me by Mr. John P. Kelly, the adjuster
hired by the Fund. My last response, which I believe resolved all of
the outstanding issues for Mr. Kelly's analysis, was submitted on
August 25, 1998. There had been no word from the Fund or Mr. Kelly in
the 3-month interval after that submittal until just last week when I
received a letter from Mr. Kelly requesting irrelevant, unnecessary and
redundant documentation. More incredibly, this documentation had been
provided and/or addressed to the satisfaction of both Mr. Kelly and the
Fund back in August. I am a fisherman who was harmed by the Spill. Why
does it take so long to get compensated for my losses?
2. I have been asked to provide too much unnecessary, irrelevant and
redundant information
First, note that my written submittal today includes all of the
relevant correspondence for my claim showing the multiple requests for
information from the Fund and its adjuster, along with my responses to
those requests. I have been asked to provide the following information,
which I believe has no bearing on my claim, to John P. Kelly &
Associates at one time or another:
Although this claim is for damages for the first quarter alone, I
had to supply settlement sheets and account information for all months
during 1993, 1994 and 1995.
I was asked to explain what other offshore lobstermen did after the
Spill.
I was asked to provide the names and telephone numbers of people
who purchased directly from me off the docks.
I was asked to provide a retrospective analysis of the costs and
difficulties of bringing my catch to alternative ports during the time
period of my claim.
All of the above was unnecessary and intrusive. I had previously:
(1) provided my tax records and backup documents that show what I
earned during the first quarter of 1993 through 1996; and (2) submitted
a sworn affidavit explaining, among other things, my fishing practices
and the unavailability of other ports. Does any of the other
information make any significant difference?
If the Fund has to make any determination at all about my claim it
is whether I showed reasonable judgment in the aftermath of the Spill
in not somehow finding a way to traverse the closed areas and land my
catch in some other State. I tell you today, and I have sworn before,
that based upon my experience and the information presented to me in
the aftermath of the Spill, that would not have been a responsible
course to follow.
I thank you for this opportunity to speak.
______
[From the Providence (RI) Journal Bulletin, November 22, 1996]
Fishing Industry Slammed by spill
(By Elizabeth Abbott)
Governor Almond and Rep. Jack Reed said they would seek Federal
help for fishermen hurt by the oil spill.
NARRAGANSETT--From offshore lobstermen who can't travel through the
spreading oil slick without killing their valuable catch, to
wholesalers along the Galilee waterfront whose lobster and crab supply
has been embargoed by State health officials, Rhode Island's
multimillion-dollar fishing industry is reeling from the grounding of
the barge North Cape.
``I've got [lobster pots] six miles away, but I can't bring them up
because I don't know where the oil is,'' Eric Winn, a Point Judith
lobsterman, said Sunday.
Peter Schone, whose lobster pots are a safe 100 miles out, has a
different dilemma. Schone can't bring his catch into shore because he
needs to pump ocean water into his boat to keep it alive.
This he can no longer do.
Commercial fishermen and seafood processors cannot use water from
the fouled area, which now stretches from South County to Block Island,
to store, wash or process seafood, according to emergency restrictions
issued by the Departments of Health and Environmental Management.
``Nobody knows where they can bring live product,'' Schone
complained.
The State's fishing industry employs between 3,000 and 4,000
people, and generates about $500 million in economic activity annually,
according to David Borden of DEM. A dollar estimate of damage from the
spill has not been formulated, but at a news conference Sunday Governor
Almond predicted it would be considerable.
Not only has shellfishing been banned in coastal ponds from Point
Judith to Napatree Point and out to three miles offshore, but 105
square miles of Block Island Sound Sunday was closed indefinitely to
all kinds of fishing.
``The fishing industry will suffer a significant loss,'' Almond
said.
Almond and Rep. Jack Reed promised to seek Federal help for
fishermen hurt by the oil spill.
If this help comes, it won't be too soon for the State's 500 to
1,000 lobstermen. So far, they have been hardest hit by the spill. The
oil has killed thousands of adult lobsters--the count as of Sunday was
11,000--and decimated the juvenile lobster population as well.
``What I don't understand is how they let the oil get in the
pond,'' a frustrated Winn said, referring to Point Judith Pond.
It's not just lobstermen who have been hurt.
The oil has contaminated the coastal pond breeding grounds of
winter flounder, a ``multimillion'' dollar fishery in Rhode Island
whose stock is already perilously low, DEM's Borden said.
``This will do nothing but make matters worse,'' he said.
The businesses who buy lobster and fish from the State's fishermen
are also feeling the effects of the spill.
On Saturday, about a dozen Health Department inspectors began
embargoing lobsters and crabs from wholesalers throughout South County.
Between 50 and 100 wholesalers were visited and an undetermined amount
of lobster and crab seized.
``Nobody likes to have their food embargoed,'' said the Health
Department's Ernest Julian, but he pointed out that this measure was
necessary to keep contaminated seafood away from consumers.
``There's nothing on the market right now that's contaminated,''
Julian said.
Nonetheless, health inspectors will also begin inspecting fish
retailers and restaurants to ensure that no contaminated seafood is
being used, he said.
Fishing and shellfishing operations hurt by the spill can file a
claim with the barge's owner with Turnabout Services LTD, officials
said. The number to call is 800-995-4045.
______
[From the Providence (RI) Journal Bulletin, January 28, 1996]
Plan Drafted for Reopening Contaminated Fishing Areas
(By C. Eugene Emery, Jr.)
NARRAGANSETT--Officials yesterday hammered out a draft proposal for
gradually reopening the 250 square miles of ocean closed to fishing by
the 828,000 gallons of oil spilled from the barge North Cape.
The plan must still be formally approved by top representatives of
several State and Federal agencies, and Eklof Marine, the company that
owns the barge and has agreed to pay for the testing needed to allow
fishing to resume.
Edward S. Szymanski, associate director for water quality
management at the Department of Environmental Management, said approval
could come as early as tomorrow.
But he and other DEM officials declined to predict how quickly,
even under the best of circumstances, the fishing ban might be lifted.
Other North Cape-related developments yesterday:
--An official for the company holding the insurance policy on the
North Cape said the total cost of the cleanup and the price tag for
reimbursing fishermen for lost income will easily exceed $10 million.
--Plans to begin pumping out the 70,000 gallons of diesel fuel left
aboard the tug Scandia were postponed yesterday morning because heavy
seas from yesterday's storm made conditions too dangerous. The Scandia
lost control of the North Cape when its engine room caught fire.
Workers will try to pump out the fuel today.
--With the North Cape harbored in Newport, workers began
disassembling the Coast Guard's command center at the Dutch Inn in
Galilee. The agencies involved in the cleanup will continue working,
with the Coast Guard directing operations from its headquarters in East
Providence.
--DEM workers at Moonstone Beach, which was hit hardest by the
spill, continued finding dead birds, lobsters and starfish along the
shore. The birds that have been rescued and cleaned, which are
recovering in a Narragansett municipal garage, are not expected to be
released for another week or so.
--The Coast Guard captain overseeing the operation said yesterday's
storm probably would have split the North Cape in two if it had
remained grounded.
The tentative blueprint for reopening the fishing areas must be
approved by the DEM; the Rhode Island Department of Health, which tries
to prevent contaminated fish from reaching the market; the University
of Rhode Island, whose scientists are serving as consultants on the
project; the National Oceanic and Atmospheric Administration; the Food
and Drug Administration; and Eklof.
Szymanski said that under the proposal, an area can't reopen to
fishing until all oil sheens have disappeared, water tests show that
the amount of oil is below Federal standards, and tests of fish and
shellfish show that the animals are safe to eat.
Yesterday's storm was expected to eliminate all of the sheens,
Szymanski said, but aerial reconnaissance will be needed to be sure.
Once the sheen has disappeared, Eklof, working under DEM
supervision, will begin collecting water samples from at least two
dozen areas, including Block Island Sound and the various ponds
believed to be affected by the spill.
The draft plan calls for collecting water 1 meter below the surface
and 1 meter above the sea floor, said Szymanski.
Those samples will be tested for traces of nearly four dozen oil-
related chemicals. If the individual concentrations of all of those
chemicals are below Federal limits--usually ranging from 0.001 to 0.004
parts per million--testers will move to the next step: looking for
pollution in finfish, lobsters and shellfish.
Only if the test results show that contamination levels are below
Federal standards will State officials reopen an area to fishing.
``Our goal, obviously, is to open the fishery as soon as we
possibly can,'' said DEM director Timothy R.E. Keeney.
There has been some confusion over how much pollution is actually
in the water.
On Wednesday, Keeney said water samples from Point Judith Pond
showing average oil concentrations of less than one part per million
was ``good news'' because the Federal standard is 10 parts per million.
Although one water sample showed an oil concentration of 3.8 parts per
million, the results seemed to suggest that the oil that spilled had
not produced a serious threat.
But Keeney said yesterday that he had misunderstood the Federal
standard, and one part per million is not good at all.
``If a lobster is exposed to 600 parts per billion (or 0.6 parts
per million) over 4 days, it will not survive,'' Keeney said.
Szymanski said he expects the closed fishing areas to be reopened a
chunk at a time as test results show them to be clean.
A priority, he said, will be to reopen the mouth of Narragansett
Bay so fishermen can draw in ocean water as they come in and out of the
Bay.
Currently, if an incoming fishing vessel tries to keep its catch
alive by taking on water from the mouth of the Bay, the whole catch
immediately is classified by the State as contaminated.
``If we find an area that meets the standards, boom, we'll open
it,'' said Keeney.
The DEM director said although fishermen are eager to resume
fishing, they also understand that the worst thing that can happen is
to reopen a closed area and later discover that tainted fish from that
area have made it to market.
``Then the whole market is at risk'' because consumers will lose
all confidence in the safety of fish, he said.
(U.S. Rep. Patrick J. Kennedy, saying that ``they have been
inconvenienced for long enough,'' yesterday called on the Department of
Health to allow lobstermen to recover their pots from the oil spill
area so they can determine how much of their catch is contaminated and
eventually get reimbursement from Eklof. He also said that lobstermen
should be allowed to clean their traps so they'll be ready to resume
work as soon as the ban is lifted.
The estimate that the eventual cost of the spill will exceed $10
million came from Ben Benson, the senior surveyor for the Maritime
Response Syndicate, which represents the Water Quality Insurance Co.
The company underwrites the first $10 million of Eklof's insurance.
``From an operations standpoint, the cleanup won't reach $10
million,'' he said. ``But with the addition of claims and the NDRA
(Federal Natural Resource Damage Assessment program) claim it will, in
all likelihood, exceed $10 million.''
Eklof has additional insurance to cover claims above the first $10
million.
Governor Almond and fellow Republican Nancy Mayer, general
treasurer and candidate for U.S. Senate, spent part of yesterday
touring the Dutch Inn command center, visiting the makeshift bird
recovery shelter and checking on the progress in removing the oil from
the Scandia.
At the command center, Coast Guard Capt. Barney Turlo said it will
probably be tomorrow or Tuesday before the North Cape, now berthed at
the Newport Navy Base, gets the go-ahead to return to New York for
repairs. The approach of yesterday's storm prompted Turlo to send the
barge to Newport.
Turlo said divers inspecting the barge found ``literally dozens of
localized tears, cracks and holes'' at the bottom of the hull, made of
\5/8\ths-inch steel. The biggest crack was 5 feet long and 8 inches
wide. ``Some of the smaller ones were a foot and a half long and an
inch wide,'' he said.
Although welds prevented the cracks from spreading as the waves and
tides put stress on the hull, Turlo said, ``We're not even sure it
would have survived the next 2 days . . .'' without breaking in two.
At the bird rehabilitation center at the Narragansett town garage,
the Almond group watched one of the 23 long-necked loons being bathed
in a series of steel basins. One worker used a toothbrush to clean oil
from an animal's head.
In all, about 40 birds are at the facility trying to regain their
strength while resting in playpens, wooden boxes and 6-foot wide pools,
some warmed by heaters and sunlamps. All were shielded from view by
blue tarps, blankets or sheets.
Lynne Frink, one of the women from the New Jersey organization in
charge of the rescue operation, said the center would be in business at
least another week. Even after the birds have recovered and their
feathers can once again protect them from the cold, Federal officials
must give their approval before the animals can be released.
(The U.S. Fish and Wildlife Service announced yesterday that,
beginning tomorrow, any sightings of oiled birds, either dead or alive,
should be reported to the Ninigret National Wildlife Refuge
headquarters in Charlestown at 364-9124.)
At Moonstone, with the noontime waves crashing over the tug
Scandia, the workers in charge of pumping out its fuel managed to
pressure test the system. But they postponed the actual pumping because
of the weather.
DEM workers said they were still finding dead birds and
contaminated lobsters being tossed onto the sand by the waves.
A walk along the beach revealed many dead starfish and skate egg
pockets.
The faint smell of oil lingered, even in the bracing wind.
Nonetheless, said Almond, the scene ``looks pretty good without the
barge.''
Across Narragansett Bay, salvage workers and Coast Guard officials
had begun moving oil from the North Cape to the smaller Clear Waters
12.
Coast Guard Reserve Chief Brian Smith said the transfer would
continue through today.
Smith said the 17 or so members of the salvage crew would keep
working as long as they could, despite the forecast of rain and a high
wind warning from the National Weather Service.
``If this was a normal operation, we probably wouldn't be
transferring fuel,'' Smith said. But seawater is seeping in through the
North Cape's cracked hull and mixing with the oil to form ``slop.''
``If they stop pumping, it could possibly sink. It's a Catch-22.
But (Captain Turlo's) policy is that no one's been hurt yet, and we'd
like to keep it that way. You can always clean up the oil, but you
can't replace somebody's hand or arm.''
______
[From the Providence (RI) Journal Bulletin, February 23, 1996]
Block Island Fishing Areas Remain Shut
(By Tom Mooney)
The expected reopening of portions of Block Island Sound to fishing
this week has been delayed by another round of sampling that found
lobsters still smelling of oil a month after the North Cape spill.
``It's a cause of concern because with some kinds of fishing gear
lobsters can be caught,'' said Ernest Julian, chief of the State Health
Department's Division of Food Protection. And one smelly lobster on
someone's table ``could destroy the industry,'' he said.
State environmental officials were planning earlier this week for
the reopening of part of the closed 250-square-mile area to gill
netters and hook-and-line fishermen. Trawlers were still to be
prohibited since their bottom nets could catch lobsters, some of which
still smell of oil.
Since the area is in Federal waters--beyond 3 miles and east of
Block Island--State officials were awaiting final approval from the
National Marine Fisheries Service.
But the number of test lobsters still smelling of oil--9 out of 44
caught between Tuesday and Thursday--surprised scientists, said Julian.
And even though all finfish samples continue coming back clean,
Julian said, the lobster findings gave reason for pause.
The scientists want more time to discuss how to enforce a
prohibition against catching lobsters and whether ground fish, like
flounder, should also continue being off-limits, said Julian.
State and Federal officials also want to reach agreement on the
type of fishing gear allowable.
``It's highly likely there will be an agreement next week,'' Julian
said. But he wouldn't commit to a day. ``Things can change.''
______
[From the Providence (RI) Journal Bulletin, March 2, 1996]
Fishing Ban Tangled in Bureaucracy
(By Peter B. Lord)
Reopening of the 250-square-mile area off Rhode Island is expected
soon, but it still needs official approval from at least a dozen State
and Federal agencies.
At first, they didn't realize they were doing something so unusual.
Soon after the barge North Cape ran aground Jan. 19 and disgorged
828,000 gallons of oil into the churning surf off Moonstone Beach,
State health and environment officials announced they were banning
fishing in all waters between Galilee and Block Island.
It was a prudent public health measure, they said, and it wouldn't
last long. The ban probably would be lifted within a week.
More than 6 weeks have passed.
Not a single fish tested by scientists since then has been
contaminated with oil. But fishing is still prohibited in a 250-square-
mile area.
State officials say they hope the ban may be partially lifted
sometime next week. But they've made so many similar predictions
already, they will not be more specific.
Instead, they talk about a ``bizarre'' review process that has
consumed the attention of dozens of State and Federal bureaucrats. One
Federal official called it ``a mess.''
Among the factors cited for delays in lifting the ban are the
primitive metabolisms of lobsters (which until recently continued to
smell of oil), snowstorms that shut down government offices, time spent
consulting experts on the West Coast who cut their teeth on the Exxon
Valdez disaster, and the slowness of completing critical laboratory
analyses.
The single most important explanation, however, is that apparently
no other State has ever instigated such an extensive fishing ban after
an oil spill. Consequently, no one has any experience in determining
when such a ban should be lifted.
So what sounded like a simple process of inspecting and certifying
the cleanliness of a body of water and its fishlife has turned into an
unprecedented bureaucratic and scientific tangle. Lawyers and
regulators from at least a dozen State and Federal agencies have been
groping toward an agreement on reopening the waters, literally making
up the rules as they go along.
``I don't know that anyone in this office has ever done this
before,'' said Dan Morris, a resource conservation officer for the
National Oceanic and Atmospheric Administration in Gloucester, Mass.
His is one of the key agencies that must approve the reopening.
``We're aware of only two emergency fishing closures: one for an
outbreak of paralytic shellfish poisoning on Georges Bank and the other
for a spill of drums filled with arsenic,'' Morris said. ``All this is
new ground. That's why we're having to proceed carefully.''
Insurers for the oil barge are expected to compensate fishermen for
income lost during the closure. And when all the reviews are completed,
there should be no doubts that the fish are safe.
Ernest Julian, chief of the State Health Department's Food
Protection Division, says it was his idea to close the fishing grounds
the weekend of the spill.
``It was the logical thing to do,'' he recalled last week. ``You
have 828,000 gallons of oil in the water, it didn't make sense to bring
product up through that.''
Julian and fishery experts at the State Department of Environmental
Management initially closed a 105-square-mile rectangle of Block Island
Sound. Later they extended it to 250 square miles.
But State officials soon learned they had overstepped their
authority in a big way. Most of the waters they closed were Federal
waters over which the State has no jurisdiction.
The oversight was kept quiet and Federal authorities quickly made
the closure of the waters legal by publishing official notice in the
Federal Register.
Within days, State and Federal agencies launched a massive effort
to collect samples of water and fish to determine the extent of
contamination.
Early indications suggested the oil was rapidly dissipating.
Officials hoped much of the closed area would be reopened the first
week of February.
Soon, the regulators would learn that it was easier to collect the
information than it was to agree on what it meant.
The various agencies informally agreed to a ``protocol'' that would
tell them when it would be safe to reopen the fishing grounds.
Most of it was fairly straightforward. The North Cape and its tug,
the Scandia, would have to be removed.
Visible oil sheens would have to be gone. (Sheens were reappearing
in Point Judith Pond as recently as a week ago, according to Julian, as
large vessels churned up the bottom and caused oil in the sediments to
return to the surface.
The water would have to be free of oil.
Finally, fish would have to pass the odor and chemical tests agreed
to by toxicologists and other scientists.
Most of the experts generally agreed to the terms of the protocol a
month ago.
David V.D. Borden, the DEM's assistant director for fish and
wildlife, said the protocol has been approved by the following State
interests: the Coastal Resources Management Council, the Health
Department, the attorney general's office, the Governor's office, and
the DEM's legal counsel, water resources division and director's
office.
A similar long list of Federal agencies is involved as well, and
Borden said most of them have yet to officially approve the protocol.
The Federal interests include: the National Marine Fisheries
Service and its offices in Gloucester, Narragansett, Seattle and
Washington, D.C.; the general counsel of NOAA; the New England Fishery
Management Council and the U.S. Food and Drug Administration.
``All these people have agreed to the concept,'' said Borden. ``But
they haven't formally signed off. It's a little bizarre.''
``It's one thing to get technical comments from experts. It's
another thing to get the administrative sign off and approval,''
observed Bob Vanderslice, a risk assessment expert with the State
Health Department. ``This is not something Federal agencies are used to
doing. They have lawyers whispering in their ears telling them not to
sign anything. Since they don't have clear authority, what should they
be doing?''
Several weeks ago, the pattern was clear. The water was clean. The
fish were fine.
The problems were with lobsters: Some picked up as far as 14 miles
offshore continued to smell of oil. And oil was suspected to be in the
sediments near the spill site.
Scientists here consulted with the Northwest Fisheries Science
Center in Seattle, where scientists have been studying the effects of
oil on fish for more than 20 years.
John Stein, director of environmental conservation at the center,
said scientists tested many of their theories after the Exxon Valdez
spill in 1989. (Even though the Valdez was a much bigger spill, it
caused a much shorter and more limited fishing ban, Stein said.)
Stein advised local officials that the problem with lobsters is
their metabolism.
``What that means is when lobsters are exposed to aromatic
hydrocarbons in the oil, they take them up, as do the fish. But the
liver of a lobster is not as efficient as the liver of a fish in
transforming the compounds into forms that can be easily excreted.''
So while fish can consume oil and expel it from their systems,
Stein said ``lobsters will accumulate appreciably higher levels.''
State officials proposed a compromise. They wanted to reopen the
fishery to gillnetters--fishermen who tow nets suspended in the water--
and to hook and line fishing. That way, regulators could be fairly
certain that no one would bring in contaminated lobsters or any other
catch from the ocean bottom.
On Feb. 16, the DEM asked the National Marine Fisheries Service to
agree to the limited reopening, expecting a response any day.
It's still waiting.
NOAA's Dan Morris acknowledged there have been delays, but he said
Thursday that he expects the reopening plan to be approved very soon.
``It's an unusual circumstance to open and close a fishery,''
Morris said. ``We're talking about public perception and public health.
You have to be careful with both.''
No one suggests that any agency wasn't doing its best to resolve
the fishing ban. In fact, there has been a lot of praise for the
Federal-State team effort.
But State officials remain amazed there are no national standards
for such a situation.
``What environmental problem is more common than an oil spill?''
said Vanderslice. ``And yet there are no national protocols. No
standards. They've never done it.''
But Ken Sherman, chief of NOAA's marine laboratory in Narragansett,
said he wasn't surprised that there are no national rules.
``Each spill is so unique. One has to tailor a closure and opening
for each event. And the events are always different. We've been very
fortunate with spills in the Northeast. We didn't have to do a closure
with the Argo Merchant because it was wintertime and all the oil was
taken offshore. With the World Prodigy, very little got into the
sediment and it evaporated much more quickly.''
Everyone agrees that the North Cape's oil is dispersing. DEM's
Borden hopes fishing will be allowed to resume this week.
Fishermen, however, face yet another roadblock--another problem
that combines science, biology and government regulations.
Gillnetting--the most important type of commercial fishing that the
State is trying to reopen--will be prohibited for the month of March in
waters off Rhode Island.
It's just a bad coincidence.
Months ago, the New England Fishery Management Council voted to ban
gillnetting for all this month in a large block of water off Rhode
Island and Martha's Vineyard to reduce the accidental netting of a
threatened marine mammal called a harbor porpoise.
Fishermen accidentally kill between 1,200 and 2,900 of the
porpoises in the Northeast each year, so the council agreed to restrict
fishing in certain areas where the highest number of kills occur.
No one realized last fall, when the council agreed to the ban for
the month of March, that the State would be trying to reopen its
fishery in the same water, at the same time.
______
[From the Providence (RI) Journal Bulletin, March 14, 1996]
Fishing Ban Based in Area Polluted by Oil Spill between Pt. Judith and
Block Island
(By Peter Lord)
Fishermen are still barred from dragging for bottom fish or
catching lobsters or shellfish in the oil spill area.
The North Cape fishing ban was eased yesterday. The action by the
Federal Government was the first letup in a 7-week-long prohibition
against all fishing in a 250-square-mile area between Point Judith and
Block Island.
Federal fisheries officials, who had the final word, finally signed
off on a State request to reopen the area to fishermen using hooks and
lines or gill nets.
The fishermen most affected by the partial reopening are charter
boat operators and commercial fishermen seeking herring and squid.
But fishermen are still prohibited from dragging for bottom fish or
trying to catch lobsters or shellfish within the area tainted by the
Jan. 19 spill of 828,000 gallons of home heating oil from the barge
North Cape.
The partial reopening reflects what scientists have discovered in
thousands of tests and samplings after the oil spill: that the water is
clean and the fish are OK, but lobsters from as far as six miles out
still smell of oil and some oil remains trapped in sediments near the
spill and under coastal ponds.
``We're making continual progress,'' said Ernest Julian, chief of
the State Health Department's Division of Food Protection. ``It's slow
progress. But look at the water temperature. It's so cold it's slowing
the breakdown of the oil. It's like putting something in the
refrigerator; it takes longer to spoil.''
Julian and other State officials recommended the limited reopening
a month ago. Since then there has been growing tension between State
and Federal bureaucrats over the delays in obtaining Federal approval.
The final decision lay with regulators and lawyers in the National
Marine Fisheries Service, an arm of the U.S. Department of Commerce.
Some observers attributed the delay to the fact that no State has ever
imposed such an extensive fishing ban before, so no one had any
experience in lifting such a ban.
For weeks State officials said fishermen had been understanding and
cooperative with the ban.
But tempers flared this week at a meeting in Narragansett to tell
fishermen about compensation programs available to help them recoup
their losses during the ban.
Fishermen responded bluntly: Forget about laying blame, they said.
Reopen the fishing grounds.
On Tuesday, DEM spokesman Peyton Fleming said, he asked a National
Marine Fisheries Service spokesman what Federal official would have the
final approval on lifting the ban. The spokesman gave him a name,
Fleming said, but refused to give him the person's telephone number.
``I told him that people up here are getting really impatient,''
Fleming said. Also on Tuesday, Fleming said, DEM Director Timothy R.E.
Keeney called the Federal agency's general counsel and ``read him the
riot act.''
Sen. John H. Chafee and Congressman Jack Reed both said yesterday
that they had been pressing the Federal fisheries people in recent days
to expedite their decision. Reed said he met with Rollie Schmitten,
director of the National Marine Fisheries Service, on Tuesday to urge
him to make a decision.
Yesterday afternoon, Schmitten officially lifted the ban. He issued
a statement from Washington saying, ``We've moved as quickly as
possible to guarantee this reopening strikes the delicate balance
between providing fishing opportunities and yet ensuring Rhode Island's
seafood is safe and wholesome.''
Schmitten pledged to continue working with State officials on
efforts to reopen the remaining fisheries.
Governor Almond called yesterday's action ``a major step forward in
getting Rhode Island commercial fishermen back to work.''
Reed and Chafee said they continue to be anxious about the fact
that the shellfishing beds are still closed.
``While I am certainly pleased by this first step toward a complete
reopening of Rhode Island waters to fishing, each day that the grounds
remain closed to other types of commercial fishing represents an
enduring economic hardship for our State,'' Chafee said.
It has been more than 7 weeks since the North Cape ran aground at
Moonstone Beach and State officials jumped into a bureaucratic morass
by imposing the fishing ban.
Yesterday Federal officials confirmed that they were officially
closing a 28-square-mile area southeast of Block Island to lobstering
because lobsters in the area were being brought up with oil odors.
The State requested the closure a month ago, according to the
National Marine Fisheries Service, and has informally enforced it with
patrol activities.
Julian said yesterday that a closed area near Brenton Reef is
looking ``pretty good'' for lobstering right now and may be the next
candidate for reopening. But he declined to guess when any other bans
will be lifted.
Meanwhile, more samples are being collected. Water samples were
taken yesterday from Point Judith Pond. The results should be available
in a few days.
__________
Statement of Frank Blount for Gail Frances, Inc.
My name is Frank Blount and I appreciate the opportunity to address
you this evening on behalf Gail Frances, Inc. My wife and I have been
for many years the owners and operators of the Frances Fleet, three
vessels that operate year-round out of the port of Galilee in
Narragansett. Our business is based on charter fishing trips, where one
of our boats is rented and daily fishing trips, which usually carry a
large number of passengers.
The winter season of 1996 started great, but then the Spill hit us
hard and had a tremendous impact on our charter and daily fishing
business. Regular customers, scared away by the closures and negative
press, went fishing in other ports in New York, Connecticut, and
Massachusetts. Charter trips were canceled one after another as groups
expressed concern about the effect of the spill and the closures.
Unfortunately, we could do nothing to counter all the negative
publicity. We even had to shut down our restaurant due to the dwindling
number of fishermen.
Our claim was first submitted to Turnaboat, who was responsible for
the spill. We sent them a detailed analysis of our entire claim,
prepared by an accountant. We also sent them corporate tax returns,
financial statements, calendars documenting passenger counts, letters
supporting charter cancellations, invoices for trade shows, and other
pertinent information. Amazingly, they kept asking us for more and more
information, like copies of our leases and salary information, that was
entirely duplicitous of what we'd already given. We gave them what they
wanted anyway, and tried to negotiate a fair settlement. Finally, about
18 months after the claim was first submitted, which is 12 months
longer than they have under the law to decide our claim, they only
offered us a fifth of what our damages were. It is clear to us now that
they never intended to fairly compensate us for the damage they did.
They said ``the ban on reel fishing was lifted on March 23, 1996,'' so
they didn't want to pay anything after that. The funny thing is, people
were not lined up outside our boats to go fishing on March 24.
Everything was not back to normal.
This same claim with the same exact documents given to Turnaboat
was then submitted to the National Pollution Fund in August 1997 A
month later, despite the fact that our claim had grown to over 200
pages, the Fund demanded even more documents that wholly duplicated the
original claim. We had already given them compiled financial statements
prepared by certified public accountants for 1993, 1994, and 1995, but
now they wanted bank statements for every month in those years. We had
already given them copies of our tax returns for 1993, 1994, and 1995,
but now they wanted us to make more copies and re-sign them in ink,
something a court would not even do. The IRS doesn't give signed copies
back! It seems like from the beginning, the Fund had a bias against us.
Nevertheless, after much time and effort, we gave the Fund exactly what
they wanted.
All of this information was apparently still not enough for the
Fund, as they insisted on a meeting I had no choice but to attend for
fear of harming my claim. In February 1998, my wife and I met with
representatives of the Fund, and thoroughly discussed our claim. We
responded to numerous questions at this meeting that could have been
answered by a thoughtful review of all the documents we already gave
them--they asked us questions about documents they already had.
How Payment For Our Charter Business Was Avoided
Incredibly, on March 1998, a month after the meeting, the Fund
wrote a letter that demanded even more information. After asking for
and receiving cancellation letters from every charter client, the Fund
apparently decided that we also had the obligation of supplying the
phone number of every individual who canceled a charter trip. We were
amazed by this demand. We had already sent the Fund eight letters
signed by each of the canceled charters that clearly stated that the
Spill caused the cancellation. But that wasn't enough for the Fund.
They wanted us to track down and give them the telephone number of
every person who canceled with us. Where else does a victim have this
burden?
We nevertheless again tried to meet the excessive demands of the
Fund by providing a charter history from our records for most of the
clients who canceled, but that wasn't good enough, either. On July 27,
1998, almost a full year after the claim was sent to the Fund, and 6
months after they are supposed to come to a decision, its offer to Gail
Frances for all of our lost charters was zero. We documented a claim
for over $50,000 for those lost charters, and the Fund offered us
nothing.
How Payment For Our Daily Fishing Business Was Avoided
As incredible as that outright denial was, the Fund also managed to
come up with a brand new idea to reduce their offer for the part of our
claim for lost daily passengers. The Fund told us that we would not be
compensated for lost passengers on days that the wind reached 25 mph or
more, apparently because it decided that even if the Spill had not
occurred, the weather would have kept many passengers away. They
subtracted forty passengers from our total lost passengers for every
day that the wind reached 25 mph. By their calculations, 356 passengers
would not have fished in 1996 based on weather alone, so the Fund
reduced its offer by another $15,000.
The Fund's methods are madness. The fact is, wind records from the
Point Judith Coast Guard Station and the Block Island Airport
demonstrate that we carried 189 passengers in 1995 on days that the
Fund would have credited us with none. Furthermore, the Fund subtracted
forty passengers from our total for days like February 17, 1996--a day
on which the wind reached 25 mph only once, when it was 25.3 mph at
midnight! I couldn't believe that the Fund was basically telling us
that less than a month after 800,000 gallons of oil had spilled, it was
really the wind at midnight that was keeping people away from the
water!
The money the Fund did offer us doesn't come close to the losses we
actually suffered. Its flat-out wrong for the Fund to desperately
search for ways to avoid making us whole. It seems to me that the only
difference between the National Pollution Fund and Turnaboat is the
letterhead of each denial we receive. Why should we have to go through
the same process twice?
It's been 2 years and hundreds of pages since we first made a claim
for our damages from this oil spill, and we still haven't gotten a
dime. Victims deserve more from a process specifically created to
compensate them.
__________
Statement of J. William W. Harsch, Esq.
The Oil Spill Liability Trust Fund (``Fund'') is generally
understood to have been set up to reimburse those suffering losses as a
result of oil spills. There is no question that the massive Rhode
Island oil spill which occurred on January 19, 1996 caused enormous
damage and resulted in great financial loss.
The process which was set up after the spill to assess and
reimburse claims became a problem almost at once. it appeared that
those handling the reimbursement process, or at least some of them,
felt that their role was an adversarial one and one in which they
should seek to settle claims for the lowest possible dollar amount.
Anyone who felt that their claim was not being treated fairly had
recourse to an intimidating and drawn-out court process or to
submitting a claim to the Fund.
Reports on the experiences of individuals and business entities in
seeking to collect damages from one of these three sources vary
considerably. However, the bottom line is that the claims processing
mechanism set up by the owners and their insurers, quite naturally,
had, as one of its objectives, keeping the claims payment numbers as
low as possible and therefore resisting claims or settling for reduced
amounts.
The court process is by definition adversary. While the law does
provide avenues for recovery, this is generally not a speedy or ``user-
friendly'' process.
The question then presented is whether the third alternative, the
Oil Spill Liability Trust Fund, would represent a somewhat different
and more accessible relief and recovery process. It is my belief, from
a review of the statute and its background material, that the Fund was
basically set up to provide a speedier and more impartial relief
mechanism.
On the one hand, this would be helpful to those seeking recovery in
that the process would be less burdensome, hopefully more prompt, and
less adversarial. On the other, it would serve to aggregate claims and
generally develop more clout in seeking eventual recovery from those
responsible for the damages and their insurers.
Either as a result of administrative misunderstanding of
congressional intent, or conservative administration of the Fund, or
difficulties with the present statutory language as drafted, this does
not appear to have turned out to be the case. You will hear a good deal
of testimony, I am sure, on the subject of the Fund's handling of
direct damage claims. This is one area which merits the committee's
attention. I would like to put before the committee another area of
difficulty as follows.
I believe that the Fund has considerable difficulty, both
conceptually and operationally, in dealing with indirect and
consequential damages occasioned by a spill such as this one. I believe
that there can be no question that oil spills, certainly larger oil
spills, create injuries and damages far beyond the area of immediate
and direct impact. Like ripples on a pond, the impact spreads to
secondary and tertiary businesses and activities.
It is my belief that the U.S. Congress intended the Fund to be
capable of handling the entirety of damages reasonably attributable to
an oil spill. If this were not the case, the result would be that those
responsible for the spill would escape a portion of the damages which
they inflicted, and would in effect transfer the cost of those damages
from themselves to those who were in fact injured.
A typical insurance company will use an adverse and skeptical
process to resist all claims. The less direct the claim, the more the
skepticism and hostility. The area of consequential damages then
becomes one which I believe should be of particular concern to the
Fund. The job of the Fund, in addition to handling promptly and with
reasonable sympathy those damages which are direct and relatively easy
to establish, should also be to respond to damage claims in the
category of indirect injury.
Such claims would include reduced access to resource supplies
because of contamination, loss of market, loss of income from those
normally involved in providing product or services in the area (and to
the resource) affected by the oil spill. Naturally, at some point, the
indirect and consequential impacts of an oil spill will become distant,
relatively small, and difficult to ascertain. That should not mean that
the Fund should not have a well-established mechanism for dealing with
indirect, partial and consequential damages. Further, it should not
mean that the process for dealing with such damages becomes very time-
attenuated.
On the plus side, there is no question that having the Fund
available is an enormous positive contribution to dealing with the
impacts of an oil spill and to requiring those responsible for damages
to pay for them. Further, the contacts which I have had with the Fund's
staff have been uniformly courteous, and the staff has certainly
attempted to be helpful and responsive.
However, it would be my impression that the Fund legislation
requires further attention to clarify the intent that there be coverage
of indirect and consequential damages, just as there is of direct
damages. Perhaps above all, I urge this committee to consider whether
the Fund is adequately defined and directed so as to provide what the
insurance companies and the representatives of ship owners do not
provide, and the court system cannot provide, which is a program
directed to full recovery of damages by each and every business and
individual affected by an oil spill. The Fund should, in my opinion, be
clearly directed that it avoid behaving like an insurance company,
avoid undue skepticism, inappropriately complex processes and over-
concern with the question of whether it, in turn, will be able to
recover its payouts from the insurance companies covering the generator
of the spill. I believe that Congress intended, and those affected by
the spills clearly need 1) a process which will allow individuals and
business enterprises to recover their damages and get back on their
feet as promptly as possible; and 2) a process which is fully committed
to the principle of seeing that there is full recompense and that, to
the extent possible, those responsible for a spill pay for the damages
caused.
__________
Statement of Raymond Nally
My name is Raymond Nally and I appreciate the opportunity to
address you today. My testimony is presented as an officer and
shareholder of Betsy Enterprises, Inc. which owns and operates the
Fishing Vessel Betsy. I will briefly describe my claim.
The F/V Betsy is used for lobstering and uses circulating sea water
to keep the lobsters alive. On or about January 19, 1996, the North
Cape Barge ran aground and spilled oil into Block Island Sound. Due to
the environmental contamination caused by the North Cape Barge oil
spill (the ``Spill''), on or about January 20, 1996, a large portion of
Block Island Sound was closed to lobstering (hereinafter referred to as
the ``closed area'').
At the time of the Spill I had about 40 trawls with a total of 960
pots in the water in various locations around Block Island Sound, with
the majority located outside of, but within one mile of the closed
area. After the Spill I was unable to tend these traps because my
crewhand quit on account of the Spill. I normally remove my traps at
this time of the year from areas that I knew to be conflicted, since I
knew that my pots would not be safe if left in place. I could not
remove the pots however, since I was unable to retain another crewhand
because of the situation created by the Spill. The market for crewhands
had been effectively cornered by Eklof Marine the party responsible for
the Spill--who supplied crewhands with partial payments as compensation
for damages from the Spill and who also employed many of these
deckhands in conducting response actions due to the Spill.
I would have had to spend twice the time and energy to look for my
gear without the assistance of a crewhand. It was simply not practical
from a business or personal safety standpoint to attempt to retrieve my
pots alone. Even if I had been able to secure a deckhand, I would have
had to travel through the closed areas to tend my traps and any
lobsters I caught would have to be kept alive without the assistance of
my water tanks, since I could not use the contaminated sea water in my
circulating sea water system. It is my belief that any lobsters caught
would have died during transportation without the use of circulating
sea water.
When I was finally able to get someone to help me tend my gear, I
discovered that 11 of my trawls were missing. I strongly suspect that
the 264 pots on these 11 trawls were destroyed by draggers who were
forced outside the closed area following the Spill. I valued the cost
of these lost trawls to be 510,736.00.
After my claim was denied outright by Turnaboat, the insurance
adjuster for Eklof, my claim was submitted to the Fund on March 19,
1998. I have been told by my lawyers from Kirkpatrick & Lockhart that
my claim was the only claim they submitted to the Fund that wasn't
assigned to an adjuster for resolution. My claim was instead handled by
NPFC Legal who denied my claim in its entirety in a letter dated August
6, 1998. Their reason for the denial, if I may quote, was:
``. . . the proximate cause of the damage to your client's fishing
equipment would not be the oil spill incident; rather it would be
intervening action of the draggers which proximately caused the
damage.''
This is wrong. My pots were in perfectly good condition before the
Spill. Because of the Spill, and its effect on manpower, its closure of
the port, its restriction on use of water over a wide area and its
forcing of all fishermen out of a wide area--my pots were destroyed or
disappeared. Was it some draggers? I don't really know because I wasn't
there and they did not leave any evidence. There is one thing I do
know: If there had not been an oil spill, I would not have lost
$10,736.00 worth of gear. And if it was actually the actions of some
draggers that caused me to lose my gear, I can tell you now that were
it not for the Spill, I would have removed my gear before the damage
could occur, just like I did in previous years.
I thank you for this opportunity to speak.
__________
National Pollution Fund Center News Release
coast guard provides information on t/b north cape claims
Washington--The U.S. Coast Guard National Pollution Funds Center
(NPFC) announced today the availability of information concerning the
methodology that it is utilizing to adjudicate or measure lost profit
claims from lobstermen that occurred from damages arising from the T/B
North Cape oil spill of January 19, 1996. The information will be
available as a hand out at the hearing held on December 10, 1998 by the
Committee on Environment and Public works of the U.S. Senate in
Narragansett, Rhode Island.
The NPFC is also providing information concerning the impact of the
3-year statute of limitations on potential claimants that were damaged
by the oil spill.
Copies of both documents are appended. They will also be available
on NPFC's web site at http:/www.uscg.mil/hq/npfc/npfc.htm.
Both documents are provided in an effort to address questions which
have arisen concerning these issues. For additional information
concerning the documents please contact, Ms. Linda Burdette, Chief
Claims Adjudication Division, National Pollution Funds Center, (703)-
235-4801.
information concerning statute of limitations and the t/b north cape
spill provided by the u.s. coast guard's national pollution funds
center 10 december 1998
The U.S. Coast Guard National Pollution Funds Center (NPFC)
announced today that any person who plans to present an OPA oil spill
incident claim for damages arising from the T/B North Cape oil spill of
19 January 1996, is advised that the claim must be presented to the
NPFC within 3 years after the date on which the injury and its
connection with the spill were reasonably discoverable with the
exercise of due care. This does not mean that the timeframe for
submitting claims to NFPC ends on 19 January 1999, however potential
claimants do need to know the general conditions that start the clock
for the 3-year statute of limitations.
All OPA damage claims arising from the T/B North Cape oil spill
must be first presented to the responsible party, Eklof Marine. If the
responsible party denies the claim or fails to settle the claim within
90 days, the claimant may present the claim to the NPFC. While the
responsible party may choose to accept and settle claims after the 3-
year period has elapsed, the NPFC cannot waive the 3-year statutory
limit for claims presented to the NPFC for payment from the Oil Spill
Liability Trust Fund.
The circumstances of each claim will determine when the 3-year
period starts. It is possible that a given claimant may have more than
one injury from a spill, each of which is discovered or reasonably
discoverable at a different time. So a claimant may have separate
claims with different 3-year periods for submission.
OPA damages for which claims may be submitted include loss of
profit damages. In general, a loss of profit injury is reasonably
discoverable no later than when, in the course of its normal business
accounting practices, or otherwise as required by law, the claimant
determines, or is required to determine, business losses for a given
period. But if a business in fact discovers it suffered a loss at an
earlier date, that date will control. In the absence of other
information as to when a loss of profit or earning capacity was in fact
discovered, the NPFC may rely on the date of relevant income tax
filings to establish the date the loss was reasonably discoverable.
The connection of the injury to the oil spill also will be
determined by the circumstances. The connection may be reasonably made
when the injury is discovered or discoverable. For example if your boat
was oiled by the spill and you had it cleaned the next week and have
not submitted a claim, the statute of limitations is quickly coming to
an end. However in some circumstances the connection may be reasonably
discoverable only at a later time because, for example, information
about the spill or its impact was not available until a later time.
Because the circumstances of each claim will determine when the 3-
year period starts for that claim, the NPFC cannot provide a single
date to begin the 3-year period that will apply to any particular claim
or class of claims. The only certainty is that the period begins no
sooner than the initial date of the spill; therefore any claim
submitted within 3 years after the initial date of the spill will
certainly be timely. Beyond that, the best guidance the NPFC can offer
to potential claimants is that they not delay submitting a claim for a
period of years. Such delays will only increase the risk that an
otherwise valid claim may be denied in whole or in part solely because
it is submitted late.
Presenting a claim to the NPFC does not preclude a claimant from
continuing to pursue settlement with the responsible party. So
claimants may submit a claim to the NPFC to meet the 3-year requirement
while still pursuing a settlement with the responsible party. Of
course, the claimant cannot be paid twice for the same damage.
______
Measurement of Lost Profits Claims by Lobstermen Arising from the North
Cape Oil Spill
us coast guard national pollution funds center--10 december 1998
The following is an explanation of the National Pollution Funds
Center's (NPFC) methodology for measurement of lost profits claims
filed by lobstermen in Point Judith, Rhode Island. The lobstermen were
prevented from fishing during part of 1996 after the oil spill from the
North Cape impacted their fishery. NPFC has concluded that damages did
occur to the lobster industry as reflected by statistics indicating
substantially reduced catch levels after the spill and into late summer
of 1996 at which point statistics indicate that catch levels returned
to previous year levels. This methodology is intended to measure the
lost profits and earning capacity suffered by lobstermen during the
period from the spill until late summer 1996 by taking into account the
seasonal nature of the lobster industry, a benefit for additional
effort expended by some individuals during 1996, and the varying levels
of success among lobstermen in the area historically. Essentially, the
methodology applies 1995 performance of claimants to 1996 effort to
calculate an expected 1996 profit. Claims paid are the difference
between expected profit and lower actual profit, adjusting for saved
expenses.
Methodology: (Example attached)
(1) The methodology uses Rhode Island DEM statistics and quarterly
catch historical data to calculate the Average pounds of marketable
lobster in each trap haul (average catch per trap-haul) on monthly
basis. The average catch per trap-haul is calculated on a monthly basis
to account for the seasonality of lobster fishing.
(2) The average catch per trap-haul is then multiplied by the
Number of traps that are checked or ``hauled'' on any given trip. This
number will vary for each fisherman; our example uses 300 traps per
trip. The number of trap-hauls in 1996 will be revised to consider
traps retired, sold or purchased. If additional traps are proven to
have been purchased in 1996, we will detente the maximum number of
traps that can be hauled per trip for each claimant. The number of
trap-hauls is multiplied by the 1996 seasonally adjusted average catch
per trap-haul to derive the 1996 Expected Catch per trip.
(3) To determine the 1996 Total Expected Catch the 1996 Expected
Catch per trip is multiplied by the number of trips. During the fishing
closure due to the spill, the number of trips for 1996 is based on the
actual number of trips made for the same period in 1995 as the
determined loss period. However, for periods when the fishing areas
were no longer closed due to the oil spill, the number of trips is
based upon settlement sheets or receipts provided by the claimant.
(4) The 1996 Total Expected Catch is then compared to the
lobstermen's previous years catch in relation to the average
lobsterman's catch, to account for the experience of the individual
lobsterman, to calculate the 1996 Projected Catch. Expected catch for
1995 is compared with the actual catch in 1995 to calculate the 1995
Monthly Catch Variance Percentage. Expected catch for 1995 is
calculated in the same manner as expected for 1996. We consider that
the claimant's 1995 catch percentage variance will be the same for
1996. For example, if the claimant's settlement sheets or receipts show
that they normally exceed this calculation (variance greater than 100
percent), we will adjust their expected catch upward to calculate
projected catch.
(5) The 1995 Quarterly Average Price Per Pound for Point Judith was
provided by a New England scientific expert.
(6) The 1996 Projected Monthly Stales is calculated by multiplying
1996 Projected Catch by the corresponding 1995 Pt. Judith quarterly
average price per pound.
(7) Actual Sales for 1996 are subtracted from projected sales for
1996 to calculate Total Lost Rules for 1996.
(8) Saved Expenses (for example, fuel, bait and crew-share) are
calculated as a percentage of sales. Amounts are based on the
claimant's 1995 Income Tax Return. During the closure due to the spill,
we calculate saved expenses as a percentage of lost sales. Any
additional expenses incurred during that time will also be considered.
(9) Saved Expenses are subtracted from 1996 lost sales and
additional expenses are added to calculate 1996 Lost Profits.
Documentation Requirements
Specific information is needed from the claimant in order to
utilize this methodology to calculate 1996 lost lobster income. We do
not require that the information be provided in a specific form or
format. We are willing to assist the claimant in assembling the
necessary information in order to adjudicate claims. The information
requirements and the rationale for the requested information is
provided below:
(1) FISHING LICENSE: Establishes a claimant's eligibility and
fishing area during the period of loss.
(2) VESSEL DOCUMENTATION & CREW INFORMATION: For 1996 establishes
where the vessel can legally fish and how crewmembers are compensated.
(3) FEDERAL INCOME TAX RETURNS: For 1993, 1994, 1995, 1996.
Establishes non-continuing expenses (bait, fuel, etc.), and confirms
that fishing income reported on the returns corresponds with settlement
sheets or receipts.
(4) DOCUMENTATION ON NUMBER OF TRAPS, TRAPS HAULED PER TRIP AND
POUNDS CAUGHT MONTHLY FOR 1994, 1995 & 1996: Shows where claimant's
traps were located during the course of the year, and whether fishing
losses resulted from the oil spill. This information is used to project
the amount of lost income due to the spill, and to account for
increased effort, seasonality and new equipment, etc.
(5) DOCUMENTATION FOR NEW TRAPS FOR 1996: Demonstrate claimant's
intent to expand his business prior to the oil spill.
(6) A MEETING WITH THE CLAIMANT: Once we and our contractor have
the above information and have had an opportunity to review it, our
contractor will meet or perform a telephone interview, if necessary,
with the claimant to resolve any questions regarding the information
provided.
NATIONAL POLLUTION FUNDS CENTER
Example 1996 Lobster Lost Profits Calculation
December 8, 1998
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sample Calculation of Lost Lobster 1996 Income
Description -------------------------------------------------------------------------------------------------------------------------------------------- Total
January February March April May June July August September October November December
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) 1996 Seasonally Adjusted Average 0.262 0.262 0.262 0.877 0.877 0.877 3.364 3.364 3.364 1.461 1.461 1.461
Catch (in Pounds) Per Trap-Haul.......
(2) Multiplied by: The Number of Trap- 300 300 300 300 300 300 300 300 300 300 300 300
Hauls...............................
1996 Expected Catch Per Trip........... 78.72 78.72 78.72 263.01 263.01 263.01 1,009.11 1,009.11 1,009.11 438.35 438.35 438.35
(3)Multiplied by: Number of Trips.... 4 4 4 6 6 6 12 12 12 8 8 8
1996 Total Expected Catch.............. 314.90 314.90 314.90 1,578.07 1,578.07 1,578.07 12,109.31 12,109.31 12,109.31 3,506.83 3,506.83 3,506.83
(4) Multiplied by: 1995 Quarterly 104.00 104.00 104.00 95.00 95.00 95.00 120.00 120.00 120.00 75.00 75.00 75.00
Catch Variance Percentage........... percent percent percent percent percent percent percent percent percent percent percent percent
1996 Projected Catch................... 327.50 327.50 327.50 1,499.17 1,499.17 1,499.17 14,531.17 14,531.17 14,531.17 2,630.12 2,630.12 2,630.12
(5) Multiplied by: 1995 Quarterly $4.02 $4.02 $4.02 $4.02 $4.02 $4.02 $3.01 $3.01 $3.01 $3.16 $3.16 $3.16
Average Price Per Pound.............
1996 Projected Sales................... $1,317 $1,317 $1,317 $6,027 $6,027 $6,027 $43,739 $43,739 $43,739 $8,311 $8,311 $8,311 $178,180
(6) Less: 1996 Actual Sales.......... $0 $0 $0 $0 $1,000 $2,400 $25,000 $44,500 $44,500 $8,500 $8,500 $8,500 $142,900
--------------------------------------------------------------------------------------------------------------------------------------------------------
(7) Total Lost Sales................... $1,317 $1,317 $1,317 $6,027 $5,027 $3,627 $18,739 No Loss No Loss No Loss No Loss No Loss $37,368
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(8) Less Saved Expenses................ Fuel 5.00 $499
Bait percent $798
8.00
percent
------------
Total Saved Expenses............... $1,267
================================================================================================================================================================================================
(9) Total Lost Profits................. ......... ......... ......... ......... ......... ......... ......... ......... ........... ........... ........... ........... $36,071
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
__________
Statement of Barry M. Hartman, Kirkpatrick and Lockhart, LLP
Good Afternoon, Senator Chafee. Thank you for the opportunity to
appear today.
My name is Barry M. Hartman. I am a partner in the law firm of
Kirkpatrick & Lockhart, LLP. I am here today my capacity as counsel to
over 100 lobstermen and women, small businesses, and crew. MOST of
these people have yet to be fully compensated for the severe economic
losses Hat they suffered as a result of the North Cape Oil Spill on
January 19, 1996.
You will hear testimony today from four of our clients. Two are
lobstermen, one used to run a small business on shore, and one operates
a charter and daily fishing boat business. All share the common injury
caused by the oil spill--their livelihoods were interrupted. They also
share the characteristic of having tried and tried to recover for their
losses, only to be turned down for no reason, or thwarted by
unreasonable and some cases irrational demands by the responsible party
and the Oil Pollution Act (OPA) Trust Fund.
My testimony today will not address any individual clients. Rather,
it will focus on the broader pattern and practices governing how the
compensation system under the Oil Pollution Act of 1990 is functioning.
Having now over 100 claimants for 3 years as a result of this spill I
can sum up the compensation system in four words.
``It does not work.''
Also, the process will not work unless the attitudes of the
responsible parties and the administrators of the The Fund can be
adjusted. By ``work'' I mean what Congress said when it passed OPA in
1990:
Finally, we make it easier for victims of oil spills to recover for
economic damages, natural resource damages, subsistence loss, and
others. They can seek reimbursement from the spiller or directly
from the $1 billion Federal Trust Fund. The 1978 Amoco Cadiz spill
off the coast of France was the biggest spill in history to come
ashore. The litigation on that spill is still going on after 12
years. and not one penny in damages has been paid. This bill will
make sure that that doesn't happen.
136 Cong. Reg. H6935 (August 3, 1990). Today, 3 years after the spill,
precious few have been fully compensated.
Before explaining why this is the case, let me give you my
perspective. I served as Acting Assistant Attorney General for the
Environment Division in the United States Department of Justice during
the Exxon Valdez spill. I was responsible for prosecuting that company.
I was also the representative of the Justice Department in connection
with the development of the Oil Pollution Act of 1990.
One of the issues we focused on as of fleers of the court as well
as law enforcers, was how to assure that victims of the spill were made
whole wisdom having to fight well paid insurance company lawyers for
years and years in court proceedings. The legislation that was crafted
included an administrative process that was supposed to assure the
quick and full payment of claims. I believed it would work. I was
wrong.
The OPA compensation process is not working for a number of
reasons. First, it is not providing full compensation to injured
parties in the timeframe established by law, and in many cases not at
all. The regulations call for a decision by the responsible park within
6 months. The Trust Fund is supposed to decide claims within 90 days.
Of the claims that my Fox filed with the responsible patty for
documented losses suffered by fishermen near the closed area, almost
none have been decided, let alone decided within the 6-month time
period. We have had claim pending with the Fund now for more than 1
year. Not a sole one has been decided within 90 days.
Second, both the responsible party and the Fund administrators are
requiring more proof of losses than would be required in a court room.
For example, if we went to court, we could use routine business records
to show our losses. Neither the Fund nor the responsible party accepts
these records. In some cases, they even made us create new ones.
Similarly, if we went to court, we could use the sworn statements of
our clients to prove their losses. Neither the responsible parry nor
the Fund accepts These. If we went to court we could use copies of our
tax returns as filed with the IRS to prove our losses. After some
persuasion, the adjusters stopped rejected copies of these reins. If we
went to court and the responsible park Nought that something over Man
the spill caused our losses, the responsible party would have to prove
that. Here, the responsible party and the Fund ignore our losses and
demand Bat we prove beyond any doubt that nothing else could possibly
or remotely have caused our documented losses. If we went to court we
could prove future losses by projections based on historical
experience. The responsible party and the Fund refuse to accept this.
They take a ``wait and see'' attitude and have indicated that they mill
nor pay any claim for any future time period. This is inconsistent with
the regulations and the law.
Third, the Fund is not providing the function that it is supposed
to provide. The whole purpose of this compensation system is to get the
responsible parry to pay. If it will not meet its obligations then the
Fund is supposed to pay, and dozen sue the responsible party for what
the Fund paid on its behalf. The fact that the law gives the Fund half
the time that it gives the responsible party to make a decision (90
days v. 6 months) reflects the notion that it should not start from
scratch. Here, the Fund has admitted that it does start from scratch,
functions exactly like an insurance company, and applies the same or
higher standards of proof than what the responsible party applies. The
insurance adjuster who considers claims for the responsible party has
no obligation to claimants--only to the insurance company. The Fund may
have a fiduciary duty to preserve the Fund for proper claims, but it
also has a statutory duty to compensate victims when the responsible
party fails to. In reality, it only preserves The Fund. Not a single
one of the claims we have filed has been paid by the Fund. The people
considering the claims for the Fund are insurance company adjusters.
They work for a responsible party one week, and the Fund another.
Fourth, the responsible party and the Fund are not adjudicating
individual claims. They are applying secretly created legislative rules
to all claims, regardless of the facts. Specifically, the responsible
party has decided that no one with documented losses from fishing near
but not in the closed area deserves more than 3.1 percent of their
losses, regardless of the facts. My letter to the Director of the Fund
outlining the absurd nature of this secret rule is attached as Exhibit
A.
Fifth, the delays in deciding claims are occurring because the
responsible park and the Fund have erected barriers to payment, and
have camouflaged them behind pretextual claims of not having sufficient
documentation. (In one case, two bankers boxes of documents was
insufficient). The law requires that the responsible party decide a
claim within 6 months of receipt of the complete claim. It requires
that the Fund do the same within 90 days of receipt of the complete
claim. To avoid this, each routinely, upon receipt of the claim, writes
a lever saying that it is missing information, and therefore is not
complete. We submitted thousands of documents for our clients and few
were considered complete. That occurred even though we provided EXACTLY
what we were told to provide. In fact, before we filed our first claim
we submitted a Freedom of Information Request to the Fund asking for
specific examples of information that was used for approving a claim.
Although the Fund initially refused to give us this, we ultimately got
some information. We followed exactly what they told us to. It was not
enough.
Sixth, the responsible party and the Fund do not even look at what
we provide before asking for more information. There have been
literally dozens of instances when, after making a submission, we get a
call asking for more information. We tell the caller he already has it.
Seventh, are being asked for the same information in two, three and
four forms. We provide tax returns that show actual net income. They
ask for our books that were used to prepare the tax returns. We provide
our books. They ask for documents and receipts to show our costs. We
provide receipts and they ask for names of people mentioned on those
receipts and other documents. We provide names, and they ask for phone
numbers. It is ridiculous.
Eighth, for 1996 and 1997 the claims process has apparently
proceeding to adjudicate claims without regard to the draft Natural
Resource Damage Assessment estimates of losses. While we think those
estimates are woefully low (as explained below) the claims adjusters
seem to think that there were and will be no losses at all.
The attached Exhibit B documents the change in Gross Lobster Sales
during 1995 through 1997 for 33 different RILA claimants represented by
Kirkpatrick and Lockhart LLP (``K&L''). Each of these 33 have filed for
lost profits during those years. These 33 claimants presented herein
are a subset of all K&L clients, which in in turn is a subset of all of
the lobstermen who fish the waters off Rhode Island. The following
summarizes the lobster losses experienced by this small group of 33
claimants:
Using the analysis of Gibson et al. \1\ losses from the
Spill in 1996 and 1997 for adult equivalents is projected as 45,847 and
165,493 adult equivalents, respectively, for a total of 211,340 adult
equivalents during 1996 and 1997.
---------------------------------------------------------------------------
\1\ Gibson, et al., Estimation of Lobster Stranding Following the
North Cape Oil Spill in Block Island Sound and Equivalent Adult
Estimates and Stock Status of lobster Involved in the North Cape Oil
Spill in Block Island Sound.
---------------------------------------------------------------------------
Using the actual lobster catch figures of the 33
claimants (converted from adult equivalents by applying an estimated
$3.25/lb. and 1.25 lb./lobster) losses for the Spill are calculated as
190,902 lobsters in 1996 and 243,912 lobsters in 1997, a total of
436,814 lobsters lost. This total figure of actual lobster loss exceeds
the projected loss by 225,474 lobsters or 107 percent.
Moreover, during 1997 there were no closures of fishing
grounds and the above 3 claimants demonstrably increased fishing
efforts in an attempt to mitigate damage losses in 1997 amounted to an
estimated 78,419 lobsters (+47 percent) more than projected by the
NRDA.
Finally, the adjusters are trying to make us prove negatives, and
wholly ignoring what caused the damage. We show documented losses from
lobstermen who fished quite close to the closed area. They say that we
have to prove that nothing else caused the losses. They ignore the fact
that the responsible party pled guilty to criminal conduct that caused
the spill, and That:
The National Transportation Safety Board determines that the
probable cause of fire damage aboard the tug Scandia and subsequent
grounding and pollution from the barge North Cape was the Eklof
Marine Corporation's inadequate oversight of maintenance and
operations aboard those vessels, which permitted a fire of unknown
origin to become catastrophic and eliminated any realistic
possibility of arresting the subsequent drift and grounding of the
barge. Contributing to the accident was the lack of adequate Coast
Guard and industry standards addressing towing safety.
Our clients are fed up. We are probably going to reluctantly
abandon the OPA process and file a lawsuit in court. I regret This
course of action, and am frankly embarrassed to say that the process I
helped create, and that I endorsed and convinced my clients to follow,
just does not work--at least not the way it should.
We to request that that the rules be changed to force the
responsible party and the Fund to pay more promptly and without the
improper resistance that exists today.
Thank you.
__________
Kirkpatrick & Lockhart,
Washington, DC 20036, July 13, 1998.
Daniel Sheehan, Director,
National Pollution Funds Center,
4200 Wilson Boulevard, Suite 1000,
Arlington, VA 22203-1804.
Re: North Cape Oil Spill
Dear Mr. Sheehan: When the North Cape barge discharged its toxic
cargo into the waters off of Moonstone Beach in Rhode Island on January
19, 1996 (the ``Spill''), few sensed the awesome significance of that
event. Experts from varied fields have made measurements, taken
samples, counted populations, and generally worked to obtain a full
understanding of the consequences of the Spill. Reports have been
written and a Natural Resources Damage Assessment will one day be
released for public scrutiny. However, at this point in time--over 2\1/
2\ years after the Spill--many of the Rhode Island fisherman have not
been compensated at all for the harm they have suffered.
We have represented well over 100 fishermen and businesses that
were impacted, to one degree or other, by the Spill. In a frustratingly
tedious process, we have pursued claims with Turnabout Services, Ltd
(``Turnabout'') on behalf of these claimants. Although every claim has
been fully and consistently documented, few have been settled quickly
and equitably. Many had to be resubmitted to the National Pollution
Funds Center (the ``Fund'' or ``NPFC'') for payment after being denied
or offered ridiculously unfair and wholly unjustified offers by
Turnaboat. Still others have been recently subsumed to Turnaboat or
will be submitted soon. The dollar value of claims submitted to date to
Turnaboat and the Fund that are still awaiting resolution is well over
$3 million.
We learned early on that there was no ``book'' or guidance from the
Federal Government or private fisheries that could tell the lobstermen
who fished the Rhode Island waters just what he should do after the
Spill to save his livelihood. Each responded with his individual
fashion, based upon what he thought would allow him to make a living at
lobstering. After the closed areas were reopened, some lobstermen
stayed in their historic fishery within the coastal waters that were
closed after the Spill. Despite best efforts, the catch of many of
these lobstermen plummeted by a third to a half of their pre-Spill
catch.
Other inshore fishermen, when they saw that their lobster traps
produced a greatly reduced, or nonexistent catch, pulled their traps
and went to areas outside the closure zone so at they could, in effect,
find new grounds or ``chase'' surviving lobsters that might have
migrated from the impacted area, and obtain at least some sort of
catch. Of course, these fishermen had to compete with others who were
also displaced by the Spill, and with those whose traditional fishing
grounds were located outside the closure boundaries to begin with. In
most every case, these displaced fishermen caught far fewer lobsters
than before the Spill.
The final group of fishermen, who were located outside the closure
boundaries in the first place, were now faced with increased
competition from the displaced fishermen, and consequently saw their
catch become greatly reduced as well.
Here is what we do know: The lobstermen who have stayed within the
closure area; the lobster who have gone out of the closure area in
whole or in part, and the lobstermen who have remained outside the
closure area and now must compete with the displaced fleet, all have
and are experiencing real losses in their livelihood because of the
Spill. Nothing else explains why their catches have drastically
decreased since January 19, 1996. Under the Oil Pollution Act of 1990
(``OPA'') each is entitled to be made whole. In fact, instead of
recognizing the probable causal relationship between the 1996 spill and
the demonstrable 1996, 1997, and now 1998 losses, our clients are being
required to prove their losses beyond doubt and to prove a negative--
that nothing else could possibly account for these losses.
In this regard, while we recognize and accept the responsibility
for documenting these losses, OPA does not require that losses be
proved beyond a reasonable doubt, or otherwise to the degree required
by a court of law. fact, that is exactly what the process was designed
to avoid:
Finally, we make it easier for victims of oil spins to recover for
economic damages, natural resource damages, subsistence loss, and
others. They can seek reimbursement from the spiller or directly
from the $1 billion Federal Trust Fund. The 1978 Amoco Cadiz spill
off the coast of France was the biggest spill in history to come
ashore. The litigation on that spill is still going on after 12
years, and not one penny in damages has been paid. This bill will
make sure that doesn't happen.
136 Cong. Rec. H6935 (Aug. 3, 1990) (statement of Rep. Jones during
adoption of conference report accompanying the Oil Pollution Act of
1990) (emphasis supplied).
Our Approach
At the initial stages of our involvement with the claims process,
our approach was straightforward. For each claimant we asks the
following questions:
What would a claimant have made if not for the Spill?
What amount of damages would make that claimant whole?
In answering these questions, we compiled the income of each
claimant after the Spill, and then compared it with a ``base year,
usually 1995 or an adjust version of 1995, that would stand as the
income standard before the Spill. So if a claimant had earned net
income of $100,000 before the Spill, and then experienced lower catches
that resulted in a net income reduced to $80,000 after the Spill, we
could conclude that the party had been damaged In the amount of
$20,000, more or less, during that time period. Each claim was
different and on some occasions we would factor in the historic growth
trends of a business or an increase in lobster pots fished. But
overall, the analysis was straightforward.
Turnabout's Approach
Unfortunately, this simple analysis has been unduly complicated by
Turnabout, the adjuster hired by the responsible party (Eklof Marine)
to handle and minimize payment of claims. In a meeting at Turnaboat
offices on June 11, 1998, after more than 2 years of repeated and
duplicative demands that we document losses, Turnaboat disclosed for
the first time that it was only authorized to pay claims for damages
incurred outside the former closed areas at the rate of 3.1 percent
regardless of individual proof of loss. Accordingly, a fisherman who
has been forced out of his traditional fishing grounds by the Spill,
and who attempts to mitigate damages (i.e., feed his family and pay the
bills) by fishing outside the imaginary line drawn in the water in
January or February 1996, and who can show that his income has
decreased by $100,000 after the Spill, will be offered only $3,100 by
the representatives of those who have caused this great harm to our
waters.
How does Turnabout justify this 3.1 percent rule? At the
aforementioned June 11, 1998 meeting, Turnabout representatives cited
the Cobb/Clancy report \1\ as establishing that about 107,000 adult, or
near-adult, lobsters were killed in the immediate aftermath of the
Spill. We have found no reference whatsoever to a lobster mortality
rate of ``107,000'' in the Cobb/Clancy report. In any event, Turnabout
then applies a ``harvest rate'' of 9.5 percent to to arrive at an
adjusted figure of 101,650 lobsters lost. Next it multiplies this
figure by 1.25 lbs./unit to arrive at 127,062 lbs. of lobster lost.
Turnabout divides this lost lobster figure by what it deems to be the
local 1996 lobster catch in Area 539 during 1996 to arrive at the 3.1
percent figure. This approach is based on spurious me of data deigned
solely to pay the injured fisherman the least amount possible.
---------------------------------------------------------------------------
\1\ North Cape Oil Spill: An Assessment of the Impact on Lobster
Populations. J.S. Cobb; M. Clancy January 5, 1998.
---------------------------------------------------------------------------
NPFC Approach
In this same vein, the NPPC, through and with its adjuster Hull &
Cargo Surveyors, Inc., has finalized a settlement offer on one claim to
date. In that claim, the final 5 months of damages have been totally
denied by applying information that is as faulty and counterintuitive
as the Turnaboat 3.1 percent position. Attached as Exhibit A is a table
that purports to show the ``Summary of Monthly Lobster Landings
(pounds)--Point Judith'' for the years 1995 and 1996. This information,
the Table states, was obtained from the National Marine Fisheries
Service, and alleges that landings at Pt. Judith have increased by 15.9
percent after the Spill. Based on this, Hull & Cargo chose to ignore
tax returns and other data that show our clients have actually incurred
great losses, concluding that if the landings at Pt. Judith increased,
the availability of lobsters to inshore lobstermen must have increased
as well. As explained below, that is simply nor the case.
While we may infer that the intent of adjusters working for the
Responsible Party is to pay the absolute bare minimum on all claims, we
are greatly concerned that the Fund appears to be adopting the same
approach and deciding, claims by ``rule'' rather than on their merits.
Impartial Analysis
We believe the best and most accurate approach remains that which
the law and regulations contemplate: each claimant documents his own
losses. However, if one is to even consider general data to consider
claims, at the very least relevant data should be considered and it
should be impartial, and reasonably accurate. For example, there is an
ongoing assessment of the Rhode Island lobster fishery that culminates
each year in a report by the Rhode Island Division of Fish and Wildlife
(the ``RIDFW'') titled ``Rhode Island Lobster Research and Management
Project Annual Report/Completion Report.'' This report results from the
work of Thomas E. Angell, a lobster biologist with the RIDFW. \2\ Mr.
Angell has produced a table that breaks out the Area 539 Landings from
the Total Rhode Island Landings. This table is attached as Exhibit B.
Attached as Exhibit C is a chart delineating the boundaries of Area
539.
---------------------------------------------------------------------------
\2\ W. Angell is the project leader and coordinator for the Rhode
Island Marine Fisheries Council (RIMFC) Lobster Industry Advisors'
Committee and a member of the Atlantic States Marine Fisheries
Commission (ASMFC) Lobster Plan Development Team (PDT), ASMFC Lobster
Technical Committee, and participates in the Stock Assessment Workshop/
Stock Assessment Review Committee (SAW/SARC) process. Moreover, Mr.
Angell's job objectives as defined in the above-referenced Annual
Report are: (1) to process, analyze, and report on biological and
population statistics collected during this project, and to
characterize the Rhode Island commercial fishery for lobsters; and (2)
to continue a data collection program to obtain biological and
population statistics on Rhode Island lobster resources and to
characterize the Rhode Island commercial lobster fishery.
---------------------------------------------------------------------------
The table at Exhibit B shows two distinct trends:
1. The Total Rhode Island Landings have increased after the Spill;
and
2. The Area 539 Landings (Inshore) have decreased by about 33
percent in each of the years after the Spill.
By and large, the claimants we represent attempt to earn their
livelihood in or very near Area 539. As stated, many have documented
real losses from 25-50 percent within this area. Yet Turnaboat ignored
their documented losses, ignored this study, and instead has decided to
pay only 3.1 percent of any damages within Area 539 that are outside
the former closure areas. Turnaboat bases this position on an
``analysis'' indicating that only 101,650 adult, or soon to be adult,
lobsters were killed by the Spill in Area 539. This ``analysis'' cannot
stand the light of day when contrasted with losses suffered by
lobstermen and the actual catch figures contained in Exhibit B, which
reveal an overall reduction in adult, caught lobsters of one million
pounds per year in Area 539 during 1996 and 1997. We fear that similar
results will occur in 1998.
The reason that the total Rhode Island Landings have increased is
easily explained by the fact that the offshore fishing fleet, whose
catch does nor occur in Area 539 but which are brought to Pt. Judith,
has experienced a remarkably productive 1996 and 1997. \3\ Their
success is being used by Turnabout to deny the severe damages
experience by the inshore fishermen.
---------------------------------------------------------------------------
\3\ Of course, inshore fishermen do not have the equipment or
resources to ``compete'' with the offshore fleet.
---------------------------------------------------------------------------
More than 2\1/2\ years after the Spill, little has changed.
Contrary to the stated intent of OPA to ``make it easier for victims of
oil spills to recover'' our clients have been forced into a defensive
and adversarial position. Accordingly, on our side of the fence are
lobstermen with damages that are easily provable using tax returns,
financial data and affidavits. Some of these victims have had to
declare bankruptcy in the aftermath of the Spill. Others have
drastically curtailed expenditures necessary to maintain or upgrade
their livelihood. On the other side of the fence are those found by a
court of law to be responsible for the Spill and liable for their
negligent and criminal behavior; those adjusting for the damages claims
resulting from the negligent and criminal behavior; and those
specifically directed by Federal law to avoid a repeat of the Exxon
Valdez oil spin claims process. All these parties have ignored the
unmistakable evidence of massive damage caused by the North Cape oil
spill.
Conclusion
The unequivocal factual data submitted for claimants and compiled
by the Rhode Island Division of Fish and Wildlife and Thomas E. Angell,
demonstrate actual losses well in excess of 3.1 percent. It is
inconsistent with OPA for the Responsible Party and the Fund so demand
detailed and extensive proof of losses, and then decide every claim
based on demonstrably irrelevant data, and a 3.1 percent rule that is
illegal and wrong. We request that the Fund reconsider the settlement
posture it has taken to date regarding the Spill, and demand that the
Responsible Party do the same. Otherwise, our clients may be forced to
forego the demonstrably ineffective OPA process, and bring suit in
court.
Respectfully submitted,
Barry M. Hartman,
Thomas F. Holt, Jr.
Peter N. McIsaac
EXHIBIT A
ABC Lobster, Inc. North Cape Oil Spill Loss--January 19, 1996
SUMMARY OF MONTHLY LOBSTER LANDINGS (POUNDS)--POINT JUDITH
(Mandatory reportings by dealers to port agents)
Information provided by John Spavins of the U.S. Department of Commerce--National Marine Fisheries Service
----------------------------------------------------------------------------------------------------------------
Zone
-----------------------------------------------------------------
Month 2 3-12 3 > 12 Total
Unknown 0 Coastal 1 < 3 miles miles miles
----------------------------------------------------------------------------------------------------------------
1995:.............................
January......................... 27,522 11,613 14,002 19,718 72,855
February........................ 9,403 10,245 7,239 13,430 40,317
March........................... 56,590 8,014 9,272 14,634 88,510
April........................... 41,445 42,112 16,071 23,909 123,537
May............................. 68,342 18,100 15,778 21,175 123,395
June............................ 54,639 65,922 55,288 77,778 253,627
July............................ 235,298 202,865 109,903 43,960 592,026
August.......................... 242,952 125,060 130,821 55,046 553,879
September....................... 304,094 104,801 162,719 81,385 652,999
October......................... 169,001 101,273 127,163 71,825 469,262
November........................ 128,721 93,240 50,593 10,119 282,673
December........................ 73,458 49,054 12,962 2,592 138,066
-----------------------------------------------------------------------------
Total 1995........................ 1,411,465 0 832,259 711,811 435,571 3,391,146
================================================================================================================
1996:.............................
January......................... 41,405 1,448 6,981 7,386 1,476 58,696
February........................ 35,090 2,142 2,754 3,178 632 43,796
March........................... 46,438 2,136 2,638 527 51,739
April........................... 94,079 6,750 6,115 26,207 133,151
May............................. 63,413 107,006 13,634 3,635 187,688
June............................ 96,218 52,270 24,176 9,154 181,818
July............................ 224,293 64,208 109,972 34,730 433,203
August.......................... 578,189 150,049 207,499 82,998 1,018,735
September....................... 217,559 204,856 96,187 46,912 565,554
October......................... 164,297 197,495 59,422 23,767 444,981
November........................ 130,552 101,259 41,858 8,371 282,040
December........................ 72,891 413,220 35,585 7,118 528,814
-----------------------------------------------------------------------------
Total 1996........................ 1,764,424 3,590 1,309,024 607,650 245,527 3,930,215
----------------------------------------------------------------------------------------------------------------
EXHIBIT B
Rhode Island Lobster Research and Management Project
NMFS Statistical Area 539 Landings
Rhode Island Inshore Landings
(Data Source: NMFS Weighout/Canvass Landings Data base)
------------------------------------------------------------------------
Area 539 Landings Total Rhode
Year (Inshore) Island Landings
------------------------------------------------------------------------
1991.............................. 4,388,120 7,445,169
1992.............................. 3,010,084 6,763,086
1993.............................. 3,246,286 6,229,001
1994.............................. 3,577,553 6,474,399
1995.............................. 3,151,915 5,363,810
1996.............................. 2,104,604 5,579,874
1997.............................. 2,135,065 5,587,678
------------------------------------------------------------------------
______
Kirkpatrick and Lockhart,
Washington, DC 20036, September 16, 1997.
Daniel Sheehan, Director,
National Pollution Funds Center,
United States Coast Guard,
4200 Wilson Boulevard, Suite 1000,
Arlington, Virginia 22203-1804.
Re: 1996 North Cape Oil Spill Claim on Behalf of ABC Lobster, Inc. for
Damages
Dear Mr. Sheehan: On behalf of ABC Lobster, Inc. (``ABC Lobster''),
and pursuant to the Oil Pollution Act of 1990, 33 U.S.C.
Sec. Sec. 2701-2761 (Supp. 1997), Kirkpatrick & Lockhart, LLP
(``Kirkpatrick & Lockhart'') hereby submits the enclosed claim for
damages suffered in the 1996 North Cape Oil Spill. Specifically, ABC
Lobster seeks damages of $207,250.25 for lost profits and earnings
capacity, embargoed lobsters and property rental for the period of
January 19, 1996 through December 31, 1996. This claim does not include
claims for long-term profits and earnings. Also, it does not include
claims for the reasonable costs of assessing damages. ABC Lobster
reserves the right to bring such claims in the future.
The damages sought by ABC Lobster are the result of a 1996 oil
spill off the coast of Point Judith, Rhode Island. Point Judith is the
third largest fishing port on the east coast and generates millions of
dollars of revenue. On January 19, 1996, the North Cape Barge, a barge
operated by Eklof Marine Corporation, ran aground and spilled at least
800,000 gallons of oil into Block Island Sound, located at Point
Judith. The spill required that the entire port be closed. The local
fishing community suffered significant property damage and loss of
earning capacity as a direct result of the spill. The impact of the
spill extended far beyond this direct area and is expected to impact
the lobster and related populations for years to come. ABC Lobster
seeks compensation for lost profits suffered by its seafood dealership
caused as a result of the spill. Because of the spill, ABC Lobster was
unable to purchase lobsters from fishermen to sell, either in wholesale
or retail markets, and thus suffered severe losses.
This claim was presented to Turnaboat Services, Ltd.
(``Turnaboat''), the insurance company for Eklof Marine Corporation, in
two parts. On May 31, 1996, ABC Lobster initially submitted a claim for
$50,248.00 for its lost profits, embargoed lobsters and property rental
from January 19, 1996 to April 30, 1996. Subsequently, on September 3,
1996, ABC Lobster provided supporting information (settlement tickets,
retail sales records, etc.) for its claim and extended it until June
25, 1996. ABC Lobster's claim for January 19, 1996 to June 25, 1996
totaled $71,784.25. Turnaboat made an insufficient offer on this claim
of $49,699.88. Turnaboat refused to increase the amount of this offer
because it disputed the amounts ABC Lobster claimed it was owed for its
sales of lobsters in the wholesale market. ABC Lobster considers
Turnaboat's insufficient offer a denial of its claim.
Later, on May 14, 1997, ABC Lobster submitted its claim for lost
profits from June 26, 1996 to December 31, 1996 for $135,466.00, making
ARC Lobster's total claim $207,250.25. Turnaboat refused to evaluate
this claim for the latter part of 1996, which ABC Lobster considers a
denial of its claim. Thus, pursuant to 33 U.S.C. Sec. 2713(c), ABC
Lobster now elects to present its claims to the Oil Spill Liability
Trust Fund (``Fund'').
In support of this claim and pursuant to 33 C.F.R Sec. 136.105,
please find enclosed the following documents and information:
1. A copy of the representation letter granting Kirkpatrick &
Lockhart the authority to file this claim on behalf of ABC Lobster
(Exhibit A);
2. A copy of the National Pollution Funds Center Standard Claim
Form (Exhibit B);
3. Affidavit of Albert B. Christopher, Jr. (officer and shareholder
of ABC Lobster) (Exhibit C);
4. Identification information for ABC Lobster (Exhibit D);
5. List of witnesses (Exhibit E);
6. Copies of the May 31, 1996 and May 14, 1997 claims submitted to
Turnaboat on behalf of ABC Lobster (Exhibit F);
7. Copies of all written communications between ABC Lobster and
Turnaboat (Exhibit G); and
8. A summary of all oral communications between ABC Lobster and
Turnaboat (Exhibit H)
As discussed in detail in these materials, ABC Lobster provided
significant supporting documentation (settlement tickets, retail sales
records, etc.) to Turnaboat in support of its claims. At the Coast
Guard's request, we would be happy to supply copies of any or all of
these materials. However, because these materials are quite lengthy, we
have not provided copies herewith.
Please do not hesitate to contact the undersigned if you have any
questions. Thank you for your prompt attention to this matter.
Respectfully submitted,
Barry M. Hartman,
Thomas F. Holt, Jr.,
Linda L. Raclin,
Elizabeth L. Smith,
Kirkpatrick & Lockhart, LLP
______
U.S. Department of Transportation,
U.S. Coast Guard,
National Pollution Funds Center,
Arlington, VA 22203, 27 October 1997.
Kirpatrick & Lockhart,
1800 Massachusetts Avenue NW
Washington, DC 20036.
Dear Ms. Raclin: This is in response to the $207,250.25 claim
submitted by ABC Lobster, Inc. for loss of profits and earning
capacity, arising from the 19 January 1996 T/B North Cape oil spill.
Before the National Pollution Funds Center (NPFC) adjudicates this
claim, we request the following information from the claimant:
(1) Monthly financial statements for the claimant's period of loss,
and for the years 1995, 1994 and 1993.
(2) According to Exhibit C of the claimant's submission, ABC
Lobster states that it buys lobsters from ``inshore lobstermen'' and
not from ``offshore lobstermen''. Please explain the difference between
these two types of lobstermen. In addition. please explain and document
why ABC Lobster considers lobster from ``offshore lobstermen''
unprofitable.
(3) Accord to Exhibit C of the claimant's submission, ABC Lobster
states that because of the oil spill, it shut down its retail counter
on 11 March 1996 to undertake renovations on the counter that were
completed sometime in mid-April. When did ABC Lobster intend to make
these renovations. and what impact did it expect to have on the
company's profits?
(4) Regarding the ``mark-up'' of $1.50 per pound on lobster in ABC
Lobster's analysis of lost lobster profits, please explain the purpose
of the ``markup'', and how the claimant derived this figure.
(5) The claimant asserts that estimated daily lobster sales
Averaged $1,893 per day from January through April 1996. What were ABC
Lobster's actual January lobster sales just prior to the oil spill?
(6) Please provide the amount of lobster by pounds sold by ABC
Lobster on monthly basis for 1996.
(7) Please provide the dollar amount of lobster sales by ABC
Lobster on a monthly basis for 1996.
(8) Does ABC Lobster purchase lobster or any other types of seafood
outside the State of Rhode Island? If not, why not?
(9) Please provide the amount of fish and shellfish by pounds sold
by ABC Lobster on a monthly basis for 1994, 1995, and 1996.
(10) Please provide the dollar amount of fish and shellfish sales
on a monthly basis for 1994, 1995 and 1996.
(11) After the finfishing and shellfishing bans were lifted, how
did the oil spill result in continue lost profits into the summer, fall
and winter of 1996? Please provide with this explanation with
supporting documentation.
(12) Finally, we request all information ABC Company provided to
the responsible party in support of this claim, that has not already
been provided to the NPFC. We believe that it is in the best interest
of the claimant, the responsible party and the NPFC that all parties
have available all information used to adjust this claim.
The claimant is in the best position to provide sufficient,
supporting documentation needed to demonstrate that his losses resulted
from an oil spill subject to the Oil Pollution Act (OPA). Pursuant to
the Claims Regulations (33 CFR 136.105(a)), the claimant bears the
burden to provide all evidence to support his claim. Generally, it has
been our experience that the greater removed the claim time period of
an alleged loss is from the date of an OPA incident, the greater the
documentation needed to demonstrate that the alleged loss resulted from
the incident.
We ask that your client provide this information within sixty days
of the date of this letter. The NPFC may have additional questions or
request more information based upon the responses to these questions.
If you have any questions would like to discuss the matter, you may
write me at the above address or contact me by phone at (703) 235-4793.
Sincerely,
Ernie Worden, Claims Manager.
______
Kirkpatrick and Lockhart,
Washington, DC 20036 November 11, 1997
Ernie Worden, Claims Manager,
National Pollution Funds Center,
United States Coast Guard,
4200 Wilson Boulevard, Suite 1000,
Arlington, Virginia 22203-1804.
Re: T/B NORTH CAPE oil spill Claim Number 016203-007
Dear Mr. Worden: We are writing on behalf of ABC Lobster, Inc.
(``ABC Lobster'') in response to your letter dated October 27, 1997,
and as a followup to our telephone conversation of Friday, November 7,
1997.
First, enclosed please find copies of ABC's settlement tickets and
other financial documents previously submitted to Turnaboat Services,
Ltd. (attached hereto as Exhibit ``J''). We believe this information
should suffice to answer your requests numbered 1,5,6,7,9,10 and 12
from your October 27, 1997 letter. Note that these copies comprise the
entirety of documents maintained by ABC Lobster. The remaining
information requests can be addressed in the following manner:
Item 2: Inshore and offshore lobstermen differ for the most part
from the point of view of equipment (offshore requires larger, more
sturdy boats, longer lines for pots which are set at much greater
depths, greater storage facilities to preserve catch, etc.), and length
of trips (inshore trips last a day, at most; offshore trips are in
multiple day segments). More importantly, for this claim, inshore
lobstermen were prevented from fishing in their normal area due to
closure of the fishery by State and Federal officials, and after the
areas were reopened, were faced with a lobster population substantially
depleted by the toxic effects of the oil spill. Offshore lobstermen, on
the other hand, suffered chiefly through an inability to pass through
closure areas, and by being unable to use (potentially contaminated)
waters for recirculating purposes.
As discussed in the Affidavit of Albert B. Christopher, Jr., which
was provided as Exhibit C in our September 16, 1997 submittal to the
Fund, ABC Lobster has only bought lobsters from a select group of
inshore lobstermen since its founding. This developing relationship
with the inshore lobstermen has allowed ABC Lobster to acquire
sufficient lobsters at a reasonable price in order to be profitable.
ABC Lobster does not yet have this relationship with any of the
offshore lobstermen who have chosen to enter into business
relationships with other wholesale operations. It should also be noted
that few offshore boats were coming into port after the spill due to
the contamination of inshore waters.
Attached for your information please find Exhibit I which reflects
the timing and substance of correspondence and conversations between
Booka Smith and Turnaboat concerning the ABC Claim. This Exhibit should
clarify some of your questions and concerns.
Item 3: Concerning the renovations of the retail counter, please
see Exhibit I on the entry dated August 30, 1996.
Item 4: Please see the August 22, 1996 entry in Exhibit I.
Item 8: Please see Item 2, above, and the October 22, 1996 and
November 6, 1996 entries in Exhibit I.
Item 11: Please see the entry dated September 11, 1996 in Exhibit
I. Note generally that the high mortality rates to the lobster and to
species that the lobster relies upon as a food source resulted in a
much smaller population class of lobsters that could be caught by the
lobstermen serviced by ABC Lobster.
Please do not hesitate to contact the undersigned with any further
questions regarding ABC's claim for damages.
Respectfully submitted,
Elizabeth L. Smith, Esq.,
Gregory P. Grimes, Environmental Consultant,
Kirkpatrick & Lockhart, LLP.
______
Kirkpatrick and Lockhart,
Washington, DC 20036, December 18, 1997
Ernie Worden, Claims Manager,
National Pollution Funds Center,
United States Coast Guard,
4200 Wilson Boulevard, Suite 1000,
Arlington, Virginia 22203-1804.
Re: T/B NORTH CAPE oil spill Claim Number 016203-007
Dear Mr. Worden: Thank you for responding to my inquiry regarding
the status of ABC Lobster Inc.'s (ABC's'') claim for damages incurred
in connection with the North Cape Barge oil spill. It is my
understanding that you are in the process of completing the paperwork
needed to secure an outside accounting firm to review RBC's claim and
that ABC can expect to receive an update on its claim on January 15,
1998.
Please understand that ABC has already experienced great difficulty
in dealing with Eklof Marine Corporation (the party responsible for the
North Cape Barge oil spill) and does not wish to repeat the experience
with the United States Coast Guard. Accordingly, I am requesting that
you contact me on January 15, 1998 to discuss the status of ABC's
claim. I look forward to hearing from you.
Very truly yours,
Elizabeth L. Smith,
______
Hull and Cargo Surveyors, Inc.
San Rafael, CA 94901, January 6, 1998.
Ms. Elizabeth Smith,
Kirkpatrick & Lockhart LLP
One International Place
Boston, Massachusetts 02110-2637
RE: 1996 North Cape Oil Spill Claim on Behalf of ABC Lobster, Inc. for
Damages--NPFC File No.: 016203-007
Dear Ms. Smith: We wish to advise you that we are the
subcontractors for the United States Coast Guard National Pollution
Funds Center on the above-referenced claim. We are currently reviewing
the documentation you have previously submitted to the NPFC. After we
have completed our review, we will contact you to set up a meeting to
discuss the details of your claim and any additional information we may
require.
If you have any questions, please feel free to contact me.
Sincerely,
Albert F. Dugan, Jr., Vice President.
______
Kirkpatrick and Lockhart,
One International Place,
Boston, MA 02110, January 22, 1998.
Albert B. Christopher, Jr.
Anne Christopher,
606 Shannock Road,
Wakefield, RI 02879.
Re: North Cape Barge Oil Spill
Dear Anne and Al: I am writing as a followup to our January 20,
1998 meeting with Hull & Cargo. In order to push along the process of
settling ABC Lobster Inc's (``ABC's'') claim for damages, I need you to
forward to me the following documentation:
a copy of ABC's tax return for 1997:
copies of ABC's settlement tickets for the period
December 31, 1996 to October 1, 1997;
a copy of the State's offer to purchase ABC for $500,000;
and
copies of any documents evidencing the purchase of
additional tanks immediately prior to the Spill (for example, check
receipts).
Thank you in advance for your cooperation. Please do not hesitate
to contact me with any questions, comments, or concerns.
Very truly yours,
Elizabeth L. Smith.
______
Kirkpatrick and Lockhart,
One International Place,
Boston, MA 02110, January 22, 1998.
Richard H. Miner,
Neil G. Stoddard,
Hull & Cargo Surveyors, Inc.,
Raynham Woods Executive Building,
175 Paramount Drive,
Raynham, MA 02767.
Re: 1996 North Cape Oil Spill ABC Lobster, Inc. Claim for Damages
H&CSI File No.: SF 980006 OS
NPFC Claim No.: 016203-007
Gentlemen: Thank you for taking the time to meet with Al
Christopher and me yesterday to discuss ABC Lobster Inc.'s (``ABC's'')
claim for damages incurred in connection with the North Cape Barge oil
spill. I hope that Al and I were able to alleviate any concerns or
doubts you may have had regarding ABC's claim.
It is my understanding that at this juncture, you will have your
accountants review ABC's claim and will make a recommendation of
settlement to the National Pollution Funds Center within the next
thirty days. As you know, almost 2 years have passed since Mr.
Christopher filed this claim and justifiably, his patience is wearing
thin. Accordingly, if there is anything I can do to speed the
processing of ABC's claim, please let me know.
Very truly yours,
Elizabeth L. Smith.
______
Hull and Cargo Surveyors, Inc.
Raynham, MA 02767, 23 January 1998.
Ms. Elizabeth L. Smith, Esq.,
Kirkpatrick & Lockhart LLP,
One International Place,
Boston, MA. 02110-2637.
Re: 1996 North Cape Oil spill
ABC Lobster Claim
Your File No: 505715.701
H&CSI File No: SF 980006 OS
NPFC Claim No: 016203-007
Dear Ms. Smith: We acknowledge receipt of your facsimile letter of
22 January 1998, and thank you for same.
In case there was any misunderstanding during our meeting, I want
to clarify one point. As I told you at the meeting we, and our
accountants, are in the process of reviewing the claim documentation at
this time. We will, as soon as possible, advise you in writing of any
additional documentation required, and of any questions that may arise
an a result of our review of the documents. Following receipt of any
requested additional documentation we will strive to complete our
analysis of the claim, and submit a claim summary to the National
Pollution Fund Center within thirty (30) days.
As we discussed, two (2) items that we will be requesting are
copies of the original dealer slips with the boat name shown, and
receipts and documentation supporting the installation of the increased
storage capacity at the claimant's facility. As soon as we have
finished reviewing the documents we will advise you of any other
required information that we need to complete our analysis of your
client's claim.
Yours truly,
Richard R. Miner,
Hull & Cargo Surveyors, Inc.
______
Kirkpatrick and Lockhart,
One International Place,
Boston, MA 02110, January 23, 1998.
Richard H. Miner
Hull & Cargo Surveyors, Inc.,
Raynham Woods Executive Building,
175 Paramount Drive,
Raynham, MA 0276.
Re: 1996 North Cape Oil Spill ABC Lobster, Inc.
Claim for Damages H&CSI File No.: SF 980006 OS
NPFC Claim No.: 016203-007
Dear Mr. Miner: I am writing in response to your facsimile dated
January 23, 1998.
As I mentioned in our meeting on January 20, 1998, ABC Lobster,
Inc. (``ABC'') plans to produce to you documentation evidencing the
installation and increased capacity of the shore-side facility. Also, I
discussed with Mr. Christopher the issue of producing original dealer
slips with the boat name shown and he has agreed to produce these
documents on the grounds that such information not be released into the
public domain. If you agree to keep this information confidential, then
I will forward the aforementioned documentation to you just as soon as
I receive it from Mr. Christopher.
As I also indicated in our meeting, ABC has already produced all
other documentation in support of its claim for damages. Accordingly,
while Mr. Christopher would be happy to answer any specific questions
your accountants may have, any requests for additional documentation
will be fruitless. ABC has presented a complete claims package and Mr.
Christopher has been kind enough to spend almost 2 hours of his time
with you answering questions about his former business. It would shock
the conscious to think that you would be unable to make a
recommendation on ABC's claim within the next thirty days. For Mr.
Christopher's sake and for his wife's sake, I urge you to make every
effort to come to closure on ABC's claim.
Thank you for your attention to ABC's claim.
Very truly yours,
Elizabeth L. Smith.
______
Hull and Cargo Surveyors, Inc.
San Rafael, CA 94901, February 9, 1998.
Ms. Elizabeth L. Smith, Esq.
Kirkpatrick & Lockhart LLP
One International Place
Boston, MA 02110-2673
RE: ABC Lobster Inc.
1996 NORTH CAPE Oil Spill
Our File No. SP. 980006 OS
NPFC Claim No. 016203407
Dear Ms. Smith: Our accountants have completed their review of the
documents previously submitted by your office. I have enclosed their
listing of the documents that were previously submitted. I have
received a copy of your letter dated February 5, 1998 outlining the
additional documents you have sent. The accountants will begin their
review of these documents.
Although I acknowledge you have stated that we have received all of
the documentation Mr. Christopher has, please provide the following
documentation or provide an explanation of why this documentation does
not exist:
1) The previous redacted settlement sheets did not include the
periods April 1994 through December 1995 or May 1995 through December
of 1995. We have not had time to determine if the settlement sheets for
these time periods are included in your February 5, 1998 submission. If
they were not, please either provide the settlement sheets for these
dates or provide art explanation of why they cannot be provided.
2) Monthly summary of sales: 1996, 1997
3) Monthly summary of purchases (pounds): May and June 1996, 1997
4) Monthly of purchases ($): 1994, 1996, 1997
5) Monthly retail sales: May through December 1996, 1997
6) Rental income for temporary rental of tanks.
7) 1997 U.S. Tax return (We will need this for your unspecified
fixture claim.)
Please provide answers or explanation to the following:
1) Provide explanation for the decline, from prior months, in
pounds of lobster purchased in December 1995 and January 1 through 18,
1996.
2) Explain relationship of F/V Miss Stacie with ABC Lobster.
3) Explain the difference between summary of monthly purchases of
$1,483,235 and purchases per the tax return for 1995 of $1,808,274
Please provide any corresponding support with your explanation.
Thank you for your assistance in this matter.
Sincerely,
Albert F. Dugan, Jr., Vice President.
______
Summary of Documents Provided as of 2/4/98
Source: ABC Lobster, Inc.
----------------------------------------------------------------------------------------------------------------
Item Description
----------------------------------------------------------------------------------------------------------------
1).......................................... Tax Returns
1933
1994
1995
1996
2).......................................... Monthly sales ($) Summary
1994
1995
3).......................................... Monthly Purchase (pounds) Summary
1994
1985
January though April 1996
June 28 through December 31, 1996
4).......................................... Monthly Purchase ($) Summary
1995
5).......................................... Daily Retail Sales
1993
1994
1995
January through July 15, 1998
6).......................................... Monthly Retail Sales Summary
1993
1994
1985
January through April, 1898
7).......................................... Settlement Tickets for Lobster Purchases
December 24, 1993 through April 6, 1994
January 8, 1995 through May 4, 1995
January 2, 1996 through March 27, 1996 (includes 2 tickets dated
12/15/95 and 12/23/95)
May 2, 1996 through June 25, 1996 (includes 1 ticket dated 4/17/
1996)
June 28, 1996 through August 1, 1996
July 28, 1996 through September 22, 1996
September 14, 1996 through January 2, 1997
----------------------------------------------------------------------------------------------------------------
______
Hull and Cargo Surveyors, Inc.
San Rafael, CA 94901, February 12, 1998.
FAX TO: Ms. Elizabeth L. Smith,
Kirkpatrick & Lockhart LLP
Subject: ABC Lobster, Inc.
We have received the box of documents sent under your cover letter
of February 5, 1998 and we wish to acknowledge that all settlement
tickets in the timeframe that were previously missing have been
received. Thank you for your assistance on this matter.
Albert F. Dugan, Jr.
______
Kirkpatrick & Lockhart LLP
One International Place,
Boston, MA 02110, February 20, 1998.
Albert F. Dugan, Vice President,
Hull and Cargo Surveyors, Inc.,
2175 E. Francisco Boulevard, Suite A-5,
San Rafael, CA 94901.
Re: ABC Lobster, Inc.
1996 North Cape Oil Spill
Your File No. SF 980006 OS
NPFC Claim No. 016203-007
Dear Mr. Dugan: Thank you for taking the time yesterday to speak
with Greg Grimes and me about issues raised in a request for additional
documentation in your letter to Elizabeth Smith dated February 9, 1998.
As a result of our conversation, it is our understanding that in
your request for certain summaries of data (sales, purchases, etc.) you
are not asking us to create anything that is not kept in the normal
course of business. As long as we provided the underlying business
records from which such a summary can be created, we will have
fulfilled our responsibility under OPA. You indicated that you had no
problem creating such summaries from our data, but wanted to make sure
we had not done so already, so that when the Fund seeks reimbursement
from Eklof; Eklof cannot claim that your doing this work duplicated
that which we already did.
As I indicated to you, Eklof has been insisting that we create new
documents summarizing business data. To the extent we have done so, we
will, of course provide this to you. We may not, however, continue to
do so in the future, particularly when Eklof denies that our costs of
doing so are recoverable. We do not see why Eklof can insist on us
creating new documents, when the Fund itself does not insist on it.
In addition, we understand that we need not provide 1997 tax
returns to support our 1996 claim. As we indicated, when this claim was
filed (in 1996) no such returns existed. Therefore we did not include
it in our claim filed with Eklof. You have indicated that under these
circumstances, and since the claim before you is only that which was
denied by Eklof, no ``new'' data not previously submitted to Eklof
needs to be submitted to you.
Finally, you indicated that other than the published guidelines on
claims (in the CFR) you have no handbook or other written materials
(including your contract with the Fund) that govern your evaluation of
claims for the Fund, or contain criteria or other instructions
affecting your consideration of the claims.
We look forward to working with you on the claims that are being
submitted to the Fund for resolution. Please continue to direct your
correspondence to Mr. Grimes.
Sincerely,
Barry M. Hartman, Esq.
Gregory P. Grimes, Environmental Project Manager.
______
Hull and Cargo, Inc.,
San Rafael, CA 94901, February 25, 1998.
Mr. Barry Hartman, Esq.,
Kirkpatrick & Lockhart LLP
One International Place
Boston, MA 02110-2637
RE: ABC Lobster, Inc.
1996 NORTH CAPE Oil Spill
Our File No.: SF 980006 OS
NPFC Claim No.: 016203-007
Dear Mr. Hartman: Thank you for your facsimile letter of February
20, 1997. Your letter reflects our conversation, except for two points
that require clarification.
First, I did not indicate ``. . . no new data not previously
submitted to Eklof needs to be submitted . . .'' for our review of your
client's claim. I only agreed that the 1997 tax return would not be
required for the current claim submission. As I mentioned, our review
is not limited to the information that was provided to Eklof, or their
claims representative Turnaboat. We are completing an independent claim
review and measurement.
Secondly, you asked if I had guidelines from the NPFC on what to
pay and not pay, and I referred you to the published guidelines on
claims (in the CFR). Your letter is a much broader statement. Our
contract of course provides some general guidelines that ``govern'' our
evaluation of claims, but with regard to what is paid and not paid, we
are guided by the published guidelines on claims (in the CFR).
We look forward to working with you and Mr. Grimes to resolve your
client's claim as soon as possible.
Sincerely,
Albert F. Dugan, Jr., Vice President.
______
Hull and Cargo Surveyors, Inc.
San Rafael, CA 94901, February 25, 1998.
Mr. Gregory Grimes,
Environmental Project Manager,
Kirkpatrick & Lockhart LLP,
One International Place,
Boston MA 02110-2673.
Dear Mr. Grimes: We have finished our preliminary review of the
settlement sheets for which the claimant did not have summaries.
Accordingly we have the following questions.
1) Please indicate the reason the following vessels stopped
deliveries in 1995 and 1996.
Spirit of Peace
Ellen June
Ziggy
Whillden
Ray Carr
Hohn Keiper
Steve Crandall
H.T.
Miss Nancy
2) Please indicate how deliveries from the following new vessels
were obtained in 1996, and please indicate any other new vessels
contacted to increase business.
Fun Yet
Cancel Bay
Spud Mack
Roy Carr
Walter Kowal
3) Explain the difference of $325,039 between the summary of
monthly purchases of $1,483,235 and purchases per the tax return for
1995 of $1,808,274. Please provide any corresponding support with your
explanation. Please note that the purchases based on settlement sheets
were $1,472,280.
4) Explain the difference of $353,750 between the purchases based
on settlement sheets of $948,914 and purchases per the tax return for
1996 of $1,302,664. Please provide any corresponding support with your
explanation.
We also await your response to our February 9, 1998 letter, and we
would also recommend any assessment cost you may wish to submit for
this claim at this time.
Thank you for your assistance in this matter.
Sincerely,
Albert F. Dugan. Jr., Vice President.
______
Hull and Cargo Surveyors, Inc.
San Rafael, CA 94901, March 4, 1998.
Mr. Gregory Grimes,
Environmental Project Manager,
Kirkpatrick & Lockhart LLP,
One International Place,
Boston MA 02110-2673.
Dear Mr. Grimes: We completed on review of the settlement sheets
and financial information you provided to date. Accordingly, we have
the following questions.
1) Please explain the reduction in deliveries from 1995 to 1996 in
the months of May through December (except August) for the vessels of
the fishermen listed below. Were any of the vessels or fishermen
selling lobsters to sources other than ABC Lobster Inc.?
1. Mason Ann
2. Undertaker
3. Amelia Ann (no deliveries after August 1996)
4. Rachel & Henry
5. Jayne Sue
6. Heather Rose
7. Select Fisheries
8. Eider
9. Gillian (no deliveries after March 1996)
2) Please provide the explanation for the reduced lobster catch for
Miss Stacie from 1995 to 1996 in the months of June through August.
Please also provide the explanation of why there was none or minimal
catch during the months of September through December 1996.
3) Please provide the daily retail sales summary for July 1996.
4) Our accountant needs to discuss purchases and sales with Mr. or
Mrs. Christopher. Please have the individual who would best be able to
discuss this aspect of the business contact Dawn Dunne, CPA of RGL
Gallagher, at (415) 956-8323.
Thank you for your assistance in this matter.
Sincerely,
Albert F. Dugan, Jr., Vice President.
______
Hull and Cargo Surveyors, Inc.
San Rafael, CA 94901, March 4, 1998.
Mr. Gregory Grimes,
Environmental Project Manager,
Kirkpatrick & Lockhart LLP,
One International Place,
Boston MA 02110-2673.
Dear Mr. Grimes: This is to confirm our conversation regarding the
submission of your assessment costs for ABC Lobster Inc., which I
requested in my facsimile of February 25, 1998. You have advised that
you had not yet submitted these costs to the Responsible Party (RP),
but you planned to submit them to the RP in the future.
I reviewed this information with the NPFC, and based on this
information, you should not submit your assessment costs to our office
or the NPFC until you have followed the necessary procedures per 33 CFR
136.103. Furthermore, the NPFC has advised that under 33 USC
2712(h)(2), no claim may be presented for recovery of damages ``unless
the claim is presented within 3 years after the date on which injury
and its connection with the discharge in question were reasonably
discoverable with the exercise of due care. . . .''
Sincerely,
Albert F. Dugan, Jr., Vice President.
______
Kirkpatrick & Lockhart LLP
One International Place,
Boston, MA 02110, March 20, 1998.
Albert F. Dugan, Vice President,
Hull and Cargo Surveyors, Inc.,
2175 E. Francisco Boulevard, Suite A-5,
San Rafael, CA 94901.
Re: ABC Lobster, Inc.
1996 North Cape Oil Spill
Your File No. SF 980006 OS
NPFC Claim No. 016203-007
Dear Mr. Dugan: This letter is in response to your letters dated
February 25, 1998 and March 4, 1998, requesting additional information
and clarification about the claim of ABC Lobster Inc.
I. February 95, 1998 letter
Item 1: Why certain vessels stopped deliveries in 1995 and 1996
The Spirit of Peace did not have dock space at the State docks in
Point Judith. The boat was on the waiting list for dockage, but often
times space opens only after an existing space-user dies or goes out of
business. Since a space did not open up, the Spirit of Peace eventually
made arrangements to dock at the Snug Harbor Marina. As a condition of
this dockage, the Spirit of Peace was required to sell its catch to Al
Conti at the Snug Harbor Marina.
For their own personal business reasons, the Ellen June made the
decision to switch its catch to Champlin's.
The owner of Ziggy came down from Connecticut and worked part time.
He stopped bringing lobsters to ABC due to illness (he is now
deceased).
The Whillden is based in Block Island and normally offloads the
lobster catch at that location.
Ray Carr worked lobstering part-time while seeking full-time
employment. He stopped deliveries after finding a full-time job.
Keiper stopped hauling his own traps at this time.
Steve Crandall, Harry Towne and Walter Kowal sold small amounts to
ABC during those times when their usual shore side facilities were
closed.
Item 2: How deliveries from new vessels were obtained
For each party listed, the answer is the same: They simply didn't
like where they were previously selling and decided to move their catch
to ABC. ABC Lobster did not solicit their business and has not
solicited the business of other fishermen. The business of ABC had
grown from its inception due to the favorable treatment of fishermen by
the Christophers. In other words, word of mouth accounted for their new
business.
Item 3 and 4: Differences in purchases per tax returns and
summaries in 1995 and 1996
Joseph Mansour of the accounting firm of Sansiveri, Kimball &
McNamee addressed these issues with your accountant, Dawn Dunne, via
telephone conversation on March 19. 1998.
II. March 4. 1998 letter
Item 1: Reduction in deliveries for certain vessels
All of the listed vessels experienced lower catches due to the Oil
Spill. The Oil Spill resulted in the temporary closure of their fishing
grounds, the loss of fishing time due to the need to remove (and later
re-set) their gear, and to reduced catches when fishing resumed (stocks
were virtually wiped out in many areas).
The Amelia Anne made a business decision to stop deliveries to ABC
Lobster in August. 1996. This vessel made another business decision in
1997 and resumed deliveries to ABC.
Before starting deliveries to ABC Lobster, the Gillian had a
relationship with the former Point Judith Lobster Company. After that
company went out of business, the Gillian moved to ABC. The Point
Judith Lobster Company later, under new ownership, became the Ocean
State Lobster Company. The Gillian was owed money by the Point Judith
Lobster Company and in order to recover as much as possible of the
former Point Judith Lobster Company business, Ocean State agreed to pay
to the Gillian the money owed by the Point Judith Lobster Company, as
long as the Gillian agreed to re-start deliveries to Ocean State. The
Gillian made the business decision to recover the moneys owed to them
and moved from ABC to Ocean State on. or about, March 1996.
Item 2: Reduced catch for Miss Stacie
Five (5) lobster boats fished the area to the immediate western
portion of Rhode Island waters, near the (Connecticut line. Three (3)
of those boats, the Undertaker, Amelia Anne and Miss Stacie, delivered
to ABC Lobster. This area was particularly hard hit by the Oil Spill,
forcing these boats to move elsewhere. The Miss Stacie, which was owned
by Al Christopher, was captained by a younger captain who was leery of
competing with the larger vessels in the heavily fished eastern fishing
grounds. Accordingly, the Miss Stacie was forced out onto less
productive areas. This accounted for the reduced catch from June
through August in 1996.
In September, the crewman on the Miss Stacie quit. It was also
about this time that Al Christopher decided to sell the Miss Stacie.
Since he had no crewman, and fishing had been poor, the captain spent
much time in Maine hunting. This explains why there was no catch in
September, 1996.
The low figures for October and November (and the zero figure for
December) resulted from the necessity to remove all of the gear from
the water to allow for the closing on the Miss Stacie (which was
completed in November).
Item 3: Retail sales for July 1996
Attached please find the ``Analysis of Monthly Retail Sales--
1996'', which should provide the necessary information in summary form.
Item 4: Purchase and sale information
Joseph Mansour of the accounting firm of Sansiveri, Kimball &
McNamee addressed these issues with your accountant, Dawn Dunne, via
telephone conversation on March 19, 1998.
If further clarification of any of the above information is
necessary, please call me at your earliest convenience. I look forward
to the speedy resolution of this claim.
Cordially,
Gregory P. Grimes, Environmental Project Manager.
Peter N. McIsaac. Esq.
______
Hull and Cargo Surveyors, Inc.
San Rafael, CA 94901, June 11, 1998.
Mr. Gregory Grimes,
Environmental Project Manager,
Kirkpatrick & Lockhart LLP,
One International Place,
Boston MA 02110-2673.
Dear Mr. Grimes: The National Pollution Funds Canter (NPFC) has
completed their review of our recommendation for ABC Lobster, Inc.
Before we send it to you, we wanted to review a procedural issue avid
you regarding this claim.
We have recommended a settlement offer for the claim period of
January 19, 19 through July 31, 1996. For the period of August 1, 1996
through December 31, 1996 we cannot yet reasonably attribute the
reduced deliveries of the fishermen who supplied your client to be the
result of the oil spill based on the information and documentation you
have provided. You claimed the reduced deliveries were due to the feet
that ``stocks were virtually wiped out in many areas.'' Although this
may be true, the enclosed ``Summary of Monthly Lobster Landings
(Pounds)--Point Judith'' for 1995 & 1996 indicates that significantly
more pounds of lobster, approximately 743,245 pounds, were landed in
1998 than in 1996 in the time period of August 1 through December 31,
1996. Thus, we need to evaluate the fishermen who supplied your client
to determine if their reduced deliveries to ABC Lobster, Inc. during
the period of September through December 1996 were the result of the
oil spill. (Your claim acknowledged that significantly more lobster
were caught in August 1996 then in August 1995.) We would expect claims
by the fishermen, if their reduced catch were due to the oil spill. (We
currently have the claim submission of John. J. Swoboda win the F/V
Karen Ann.) If we determine that their reduced catch and subsequent
reduced deliveries to your client are due to the oil spill we would be
able to address ABC Lobster, Inc.'s loss of profits claim during this
period.
Considerlng the above, we can split the ABC Lobster claim into two
time periods to facilitate a settlement to your client. We can make the
claim period from January 19, 1996 through July 31, 1996 one claim,
designated the 007-001, for which a settlement offer would be offered.
The claim period of August 1, 1998 through December 31, 1996 would be
designated 007-002.
Please let me know if you wish us to proceed in this manner. It
not, we can provide you with one claim measurement for the period of
January 19, 1996 through December 31, 1996.
I await your written response to this matter.
Sincerely,
Albert F. Dugan, Jr., Vice President.
______
Turnaboat Services, Ltd.,
Oil Spill Claims Center,
P.O. Box 558,
Narragansett, RI 02882, May 9, 1997.
Kirkpatrick & Lockhart, LLP,
1800 Massachusetts Avenue, NW,
Second Floor,
Washington, DC 20036-1800.
RE: IN NORTH CAPE Oil Spill at Pt. Judith, Rhode Island
Bruce Kopf
Claim No. 4013-96422
Your file No. 3524-325
Dear Ms. Raclin: We have reviewed the above claim file, received at
our office on March 27, 1997.
The documentation provided does not support that Mr. Kopf sustained
a loss as a result of the spill. Specifically, Mr. Kopf is an offshore
lobsterman and the area where he fishes was never closed. Mr. Kopf was
not precluded from mitigating his loss by landing his catch at other
nearby fishing ports (e.g. Montauk, NY; Stonington, CT; Sakonnet, RI or
Westport, MA).
Further, the records provided indicate that Mr. Kopf stopped
fishing on December 31, 1995 as he shows no earnings for the first 3
weeks of January 1996. This appears to be consistent with his
historical fishing practices since at least 1994.
Based on the above, we are not in a position to proffer a
settlement at this time. If further information becomes available, we
will gladly review it for possible reconsideration.
Thank you for your cooperation and patience.
Very truly yours,
Michael L. Collyer, Staff Adjuster,
Turnaboat Services, Ltd.
______
Kirkpatrick & Lockhart LLP
One International Place,
Boston, MA 02110, March 26, 1997.
Mike Collyer,
Turnaboat Services, Ltd.
Oil Spill Claims Center,
P.O. Box 558,
7 Pier Market Place,
Narragansett, RI 02882.
Re: Rhode Island Oil Spill
Dear Mr. Collyer: As you know, Kirkpatrick & Lockhart LLP
represents Bruce Kopf with respect to his claim for damages arising out
of the oil spill which occurred on or about January 19, 1996 in Block
Island Sound, Rhode Island.
Enclosed please find a partial claims package for Mr. Kopf
containing all of the information necessary to state a valid claim for
certain damages directly relating to the Rhode Island oil spill for the
period January 19, 1996 through March 39, 1996, together with all the
documentation and information Eklof Marine Corp. has requested to
support a claim for partial damages. This partial claim does not
include claims for reimbursement of the reasonable costs of assessing
damages (e.g. accounting fees), attorneys' fees or, in some cases,
certain other costs resulting from the oil spill. Mr. Kopf reserves the
right to bring such claims in the future, as appropriate.
Included in this package you will find a form indicating that we
have provided all the information Eklof Marine Corp. requires to
support a claim for partial damages. As with all previous partial
claims we submitted, we consider the information and documentation
provided in these packages to be complete so as to trigger the 90
settlement period required by the Oil Pollution Act of 1990. See 33
U.S.C. Sec. 2713 (c)(2)(claims not settled within 90 days after the
date presented to the responsible party may be submitted to the Oil
Spill Liability Trust Fund).
Please process this partial claim and then forward to us a
breakdown sheet outlining the terms of your initial partial settlement
offer.
If you have any comments or questions, please direct them to the
undersigned at the address and phone number listed on this letter. We
look forward to working with you to assure the prompt and efficient
processing and payment of these partial claims.
Thank you for your anticipated cooperation.
Very truly yours,
Thomas L. Crotty, Jr.,
Elizabeth L. Smith.
______
Kirkpatrick & Lockhart,
Washington, DC 20036, January 30, 1998
Daniel Sheehan, Director,
National Pollution Funds Center,
4200 Wilson Boulevard., Suite 1000,
Arlington, VA 22203-1804.
Re: Claim on Behalf of Bruce E. Kopf for Damages from 1996 Rhode Island
Oil Spill
Dear Mr. Sheehan: Kirkpatrick & Lockhart, LLP (``Kirkpatrick &
Lockhart'') submits this claim pursuant to 33 U.S.C. Sec. 2713 (Supp.
1997) on behalf of Mr. Bruce E. Kopf for dear ages suffered in the 1996
Rhode Island Oil Spill. Mr. Kopf seeks partial damages of $23,762 for
lost profits and earning capacity for the period January 19, 1996
through March 31, 1996. This claim does not include claims for lost
long-term profits and earnings. Mr. Kopf reserves the right to bring
such claims in the future.
The damages sought by Mr. Kopf are the result of a 1996 oil spill
off the coast of Point Judith, Rhode Island. Point Judith is the third
largest fishing port on the east coast and generates millions of
dollars of revenue annually. On January 19, 1996, the North Cape Barge,
a barge operated by Eklof Marine Corporation, ran aground and spilled
over 800,000 gallons of oil into Block Island Sound, near Point Judith.
The spill required that the entire port be closed and millions of
lobsters died as a result of the spill. The impact of the spill
extended far beyond this direct area and is expected to impact the
lobster and related population for years in the future. The local
fishing community suffered significant property damage and loss of
earning capacity as a direct result of the spill. Many of the fishing
boats and other equipment have been damaged or destroyed. Mr. Kopf
seeks partial damages for the lost profits and earnings for the period
January 19. 1996 through March 29, 1996.
Mr. Kopf presented this claim for short term lost earnings, to
Turnaboat Services, Ltd. (``Turnaboat''), the insurance company for
Eklof Marine Corporation on March 26, 1997. On May 9, 1997, Turnaboat
denied Mr. Kopf s claim for partial damages.
In accordance with 33 C.F.R. Sec. 136.215, enclosed are the
following documents in support of Mr. Kopf's claim for property
damages:
3 . A copy of representation letter granting Kirkpatrick it:
Lockhart the authority to file this claim on behalf of Mr. Kopf
(Exhibit A);
2. A copy of the National Pollution Funds Center Standard Claim
Form (Exhibit B);
3. Affidavit of Bruce E. Kopf (Exhibit C);
4. Identification information for Mr. Kopf (Exhibit D);
5. A copy of the 1996 tax returns for Bruce E. and Dorothy M. Kopf
(Exhibit E);
6. A copy of the claim submitted to Turnaboat on March 26, 1997,
including tax returns and other financial statement (Exhibit F);
and
7. A copy of communications between Mr. Kopf and Turnaboat
Services, Ltd. (Exhibit G).
Please do not hesitate to contact the undersigned if you have any
questions regarding this matter. Thank you for your prompt attention to
this matter.
Respectfully submitted,
Barry M. Hartman, Esq.
Thomas F. Holt, Jr., Esq.
Gregory P. Grimes, Environmental Project Manager.
Kirkpatrick & Lockhart, LLP
______
U.S. Department of Transportation,
United States Coast Guard,
National Pollution Funds Center,
Arlington, VA 22203-1804, 25 February 1998.
Bruce E. Kopf,
One International Place,
Boston, MA 02110-2637.
RE: Claim Number 016203-003
T/B NORTH CAPE oil spill
Dear Mr. Holt: This is in response to the loss of profits and
earning capacity claim submitted by Mr. Bruce E. Kopf, arising from the
T/B North Cape oil spill. The National Pollution Funds Center (NPFC)
intends to hire, in accordance with Federal Government contracting
regulations, a private claims adjusting company to adjust this claim.
Once the NPFC has hired a claims adjusting company, I will immediately
notify you of the name of the company and a point-of-contact person.
The Claims Regulations requires that each claim must be signed in
ink by the claimant certifying to the best of the claimant's knowledge
and belief that the claim accurately reflects all material facts (33
CFR 136.105(c)). The standard claim form signed by Mr. Kopf appears to
be a copy and not the signed original. Please provide the NPFC with the
signed, original standard claim form. We also note that Mr. Kopf's
claim package includes unsigned Federal tax returns. As we noted in a
letter to Kirkpatrick & Lockhart on 11 September 1997, we require
copies of tax returns that have been signed by the claimant.
If you have any questions or would like to discuss this matter, you
may write me at the above address or contact me by phone at (703) 235-
4793.
Sincerely,
Ernie Worden, Claims Manager.
______
Kirkpatrick & Lockhart,
Washington, DC 20036, March 9, 1998
Ernie Worden, Claims Manager,
National Pollution Funds Center,
4200 Wilson Boulevard, Suite 1000,
Arlington, VA 22203-1804.
Re: T/B NORTH CAPE Oil Spill
Dear Mr. Worden: Per your request in letters dated February 25 and
26, 1998, please find the signed, original, standard claim forms to the
NPFC for the following:
1. Claim Number 016203-008, Mr. Bruce E. Kopf
2. Claim Number 016203-009, Mr. Charles Follett dba Cindy-Bet, Inc.
3. Claim Number 016203-010, Mr. James D. Patterson
4. Claim Number 016203-011, Fran Dek, Inc.
If additional information or clarification is needed, please do not
hesitate to contact the undersigned.
Sincerely,
Barry M. Hartman, Esq.
Thomas F. Holt, Jr., Esq.
Gregory P. Grimes, Environmental Project Manager.
______
John P. Kelly & Associates,
117 Kentucky Street,
Vallejo, CA 94590, March 25, 1998.
Gregory P. Grimes, Environmental Project Manager,
Kilpatrick & Lockhart, LLP
One International Place
Boston, MA 02110-2637
Re: Bruce Kopf
North Cape Oil Spill
NPFC 016203-008
Dear Mr. Grimes: We have been asked by the National Pollution Fund
Center to investigate Bruce Kopf's claims for damage as a result of the
North Cape Oil Spill.
As we discussed, please provide the all the claims document that
were sent to Turnaboat Services, Ltd. Also, please provide any other
information you feel will document your client's claim.
We look forward to working with you in this matter.
Regards,
John P. Kelly,
John P. Kelly and Associates
______
Kirkpatrick & Lockhart, LLP,
Boston MA, March 26, 1998.
John P. Kelly & Associates
117 Kentucky Street
Vallejo, CA 94590.
Re: North Cape Oil Spill Bruce E. Kopf NPFC Claim Number 016903-008
Dear John: Per our conversation of March 95, 1998, it is my
understanding that your firm will be evaluating the Fund submittal of
Bruce E. Kopf for the National Pollution Fund Center. Per your request,
please find enclosed a copy of the entire Fund submittal for Mr. Kopf.
I look forward to working with you on this matter.
Cordially,
Gregory P. Grimes, Environmental Project Manager.
______
John P. Kelly & Associates,
117 Kentucky Street,
Vallejo, CA 94590, March 25, 1998.
Gregory P. Grimes, Environmental Project Manager,
Kilpatrick & Lockhart, LLP
One International Place
Boston, MA 02110-2637
Re: Bruce Kopf
North Cape Oil Spill
NPFC 016203-008
Dear Mr. Grimes: We have reviewed the documents provided by Berry
Kopf through you.
After reviewing The Affidavit of Bruce E. Kopf, we believe it
necessary to request additional information from Mr. Kopf.
1. We wish to request documentation that Mr. Kopf's vessel actually
needed to use circulating sea water.
2. We need to determine and confine Mr. Kopf's normal fishing area
with maps or charts.
3. We need documentation of the amount and value of Mr. Kopf's
landings by month for 1993-94-95.
4. We need documentation of the type of repairs to Mr. Kopf's
vessel, the location of the repair facility and when the repairs were
to be completed.
5. We need documentation of Mr. Kopf's intention to resume fishing
in late January 1996.
6. We need documentation of the areas closed.
7. We need to know why the water circulation system could not be
turned off while heading to Mr. Kopf's fishing areas.
8. We need to know why it was necessary to pass through the closed
areas to deliver caught lobsters to an open port.
9. Please provide documentation of the sale of the Fishing Vessel
Spartan.
After we receive this information, we may have further questions.
We believe that these questions will provide essential information
regarding this claim.
If you have any questions please contact us.
Regards,
John P. Kelly,
John P. Kelly & Associates.
______
Kirkpatrick & Lockhart,
One International Plaza,
Boston, MA 02110, April 27, 1998.
John P. Kelly & Associates,
117 Kentucky,
Vallejo, California 94590.
Re: TIB North Cape Oil Spill
Claim No. 01690-008
Claimant: Bruce E. Kopf
Dear Mr. Kelly: The following information is provided in response
to your letter request for additional information dated April 10, 1998,
and is answered by numbered paragraph.
1. It is the understanding of Mr. Kopf that circulating sea water
is used on all lobster boats on the East Coast. It is the only way that
lobsters are kept other than some boats which have refrigerated salt
water systems. This occurs maims on vessels fishing lone trips or
vessels catching red crabs.
The F/V Spartan is outfitted with three salt water pumps. The main
pump is 4 inches and runs organ auxiliary engine. The other two smaller
pumps run off the main engine. It is especially necessary to have
circulating seawater in sub-freezing temperatures as the lobsters drop
their claws under those conditions. Attached at Exhibit A please find
documentation regarding the sale of the F/V Spartan to Violet Fish &
Trap Corporation. If additional information to verify the existence or
use of the circulating system is necessary. please feel free to contact
the existing owner.
When there were lobsters on board from fishing. the circulating
system served the following functions.
(a) It provided for a constant replenishment of oxygen for the
lobsters and allowed for the dispersion of wastes (primarily:
nitrogenous compounds) from the lobsters stored on board: these
lobsters were caught at a considerable distance off-shore and were
densely packed and subjected to a long period of transport; the
recirculating system was essential for their survival:
(b) In the winter. it provided an environment for the successful
storage and transport of the lobsters without freezing; and
(c) The water served to cushion the impact of the massed lobsters
on each other.
2. As stated in the Affidavit of Bruce E. Kopf, which was part of
the Fund submittal. the fishing area for Mr. Kopf for the past 10 years
was in an area about 80 miles south/southwest of Block Island to just
north of Hudson's Canyon. See Exhibit B. which is a chart outlining the
fishing grounds of the F/V Spartan, and Exhibit C, which is Mr. Kopf s
trip log of his last trip to the ``dumping grounds'' prior to the
Spill.
3. Exhibit D contains the following information responsive to this
request:
(a) 1993 and 1994 Statement of Accounts for the F/V Spartan; and
(b) 1995 settlement sheets
(Note: Mr. Kopf was unable to locate all of the bank statements and
settlement sheets responsive to your request [namely, 5/93, 12/93 and
8194 Statement of Accounts, and 3/95-6/95 settlement sheets]. However,
the underlying claim submitted to Turnaboat, provided as Exhibit F in
the claim to the Fund, is for damages solely for the period of January
19, 1996 to March 99. 1996. That submittal included the financial
information required by Turnaboat, namely, bank statements for January,
February, March, October, November and December, 1995).
4. As stated in his Affidavit, Mr. Kopf was making the repairs to
his boat in early January 1996. The repairs were made at dockside and
included replacing all deck lighting, plumbing and main pump
replacement with spare, wiring upgrades, engine repairs and general
maintenance. These repairs were made by Mr. Kopf and Carr Marine. See
Exhibit E for copies of repair receipts. Note that Mr. Kopf effected
the repairs prior to the Spill and was awaiting a favorable weather
forecast to resume fishing.
5. Documents provided in the underlying claim clearly evidence that
Mr. Kopf had fished in January 1995 and January 1994, as well as
December 199 . The only reason Fir. Kopf was not fishing in January
prior to the Spill was the aforementioned need to perform some
maintenance on his boat. Said repairs were completed prior to the
Spill.
6. The following information documenting the areas closed to
fishing as a result of the Spill can be found at Exhibit F
(a) Barge North Cape Incident Fisheries Closures Prepared by Rhode
Island Department of Environmental Management, Department of Health 23
January 1996.
(b) Federal Register Closure Notices dated 2/1/96, 3/19/96, 4/15/
96, 5/6/96, 6/3/96 and 6/05/96.
7. At the time of the Spill on January 19, 1996 Mr. Kopf's Fishing
Vessel Spartan was docked at Point Judith. In order to reach his off-
shore fishing grounds after the Spill, Mr. Kopf would have had to
travel through polluted waters which were closed to fishing.
Theoretically, Mr. Kopf's vessel could operate with, or without. the
use of circulating sea water. However, that is theory. In practice Mr.
Kopf would only travel with the catch hold full of water since the
weight of the water was necessary for the proper stabilization of the
vessel. If Mr. Kopf had attempted to travel from port and through the
closed waters with an empty catch hold. he would have been bounced
around and experienced a particularly uncomfortable ride. Furthermore.
if successful in traveling through the closure areas with a dry hold,
Mr. Kopf would then have had to fill the system at sea a practice which
could have damaged the baffles within the hold.
8. When Turnaboat denied the Kopf claim. they noted that he could
have landed his catch at Montauk, NY, Stonington, CT. Sakonnet. Ri or
Westport. MA. This was simply not the case for the following reasons:
Montauk, NY was closed for the winter; more importantly. Mr. Kopf
no longer possessed a valid New York Landing Permit which would have
allowed him to offload his vessel in a New York port;
Stonington, CT is over 90 miles south of Mr. Kopf's home port at
Point Judith; in addition to this port being unreasonably out of the
way (extended travel time and fuel costs), Mr. Kopf had never sailed to
this port, had no knowledge of the shoreside facilities. indeed, did
not even know if a shoreside facility at this location would be geared
to handle his volume or if he could be fairly compensated for his catch
at this location. Most importantly, Mr. Kopf did not possess a Landing
Permit to be able to offload in Connecticut:
Westport, MA could only be reached by traversing completely around
the closure area. a course unreasonably far removed from his fishing
grounds. In addition. Mr. Kopf did not possess a Landing Permit for
Massachusetts; and
Sakonnet, RI could only be reached by traversing completely around
the closure area. a course unreasonably far removed from his fishing
grounds and his home port. Furthermore, Mr. Kopf does not believe that
the port facilities in Sakonnet, RI would have been able to accommodate
his 70-foot vessel.
9. See Exhibit A.
Please call if you need further clarification on any of the above.
Cordially,
Peter N. McIsaac. Esq.
Gregory P. Grimes, Environmental Project Manager.