Vessel Held Liable for “Substantial Threat of a Discharge” of Oil under OPA 90
United States v. Ernst Jacob and Shipowners Insurance and Guaranty Company Ltd., 2023 U.S. Dist. LEXIS 159547 *, 2023 WL 5805856 (D. P.R. Sept. 7, 2023, Méndez-Miró, J.).
No court has previously addressed what is a substantial threat of a discharge of oil under OPA 90 and the administrative process in that determination until this case. T/V MARGARA, a 748-foot double hull tanker carrying 300,000 barrels of No. 6 fuel oil, on April 27, 2006 grounded off the southern coast of Puerto Rico in an area containing sensitive coral reefs. The master notified the Coast Guard which told him to cease and desist from attempting to dislodge the vessel. The Federal On-Scene Coordinator (“FOCS”) determined that the vessel presented a “substantial threat of a discharge.” The Coast Guard then served the master with a “Notice of Federal Interest For An Oil Spill Incident” which declared that an “oil pollution incident ‘occurred or threatens to occur.’” The vessel was freed on April 28 with no discharge of oil or taking on of water by the vessel.[1]
In dislodging the vessel, coral was destroyed. Over a two-year period from 2006 to 2008, the government took measures to restore the damaged reef. The U.S. sought recovery of the costs incurred by the Oil Spill Liability Relief Fund for responding to the incident, lightering and dislodging the vessel, deploying booms and the costs of restoration. The initial demand was made on the Norwegian Hull Club for $5,932,380.20 with no response.[2] Subsequently, Shipowners Insurance & Guaranty Company, Ltd. (SIGCo)[3] was identified as the guarantor which denied reimbursement asserting that “NOAA failed to establish that there was a substantial threat of discharge of oil from the vessel; therefore, the coral reef damages were not damages resulting from an OPA incident.”[4]
The United States filed suit against the vessel owner and its guarantor in 2021 seeking:
(1) A declaratory judgment for the Plaintiff pursuant to Section 1017(f)(2) of the OPA for all uncompensated damages to natural resources arising out of the grounding of the T/V MARGARA including assessment costs and loss, loss of use, or injury to said natural resources;
(2) a judgment against the Defendants for compensation paid by the Fund to Trustees for natural resource damages arising from the T/V MARGARA incident as well as all costs incurred by the Fund due to those claims including interest, attorney's fees, adjudicative, and administrative costs;
(3) a judgment for the Plaintiff, on behalf of the National Oceanic and Atmospheric Administration (“NOAA”), for all natural resource damages assessed in the Trustee's Final Compensatory Restoration Plan and NOAA's incurred and uncompensated assessment costs; and
(4) an award of any additional relief as the Court deems appropriate.[5]
The vessel owner and its guarantor challenged the determination by the Federal On-Scene Coordinator that there was a “substantial threat” of a discharge oil into navigable waters and also filed a Motion to Deny the Summary Judgment Motion as premature.
The primary dispute was the scope of review of the district court of the administrative determination of a substantial threat of discharge of oil into navigable waters. On the one hand the U.S. asserted that the court’s review was whether the agency’s determination was arbitrary and capricious, an abuse of discretion or not in accordance with law. The defendants maintained that this deferential standard applies only when the government provides the court with the “whole administrative record,” which the government has failed to do; thus, the court was bound to undertake de novo review of the “substantial threat” determination.
Judge Méndez-Miró first had to determine if the administrative record “was sufficient to constitute a ‘whole record’ under the APA.”[6] Based on the opinion of the U.S. Supreme Court in Citizens To Preserve Overton Park, Inc. v. Volpe,[7] the whole record is what the administrative agency had at the time of the decision and does not include material prepared for litigation afterwards. De novo review applies only if the reviewing court does not have an adequate administrative record to review which is exceedingly rare.[8]
Admittedly, the record provided by the government may be wanting and though the Coast Guard did not include the final determination of the FOSC of the substantial threat, this was not one of the rare cases in which the court will exercise de novo review.[9] Important in assessing whether the administrative decision arbitrary and capricious is that a “substantial threat” of discharge is not based on actual discharge of petroleum.[10] Rather, the court reviews whether based on the information the FOSC had at the time there was a “substantial threat” of a discharge and whether the measures taken to respond to that were justified.[11]
The defendants failed to present evidence to overcome “the presumption of administrative regularity.”[12] The evidence submitted by the government was sufficient to constitute “the whole record” subject only to arbitrary and capricious review.[13]
A “substantial threat” of a discharge determination is based on the assessment by the FOSC that as a result of the incident, there may be damage to natural resources, that a discharge will likely occur without intervention by the FOSC, and that quick action will reduce the risk of a spill.[14] Given the known facts, it cannot be said that the determination was arbitrary and capricious.
The court granted the government’s Motion for Partial Summary Judgment.
[1] See National Pollution Funds Center Determination, https://www.uscg.mil/Portals/0/NPFC/Claims/NRD/M06017-OC01.pdf?ver=2019-09-09-113202-653
[2] Id. at p. 6-7.
[3] Id. at p. 3.
[4] Id. at p. 7.
[5] Ernst Jacob, 2023 WL 5805856 at *1.
[6] Id. at *5.
[7] Citizens To Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420 (1971).
[8] Ernst Jacob, 2023 WL 5805856 at *5.
[9] Id. at *6.
[10] Id.
[11] Id.
[12] Id. at *7.
[13] Ernst Jacob, 2023 WL 5805856 at *7.
[14] Id.
