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Energy Law Exchange

October 11, 2018

U.S. Fifth Circuit Broadly Defines Vessel “Operator” Under the Oil Pollution Act

There are few questions more important in the context of oil spill liability than who constitutes a Responsible Party under the U.S.’s Oil Pollution Act (OPA).  Recently, the U.S. Court of Appeals for the Fifth Circuit in United States v. Nature’s Way Marine, LLC -- F.3d – (5th Cir. 2018) interpreted the meaning of “operator” in the case of a vessel.  In doing so, the Court may have expanded the class of marine parties potentially liable under the OPA to include time and voyage charterers.

In a case of first impression, the Court was asked to interpret the meaning of “operator” under the OPA in the context of a vessel.  The issue in Nature’s Way Marine was simple.  Is the operator of a tug also deemed to be the operator of barge, which is made fast to the tug and dependent on the tug for its propulsion and navigation. 

The OPA text provides little guidance.  It circularly defines an “owner or operator” to be “in the case of a vessel, any person owning, operating, or chartering by demise, the vessel.”  Id. at *3 (citing 33 U.S.C. § 2701(26)(A)(i)).   The Court ultimately found guidance in the U.S. Supreme Court’s interpretation of “operator,” as used in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA)—the environmental liability regime on which the OPA is based.  In United States v. Bestfoods, the Supreme Court held that “under CERCLA, an operator is simply someone who directs the workings of, manages, or conducts the affairs of a facility.”  524 U.S. 51, 66 (1998).  The Nature’s Way Marine Court found no reason to interpret the identical OPA term differently.  In concluded, “the ordinary and natural meaning of an ‘operator’ of a vessel under the OPA would include someone who directs, manages, or conducts the affairs of the vessel.”  As a result, Nature’s Way Marine was found to have maintained “exclusive navigational control over the barge at the time of the collision, and, as such, that it was a party whose direction (or lack thereof) caused the barge to collide with the bridge.” Nature’s Way Marine at *3.

It may not be surprising that a tug was found to be operating a barge that allided with a bridge.  However, the Court’s adoption of the CERCLA land-based standard may have greater consequences for the often complex vessel-owning and -operating structures employed in today’s marine transportation industry.

Numerous parties are involved with every crude tanker that loads or discharges at a U.S. port.  The vessel’s registered owner qualifies as a Responsible Party under the OPA, as does the  demise (or bareboat) charterer, which is responsible for maintaining, crewing, and navigating the vessel.  The demise charterer will then provide the commercial use of the vessel to another party for an agreed period of time (i.e., a time charterer) or for a fixed number of voyages (i.e., voyage charterer). These time and voyage charterers have historically avoided liability under the OPA. However, an argument can now be made that Nature’s Way Marine has expanded the definition of “operator” to include these commercial parties.

Time and voyage charterers derive the economic benefit of the vessel typically without any of the liabilities associated with the vessel.  They direct the vessel to a particular port to load a particular cargo and then to a different port to discharge that cargo.  They give the vessel orders, which are then executed by the vessel’s crew often employed by the demise charterer.  But in ordering the vessel to proceed to certain ports, the time or voyage charterer arguably “directs … the affairs of the vessel.”  The Court’s use of “or” in defining operator to mean one that “directs, manages or conducts the affairs of the vessel” could be important.  This suggests a broader category of conduct that could constitute operating a vessel.  This also suggests courts may have to embark on a fact-intensive inquiry to determine whether a party now constitutes an operator.

While it may appear inequitable to impose liability under the OPA on a commercial party far removed from the vessel’s actual navigation (and most often without a representative on board the vessel), the OPA imposes a strict liability regime intended to protect those damaged by oil pollution—not those that stand to profit from the venture.  The government could argue that a company should be at risk if there is an incident, when it is a party directing the tanker to carry the discharged oil and benefiting from its transportation.

Such an expansive interpretation of “operator” would be a significant change in the application of the OPA.  The U.S. Coast Guard, which requires that vessels provide Certificates of Financial Responsibility (COFR) evidencing their ability to satisfy potential oil pollution liabilities, does not require time and voyage charterers to provide these certificates.  33 C.F.R. § 138.20 (excluding from the definition of “operator” for purposes having to provide a COFR,  “[a] time or voyage charterer that does not assume responsibility for the operation of a vessel is not an operator for the purposes of this subpart.”).  This, combined with the OPA’s express inclusion of demise charterers (but not time or voyage charterers) as Responsible Parties, provide strong arguments that the U.S. Congress did not intend these charterers to be subject to the OPA. 

Time and voyage charterers should take notice of the potential risk created by Nature’s Way Marine.  Large-scale pollution events are prone to result in novel and untested legal theories by regulators and private parties.   Whether it is public outcry or a potential shortfall of solvent defendants, any party commercially linked to the oil at issue will be scrutinized.  Time and voyage charterers should review their charter parties and charterers liability insurance to assess their potential risks under the OPA, as well as monitor how other courts may apply this new definition.