Providing coverage of Alaska and northern Canada's oil and gas industry
February 2018

Vol. 23, No.6 Week of February 11, 2018

Increased oil spill penalties proposed

House Resources introduces bill to stiffen penalties for spills of crude, and mandate contingency plans for oil tanker truck use

Alan Bailey

Petroleum News

The Alaska House Resources Committee has introduced a bill, House Bill 322, to increase the financial penalties for spills of oil and other contaminants in the state. The bill would also introduce a new mandate requiring that operators of tanker trucks carrying crude oil must maintain oil spill contingency plans for the trucking operations. The bill also says that produced water spilled along with oil must be included when calculating the scale of a spill. And the bill authorizes the Alaska Department of Environmental Conservation to impose punitive administrative penalties for serious or repeated discharges.

If enacted, the bill would go into effect on Jan. 1, 2019, a date that would allow time for DEC to write appropriate regulations and for oil truckers to develop contingency plans.

A prime motivation behind the bill is the fact that the oil spill penalties have not been increased since they were originally set many years ago. Some penalties date back to the 1970s while others date back to the 1980s. DEC recommended many of the provisions in the bill to the House Resources Committee.

Increased penalties

DEC has proposed penalty levels that the agency sees as appropriate to the violations involved. In some cases the new penalties reflect or exceed inflation levels since the original penalties were enacted, while in others the new rates come well below inflation adjusted amounts.

In general, the civil penalties for an initial discharge violation would double, relative to their current levels, while penalties for continuing violations would increase by higher factors. For example, the civil penalty for a discharge of less than 18,000 gallons of oil and crude oil would increase from a range of $500 to $100,000 to a range of $1,000 to $200,000. The penalty for each day of a continuing violation would increase from $5,000 to $25,000.

For crude oil spills more than 18,000 gallons, the penalties would increase from $8 to $16 per gallon spilled for a spill of less than 420,000 gallons, and from $12.50 to $25.00 per gallon for a spill of more than 420,000 gallons.

Agency and court discretion

For these civil penalties, DEC can choose whether to sue the party responsible for the spill through the courts, with the court able to impose a fine within the prescribed penalty range for the type of spill. During a Feb. 2 meeting of House Resources, Kristin Ryan, director of DECís Division of Spill Prevention and Response, explained that DEC has discretion over whether to sue and what level of penalty to assess, depending on the circumstance of the spill and the actions taken by the party responsible for the spill. Similarly, the court can assess what level of fine to impose, depending on the circumstances.

The proposed new statute enabling DEC to impose administrative penalties would allow the department to assess a penalty of not less than $1,000, and not more than $10,000 or $24 per gallon spilled, for egregious discharges of crude oil, petroleum and any substance refined from oil. Being administrative penalties, these penalties would be imposed by DEC and not through a court. And any associated civil penalty would be reduced by the amount of the administrative penalty.

Concerns about trucking

Ryan explained that the proposed requirement that the truck transportation of oil will require a DEC approved oil spill contingency plan reflects DECís concern that there are now two companies transporting crude oil by highway on the Kenai Peninsula. The contingency plan mandate, as well as requiring the filing of plans, would invoke the need for oil spill drills to test the plans. One of the companies involved in trucking crude is BlueCrest Energy, which transports oil from its Cosmopolitan field in the southern Kenai Peninsula to the oil refinery at Nikiski in the northern peninsula - Ryan emphasized that the proposed statute is not a criticism of BlueCrest, which she characterized as ďdoing a great jobĒ in managing its crude oil trucking operations.

Ryan also explained that the proposed inclusion of produced water, salt water that is produced along with oil from an oil field, in the calculations for assessing oil spill volumes reflects the increasing volumes of produced water emanating from the North Slope fields, and the fact that the water is as toxic to the environment as the oil, while typically being more difficult to clean up. In particular, salt from the water tends to persist in the tundra, she said.

Invited testimony

During invited testimony to House Resources on Feb. 5 Patti Saunders from Alaska Community Action on Toxics commented that her organization sees many things that it likes in the bill but questioned why the doubling of a number of the penalties falls well short of increasing the penalties in line with inflation.

Bob Shavelson from Cook Inlet Keeper also questioned why some of the penalties did not keep in step with inflation, saying that the current low penalties do not deter spill violations. Shavelson also commented that, while BlueCrest has generally done a good job in addressing the risks involved in its crude oil trucking operations, mandated contingency plans would, in particular, help address the need for a rapid response to an oil spill that impacts one of the several important salmon streams and rivers crossed by the highway that the trucks use.

Douglas Mertz from Prince William Sound Regional Citizensí Advisory Council said that his organization is an enthusiastic supporter of the bill. Given that interest in oil spills tends to wax and wane, depending on how long it has been since the last large major spill disaster, it is important that legal provisions maintain a focus on doing things correctly all of the time, he said.

Steve Catalano from Cook Inlet Regional Citizensí Advisory Council also expressed his organizationís support for the bill.

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