Financial Responsibility for Water Pollution (Vessels); Final Rule

SUMMARY: The Coast Guard is promulgating interim regulations to

implement the provisions concerning financial responsibility for

vessels under the Oil Pollution Act of 1990 and the Comprehensive

Environmental Response, Compensation, and Liability Act, as amended

(Acts). These provisions require owners and operators of vessels (with

certain exceptions) to establish and maintain evidence of insurance or

other evidence of financial responsibility sufficient to meet their

potential liability under the Acts for discharges or threatened

discharges of oil or hazardous substances. The regulations are

administrative in nature and concern procedures for evidencing

financial responsibility.

DATES: Effective Date. This rule is effective on July 1, 1994.

Comment Closing Date. Comments must be received on or before

September 29, 1994.

Implementation Date. The Coast Guard will issue new Certificates of

Financial Responsibility under this rule beginning December 28, 1994,

following the implementation schedule described in this preamble.

ADDRESSES: Comments may be mailed to the Executive Secretary, Marine

Safety Council (G-LRA/3406) (CGD 91-005), U.S. Coast Guard

Headquarters, 2100 Second Street SW., Washington, DC 20593-0001, or may

be delivered to room 3406 at the same address between 8 a.m. and 3

p.m., Monday through Friday, except Federal holidays. The telephone

number is (202) 267-1477.

The Executive Secretary maintains the public docket for this

rulemaking. Comments will become part of this docket and will be

available for inspection or copying at room 3406, U.S. Coast Guard

Headquarters, between 8 a.m. and 3 p.m., Monday through Friday, except

Federal holidays. Unless otherwise indicated, documents referred to in

this preamble also are available in this docket.

FOR FURTHER INFORMATION CONTACT: Mr. Robert M. Skall, (703) 235-4704,

or Mr. Robert S. Horowitz, (703) 235-4792, National Pollution Funds

Center. Procedural questions may be directed to Mr. Richard Castellano

at (703) 235-4810.

SUPPLEMENTARY INFORMATION:

Request for Comments

The Coast Guard encourages interested persons to participate in

this rulemaking by submitting written comments on the implementation

schedule as well as other changes to the NPRM. Commenters are requested

not to resubmit or restate comments already filed to the docket, as

those comments have been considered in promulgating this rule. Persons

submitting comments should include their names and addresses, identify

this rulemaking (CGD 91-005) and the specific section of this rule to

which each comment applies, and give the reason for each comment.

Please submit two copies of all comments and attachments in an unbound

format, no larger than 8\1/2\ by 11 inches, suitable for copying and

electronic filing. Persons wanting acknowledgment of receipt of

comments should enclose stamped, self-addressed postcards or envelopes.

The Coast Guard will consider all comments received during the

comment period. It may change this rule in view of the comments.

The Coast Guard plans no public hearing. Persons may request a

public hearing by writing to the Marine Safety Council at the address

under ADDRESSES. The request should include the reasons why a hearing

would be beneficial. If it determines that the opportunity for oral

presentations will aid this rulemaking, the Coast Guard will hold a

public hearing at a time and place announced by a later notice in the

Federal Register.

Drafting Information

The principal persons involved in drafting this document are Mr.

Robert M. Skall, Project Manager, and Mr. Robert S. Horowitz, Project

Counsel, National Pollution Funds Center.

Regulatory Information

This interim rule is being made effective on the date of

publication for the reasons given in the ``Implementation Schedule''

section of this preamble. Therefore, the Coast Guard for good cause

finds, under 5 U.S.C. 553(d)(3), that this rule should be made

effective in less than 30 days after publication. An interim, rather

than a final, rule is being issued to enable the public to comment on

the changes that have been made to the notice of proposed rulemaking

(NPRM).

Regulatory History

On September 26, 1991, the Coast Guard published an NPRM titled

``Financial Responsibility for Water Pollution (Vessels)'' in the

Federal Register (56 FR 49006). The Coast Guard received over 300

letters commenting on this proposal. On July 21, 1993, the Coast Guard

published a notice of availability of a Preliminary Regulatory Impact

Analysis (PRIA) in the Federal Register (58 FR 38994). The Coast Guard

received over 60 letters commenting on this PRIA.

Several of the commenters requested a public hearing. Extensive

comments were provided to the public docket, both concerning the NPRM

and the PRIA, during this extended comment period. In addition, on

November 9, 1991, the House Subcommittee on Coast Guard and Navigation

of the House Committee on Merchant Marine and Fisheries held a

Congressional hearing concerning the substance of the NPRM.

Certificates of Financial Responsibility Under the Oil Pollution Act:

Hearing Before the Subcommittee on Coast Guard and Navigation of the

House Committee on Merchant Marine and Fisheries, 102d Cong., 1st Sess.

(1991). Witnesses' oral and written statements at this hearing are very

similar to comments supplied to this rulemaking docket. The Coast Guard

determined that a public hearing would not further illuminate the

detailed comments provided to the docket or otherwise facilitate

development of the rule. Accordingly, a public hearing was not held by

the Coast Guard.

The Coast Guard also received about eight letters concerning this

rulemaking in response to a request for comments to the regulatory

review docket associated with former President Bush's regulations

moratorium and review (Coast Guard Docket No. CGD 92-005 and DOT Docket

No. 92-1). These comments sound the same themes as the comments to this

docket (CGD 91-005). This preamble, the PRIA and the final RIA that

accompanies this rule address the issues raised by these comments.

Background and Purpose

On August 18, 1990, the President signed into law the Oil Pollution

Act of 1990 (Pub. L. 101-380; 33 U.S.C. 2701 et seq.) (OPA 90). Under

Federal law before that date, several statutes dealt with the issue of

oil spill liability and compensation. Each was different and narrow in

scope.

To remedy this situation, OPA 90 repealed or superseded certain oil

spill liability provisions under the Federal Water Pollution Control

Act (33 U.S.C. 1321) (FWPCA), title III of the Outer Continental Shelf

Lands Act Amendments of 1978 (43 U.S.C. 1814) (OCSLAA), the Trans-

Alaska Pipeline Authorization Act (43 U.S.C. 1653) (TAPAA), and the

Deepwater Port Act of 1974 (33 U.S.C. 1517) (DPA). The financial

responsibility provisions of those acts (i.e., the provisions requiring

vessel owners and operators to maintain evidence of financial

responsibility sufficient to meet their potential liability under each

of those Acts) were replaced by a single financial responsibility

regime under section 1016 of OPA 90 (33 U.S.C. 2716). This new

financial responsibility regime is keyed to the broader and higher

limits of liability under OPA 90.

In addition to OPA 90, which is limited to all types of oil, the

Comprehensive Environmental Response, Compensation, and Liability Act,

as amended (42 U.S.C. 9601 et seq.) (CERCLA or Superfund) also concerns

pollution liability and compensation. CERCLA establishes a financial

responsibility regime for hazardous substances other than oil. The

Conference Report on OPA 90 (H. Rep. No. 653, 101st Cong., 2d Sess. 120

(1990) (Conference Report) states:

To avoid undue administrative burdens, the regulations for

financial responsibility for vessels should be consolidated,

wherever possible, with those under other Federal statutes. In this

manner, only one certificate would be required for vessels to meet

the requirements for financial responsibility for the statutes

consolidated by this Act, and other pollution laws such as the

Comprehensive Environmental Response, Compensation, and Liability

Act of 1980.

This rulemaking, therefore, consolidates financial responsibility

requirements for vessels under both OPA 90 and CERCLA. It allows the

issuance of a single, unified Certificate of Financial Responsibility

(COFR or Certificate) for vessels, replacing the separate certificates

and financial responsibility regimes under the FWPCA, OCSLAA, TAPAA,

and DPA. This new, unified COFR and financial responsibility regime

(under new part 138) also make it unnecessary for a separate

Certificate and regime under CERCLA. In effect, this rule alleviates

the need for five separate sets of regulations and certificates, as

well as the accompanying paperwork burden on government and industry.

Discussion of Comments and Changes

General Issues

This rulemaking proceeding has been contentious due to a number of

factors, most of which are not directly germane to the specifics of the

rule itself. Many in the maritime industry opposed title I of OPA 90 as

enacted, preferring instead the international liability and

compensation scheme for oil, namely the International Convention on

Civil Liability for Oil Pollution Damage of 1969 (1969 CLC) and its

companion International Convention on the Establishment of an

International Fund for Compensation for Oil Pollution Damage (1971 Fund

Convention). (These Conventions may be replaced by 1992 Protocols,

which incorporate amendments made in 1984 Protocols.) Under the 1969

CLC, insurers such as the Protection and Indemnity Clubs (P&I Clubs)

provide financial responsibility guaranties on behalf of their

shipowner members. These guaranties subject the Clubs to direct action

by all claimants and do not allow the use of policy defenses. The lower

shipowner limits of liability under the 1969 CLC are practically

unbreachable compared to OPA 90. Although this is not an issue directly

related to this rulemaking, it has, nevertheless, been the reason why

this rulemaking has been drawn out and contentious. In short, this

rulemaking has become the victim of the non-rulemaking-related

opposition to OPA 90.

The U.S. Congress, after the EXXON VALDEZ catastrophe, essentially

adopted the 1969 CLC's financial responsibility scheme, but rejected

its unbreachable limit of liability scheme, and instead enacted OPA 90.

Thus, although OPA 90's financial responsibility concept and mechanism

is very similar to that of the 1969 CLC, OPA 90 potentially exposes

owners and operators to far greater liabilities for removal costs and

damages from oil spills. OPA 90's philosophy is that, in general, the

spiller--not U.S. consumers and taxpayers--should bear the lion's share

of costs and damages.

In addition, under OPA 90, owners and operators remain subject to

potential unlimited liabilities under State laws as well. Adoption of

the 1969 CLC would have required preemption of State laws. These issues

are not matters within the Coast Guard's discretion to affect.

Nevertheless, these issues have impeded drastically the course of this

rulemaking.

Oceangoing shipowners and their wholly owned insurers, the P&I

Clubs that are members of the International Group of P&I Clubs,

objected to OPA 90's liability and compensation scheme before

enactment, after enactment, and in several comments to this rulemaking

docket. These commenters have emerged OPA 90's liability provisions

with financial responsibility issues, complicating this rulemaking

proceeding. The most serious commingling of the issues is the

unsubstantiated allegation by the P&I Clubs and their principal

reinsurer, Lloyd's of London, that, somehow, despite OPA 90's clear

statement to the contrary, the American court system would make

insurers serving as OPA 90 guarantors subject to unlimited liability.

Although it is true that no insurer can survive a legal system that

imposes unlimited liability on insurers, it is equally true that

Congress always has been well aware of that fact and paid sufficient

attention to that matter when it drafted OPA 90's provisions. No one

disputes the fact that vessel owners and operators are subject to

potential unlimited liability under OPA 90 (for example, when there is

gross negligence), but that fact should not be confused with the

alleged potential for guarantors to be liable without limit because of

this rule. There simply is no support in OPA 90 or in law for the

insurers' assertions.

The P&I Clubs, in particular, by stating early on that under no

circumstances would they open themselves up to unlimited liability by

continuing to provide 1969 CLC-type insurance guaranties to the Coast

Guard, placed an understandable fear in many segments of the maritime

industry. This fear was that, because the P&I Clubs have a virtual

monopoly on relatively inexpensive marine pollution liability

insurance, no vessel could demonstrate acceptable evidence of financial

responsibility without the P&I Clubs. The obvious consequence was said

to be that, if the Coast Guard adopted the NPRM, neither oil nor other

commodities would move in United States trade, thereby severely

disrupting the United States and global economies. In later comments to

the docket, the P&I Clubs confirmed that their shipowner boards of

directors would not permit the P&I Clubs to soften their stand. Thus,

the main focus of the debate has been whether the P&I Clubs would, in

fact, not provide these guaranties, and on the assumption that they

would not, whether there are other options (obtainable commercial

insurance or bonds) available to avoid this alleged economic

disruption. In fact, no commenters objected to the time-tested

mechanics of the proposed rule, which mechanics have been in place and

worked well for 23 years in the United States, and since 1975 in the

rest of the world under the 1969 CLC.

In order to explore all possible options, the Coast Guard has

examined all comments carefully, and looked at the suggested

alternatives to the NPRM. The PRIA, made available on July 21, 1993,

and open for public comment, refined the issues and elicited several

amplifying comments.

All issues now have been aired, and the Coast Guard has decided to

adopt the essence of the NPRM, subject to technical changes adopting

many of the commenters' suggestions and, hopefully, alleviating the

comments that P&I Clubs and other guarantors could somehow become

subject to unlimited liability. These changes are identified in the

discussion that follows. The Coast Guard has decided on this course of

action because it believes that the central objections of the

commenters to the rule are objections to OPA 90 itself (for example,

potential unlimited liability of vessel owners and operators), and, if

necessary, should be dealt with by the Congress and not the Coast

Guard. The central issue germane to this rulemaking is whether owners

and operators will be able to obtain financial responsibility

guaranties if the P&I Clubs, as they have declared, do not provide

guaranties of insurance. From the letters submitted to the regulatory

docket, the Coast Guard concludes that even if the P&I Clubs do not

provide these guaranties, alternative financial responsibility sources

will be available. These include commercial insurance entities and

surety bond companies, as well as the potential greater use of self-

insurance and financial guaranties. These alternatives are described

more fully in the final regulatory impact analysis (RIA) that

accompanies this rule, a summary of which appears under the heading

``Regulatory Impact Analysis'' in this preamble. The Coast Guard has

determined that the approach in the NPRM best fulfills the intent of

Congress to assure prompt and certain compensation by the polluter to

victims of oil spills and hazardous substance releases. Other suggested

alternatives do not satisfy that intent. Among these alternatives are:

treating P&I Club membership as an asset for self-insurance purposes;

treating P&I Club membership, with a provision making the Oil Spill

Liability Trust Fund a ``loss-payee,'' as a form of self-insurance; and

adoption through legislation of a ``Mandatory Excess Insurance

Facility.'' These alternatives are discussed in detail in the final RIA

accompanying this rule. The alternatives have not been adopted. That

was the main issue in this proceeding. The other issues primarily

concern specific technical aspects of each section of the rules.

Part and Section Numbers

The NPRM proposed that preexisting part 130 be replaced by a

completely new part 130, that parts 131 and 132 be removed, and that

subpart D of part 137 be removed and reserved. In order to phase in the

new rules with the least disruption and cost to the maritime industry,

an orderly compliance schedule is being adopted. This schedule allows

existing Certificates for non-tank vessels to be used until their

regularly scheduled expiration dates, as described in the section of

this preamble labeled, ``Implementation Schedule.'' Because of this

phased approach, preexisting parts 130, 131, and 132, and subpart D of

part 137, must temporarily remain effective after the effective date of

this rule. Accordingly, a new part 138 has been designated for the rule

that will replace preexisting parts 130, 131, and 132, and subpart D of

part 137. Conforming amendments have been made to 33 CFR parts 130,

131, and 132, and subpart D of part 137. The following table shows the

location in the new part 138 of the corresponding sections of the NPRM:

------------------------------------------------------------------------

NPRM Part 130 Part 138

------------------------------------------------------------------------

130.1(b)........................... 138.10.

130.1(a); 130.2(b) (``vessel'').... 138.12.

138.15 [new].

130.2.............................. 138.20.

130.3.............................. 138.30.

130.4.............................. 138.40.

130.5.............................. 138.50.

130.6.............................. 138.60.

130.1(c)........................... 138.65.

130.7.............................. 138.70.

130.8.............................. 138.80.

130.9.............................. 138.90.

130.10............................. 138.100.

130.11............................. 138.110.

130.12............................. 138.120.

130.13............................. 138.130.

130.14............................. 138.140.

130.15............................. 138.150.

Appendix A......................... Appendix A.

Appendix B......................... Appendix B.

Appendix C......................... Appendix C.

Appendix D......................... Appendix D.

Appendix E......................... Appendix E.

Appendix F......................... Appendix F.

Appendix G......................... 138.80(f).

------------------------------------------------------------------------

Implementation Schedule

Section 1016(h) of OPA 90 (33 U.S.C. 2716(h)) states that financial

responsibility regulations under acts repealed or superseded by OPA 90

remain in effect until superseded by new regulations issued under OPA

90. Therefore, the financial responsibility requirements in 33 CFR part

130 (FWPCA), 33 CFR part 131 (TAPAA), 33 CFR part 132 (OCSLAA), and 33

CFR part 137, subpart D (DPA) will remain in effect with respect to

individual vessels in the manner prescribed by section 138.15 of this

rule. The intent of the implementation schedule (which could also be

termed a compliance schedule) is to allow for an orderly transition to

part 138 by allowing, as some commenters recommended, COFRs issued

under the preexisting regulations to remain valid until their

expiration dates. The Coast Guard is adopting that comment, but only

with respect to non-tank vessels. (As explained below, tank vessels

will be required to demonstrate financial responsibility under the new

part 138 on a more expedited schedule.) This phased-in transition will

also enable the Coast Guard to issue new Certificates in an orderly

manner utilizing existing resources. Rather than attempting to issue

approximately 23,000 new COFRs by a single, mandatory date, the Coast

Guard expects the future Certificate renewal cycle, applicable to

Certificates issued under this rule, to result in the renewal of about

one-third that number each year. No new Coast Guard resources would be

required for that routine renewal cycle.

The existing operators of non-tank vessels which presently are

subject to the regulations issued under one or more of the preexisting

CFR parts may continue to comply with those preexisting regulations

for, in some cases, three and one half years after publication of this

rule in the Federal Register, depending upon the expiration dates of

their preexisting COFRs. These operators also have the option of

choosing to comply with this rule soon after its initial implementation

date, which is 180 days after the publication date, i.e., ``effective

date''.

On the other hand, self-propelled tank vessels, followed by non-

self-propelled tank vessels, will be required to comply with this rule

sooner than non-tank vessels because of the generally greater danger of

large and possibly catastrophic spills from tank vessels. Self-

propelled tank vessels will be required to submit, not later than 180

days after publication of this rule in the Federal Register, at least

the evidence of financial responsibility required by this rule (new

application forms will be required later). Non-self-propelled tank

vessels (i.e., tank barges) will be required to submit, not later than

one year after publication of this rule in the Federal Register,

application forms as well as evidence of financial responsibility

required by this rule.

Although this phased transition to the new rule may appear

complicated it is designed to impose the least burdensome requirements

on the regulated community while balancing the need of potential

claimants to be assured that the vessels posing the greatest pollution

threat, tank vessels, are in compliance within a reasonable time. It

also accounts for the administrative needs of the Coast Guard. A

reading of the actual regulation (Sec. 138.15) is encouraged to ensure

a full understanding of the compliance deadlines.

There are three dates germane to this implementation schedule. The

first is the ``effective date''. The other two can be termed the

``initial implementation date'' and the ``final implementation date''.

The effective date, as already discussed, is the date of publication in

the Federal Register. The initial implementation date is the date 180

days after the effective date. The final implementation date is the

date three years plus 180 days after the effective date. The final

implementation date is the date by which every vessel subject to OPA

90/CERCLA financial responsibility provisions is required to have an

OPA 90/CERCLA COFR issued under this new part 138.

Effective Date: The effective date of this rule is the date of its

publication in the Federal Register (see DATES at the beginning of this

preamble), for the following reasons:

(1) The phased implementation schedule imposes both a benefit and a

condition on current Certificate holders. The benefit is the ability to

use, temporarily, an existing Certificate. The condition is that the

Coast Guard will not accept the surrender (for the purpose of obtaining

a new Certificate with an extended expiration date) of a Certificate

during the 179 day period beginning on the effective date (publication

date) of this rule. Otherwise, Certificate holders simply could

surrender their existing Certificates and request the Coast Guard to

issue new Certificates with new three-year expiration dates. Were the

Coast Guard to allow this, the Coast Guard would be encouraging vessel

owners and operators to unreasonably delay compliance with the law and

this new rule. The likely result would be that thousands of COFRs would

be surrendered with requests for reissuance with new three-year

expiration dates, as would otherwise be permitted by the preexisting

rules. This would be an intolerable situation--one not contemplated by

Congress, and wholly inconsistent with the intent of the orderly

implementation schedule now being adopted.

(2) A second reason for the immediate effective date is to enable

vessel owners and operators that either are required, or wish, to carry

new Certificates under the new rule on or soon after the initial

implementation date, to file their applications as soon as possible.

For example, operators who already purchase OPA 90/CERCA liability

insurance and whose insurers' agree to issue the insurance guaranty

appended to this rule, may wish to apply for OPA 90/CERCLA COFRs on or

shortly after the effective date of this rule. The same applies to

operators who can obtain OPA 90/CERCLA surety bond or financial

guaranties, or who can self-insure.

(3) Although this rule is being made effective immediately, no

vessel is required to possess a new OPA 90/CERCLA COFR (part 138 COFR)

until at least the initial implementation date (180 days after the

effective date). Therefore, there is no burden placed upon any vessel

owner or operator by making the effective date immediate. For these

reasons, the Coast Guard has determined under 5 U.S.C. 553(d)(3) that

good cause exists for making the rule effective in less than 30 days

after publication in the Federal Register.

Initial and Final Implementation Dates: New Sec. 138.15 (and the

conforming new Secs. 130.0, 131.0, 132.0, and 137.300 in the

preexisting regulations) sets forth the effects of these dates on all

vessels, including vessels having existing COFRs issued under the

preexisting regulations, i.e., issued before the initial implementation

date of this new rule. The discussion in this preamble under

Sec. 138.15 explains these requirements.

Upon the final implementation date, 33 CFR parts 130, 131, and 132

and subpart D of part 137 (which concern vessel financial

responsibility under the FWPCA, TAPAA, OCSLAA, and DPA for water

pollution) will be removed. Title 33 CFR part 138 will then be the sole

rule governing vessel financial responsibility for oil spill incidents

and hazardous substance releases. ``Incidents'' and ``releases'' are

statutory terms with legal significance under OPA 90 and CERCLA,

respectively.

Mobile Offshore Drilling Units (MODUs)

Requirements for OPA 90 COFRs for offshore facilities per se do not

fall under the jurisdiction of the U.S. Coast Guard and, therefore, are

not included in this rule. However, COFRs issued to vessels which are

MODUs under this rule will cover not only the general (i.e., non-tank

vessel) liability of MODUs (section 1004(a)(2) of OPA 90) but their

tank vessel liability as well (section 1004(b)(1) of OPA 90).

Specifically, MODUs, when being used as offshore facilities, are deemed

by OPA 90 to be tank vessels with respect to discharges of oil on or

above the surface of the water. This rule, therefore, concerns only

vessel financial responsibility, not offshore facility financial

responsibility. Financial responsibility requirements for offshore

facilities under OPA 90 are administered by the Department of

Interior's Minerals Management Service.

Some commenters observed that the delineation of responsibility

between a MODU operator and an offshore leaseholder should be clarified

by these rules. The Coast Guard believes there are two distinct issues

here: (1) Demonstration of financial responsibility, and (2) liability

in the event of an oil discharge or substantial threat of a discharge.

(Clarification of what constitutes a MODU is accomplished in

Sec. 138.12(b) and in the definition of ``self-elevating lift vessel''.

See discussion associated with Secs. 138.12 and 138.20.) As to

financial responsibility, since a MODU, when operating as an offshore

facility, has the potential for liability as a ``tank vessel'', a MODU

must demonstrate financial responsibility that would apply to both non-

tank vessel and tank vessel situations. All of the guaranty forms

provide for such all-purpose coverage.

It could be argued that questions of allocating liability lie

outside the scope of this rulemaking respecting financial

responsibility. However, the Coast Guard is aware of the importance to

responsible parties and guarantors of assessing liability exposure in

making decisions relating to the provision of coverage, and hence

financial responsibility, for that exposure. Consequently, while

recognizing that the courts will determine matters of liability under

the provisions of OPA 90, the Coast Guard believes the following

legislative history is pertinent to the determination of Congressional

intent as to the scope of liability respecting MODUs operating as

offshore facilities.

The enactment of title I of OPA 90 represented the culmination of

the work of many Congresses on comprehensive oil pollution liability

and compensation at the federal level. The text of subsection (b) of

section 1004 of OPA 90, 33 U.S.C. 2704(b), which concerns the

delineation of MODU owner and operator and lessee or permittee

liability, derived from related provisions in bills considered by prior

Congresses.

The first bills concerning comprehensive oil spill liability and

compensation in which this delineation was made were H.R. 2222 and

2368, introduced and considered by the 98th Congress. Chairman Studds

of the House Coast Guard and Navigation Subcommittee of the House

Merchant Marine and Fisheries Committee, at a hearing of that

Subcommittee relating to those bills and H.R. 2115 held on April 20,

1983, called attention to the addition of text relating to that

delineation:

Mr. Biaggi has introduced H.R. 2115, which is identical to the

bill approved by our committee in the last Congress.

I have introduced H.R. 2222, which incorporates the main themes

of past legislation with three significant variations. First, it

incorporates the proposed change in allocating liability between oil

contractors and lessees which was included in H.R. 5906 last year; *

* *. Oil Pollution Liability: Hearing on H.R. 2222 (H.R. 2115, H.R.

2368), before the Subcomm. on Coast Guard and Navigation of the

House Comm. on Merchant Marine and Fisheries, 98th Cong., 1st Sess.

1 (1983).

The bill referred to by Mr. Studds, H.R. 5906 (97th Cong.), as

being the one in which the related change originated, passed the House

of Representatives on December 13, 1982. 128 Cong. Rec. 30336 (1982).

That bill would have amended title III of the Outer Continental Shelf

Lands Act Amendments of 1978, the extant federal statute concerning oil

pollution liability and compensation relative to vessels and facilities

engaged in Outer Continental Shelf Lands Act activities. Mr. Studds,

speaking on behalf of H.R. 5906, informed the House that one of the

goals of that bill was:

To reapportion the liability among the parties operating on the

OCS to reflect more closely the industry practice that prevailed

prior to enactment of the OCSLAA.

* * * * *

Finally, the reapportionment of liability mandated by H.R. 5906

will allocate the risks associated with OCS development more

equitably among the participants in that development. While title

III presently imposes liability solely upon the owners and operators

of offshore facilities and vessels, H.R. 5906, as amended, will

apportion it among the holders of leases, permits, and easements

issued under the OCSLAA, as well as the owners and operators of

vessels, mobile offshore drilling units and pipelines. Id. at 30334.

In the ensuing remarks during the House's consideration of H.R.

5906, those of Mr. Breaux were of special pertinence to the particular

scope of the intended liability of the MODU owner or operator:

The current statute has resulted in Coast Guard interpretations

holding the drilling contractors solely responsible for all oil

spills and the major oil company lessees free from liability.

* * * * *

Essentially, the amendment enacts into statute the preferred

industry practice for the apportionment of liability. The general

rule, therefore, is the imposition of liability on oil company

lessee for any oil spill emanating from their lease and the oil

reservoir contained therein. * * * The Committee intends that the

point of origin of an uncontrolled flow of oil determines where an

oil pollution incident originates, and not where the oil and water

first come into contact with one another. For example, the Pemex Bay

of Campeche oil spill originated below the surface of the water.

Within this general rule, the amendment would impose liability

on the drilling contractor operating on a lease for those oil spills

originating on or above the surface of the water. Our intent in

dividing liability in this manner is to hold the contractor

responsible only for the required petroleum and other oil that is

present on the rig in order for it to conduct its operations and

which are clearly under the control of the rig owner. (Emphasis

added) Id. at 30335.

A careful examination of the legislative history of the succeeding

bills relating to comprehensive oil spill liability and compensation

has failed to disclose any expressed alteration in Congressional intent

respecting the allocation of liability for MODUs engaged in drilling

operations.

This apparent Congressional intent comports with the position

advocated by some commenters. Moreover, if the words ``on or above the

surface'' were applied literally, a result certainly unintended by

Congress could easily occur. That result would be to invite liability

considerations to take precedence over safety and environmental

protection decisions. Clearly, in this comprehensive environmental

legislation, it would be unreasonable to interpret the statute in a way

that could easily degrade safety and the environment. By recognizing

that when the source of a discharge is below the seabed, the spill is

not an above the surface spill, emergency response actions will be

predicated on the best and safest means to abate the blowout, rather

than on the means (e.g., shutting in the blowout preventer and risking

a pressure buildup that could result in a catastrophic sub-seabed well

blowout) which would shift liability without regard to safety or the

environment. If the parties involved (the leaseholder and the MODU

owner or operator) so choose, they can enter into indemnification

agreements to allocate among themselves an apportionment of liability.

The indemnification agreements cannot be used, however, to avoid

completely liability to a claimant under OPA 90.

Paperless COFRs

One commenter recommended that the Fleet Certificate concept (which

concerns non-tank barges) be expanded to cover tank barges as well, and

that no COFR or copy be required aboard any barge on inland waters. In

view of its evolving computer technology for COFR enforcement purposes,

the Coast Guard may be able to adopt that recommendation in the future.

However, the Coast Guard's computer network has not yet evolved to a

level where this suggestion can be implemented. When it becomes

possible for the Coast Guard to adopt such a system, a notice proposing

this change will be published in the Federal Register.

Applicable Amounts of Financial Responsibility

Appendices B through F are guaranty form for evidencing financial

responsibility. Each contains an ``Applicable Amount Table''. Appendix

G of the NPRM, which also contained the Applicable Amount Table, has

been moved to a new paragraph (f) of Sec. 138.80. Section 138.80(f) and

the Applicable Amount Table in each form set out the means by which

applicants and guarantors calculate the amounts of financial

responsibility required to be established and maintained under this

rule.

The amount of financial responsibility which must be established

and maintained with respect to each vessel to be covered under section

1016(a) of OPA 90 (33 U.S.C. 2716(a)) (i.e., the amount applicable to

the vessel under OPA 90) is calculated by applying the appropriate

formula specified in Sec. 138.80(f)(1) (Part I of the Applicable Amount

Table in the forms) in accordance with the type of vessel and its size

in gross tons. The formulae set out in Sec. 138.80(f)(1) and Part I are

based upon the provisions of paragraphs (a)(1) and (a)(2) of section

1004 of OPA 90 (33 U.S.C. 2704), as mandated by section 1016(a) of OPA

90.

With respect to CERCLA, the NPRM proposed that all vessels

demonstrate financial responsibility at the minimum amount of $5

million, by applying the formula specified under Part II of the Table,

as proposed. The formula was derived from the provisions of section

108(a)(1) of CERCLA. In deriving the formula for Part II as proposed,

the Coast Guard took cognizance of practical considerations of which

Congress must be deemed to have been aware when drafting CERCLA. The

term ``hazardous substances'' as defined for the purposes of CERCLA (42

U.S.C. 9601(14)) includes an almost limitless number of materials. In

addition, there are numerous methods by which any one of those

materials, especially in small amounts, may be carried as cargo aboard

vessels. At the time a CORF application for a particular vessel is

processed, and even after a COFR is issued, there is no known way for

the Coast Guard to determine that a hazardous substance is not being

carried, or will not be carried (especially in small amounts), aboard

that vessel as cargo.

Consequently, in order to assure that the statutorily required

amount of financial responsibility had been calculated and established

and would be maintained for every subject vessel, it was considered

necessary to assume that all vessels subject to the provisions of

section 108(a)(1) of CERCLA carry, or might carry, hazardous substances

as cargo. For this reason, the formula in part II of the Table as

proposed prescribed a minimum of $5,000,000 for all vessels. Comments

were encouraged regarding possible means by which a determination could

be made at the time of certification that, in fact, a particular vessel

is not carrying and will not carry hazardous substances as cargo.

Some commenters, however, object to having to demonstrate financial

responsibility at this minimum $5 million level. They assert that this

is inconsistent with CERCLA in that CERCLA recognizes that for vessels

not carrying hazardous substances as cargo, the liability limit is a

minimum of ``(500,000 (section 108(a)(1) of CERCLA requires financial

responsibility to cover the liability prescribed under section

107(a)(1), and that section in paragraph (B) establishes a minimum

liability limit of $500,000 for vessels not carrying hazardous

substances as cargo). One commenter states that if the Coast Guard can

rely upon a declaration of a vessel owner that the vessel is a non-tank

vessel, a similar declaration should be allowed for carriage of

hazardous substances as cargo. Another commenter alleges that vessels

carrying hazardous substances as cargo can only do so in accordance

with Coast Guard safety regulations, and that it is inappropriate to

assume that vessels will operate in violation of those regulations.

In adjusting this rule, the Coast Guard has adopted revisions that

balance two of CERCLA's apparently contrary mandates: (1) That the

Coast Guard certify that the required minimum amount of financial

responsibility ($5 million) is maintained by a responsible party in the

event of a release or threatened release of a hazardous substance

carried as cargo; and (2) the provision in CERCLA that vessels that do

not carry hazardous substances as cargo need demonstrate financial

responsibility only at the greater of $500,000 or $300 per gross ton.

The Coast Guard concludes that the fairest way to accommodate these two

opposing interests is by allowing the vessel operator and the provider

of financial responsibility to decide the matter between themselves.

For example, if an insurer or surety company is satisfied that its

insured or principal in fact does not and will not carry hazardous

substances as cargo, then the cost of the insurance or surety bond

guaranty with respect to CERCLA may be priced at the $500,000/$300 per

gross ton premium. The proposed and now adopted wording of the

insurance and the financial guaranty forms, as well as the new wording

of the surety bond guaranty, is such that, should a release occur and

the facts show that a vessel was carrying a hazardous substance as

cargo, the limit of the guaranty will automatically be raised to the

higher amount, i.e., the greater of $300 per gross ton or $5 million.

(The guaranty forms have also been amended to achieve a parallel result

with respect to OPA 90 financial responsibility if the vessel is in

fact a tank vessel.) This will not affect the qualifications of self-

insurers or financial guarantors who, as proposed, still must

demonstrate working capital and net worth according to the $300 per

gross ton/$5 million formula. Only by methods such as these may the

Coast Guard certify that financial responsibility requirements have

been met, whether or not hazardous substances are carried as cargo. The

Coast Guard has determined that this protection is necessary given the

peculiar nature of hazardous substance carriage, and the inability to

be assured ahead of time that no hazardous substances are being or will

be carried as cargo. Section 138.80(f)(2) (Part II of the Applicable

Amount Table in the forms) has been adjusted to reflect this decision.

The Coast Guard also notes that, with respect to carriage of

hazardous substances, this decision only affects vessels under 16,666

gross tons. Above 16,666 gross tons, at $300 per gross ton a vessel

would have to meet the $5 million minimum threshold. However, those

operators of smaller vessels who can assure their financial

responsibility providers that hazardous substances are not and will not

be carried as cargo, may obtain a cost savings by being able to

purchase guaranties of financial responsibility at the $500,000/$300

per gross ton premium level.

Section 138.80(f)(3) (Part III of the Table in the forms) is simply

the addition of the amounts of financial responsibility required by

paragraphs (f)(1) and (f)(2) of Sec. 138.80 (Parts I and II of the

Table in the forms). This sum is termed the ``total applicable

amount''. The formula is derived from the provisions of section 1004 of

OPA 90 and section 107(a) of CERCLA (as noted above) and reflects the

fact that liability stemming from one event may arise under both Acts.

In such a circumstance, and only in such a circumstance, it is

necessary that two separate and distinct amounts of financial

responsibility be available to meet equally separate and distinct

amounts of liability under the Acts. The ``total applicable amount'' is

not an aggregate amount applicable to a guarantor's liability under

just one of the Acts.

One company commented that some of its barges are unable to carry

both oil and hazardous substances at the same time, and therefore, that

it should not have to establish an amount of financial responsibility

reflecting both OPA and CERCLA with respect to such single-commodity

barges. The Coast Guard concluded, however, that it is not in a

position to issue a special tank barge COFR just for OPA 90 and a

separate tank barge COFR just for CERCLA. In the first place, the Coast

Guard could never be certain that a particular tank barge, which had

been issued only a CERCLA COFR, was not carrying oil, or vice versa. In

order to become certain that a barge's COFR matched its permissible

cargo, it would be necessary to physically detain the barge, test its

cargo and determine whether it was either an OPA 90-regulated oil or a

CERCLA-regulated hazardous substance derivative of oil, and then match

such cargo against the type of COFR being carried that particular day.

The tremendous cost, delay and burden such an enforcement system would

entail, both for the barge industry and the Coast Guard, would not

justify separate certification and enforcement procedures.

Section-by-Section Discussion

A number of drafting changes have been made to improve readability

and to specify the persons upon whom obligations are placed. These

changes are considered non-substantive and are not further explained.

Also, new sections have been added to add further clarity to the rule.

These are: Sec. 138.12 (applicability); Sec. 138.15 (implementation

schedule); and Sec. 138.65 (issuance and carriage of Certificates).

Only Sec. 138.15 contains entirely new text, reflecting the compliance

schedule adopted by this rule.

Section 138.10 Scope

This section addresses the general purpose of these regulations,

namely that they establish the procedures for establishing and

maintaining evidence of financial responsibility under OPA 90 and

CERCLA. This section is derived from proposed Sec. 130.1(b). (Proposed

Sec. 130.1(a) is new Sec. 138.12(a), and proposed Sec. 130.1(b) is new

Sec. 138.65.) Section 138.10 clarifies the proposed text by adding the

term ``demise charterer'' to the class of persons who must be covered

by the evidence of financial responsibility required under this part.

This clarification is being made because both OPA 90 and CERCLA define

an ``owner or operator'' of a vessel as including any demise charterer

of the vessel. Thus, if any vessel subject to this part simultaneously

has an owner, a demise charterer and an ``operator'' (as defined in

this part), all three of those entities automatically will be covered

by the guaranty of insurance or other evidence of financial

responsibility submitted under this part. Demise charterer, as used in

this part, is synonymous with the common parlance term ``bareboat

charterer''.

Section 130.1(d) of the NPRM, which concerned ``public vessels'',

has been deleted. New Sec. 138.12(d) provides that 33 CFR part 138 does

not apply to any public vessel. Thus, it will not be necessary for

public vessels to apply for COFRs. However, all public vessels which

are not readily identifiable as such (i.e., vessels which are not naval

war ships, Coast Guard cutters, etc.) and which are crewed by

nongovernmental personnel, are strongly encouraged to carry appropriate

government documentation indicating that the vessels are, in fact,

public vessels, i.e., vessels owned or bareboat chartered by a

government and not engaged in commerce. Such documentation, including a

copy of any bareboat charter party, will serve to avoid

misunderstandings with enforcement personnel who are not readily able

to determine whether a particular vessel, especially a vessel owned and

operated by private interests, and engaged in business which could be

construed as commercial in nature (e.g., dredging), is or is not a

public vessel.

Section 138.12 Applicability

New Sec. 138.12 has been created to state clearly the applicability

of part 138. This section is comprised of parts of proposed

Sec. 130.1(a), and of the definition of ``vessel'' from proposed

Sec. 130.2(b).

Paragraph (a)(1): In response to comments, this paragraph, which is

derived from proposed Sec. 130.1(a)(1), has been amended to make it

clear that ``vessels of any size using the waters of the exclusive

economic zone to transship or lighter oil'' means both delivering and

receiving vessels. The term ``vessel of any size'' does not include the

towing/pushing vessel (tug) that has custody of a barge transshipping

or lightering oil within the exclusive economic zone. That is, a tug of

300 gross tons or less would not be made a tank barge (i.e., would not

be made subject to the financial responsibility requirements of this

rule) just because it had custody of a transshipping or lightering

vessel.

Paragraph (a)(2): This paragraph is derived from proposed

Sec. 130.1(a)(2). The FWPCA excluded from the requirement to establish

and maintain evidence of financial responsibility, a non-self-propelled

``barge'' that does not carry oil as cargo or fuel. Section 1016(a)(1)

of OPA 90 excludes from that requirement a non-self-propelled

``vessel'' that does not carry oil as cargo or fuel. In this rule, the

Coast Guard considers OPA 90's use of the term ``non-self-propelled

vessels'' to mean non-self-propelled barges. This construction is

consistent with a similar exception in CERCLA. Therefore, in

Sec. 138.12(a)(2)(ii) of this rule, the exception refers to ``barges''

rather than ``vessels''.

Paragraph (b): This paragraph concerns MODU liability and is

derived from the proposed definition of the term, ``vessel''. Some

commenters asserted that a mobile offshore drilling unit (MODU) should

not be treated as a tank vessel when drilling. The Coast Guard cannot

adopt this suggestion as the liability ascribed to a MODU when drilling

has been fixed by Congress. Therefore, paragraph (b) of Sec. 138.12 has

been amended to make it clear that under OPA 90, when there is an ``on

or above the surface of the water'' discharge or substantial threat of

a discharge of oil from a MODU, the MODU is treated as tank vessel (for

purposes of determining the limits of liability and the identity of the

responsible party) (33 U.S.C. 2704(b)). Since a MODU has potential

liability as a tank vessel, the MODU operator must demonstrate

financial responsibility at tank vessel limits to cover the time that

the MODU is operating as an offshore facility and has a spill ``on or

above the surface of the water.''

Paragraph (c): This paragraph has been added to make it clear that

CERCLA's financial responsibility provisions and this rule apply to

self-propelled vessels which exceed 300 gross tons, even if they do not

carry hazardous substances. Congress mandated that owners, demise

charterers, and operators of all self-propelled vessels over 300 gross

tons comply with CERCLA's financial responsibility provisions, without

regard to whether or not the vessels actually carry hazardous

substances. In this connection, the following points may be indicative

of Congressional thinking: Most, if not all, self-propelled vessels

over 300 gross tons carry hazardous substances in one form or another

(e.g., ships' stores); and insurance coverage for liabilities

concerning releases of hazardous substances from brown water vessels

has never been unavailable or subject to high premiums in the United

States (viz: coverage provided by the Water Quality Insurance

Syndicate, New York, NY). Further, with respect to blue water

(oceangoing) vessels, the International Group of P&I Clubs

traditionally has provided unlimited liability coverage for releases of

hazardous substances, and still does; and P&I Club premiums for this

coverage (while not broken out from the total calls and premiums for

P&I cover) are understood to be relatively low. Accordingly, prudent

vessel operators would choose to take advantage of the available,

relatively inexpensive insurance and carry such coverage as a matter of

course. Whatever the reason for the Congressional mandate may have

been, the Coast Guard has no rulemaking flexibility where the law is

clear on its face.

Paragraph (d): This paragraph recites that 33 CFR part 138 does not

apply to public vessels.

Section 138.15 Implementation Schedule

This new section sets forth the implementation schedule for vessels

requiring COFRs under OPA 90 and CERCLA by specifying mandatory

compliance dates for categories of vessels. As discussed earlier under

``Implementation Schedule,'' this section establishes a phased

compliance schedule, based on two categories of vessels--tank vessels

(which are broken into two groups, self-propelled and non-self-

propelled), and non-tank vessels. As to the latter category, this

section, for the most part, allows vessels to operate with their

prexisting COFRs until they expire. This section also prevents vessel

owners and operators from surrendering prexisting COFRs solely for the

purpose of obtaining, under the preexisting rules, new COFRs with

extended expiration dates.

Paragraph (a): This paragraph governs the compliance schedule for

tank vessels. Paragraph (a)(1) provides that a self-propelled tank

vessel may continue to carry its preexisting COFR (or obtain one and

carry it) until December 28, 1995, so long as acceptable evidence of

financial responsibility has been submitted under the new part 138 by

December 28, 1994. A non-self-propelled tank vessel may continue to

carry its preexisting COFR (or obtain one and carry it) until July 1,

1995.

Paragraph (a)(2) concerns self-propelled tank vessels and requires

that they submit evidence of financial responsibility under the new

part 138 by December 28, 1994. An application form for a new COFR may

be submitted at a later date. For administrative convenience,

preexisting Certificates issued under 33 CFR parts 130, 131, or 132 may

continue to be carried on these self-propelled tank vessels so long as

the new part 138 evidence of financial responsibility has been

submitted. If this new evidence of financial responsibility is not

submitted by December 28, 1994, the preexisting Certificates for that

vessel will be revoked on that date. By December 28, 1995, a self-

propelled tank vessel must have applied for, and be carrying, a new

part 138 Certificate, regardless of the expiration date on any

preexisting Certificates.

Paragraph (a)(3) concerns the requirements for a self-propelled

tank vessel that does not possess a preexisting COFR issued under 33

CFR part 130 before December 28, 1994. This vessel may not operate on

or after that date unless it carries a new part 138 COFR. Accordingly,

this vessel must apply for a new part 138 COFR following the procedures

specified in Secs. 138.50 and 138.60.

Paragraph (a)(4) requires a non-self-propelled tank vessel to

submit evidence of financial responsibility and a new application form

under this new rule at least 21 days before July 1, 1995. (The 21 days

refers to a time constraint imposed by Sec. 138.50.) By July 1, 1995, a

non-self-propelled tank vessel must carry a new OPA 90/CERCLA (part

138) COFR. On that date, preexisting COFRs for non-self-propelled tank

vessels will be revoked.

Paragraph (b): This paragraph governs the compliance schedule for

non-tank vessels. Paragraph (b)(1) provides that a non-tank vessel must

carry a part 138 Certificate no later than December 28, 1997, provided

that before that date, the vessel carries a non-expired, part 130

Certificate. A part 132 Certificate, if applicable to that vessel, must

also be carried. A non-tank vessel subject to part 138 may apply for a

part 138 Certificate any time on or after July 1, 1994.

Paragraph (b)(2) provides that on and after December 28, 1994, and

before December 28, 1997, a Certificate issued to replace an existing

33 CFR part 130 or 132 Certificate for non-tank vessels will bear the

same expiration date as the Certificate being replaced. The

circumstances where this might occur are when a Certificate has been

lost, or there is a vessel name change or operator name change. A

change in legal identity is not a mere name change. This paragraph also

provides that during this interval, the expiration date on a renewal

Certificate issued under 33 CFR part 132 will be the same as the

expiration date on the 33 CFR part 130 Certificate for that vessel.

Paragraph (b)(3) provides that a non-tank vessel holding a 33 CFR

part 130 Certificate issued before December 28, 1994, may continue to

operate with that Certificate until it expires.

Paragraphs (b)(4) and (b)(5) provide that new Certificates issued

under 33 CFR parts 130 and 132 on or after July 1, 1994, and before

December 28, 1994, will bear an expiration date three years after the

date of issuance, except that a Certificate surrendered during that

interval with a request for the issuance of a new Certificate for that

same vessel will bear an expiration date the same as the expiration

date appearing on the surrendered Certificate.

Paragraph (c): This paragraph provides that after the effective

date of this rule, a vessel that is 300 gross tons or less and,

therefore, does not carry a Certificate under 33 CFR part 130, need no

longer carry a Certificate issued under 33 CFR part 131 (relating to

TAPAA) or part 132 (relating to OCSLAA), so long as that vessel is not

required by OPA 90 to obtain a Certificate because the vessel is

engaged in lightering in the Exclusive Economic Zone. A vessel of this

size engaged in lightering is required to maintain its part 131 or 132

Certificate until the vessel obtains a certificate under paragraph (a)

or (b) of this section, as may be applicable.

Section 138.20 Definitions

Cargo: At the suggestion of one commenter, the definition of cargo

has been amended to make it clear that neither hazardous substances nor

oil, when carried solely for use aboard vessels (oil to power or lube

onboard machinery; paints; cleaners; degreasers; etc.), are included in

the definition of cargo.

Demise Charterer: A definition has been added to make it clear that

this term is synonymous with the common term ``bareboat charterer''.

Fish tender vessel and fishing vessel: A definition was added for

these terms in order to indicate that the terms have the same meaning

as set forth in 46 U.S.C. 2101. This will aid in determining the

meaning of the term ``tank vessel''. Section 5209 of Pub. L. 102-587

provided that each of these types of vessel is not a tank vessel. This

law was enacted after the NPRM was published.

Guarantor: For the sake of convenience to persons who must comply

with this rule, a definition of ``guarantor'', based on the definition

in OPA 90 and CERCLA, was added to the rule.

Hazardous material: Some commenters observed that this term is

different from ``hazardous substances'' as used in CERCLA, and were

concerned that tank vessel liability not be ascribed to vessels

carrying non-liquid hazardous substances. A definition of this term has

been added to make clear that a vessel carrying liquid hazardous

materials is a tank vessel. In the Conference Report, at page 102,

Congress stated, ``The term `tank vessel' has the same meaning as that

term has under section 2101 of title 46, United States Code.'' This 46

U.S.C. 2101 definition of tank vessel uses the term ``hazardous

material,'' which is defined in 46 U.S.C. 2101(14), and that definition

of hazardous material controls.

Insurer: This definition has been amended to clarify the meaning of

``insurer'' or ``insurers'' as used in this rule (see, for example,

Sec. 138.80(b)(1) concerning insurance guaranties). The words ``is a

type of guarantor'' have been added to make it clear that, insofar as

insurers are concerned, this rule applies only to that class of

insurers who choose to be guarantors.

Offshore supply vessel: A definition of this term was added to

indicate that it has the same meaning as set forth in 46 U.S.C. 2101,

and will assist in the determination of the term ``tank vessel''.

Section 5209 Public Law 102-587, enacted after the NPRM was published,

provided that an offshore supply vessel is not a tank vessel.

Operator: Some commenters felt this definition was confusing and

some recommended that the term ``responsible party'' be used instead.

Accordingly, the definition of operator was amended first, to narrow

its scope by deleting the words ``including but not limited to'' and,

second, to clarify its meaning by adding the words ``or who agree by

contract to become responsible'' [for a vessel in the capacity of an

operator]. The first change was made to make the definition less open

ended. There are entities, such as agents, ``manager'', traditional

time charterers and traditional voyage charterers (i.e., charterers who

do not take operational responsibility for the vessels they charter)

that are not intended to be included in this definition. The second

change was made for the benefit of persons, such as ship repair yards,

who objected to the word ``repairer'' in the definition of operator.

For example, one commenter stated that the owner or operator who brings

a vessel to the shipyard remains absolutely the owner or operator, and

there is no transfer of rights or responsibilities to the repair

facility. In a case such as this, the term ``operator'' would not apply

to repair facilities. However, in a case where a ship repair yard

either is responsible under law, or for commercial reasons agrees with

owners to become responsible for pollution liability in connection with

a vessel under the repairer's custody, that repair facility is and has

been subject to vessel financial responsibility requirements since

1971. See discussion at 43 FR 35705, August 11, 1978. In short, this

rule does not transform non-liable repairers of vessels into legally

liable ``operators'' of those vessels. Shipyards and other persons who

would not otherwise be responsible for vessels are free, of course, to

contract with vessel owners, as they may see fit, with respect to

becoming responsible for (i.e., becoming the operators of) vessels in

their custody. As always, if repairers or other person are not

responsible for the non-owned vessels in their custody, this rule will

not apply to them. In a case such as that, any valid COFR, issued to a

vessel's owner, operator, or bareboat charterer, will remain valid and

must be retained aboard the vessel while in the repairer's custody. The

third change to the definition of ``operator'' was the addition of the

word ``custodian''. This change was made merely to confirm that a

person who is responsible for a vessel need not physically operate the

vessel--move it from place to place--to be its ``operator'' for

purposes of this rule.

Public Vessel: In accordance with a ruling by the General Counsel

of the Department of Transportation interpreting the statutory

definition of ``public vessel'', this definition has been modified by

deleting the words ``and operated''. Accordingly, any vessel owned or

bareboat chartered by the United States, or by a State or political

subdivision of a State, or by a foreign nation, is a public vessel

except when engaged in a commercial service. (An example of a

commercial service is holding oneself out for hire to carry passengers

or cargo, and the lack of profit is not necessarily determinative of a

commercial service.)

Accordingly, it is no longer necessary that a vessel be physically

operated by a governmental entity or under its direct day-to-day

control in order to qualify as a public vessel, i.e., vessels owned or

bareboat chartered by governmental agencies may be crewed by commercial

entities and remain ``public vessels'', for the purpose of this

regulation, provided the vessels engage only in governmental

(noncommercial) service.

Self-elevating lift vessel: This definition was added because OPA

90 defines a ``mobile offshore drilling unit'' (MODU) as a vessel,

other than a ``self-elevating lift vessel'', capable of use as an

offshore facility. It has been argued that because a self-elevating

lift vessel can, literally, be a type of MODU known as a jack-up

drilling rig, Congress intended the term ``self-elevating lift vessel''

to include a jack-up drilling rig, i.e., that MODUs do not include

jack-up drilling rigs. One argument to the contrary is that Congress

could not have meant to exclude jack-up drilling rigs from the

definition of MODUs because jack-up drilling rigs constitute the most

common type of MODU; had Congress intended to exclude from the

classification of MODUs the most common type of MODU (jack-up drilling

rigs), it surely would have at least hinted at that result, in the

law's legislative history. Another argument to the contrary is that had

Congress intended to exclude jack-up drilling rigs, it would have used

the term ``self-elevating drilling vessel'', not ``self-elevating lift

vessel.'' The Coast Guard interprets OPA 90's use of the term ``self-

elevating lift vessel'' to mean a self-elevating, offshore work boat

(or work barge) that does not engage in actual drilling operations.

Tank Vessel: This definition has been changed by deleting the

proposed regulatory definition and substituting the definition in

section 1001(34) of OPA 90 (33 U.S.C. 2701(34)), with three

clarifications. This accords with Congressional intent expressed in the

Conference Report at page 102. First, the word ``liquid'' has been

inserted before the words ``hazardous material'', in accordance with

the definition of hazardous material in 46 U.S.C. 2101(14) (see

explanation under ``hazardous material''). Second, specific exclusions

to the definition of ``tank vessel'' have been added in accordance with

section 5209 of Public Law 102-587, which was enacted after the NPRM

was published. Third, in accordance with one comment, the definition

has been amended to make it clear that a vessel towing or pushing, or

having in its custody, a tank barge, cannot for those reasons alone, be

deemed included in the definition of tank vessel. Some carriers of

liquefied natural gas (LNG) argued that they should be able to

demonstrate lower levels of financial responsibility than is required

for oil-carrying tank vessels. Tank vessel limits are set by Congress

and the Coast Guard is not empowered to lower those limits. A vessel

carrying LNG clearly meets the definition of ``tank vessel''.

Section 138.30 General

Paragraph (a): A number of commenters were concerned that the NPRM

was ambiguous, possibly multiplying the liability limit with respect to

a vessel by three--that is, the owner, operator, and demise charterer

would each have liability up to the specified limit, and their

liabilities would be added together. That was not the intent of the

NPRM. Nevertheless, potential guarantors were likewise concerned that

they might be liable for three times the amount of the guaranty. The

Coast Guard believes that OPA 90 and CERCLA impose only one limit of

liability, per incident or release or threatened release, under each

Act for a guarantor with respect to a vessel. Therefore, this

subsection has been amended to clarify the fact that even though the

owner, demise charterer, and operator of a vessel are jointly and

severally liable, and must all be covered by the evidence of financial

responsibility submitted for a COFR, the amount of that financial

responsibility provided by a guarantor is for the single limit. For

example, if the operator of a 40,000 gross ton tanker spills oil and

the $1,200 per gross ton limit of liability is not broken, the owner,

demise charterer, operator, and guarantor would be jointly and

severally liable for that incident, and the guarantor's liability

(without regard to whether the limit is broken) under OPA 90 should the

owner, demise charterer, and operator pay nothing, cannot exceed the

amount of financial responsibility provided by the guarantor, in this

case $48 million ($1,200 x 40,000).

This section also has been amended to confirm that the total amount

of financial responsibility provided by a guarantor is not applicable

to an incident or release or threatened release of just oil or just

hazardous substances--only the amount guarantied for an oil incident is

available for that incident, and only the amount guarantied for a

hazardous substance release or threatened release is available for that

event.

Paragraph (b): As recommended by some commenters, this paragraph

has been amended to state that this rule does not apply to time

charterers or voyage charterers, i.e., charterers who do not assume,

and do not have imposed upon them by contract or otherwise, the

responsibility associated with operation of a vessel.

Paragraphs (c)-(f): Potential insurance guarantors commented that

guarantors should be able to rely upon official tonnage certificates,

particularly with respect to tank vessels under OPA 90. A tank vessel

greater than 3,000 gross tons carries a minimum liability of ten

million dollars while a tank vessel of 3,000 gross tons or less carries

a minimum liability of two million dollars. Guarantors justifiably

relying on tonnage set out in tonnage certificates understandably wish

to avoid situations where, after incidents involving tank vessels, they

could find themselves exposed in a direct action to a ten million

dollar liability rather than the anticipated lower limit applicable to

tank vessels of 3,000 gross tons or less.

Thus, in a case where a tank vessel's official, applicable tonnage

document declares the vessel's official tonnage to be (for example)

2,990 gross tons, the Coast Guard agrees that the vessel's guarantor

should be able to rely on a maximum liability under OPA 90 of

$3,588,000 (2,990 tons x $1,200 per ton) even if it develops that

2,990 gross tons was a typographical error on the official, applicable

tonnage certificate or the vessel was incorrectly measured, and that

the vessel's true tonnage is over 3,000 gross tons. The rule has been

amended in order to provide that protection to guarantors, except where

a guarantor knew or should have known that the applicable tonnage

certificate was incorrect. (This additional defense is reflected in the

various guaranty forms appended to this rule.) Paragraphs (c), (d), and

(e) have been revised slightly to clarify the appropriate tonnage to

use for various vessel types and flags, and a clause has been added to

each section to clarify the appropriate tonnage used for determining

the limits of liability under OPA 90 CERCLA.

Section 138.50 Time to Apply

Paragraph (a): Paragraph (a) was amended at the request of one

commenter, to provide that the Coast Guard may waive the requirement to

file an application for a Certificate of Financial Responsibility at

least 21 days before the Certificate is required. This same amendment

was made in Sec. 138.70(a), concerning applications to renew

Certificates. An example of a circumstance when the 21-day requirement

might be waived is when a tank vessel, not having a current COFR and

not planning on entering the United States, does not have an

opportunity to file an application 21 days in advance because it is

redirected on short notice to call at a United States port. The Coast

Guard makes every attempt to accommodate unusual circumstances.

Section 138.60 Application, General Instructions

Paragraph (c): This paragraph was amended at the request of one

commenter, by deleting the words ``other empowered'' and substituting

therefore the more correct words ``the chief executive officer, or any

other duly authorized'', to describe who may sign an application on

behalf of a corporate applicant.

Paragraph (d): This paragraph was amended at the request of one

commenter, to change ``days'' to ``business days'' in order to provide

more time for an applicant to inform the Coast Guard of a change in the

information provided in an application. For the same reason, ``days''

was changed to ``business days'' in Sec. 138.80(b)(3)(iii)(B).

Section 138.65 Issuance and Carriages of Certificates

This new section is derived from the text of proposed

Sec. 130.1(c). It is placed more properly in a section other than

``scope.''

The text has been amended to make it clear that vessels are not

subject to sanctions for failure to carry a valid Certificate of

Financial Responsibility in cases where a COFR is removed from a vessel

temporarily, at the request of U.S. law enforcement personnel.

Section 138.70 Renewal of Certificates

A new paragraph (c) was added to clarify that the first time a

Certificate is required under part 138, to replace a Certificate issued

under 33 CFR part 130, a new full application form, rather than a

letter, is required. However, the Coast Guard is not requiring a

``first time'' application fee under these circumstances, recognizing

that under preexisting practice, a ``first time'' fee is not required

for a renewal application. Once a new application form has been filed

for a part 138 Certificate, any additional Certificates may be applied

for by letter.

Section 138.80 Financial Responsibility, How Established

A number of changes, explained under each paragraph, were made to

address several comments. These changes concern use of multiple

guarantors, defenses available to guarantors, and the addition of a

catchall method, ``other evidence of financial responsibility''.

Paragraph (b)(1) (Insurance): In the proposed phrase ``executed by

an insurer that has been approved by * * * the Director, NPFC, for

purposes of this part'', the word ``approved'' was deleted and the

words ``found acceptable'' were substituted. The word ``acceptable'' is

preferred because it is used in the definition of ``Insurer'' in

Sec. 138.20(b). Section 138.80(b)(1) also has been amended to clarify

the fact that more than one insurer may execute an insurance guaranty,

and that the subscribing insurers shall be jointly and severally liable

unless percentages of participation are provided on the guaranty by

each subscribing insurer. For purposes of this part, and as discussed

below, a percentage means a vertical percentage (rather than a

horizontal layering).

One commenter recommended that the Coast Guard incorporate

standards for approval of insurers, sureties, and financial guarantors.

Standards for sureties are set by the Department of the Treasury, as

OPA 90 requires bonding companies to be authorized to do business in

the United States, a reference to Treasury-approved sureties. Financial

guarantors must meet the detailed standards for self-insurers. Insurers

must be acceptable to the Coast Guard, and for many years,

acceptability had been determined by the Federal Maritime Commission

(FMC) on a case-by-case basis. The Coast Guard has followed the

criteria established by these decisions. Any insurer desiring to be

recognized, as an acceptable insurer may telephone, write to, or meet

with the Coast Guard to review the factors considered. The Coast Guard

is evaluating the possibility of a future rulemaking adopting

acceptability standards, but has decided not to develop these standards

through this financial responsibility rule.

Paragraph (b)(2) (Surety bond): This paragraph was amended to

clarify the fact that more than one surety may execute a surety bond

guaranty form. As in the cage of insurers, sureties must state vertical

percentages of participation if they wish to avoid joint and several

liability.

Paragraph (b)(3) (Self-insurance): A number of commenters

recommended that the Coast Guard adjust the net worth and working

capital formulae by allowing worldwide assets rather than only U.S.-

based assets to be counted in the asset side of the equation. The Coast

Guard has not adopted this suggestion. The reasons are explained fully

in the Regulatory Impact Analysis associated with this rulemaking.

Paragraph (b)(3)(vi) permits the Coast Guard to waive the working

capital requirement under certain circumstances. Under paragraph

(b)(3)(vi)(A) the Coast Guard may waive the working capital requirement

for prospective self-insurers who are regulated public utilities,

municipal or other governmental entities, or charitable, non-profit

making organizations under section 501(c) of the Internal Revenue Code.

One commenter stated that it is a tax-exempt, not-for-profit U.S. oil

spill response corporation, that operates vessels for that purpose. It

commented that it does not believe it will be able to obtain a surety

bond, insurance or financial guaranty, or be able to qualify as a self-

insurer under the proposed rule. It, therefore, believes that the

proposed rule will hamper ``reliable'' response organizations and thus,

undermine an essential purpose of OPA 90--a quick, effective response

to oil spills. It proposes, among other things, that the section in

question be amended so that the availability of the working capital

waiver would not be limited to charitable organizations; i.e., that the

waiver be made available to any non-profit response organization

qualifying as a social welfare organization under section 501(c)(4) of

the Internal Revenue Code.

This comment requesting an extension of the applicability of the

working capital requirement under proposed Sec. 130.8(b)(3)(vi)(A)

apparently does not take into consideration the next paragraph (i.e.,

Sec. 138.80(b)(3)(vi)(B)) of the rule which allows an alternative basis

for certain organizations to apply for waivers. Accordingly, paragraph

(b)(3)(vi)(A) of Sec. 138.80 has not been amended. The Coast Guard does

not believe that this rule will inhibit the commenter's ability to

obtain COFRs, or otherwise undermine any essential purpose of the law.

The essential purpose of OPA 90 to be implemented by this rule is to

deny the use of United States waters to entities which do not have the

financial capacity to meet OPA 90 and CERCLA liability, by

demonstrating self-insurance capacity, or by purchasing an insurance or

surety bond guaranty or by obtaining a financial guaranty.

Paragraph (b)(4) (Financial Guaranty): This paragraph was amended,

consistent with the insurance and surety bond guaranty methods, to

allow more than one financial guarantor to execute a financial guaranty

form. Financial guarantors also must state vertical (i.e., non-layering

type) percentages of participation to avoid joint and several

liability.

Paragraph (b)(5) (Other evidence): This is a new paragraph which

has been added to the rule as a result of the numerous comments

requesting the Coast Guard to accept evidence of financial

responsibility by methods other than the four proposed methods. This

new paragraph will permit ``other evidence of financial

responsibility'' if it meets the criteria set forth in this new

paragraph and in expanded Sec. 138.80(d). ``Other evidence'' meeting

that criteria, if being submitted for the first time, must be submitted

at least 45 days before a Certificate is required. The Coast Guard will

not accept an ``other evidence'' method that merely alters or deletes a

provision of one of the established methods. For example, a proposed

``other evidence'' guaranty form that includes a clause requiring COFRs

to be renewed each year rather than every three years as provided in

the rule would not be accepted. Some commenters suggested that the use

of letters of credit be authorized. The use of letters of credit is

discussed at the end of this section. Since commenters stated they

would not utilize this method, it has not been included separately.

However, it is a method that could be proposed under paragraph (b)(5).

An applicant seeking approval of ``other evidence'' must submit a

sample, proposed guaranty form.

Paragraph (c): This paragraph has been amended in response to

comments that neither OPA 90 nor CERCLA specifically requires the Coast

Guard to make co-subscribers to an insurance, surety bond, or financial

guaranty jointly and severally liable. The Coast Guard agrees with

these comments.

The gist of these comments is that if the Coast Guard would permit

co-subscribers to be liable only up to their individual limits of

participation on a particular bond, no individual amount of financial

responsibility required by OPA 90 and CERCLA (the Total Applicable

Amount) would be impossible to write. For example, a major surety

broker commented that at least 32 Treasury-approved sureties have

indicated to that broker an interest in writing surety bond guaranties.

One of these companies is approved to write bonds in excess of $200

million, and the 32 companies have an approved, combined underwriting

capacity in excess of $1 billion. Accordingly, the Coast Guard has

acceded to this request and has amended proposed Sec. 130.8(c) (new

Sec. 138.80(c)) to specifically allow limited (i.e., non-joint and

several as among themselves) participation on a single bond or other

guaranty.

The Coast Guard will only accept, for purposes of a guaranty,

percentages of participation on a vertical, non-layered basis (tiers,

one in excess of another, are not acceptable). For example, four

insurers may each limit their participation to 25 percent. If a spill

results in $10,000 in costs and damages, each insurer would be liable

as a guarantor for $2,500. The Coast Guard will not accept a horizontal

arrangement whereby one insurer subscribes to a first tier of $2,500, a

second insurer to the next tier of $2,500, and so forth. Under this

latter, layered arrangement, if the total costs and damages were

$10,000, but the first insurer, subscribing for only the first $2,500

layer was bankrupt, the other insurers may be under no obligation to

pay. The Coast Guard cannot accept this result.

In addition, the Coast Guard has limited this shared participation

to no more than four guarantors executing a guaranty form. The Coast

Guard believes this limitation is needed to provide a manageable

process for claimants dealing with guarantors. More than four insurers

or sureties, however, can still participate in a guaranty by appointing

a lead underwriter or surety to act on their behalf, such as is done by

Lloyd's Underwriters. Further, in order to facilitate dealing with

multiple guarantors and to avoid complications that might ensue if the

guarantors do not all agree on a particular action, the Coast Guard is

requiring the guarantors to appoint a lead guarantor to act on behalf

of, and have the authority to bind, the co-guarantors. Paragraph (c)

further provides that if one or more guarantors do not specify

percentages of participation, then as between or among them, they share

joint and several liability for the total of the unspecified portion.

Those guarantors specifying percentages will be liable only up to

respective specified limits, as noted above. The Coast Guard considers

this an important incentive to permit new providers of financial

responsibility to become guarantors under OPA 90 and CERCLA.

Paragraph (d) (Direct action): This paragraph has been rewritten in

response to comments requesting clarification of the exposure and

limits of liability of guarantors under OPA 90 and CERCLA. Anything

that might be considered new, e.g., a guarantor's right to limit its

liability to the tonnage on an official tonnage document, has already

been discussed herein, or is discussed below in connection with

specific guaranty forms. It is appropriate to note in this section of

the preamble, however, that a claim against an insurer or a surety in

connection with an insurance or surety bond guaranty established under

this part does not entitle a claimant to somehow ``cut-through'' the

guarantor and reach the guarantor's ensuring entity. No right of direct

action against a guarantor relating to financial responsibility

provided under this part endows a claimant with rights against a

guarantor's reinsurer. This is not to say, of course, that a guarantor

and its reinsurer are in any way precluded from entering into a

reinsurance arrangement that permits cut-throughs by claimants against

reinsurers. Such cut-through clauses, however, are not imposed by this

rule.

Letters of Credit: Section 1016(e) of OPA 90 allows the Coast Guard

to consider inclusion of a letter of credit in the permissible methods

of establishing financial responsibility. The use of letters of credit

as evidence of financial responsibility has never been and is not now

being requested by the international vessel operating industry. Years

ago, lengthy, in-depth exploration of this matter was undertaken with

one of the largest U.S. financial institutions in an effort to

determine the value of irrevocable letters of credit as evidence of

financial responsibility under direct action statutes. It was concluded

by all concerned that such instruments were of little or no value for

such purposes. One of the reasons for that conclusion was that, unlike

insurance companies defending their own money, banks and other

financial institutions that issue letters of credit generally would

have no interest in providing the legal and other resources necessary

to seriously investigate or defend claims against their principals'

money for removal costs and economic damages.

During this rulemaking, not one financial institution came forward

to state that it would be willing to issue letters of credit as OPA 90

guaranties, and no commenter explained how letters of credit could be

structured so that they could become appropriate mechanisms for the

financial responsibility purposes of OPA 90 and CERCLA. Nor has any

vessel operator come forward to state that it would be willing to allow

a bank to act as a guarantor and put at risk millions of dollars of the

operator's money without a vigorous defense mechanism.

In the proposal stage of this rulemaking, it was assumed that there

may be some vessel operators who did not wish to use insurance,

financial or surety bond guaranties. The Coast Guard, therefore,

encouraged comments on how letters of credit might be used as evidence

of financial responsibility. Several commenters stated that letters of

credit were not viable options for demonstrating financial

responsibility.

Although no commenter stated that it would or could use a letter of

credit as evidence of financial responsibility, some commenters argued

that, nevertheless, the non-inclusion of letters of credit constituted

a fatal flaw in the NPRM. The Coast Guard does not agree, given the

general convergence of views among the commenters. Therefore, no change

is being made, i.e., letters of credit are not being specifically

included in this final rule.

No door on any financial responsibility method is being closed with

finality, however. The Coast Guard has taken the advice of several

commenters that an additional category, permitted by section 1016(e) of

OPA 90, be included in the rule, and has added a catchall category,

``other evidence of financial responsibility'' (see discussion under

Sec. 138.80(b)(5)). If an applicant and bank wish to use a letter of

credit, it can be proposed, in a specific situation, as ``other

evidence'' under the guidelines established in Sec. 138.80(b)(5).

Paragraph (f): This new paragraph has been added to incorporate the

``Applicable Amount Table'' that was contained in Appendix G of the

NPRM. This paragraph (and the corresponding applicable amount table in

each guaranty form) sets out the means by which applicants and

guarantors calculate the amounts of financial responsibility required

to be established and maintained under this rule. As discussed earlier,

this calculation has been amended to reflect the actual limits of

liability applicable to vessels under CERCLA, rather than just the

limit applicable to vessels carrying hazardous substances as cargo.

Section 138.90 Individual and Fleet Certificates

Fleet Certificates

This rule will further reduce the existing burden on operators of

non-tank barges that sometimes carry oily cargo or small amounts of oil

or hazardous substances. Such operators currently bear the expense and

paperwork burden of obtaining individual COFRs and paying certification

fees for a COFR for each barge, just on the chance that one or more of

those barges may technically become subject to financial responsibility

requirements. Examples of such non-tank barges are deck or hopper

barges that might occasionally carry a few barrels of oil, oily metal

shavings or non-bulk hazardous substances. Upon request (and with the

cooperation of a guarantor), a single COFR, designated as a Fleet

Certificate, may now be issued to the operator of these non-tank

barges. Only a certified copy of that single Fleet COFR would need to

be carried on each barge, and then only when that barge had oil or

hazardous substances aboard. See Sec. 138.90(b) of this rule.

Paragraph (b): Paragraph (b) has been changed in one respect. In

the proposal, only an insurance guaranty was envisioned as being an

appropriate method of establishing financial responsibility for Fleet

Certificates. Upon reflection, there is no reason why other types of

guaranties should be excluded. This paragraph reflects this broader

approach.

Paragraphs (d) and (e): Some of the notice requirements in these

paragraphs have been stated more precisely by adding specific time

limits.

Section 138.120 Certificates, Denial or Revocation

Some commenters recommended that this section be revised to afford

more procedural protections to certificants whose Certificates are

subject to revocation. Proposed Sec. 130.12 (new Sec. 138.120) has been

redrafted to afford greater procedural protections to applicants and

certificants, and to remove ambiguities from the proposed text.

Paragraph (a): This paragraph governs the circumstances under which

the issuance of a Certificate may be denied. It is derived from

paragraphs (a) and (b) of proposed Sec. 130.12.

Paragraph (b): This paragraph governs the circumstances under which

a Certificate may be revoked. It also is derived from paragraphs (a)

and (b) of proposed Sec. 130.12.

Paragraph (c): Paragraph (c) governs the circumstances under which

a Certificate is automatically revoked, without prior notice. It is

derived from paragraph (b) of proposed Sec. 130.12(b).

Paragraph (d): This paragraph is derived from proposed

Sec. 130.12(c) and provides that before a Certificate is denied under

paragraph (a) of this section or revoked under paragraph (b), the Coast

Guard will advise the applicant or certificant, in writing, of the

proposed denial or revocation, and the reasons therefore.

Paragraph (e): This paragraph is derived from proposed

Sec. 130.12(d) and provides that proposed revocations due to failure to

file required financial statements and other information become

effective within 10 days of the notice, unless the certificant

demonstrates that the information has been filed.

Paragraph (f): This paragraph is derived from proposed

Sec. 130.12(e) and provides an applicant or certificant the opportunity

to present information showing why a proposed denial under paragraph

(a)(1) or (a)(3) of this section or revocation under paragraph (b)(1)

or (b)(2) is unwarranted. A new sentence is added to clarify that a

Certificate remains valid pending a decision under this paragraph. Note

that these procedures do not apply to an immediate revocation under

paragraph (c) of this section.

Paragraph (g): Paragraph (g) is new, and provides an applicant or

certificant the opportunity to request reconsideration of an

unfavorable decision on issuance or revocation. This paragraph states

the applicable procedures for filing a request for reconsideration, and

also provides that a revoked certificate remains invalid pending a

decision on reconsideration.

Section 138.130 Fees

A few commenters objected to the doubling of the fees charged for

applications and for Certificates. The preexisting fees were instituted

in 1977 to implement the general user fee statute, now codified at 31

U.S.C. 9701. Since that time the U.S. Consumer Price Index has more

than doubled. Office of Management and Budget revised Circular Number

A-25 provides general guidelines for calculating the proper level of

fees. Applying these principles, the Coast Guard calculates that

currently, average COFR revenues do not cover average COFR costs. COFR

costs include salaries, rent, computers and other office equipment,

travel, and supplies. Doubling the fees, as proposed, will more closely

recover for the Coast Guard the costs of administering the vessel

financial responsibility certification program. Accordingly, to fulfill

the intent of 31 U.S.C. 9101, this rule maintains the fees at the

levels proposed. Calculations showing these program costs and projected

revenues from the fees are available for inspection in the docket.

The justification for the assessment of different fees for new

``first-time'' applications than for Certificates is based upon the

amount of processing time required by vessel certification program

personnel. On average, it takes twice as long to process a new

application and issue a new Certificate than it does to issue

additional or modified Certificates.

Although vessel certification fees must be paid, the Coast Guard

has decided not to collect the application fee for an application filed

to obtain a Certificate under part 138 that will replace an existing

Certificate issued under 33 CFR 130. This is reflected in the first

clause of Sec. 138.130(c), which references Sec. 138.70(c). This

approach continues the scheme currently in place whereby an application

fee is not paid each time a Certificate is replaced or renewed. The

only fee collected in that circumstance is the certification fee.

Section 138.140 Enforcement

Some commenters believed the penalties identified in this section

are unfair. This section simply restates, for the convenience of the

user, the sanctions prescribed by Congress in OPA 90 and CERCLA. The

Coast Guard has no discretion to alter these potential sanctions.

Another commenter recommended that an appeals process be incorporated

in connection with the Coast Guard's detention of a vessel. This

suggestion is beyond the scope of this rulemaking, which deals with

methods for demonstrating financial responsibility, and associated

matters. It is noted that actions by Coast Guard enforcement personnel

are governed by other regulations. For example, certain actions taken

by Coast Guard Captains of the Port may be appealed according to

procedures elaborated in 33 CFR part 160.

Section 138.150 Service of Process

Text has been added to this section to reflect responsibilities

placed upon responsible parties and guarantors by OPA 90, such as

receipt of a notice of designation of source. The additional text

clarifies that the persons designated by applicants and guarantors as

agents to receive service of process also may be served with notices of

designations and presentations of claims under the Acts. The

Application Form and guaranty forms have also been amended to reflect

this clarification.

Appendix A--Application for Certificate

The application form was left basically the same as in the

proposal. Substantive changes are as follows:

Part I, Question 4: This portion of the application was amended to

permit United States applicants the option of appointing themselves as

U.S. agents for service of process, as is currently permitted under

part 130. Doing so would preclude the need for the applicant and U.S.

agent to complete part IV, Concurrence of Agent. As is presently the

case, Certificates will not be issued to vessel operators who have not

appointed U.S. agents for service of process, with accompanying written

concurrence by such agents. This is the purpose of part IV of the

application form. Since 1971, each P&I Club has arranged for a blanket

concurrence of agent for service of process to be maintained on file

with the Coast Guard's National Pollution Funds Center. This makes it

unnecessary for vessel owners and operators who are members of the P&I

Clubs, or their U.S. agents for service of process, to complete part IV

of the application form.

Because vessel owners and operators who are members of P&I Clubs

apparently will not currently permit their Clubs to act as guarantors

for purposes of this rule, it has to be further assumed that the P&I

Clubs will not be permitted to continue to arrange blanket concurrences

of U.S. agents for service of process for purposes of this rule.

Accordingly, each applicant who is a member of a P&I Club now will have

to: (1) Locate in the United States an entity willing to act as that

applicant's agent for service of process and; (2) mail to that agent

part IV of an application form, with a request to forward the

completed, executed part IV-A to the National Pollution Funds Center

(part IV-B is to be completed by the applicant before mailing to the

agent). Applicants are encouraged to mail parts I, II and III, fees,

and any evidence of financial responsibility directly to the National

Pollution Funds Center to minimize mail handling. In most cases,

guarantors are instructed by vessel operators to mail guaranties

directly to the National Pollution Funds Center.

A U.S. agent for service of process who is willing to act as agent

for an operator's entire fleet of vessels need complete part IV-A only

once. An agent for service of process, acting solely as agent, does not

incur any OPA 90/CERCLA liability for removal costs or damages. An

agent's responsibilities are as agreed between itself and the vessel

operator on whose behalf the agent agrees to act.

Part II, column (d): As proposed, column (d) requested an applicant

to indicate a vessel's ``Registration Number''. As amended, column (d)

requests a ``Documentation Number'' for U.S.-flag vessels and an ``IMO

Number'' for non-U.S.-flag vessels. A ``Registration Number'' is

requested if an ``IMO Number'' has not been assigned.

Part III, question 11: Question 11 is an addition to the proposed

Part II, and was necessary to accommodate an applicant who wishes to

establish evidence of financial responsibility other than by self-

insurance, insurance guaranties, surety bond guaranties, or financial

guaranties. If that is the case, new question 11 requests the applicant

to provide, separately, all of the information required by

Sec. 138.80(b)(5) of this rule (see discussion under

Sec. 138.80(b)(5)).

Appendices B Through F

These appendices are, respectively, the insurance guaranty form,

the master insurance guaranty form, the surety bond guaranty form, the

financial guaranty form and the master financial guaranty form. Each of

these guaranty forms has undergone numerous changes in format and

wording which have no impact on meaning or content. However, each

guaranty form has undergone the following common substantive

amendments:

Defenses: The defenses are those enumerated in Sec. 138.80(d).

Rather than merely say that in the event of a direct action a guarantor

may invoke only the rights and defenses specifically permitted by the

Acts, those rights and defenses are now mentioned in more detail in

each guaranty form. These statutorily permitted rights and defenses

comprise defense numbers one and two of a new section in each guaranty

form, which new section lists the rights and defenses available to

guarantors in the event of a direct action. Right or defense number

three confirms that a guarantor shall have the right to limit its OPA

90/CERCLA liability under its guaranty to the amount of that guaranty,

despite the number of claimants and venues in which claims are brought

against the guarantor for the same incident, release or threatened

release. Number four, in this new listing of rights and defenses,

provides that a guarantor shall have the right to limit its liability

to the amount obtained by using the gross tonnage entered on the

involved vessel's international tonnage certificate or other

certificate of measurement, whichever is the vessel's official,

applicable declaration of tonnage, except where the guarantor knew or

should have known that the applicable tonnage certificate was

incorrect. The Coast Guard intends the right to so limit liability to

be available to guarantors despite any higher or different tonnage

which may be listed on the COFR application form or guaranty form.

Indeed, the Coast Guard intends this right of a guarantor to so limit

its liability to apply even if it is determined after an incident or

release that the official tonnage document is incorrect and that a

vessel's correctly admeasured tonnage exceeds the tonnage listed on the

incorrect tonnage document. The Coast Guard agrees with a commenter

that a guarantor should be able to rely on a vessel's official tonnage

document rather than find itself liable for a $10 million tank vessel

liability when it accepted an exposure and a premium based on a tonnage

document that indicated a substantially lesser amount of liability (see

the liability minimums for tank vessels under section 1004(a) of OPA

90). This right is being extended to guarantors under the general

rulemaking authority contained in OPA 90 and CERCLA to define terms

such as gross tons, and under section 1016(e) of OPA 90. Only a

guarantor may invoke this right or defense. The responsible party's

liability is based on the actual gross tonnage of the vessel.

Right or defense number five in the new section of the guaranty

forms is that ``the claim is not one made under either of the Acts.''

Potential guarantors were concerned that by executing the guaranty

form, they would be subjecting themselves to direct action under other

laws as well, whether in federal or state courts. The Coast Guard does

not believe that this was the intent of Congress. Accordingly, the

purpose of this defense is to ensure that guarantors are not subject to

direct actions under other laws solely because they executed the OPA

90/CERCLA guaranty to the Coast Guard.

The Coast Guard does not intend, and does not believe Congress

intended, that execution of a guaranty appended to or acceptable under

this part in any way indicates that the guarantor is implicitly

agreeing to liability in an amount or scope different than set forth in

such guaranty. No guaranty accepted under and executed for purposes of

this part, without more, is to be construed as subjecting the guarantor

to unlimited liability in any venue for any purpose. The Coast Guard

considers this defense to be absolute, and necessary to effectuate the

purposes of OPA 90, in accordance with section 1016(e) of OPA 90.

Joint and several liability: The second common change to the

guaranty forms is the granting of an option to co-subscribing

guarantors. In the proposed rule, joint guarantors to a single guaranty

form would be jointly and severally liable for the full amount of the

guaranty. This second common amendment to the guaranty forms, however,

permits each joint guarantor the option of limiting its liability to

less than the full amount of the guaranty by specifying its particular

percentage of participation in each guaranty it co-executes. However,

that participation must be in a vertical, non-layered share (see

discussion under Sec. 138.80(c)). Any co-insurer not specifying a

percentage of participation would be held liable for the unspecified

portion of any risk. If no co-insurers specify a percentage of

participation, each would be held jointly and severally liable up to

the full amount of the guaranty. The Coast Guard will continue to

permit acceptable market entities such as the Institute of London

Underwriters and the Underwriters at Lloyd's to execute a guaranty

under the signature of a lead underwriter, or underwriters, with each

co-subscribing, limited-liability signatory counting as only one

guarantor. Thus, for example, twenty or so Lloyd's syndicates may join

together under one lead underwriter (i.e., one signature on the

guaranty form) for 40 percent of a risk, with numerous Institute of

London Underwriters joining together under one lead underwriter (i.e.,

one signature guaranty on the guaranty form) for the remaining 60

percent. This method would count as only two guarantors under this new

rule. Co-guarantors must appoint and name on the form a lead guarantor,

having authority to bind all co-guarantors. This will facilitate

handling of claims or other activities under the Acts. The co-

guarantors decide among themselves which guarantor will serve as lead,

and certainly should specify among themselves how claims or other

activities under the Acts will be handled.

Deletion of the sixty-day notice: The third common change made to

the guaranty forms is the deletion of the proposed requirement for a

sixty-days written notice of cancellation requirement in connection

with laden tankers. The Coast Guard concludes that, based on 23 years

experience, thirty days written notice of cancellation of a guaranty

will provide adequate notice in almost all cases.

Service of process: The fourth common change is the clarification

that an agent designated to receive service of process also is required

to receive notices of designation or presentations of claims under the

Acts.

Total Applicable Amount: The fifth and final common change made to

the guaranty forms is the relaxation in the method of calculating the

total applicable amount with respect to vessels carrying hazardous

substances as cargo. The relaxation (with respect to guaranties) of the

proposed requirement that financial responsibility always would have to

be demonstrated at the minimum amount of $5 million, already has been

discussed in this preamble under the heading ``Applicable Amounts of

Financial Responsibility.''

As already discussed, a guarantor and its principal or insured may

decide among themselves as to the level of premium to be paid for the

cover, it being understood that the guarantor will in any case be

liable for the limit of liability applicable to the type of vessel in

question at the time of the incident, release or threatened release,

despite the level of premium accepted by the guarantor. This concept of

full coverage, regardless of the type of vessel, applies under current

part 130 and was the basis for certain language in all of the guaranty

forms appended to this part. Nevertheless, in view of the relaxation of

the total applicable amount calculation, all of the guaranty forms

appended to this part (except the two insurance guaranty forms) have

been amended to emphasize that concept of full coverage, including tank

vessel liability. Thus, the surety bond guaranty form, for example, has

been amended by adding the following clause:

Principal and Surety or Sureties further agree that if at the

time of an incident, release, or threatened release a covered vessel

is a tank vessel or is carrying a hazardous substance as cargo, the

penal sum of this surety bond guaranty automatically increases, if

necessary, to the total applicable amount appropriate for such

vessel as determined in accordance with the Applicable Amount Table

below. In no case, however, shall the penal sum be increased to an

amount greater than the total applicable amount.

This change is especially appropriate to the surety bond guaranty

form (Appendix D) because of the bond guaranty's provision for showing

the penal sum of the guaranty. It was believed appropriate to also

amend the financial guaranty forms (Appendices E and F) in order to

remind prospective financial guarantors that the amounts of working

capital and/or net worth to be demonstrated (in order to qualify as

financial guarantors) would be based on the minimum $5 million formula

for CERCLA, and $1,200 per gross ton/$10 million for OPA 90, when

calculating the total applicable amount to be guarantied.

Appendix D Surety Bond Guaranty Form

A change peculiar to the bond guaranty form is the addition of the

following clause:

If the Principal is responsible for more than one vessel covered

by this guaranty, then the penal sum is the total applicable amount

for the vessel having the greatest liability under the Acts.

This change was made solely to clarify the surety's limit of OPA

90/CERCLA liability under a bond guaranty, regardless of the actual

penal sum indicated on the bond guaranty. This new clause, when coupled

with a second new clause that has been added to the form, permits the

bond guaranty automatically to cover all of the vessels for which the

vessel operator-principal is responsible under the Acts, yet provides

protection to the surety if any of such vessels are specifically named

in other evidence of financial responsibility (on behalf of the vessel

operator-principal named on the bond guaranty) applicable during an

incident, release or threatened release giving rise to a claim against

the surety or vessel operator-principal. This second new clause appears

directly above the name of the surety's U.S. agent for service of

process, and will aid in determining the specific vessels covered by a

bond guaranty, should such question ever arise.

Assessment

The NPRM was classified as not ``major'' under former Executive

Order 12291, which was revoked and replaced by Executive Order 12866

(September 30, 1993), but was considered significant under the

regulatory policies and procedures of the Department of Transportation

(DOT) (44 FR 11040, February 26, 1979) because of substantial public

interest. Many commenters to the NPRM stated that the proposed should

be classified as major under Executive Order 12291. In fact, this

rulemaking has followed most of the procedural aspects of a ``major''

rule, notably, the publication of the PRIA for public comment.

Executive Order 12866 now governs this proceeding.

This rule is a significant regulatory action under section 3(f) of

Executive Order 12866 because it is perceived to raise novel legal and

policy issues. It has been reviewed by the Office of Management and

Budget under that order. It requires an assessment of potential costs

and benefits under section 6(a)(3) of that order. It is significant

under the regulatory policies and procedures of DOT. A Regulatory

Impact Analysis (``assessment'' under the new Executive Order) has been

prepared and is available in the docket for inspection or copying where

indicated under ADDRESSES. The purpose of Executive Order 12866 (and

its predecessor) is to improve the internal management of the federal

government and it does not create any procedural or substantive rights

or benefits enforceable at law by a party against the United States.

These regulations are promulgated under section 1016(a) of OPA 90

(33 U.S.C. 2716) and section 108(a)(1) of CERCLA (42 U.S.C.

9608(a)(1)), concerning the ``establishment and maintenance'' of

evidence of financial responsibility for vessels. This rulemaking is

intended to implement that joint statutory mandate and, therefore,

primarily is limited to matter relating to ``establishment and

maintenance'' of financial responsibility, such as how to apply for a

COFR and how to establish evidence of financial responsibility.

This rule imposes no new paperwork burdens on vessel operators. The

methods for applying for a COFR and establishing evidence are similar

to those in the preexisting regulations under the FWPCA, TAPAA, OCSLAA,

and DPA. Vessel operators will be required to complete and submit a

prescribed application form for a COFR and, if other than a self-

insurer, a prescribed form, completed by their guarantors, evidencing

acceptable financial responsibility. A similar requirement, however, is

being imposed presently under preexisting 33 CFR parts 130, 131, and

132, and subpart D of part 137. This rule not only adopts these

application procedures but actually reduces the paperwork burden by

requiring that only one application be submitted under OPA 90/CERCLA,

rather than separate applications under the FWPCA, TAPAA, and OCSLAA,

which is now the case. The implementation schedule, discussed under

Sec. 138.15, will also alleviate some burden in that, for most vessels,

new COFRs will only have to be obtained at their normal renewal cycle.

This rule may affect a slightly different population of vessels

than under the preexisting regulations. This difference results from

section 1016(a) of OPA 90 (33 U.S.C. 2716(a)). Before OPA 90 was

enacted, the most encompassing Federal statute concerning financial

responsibility (the FWPCA) was limited to vessels over 300 gross tons.

(TAPAA, OCSLAA, and DPA have no vessel tonnage limits, but very few

vessels of 300 gross tons or less operate under those regimes.) Under

section 1016(a)(2) of OPA 90, all vessels ``using the waters of the

exclusive economic zone to transship or lighter oil destined for a

place subject to the jurisdiction of the United States'' also must meet

the financial responsibility requirements. The exact number of vessels

of 300 gross tons or less engaged in transshipping or lightering oil,

not already subject to the preexisting regulations, is unknown. The

Coast Guard requested information on the vessel population not subject

to a financial responsibility regime under Federal law before enactment

of OPA 90 and which must now comply with the requirements of section

1016 of OPA 90, but none was provided.

Regulatory Impact Analysis

General Issues

Due to the substantial public interest in this rulemaking, on July

21, 1993, a Preliminary Regulatory Impact Analysis was made available

for public comment (58 FR 38994), in accordance with the request of

many commenters to the NPRM. Nearly 600 copies of the PRIA were

distributed worldwide. The PRIA analyzed the costs and benefits of four

options, namely: (1) Retain the preexisting rules; (2) adopt the NPRM;

(3) amend the NPRM to accept entry in a Protection and Indemnity Club

(P&I Club) as an asset for self-insurance; and (4) amend the NPRM's

self-insurance formulate (i.e., eliminate the working capital

requirement and/or the requirement to maintain assets in the United

States by allowing worldwide assets to be measured against worldwide

liabilities). The PRIA noted that these were the options (not all of

which are, necessarily, legally permissible options) most often

mentioned in comments to the NPRM.

Over 60 letters commenting on the PRIA were received. The comments

fall into four general categories: (1) Those that support the NPRM; (2)

those that support the P&I Club membership as an asset option, with an

added feature of making the Oil Spill Liability Trust Fund an assignee

of the member's rights under the Club policy; (3) those that oppose the

NPRM altogether (primarily the P&I Clubs and Lloyd's of London); (4)

and those that support enactment of legislation to create a Mandatory

Excess Insurance Facility (MEIF), to address tank vessel owners'

desires to be granted higher levels of insurance than appear to be

available in the commercial marketplace. The MEIF then could also serve

as a COFR insurance guarantor.

The central concern expressed by most vessel owners and operators

is how to provide evidence of financial responsibility if their P&I

Clubs do not issue insurance guaranties. The Clubs act in unison

through the International Group of P&I Clubs. They have unequivocally

stated in their comments that these same vessel owners and operators

will not permit the Clubs to provide insurance guaranties, and that

there is no rule change that could be made to induce them to do so. The

reason for this position has not, in the Coast Guard's judgment, been

made clear nor has it been adequately justified. Thus, the PRIA and

final RIA assess the so-called ``train-wreck'' scenario, i.e., the

unlikely scenario whereby the NPRM is adopted as a rule, the P&I Clubs

remain prohibited by their shipowner members to provide insurance

guaranties, and no other sources of financial responsibility exist. The

final RIA takes into account all the comments and concludes that a

``train-wreck'' is not likely to occur because it appears that other

sources of financial responsibility will develop. Even if they do not

develop, there need not be a ``train-wreck'' because the shipowners can

vote to permit their Clubs to issue the guaranties. The choice of

compliance with this rule is entirely up to the shipowners.

Summary of Costs and Benefits

The options have been measured against the fundamental legislative

precept, namely, that the polluter should pay promptly and with

assurance for removal costs and damages resulting from an oil spill or

release of hazardous substances. The option that most closely fulfills

this congressional objective is the approach proposed in the NPRM and

adopted in this rule. It is legally defensible, it enhances claimants'

rights to compensation, it does not impose undue administrative

burdens, and it need not impose measurable costs on consumers. On the

other hand, the other options all lack the Congressionally intended

assurance that the polluter or its guarantor will pay promptly for

costs and damages.

The ``do nothing'' approach means that financial responsibility is

maintained at much lower levels than are required by OPA 90, and that

CERCLA vessel financial responsibility remains unimplemented. If an oil

spill or hazardous substance release occurs under this circumstance,

there is serious concern whether a guarantor or the spiller will pay

removal costs and damages that exceed the lower, preexisting limits of

liability.

The P&I Club membership-as-an-asset approach is not supported by

Generally Accepted Accounting Principles, and allows the P&I Clubs to

avoid paying claims by invoking an unlimited number of policy defenses

and the pay-to-be-paid rule. Under this rule, a Club only is required

to ``indemnify'' its shipowner-member for payments actually made by the

shipowner. In the case of bankruptcy, for example, where the shipowner

is discharged from paying removal costs and damages, there would be no

obligation for the shipowner's P&I Club to pay claimants. This option,

even with the added feature of the assignment clause, offers not much

greater protection to claimants because policy defenses could still be

invoked. Additionally, the assignment clause would require the assent

of the P&I Clubs, and there is no evidence in the record that the Clubs

would provide this assent. Hence, there is no assurance that shipowners

would have this method available to them, even if it could be adopted

under OPA 90 and CERCLA.

The Mandatory Excess Insurance Facility (MEIF), proposed primarily

to provide shipowners with very high levels of insurance, could provide

assurance of payment fulfilling, on the surface, the polluter pays

concept. This approach, however, requires legislation, a necessarily

long-term endeavor. Its initially conceived funding mechanisms place

the cost of this approach on U.S. consumers and taxpayers, but the

funding mechanisms have not been fully developed. A full assessment of

the MEIF, including the demands that might be placed on the public

treasury, has not been possible. Even though the funding details have

not been fully developed, the MEIF, overall, would be a more costly

option than the NPRM approach. Its tanker owner proponents have stated

that their primary objective is to address the lack of high levels of

insurance to cover a shipowner's potential unlimited liability under

OPA 90. Most of the MEIF's costs are attributable to the higher levels

of insurance and not with OPA 90 financial responsibility requirements.

For these reasons, and since there appear to be commercial alternatives

to P&I Club insurance guaranties, the MEIF currently is not viewed as a

timely or practical source of insurance guaranties. Nevertheless, the

Coast Guard understands tankers owners' concerns regarding the lack of

very high levels of oil pollution insurance in the commercial

marketplace. The Coast Guard intends to continue examining the MEIF for

this purpose, recognizing that this is, fundamentally, a liability

issue beyond the scope of this rulemaking and one that would have to be

dealt with through legislation.

The main concern about the NPRM approach is whether it will cause a

``train-wreck.'' Representatives of two new insurance entities now

being formed commented in response to the PRIA that they were

developing insurance alternatives to P&I Clubs for the purpose of

providing financial responsibility guaranties. Representatives of

surety companies commented that surety bonds can be a source of

financial responsibility guaranties. The major provider of financial

responsibility backing for FWPCA COFRs for the inland and near coastal

fleet, the Water Quality Insurance Syndicate, has not stated any

refusal to issue OPA 90 and CERCL A financial responsibility

guaranties. One domestic insurance company and one independent P&I Club

voiced an interest as well, and many domestic and foreign insurance

companies would be able to issue guaranties immediately, if they chose

to do so. Thus, the record demonstrates that alternative sources of

financial responsibility backing are likely to be available, suggesting

that the ``train-wreck'' will not occur.

This is not to say that if the P&I Clubs and their members maintain

their refusal to issue financial responsibility guaranties this rule

will not result in more costs to the shipowner. Most of those costs are

likely to be passed to the end consumer, principally in a fractional

increase in the cost of a gallon of refined product, such as gasoline.

Assessment of costs is very difficult because, for commercial reasons,

the intended insurance providers have been unwilling to submit cost

estimates to the docket. On the other hand, one surety company did

submit rough cost estimates. The final RIA makes a number of

assumptions about possible costs, and calculates the possible range of

costs. The presumed ``worst-case'' cost translates to less than two-

fifths of one cent per gallon of refined product.

The final RIA, which is available in the docket for inspection or

copying, as indicated under ADDRESSES, details the cost calculations

and assumptions. The Coast Guard concludes that the cost of the

approach taken in this rule is minimal and that the benefits to the

public justify these costs. Further, since these costs need not be

incurred, the Coast Guard concludes that cost is not the sole

controlling factor in the decision on which option to select.

Small Entities

In the NPRM, the Coast Guard solicited comments from small

businesses, as defined by the Regulatory Flexibility Act (5 U.S.C. 601

et seq.), to ascertain whether the proposed rule will have a

significant economic impact on their business. One commenter, the Delta

Queen Steamboat Company (``Delta''), seeks exemption from this

regulation, as it believes is permitted under 5 U.S.C. 603(c)(4).

Delta states that it is a small cruise line operator, whose two

overnight, passenger, paddlewheel steamboats operate on the inland

rivers of the Mississippi, Ohio, Cumberland and Tennessee. The largest

of those vessels, at 3,364 gross tons, requires combined OPA 90 and

CERCLA financial responsibility under the NPRM of $7,018,400. Even

though the company stated it currently has $500,000,000 of oil

pollution insurance with a P&I Club, the Club has indicated that it

will not provide a guaranty of insurance for purposes of the COFR rule.

Delta also states that it cannot demonstrate financial responsibility

using the other methods listed in the NPRM. Therefore, Delta requests

exemption from the final COFR rule.

The Coast Guard believes that Delta will be able to demonstrate

financial responsibility through alternative means, and is in no

different position than any other vessel owner or operator. For

example, one of the alternative insurance companies indicated that it

believed the cost of insurance for non-tankers would be minimal. The

amount of financial responsibility required by Delta is within the

capacity of the Water Quality Insurance Syndicate, which has not

declared it will not provide the guarantees of insurance, and any

number of surety companies.

Title 5 U.S.C. 603(c)(4) provides that consistent with the

objectives of the relevant statutes (in this case OPA 90 and CERCLA),

this analysis shall discuss significant alternatives, such as an

exemption from the rule for small entities. Neither OPA 90 nor CERCLA

provide a basis to exempt covered vessels from the requirement to

demonstrate evidence of financial responsibility. Accordingly, no

provision for exemptions is provided in this rule. As noted above, no

exemption is warranted in the case of Delta (or similar entities) as

alternative sources of financial responsibility guaranties are expected

to be available.

This rule will have minimal direct economic impact on small

business. The rule retains procedures presently in effect, and through

consolidation, eliminates duplication of effort on the part of the

regulated industry. Therefore, the Coast Guard certifies under section

605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) that

this rule will not have a significant economic impact on a substantial

number of small entities.

Collection of Information

This rule contains collection-of-information requirements. The

Coast Guard has submitted these requirements to the Office of

Management and Budget (OMB) for review under section 3504(h) of the

Paperwork Reduction Act (44 U.S.C. 3501 et seq.), and OMB has approved

them. The information collection requirements under this rule continue

previous requirements. OMB Control Number 2115-0545 was assigned to 33

CFR parts 130, 131, 132, and 137. The collection-of-information

requirements in these four parts are being consolidated into part 138.

Under this rule, the need to apply for separate Certificates under

separate laws is eliminated, along with the associated paperwork.

Because of the phase-in provisions in this rule, the information

collection requirements in 33 CFR parts 130, 131, 132, and 137 remain

in effect for varying periods of time. The table in 33 part 4 is being

amended to show this approval number.

Federalism

The Coast Guard has analyzed this rule under the principles and

criteria contained in Executive Order 12612. Section 1018 of OPA 90

specifically allows states to enact their own liability laws, and many

states have indeed established their own requirements. Therefore, the

Coast Guard has determined that this rule does not have sufficient

federalism implications to warrant the preparation of a Federalism

Assessment.

Environment

The Coast Guard considered the environmental impact of this rule

and concluded that, under section 2.B.2 of Commandant Instruction

M16475.1B, this rule is categorically excluded from further

environmental documentation. This rulemaking is administrative in

nature and has no environmental impact. This rule provides the

procedure by which a vessel operator establishes evidence of financial

responsibility.

A ``Categorical Exclusion Determination'' is available in the

docket for inspection or copying where indicated under ADDRESSES.

List of Subjects

33 CFR Part 4

Reporting and recordkeeping requirements.

33 CFR Part 130

Insurance, Maritime carriers, Reporting and recordkeeping

requirements, Water pollution control.

33 CFR Part 131

Alaska, Insurance, Maritime carriers, Oil pollution, Pipelines,

Reporting and recordkeeping requirements.

33 CFR Part 132

Continental shelf, Insurance, Maritime carriers, Oil pollution,

Reporting and recordkeeping requirements.

33 CFR Part 137

Claims, Harbors, Insurance, Oil pollution, Reporting and

recordkeeping requirements, Vessels.

33 CFR Part 138

Insurance, Maritime carriers, Reporting and recordkeeping

requirements, Water pollution control.

For the reasons set out in the preamble, the Coast Guard amends 33

CFR parts 4, 130, 131, 132, and 137, and adds a new part 138, as

follows:

PART 4--OMB CONTROL NUMBERS ASSIGNED PURSUANT TO THE PAPERWORK

REDUCTION ACT

1. The authority citation for part 4 continues to read as follows:

Authority: 44 U.S.C. 3507; 49 CFR 1.45(a).

Sec. 4.02 [Amended]

2. In Sec. 4.02, add the following entries in numerical order to

the table:

Part 130

2115-0545

Part 131

2115-0545

Part 132

2115-0545

Part 138

2115-0545.

PART 130--FINANCIAL RESPONSIBILITY FOR WATER POLLUTION

3. The authority citation for part 130 is revised to read as

follows:

Authority: 33 U.S.C. 2716; 49 CFR 1.46.

4. Section 130.0 is added to read as follows:

Sec. 130.0 Dates.

(a) A Certificate will not be issued under this part on or after

December 28, 1997.

(b) A Certificate issued under this part on or after July 1, 1994,

has the expiration date specified in Sec. 138.15 of this chapter.

PART 131--FINANCIAL RESPONSIBILITY FOR OIL POLLUTION--ALASKA

PIPELINE

5. The authority citation for part 131 is revised to read as

follows:

Authority: 33 U.S.C. 2716; 49 CFR 1.46.

6. Section 131.0 is added to read as follows:

Sec. 131.0 Dates.

(a) A Certificate will not be issued under this part on or after

July 1, 1995.

(b) A Certificate issued under this part on or after July 1, 1994,

has the expiration date specified in Sec. 138.15 of this chapter.

PART 132--FINANCIAL RESPONSIBILITY FOR OIL POLLUTION--OUTER

CONTINENTAL SHELF

7. The authority citation for part 132 is revised to read as

follows:

Authority: 33 U.S.C. 2716; 49 CFR 1.46.

8. Section 132.0 is added to read as follows:

Sec. 132.0 Dates.

(a) A Certificate will not be issued under this part on or after

December 28, 1997.

(b) A Certificate issued under this part on or after July 1, 1994,

has the expiration date specified in Sec. 138.15 of this chapter.

PART 137--DEEPWATER PORT LIABILITY FUND

9. The authority citation for part 137 is revised to read as

follows:

Authority: 33 U.S.C. 2716; 49 CFR 1.46.

Subparts B and C--[Removed and Reserved]

10. Subparts B and C of part 137 are removed and reserved.

Subpart D--[Amended]

11. Section 137.300 is added to subpart D to read as follows:

Sec. 137.300 Dates.

(a) The Fund Administrator will not accept certification of

coverage of a vessel under this part on or after July 1, 1995.

(b) The Fund Administrator will only accept certification of

coverage of a vessel under this part if that vessel holds a Certificate

issued under part 130 of this chapter.

Note: The functions of the Fund Administrator have been assumed

by the Director, National Pollution Funds Center, United States

Coast Guard, 4200 Wilson Boulevard, suite 1000, Arlington, Virginia

22203-1804, attention: cv. The telephone number is 703-235-4813 and

the facsimile number is 703-235-4835.

Subpart E--[Removed and Reserved]

12. Subpart E of part 137 is removed and reserved.

13. Part 138 is added to read as follows:

PART 138--FINANCIAL RESPONSIBILITY FOR WATER POLLUTION (VESSELS)

Sec.

138.10 Scope.

138.12 Applicability.

138.15 Implementation schedule.

138.20 Definitions.

138.30 General.

138.40 Where to apply for and obtain forms.

138.50 Time to apply.

138.60 Applications, general instructions.

138.65 Issuance and carriage of Certificates.

138.70 Renewal of Certificates.

138.80 Financial responsibility, how established.

138.90 Individual and Fleet Certificates.

138.100 Non-owning operator's responsibility for identification.

138.110 Master Certificates.

138.120 Certificates, denial or revocation.

138.130 Fees.

138.140 Enforcement.

138.150 Service of process.

Appendix A to Part 138--Application Form.

Appendix B to Part 138--Insurance Guaranty Form

Appendix C to Part 138--Master Insurance Guaranty Form

Appendix D to Part 138--Surety Bond Guaranty Form

Appendix E to Part 138--Financial Guaranty Form

Appendix F to Part 138--Master Financial Guaranty Form

Authority: 33 U.S.C. 2716; 42 U.S.C. 9608; sec. 7(b), E.O.

12580, 52 FR 2923, 3 CFR, 1987 Comp., p. 198; 49 CFR 1.46;

Sec. 138.30 also issued under the authority of 46 U.S.C. 2103; 46

U.S.C. 14302; 49 CFR 1.46.

Sec. 138.10 Scope.

This part sets forth the procedures by which an operator of a

vessel may establish and maintain, for itself, and, where the operator

is not the owner or demise charterer, for the owner and demise

charterer of the vessel, evidence of financial responsibility to cover

liability of the owner, operator, and demise charterer arising under--

(a) Section 1002 of the Oil Pollution Act of 1990 (OPA 90) (33

U.S.C. 2702); and

(b) Senate 107(a)(1) of the Comprehensive Environmental Response,

Compensation, and Liability Act, as amended (CERCLA) (42 U.S.C.

9607(a)(1)).

Sec. 138.12 Applicability.

(e) This part applies to--

(1) A tank vessel of any size, and to a foreign-flag vessel of any

size, using the waters of the exclusive economic zone to transship or

lighter oil (whether delivering or receiving) destined for a place

subject to the jurisdiction of the United States; and

(2) A vessel using the navigable waters of the United States or any

port or place subject to the jurisdiction of the United States,

including an offshore facility subject to the jurisdiction of the

United States, except--

(i) A vessel that is 300 gross tons or less; and

(ii) A non-self-propelled barge that does not carry oil as cargo or

fuel and does not carry hazardous substances as cargo.

(b) For the purposes of financial responsibility under OPA 90, a

mobile offshore drilling unit is treated as a tank vessel when it is

being used as an offshore facility and there is a discharge, or a

substantial threat of a discharge, of oil on or above the surface of

the water. A mobile offshore drilling unit is treated as a vessel other

than a tank vessel when it is not being used as an offshore facility.

(c) For the purposes of financial responsibility under CERCLA, this

part applies to a self-propelled vessel over 300 gross tons, even if it

does not carry hazardous substances.

(d) This part does not apply to a public vessel.

Sec. 138.15 Implementation schedule.

(a) A tank vessel is subject to the following implementation

schedule:

(1) Until December 28, 1994, a tank vessel is required to carry a

Certificate issued under parts 130, 131, and 132 of this chapter, as

may be applicable to that vessel. On or after that date, and until July

1, 1995, a non-self-propelled tank vessel must carry a Certificate

issued under parts 130, 131, and 132 of this chapter, as may be

applicable to that vessel, unless it carries a Certificate issued under

this part.

(2) A self-propelled tank vessel to which this part applies and

which carries a valid Certificate issued under part 130 of this chapter

may not operate on or after December 28, 1994, unless the operator of

that vessel has submitted to the Director, NPFC, before that date

acceptable evidence of financial responsibility applicable to that

vessel under this part. A self-propelled tank vessel covered by that

evidence of financial responsibility before December 28, 1994, may

continue to operate with the Certificate issued under part 130 of this

chapter. The expiration date of the Certificate issued under part 130

of this chapter for that vessel will be deemed to be December 28, 1995,

regardless of the expiration date appearing on the Certificate.

Thereafter, a Certificate issued under this part is required.

(3) A self-propelled tank vessel to which this part applies, but

which does not carry a valid Certificate issued under part 130 of this

chapter before December 28, 1994, may not operate on or after that date

unless it carries a Certificate under this part.

(4) A non-self-propelled tank vessel to which this part applies may

not operate on or after July 1, 1995, without a Certificate issued

under this part. A non-self-propelled tank vessel may continue to

operate with a Certificate issued under parts 130, 131, and 132 of this

chapter, as may be applicable to that vessel, until that date.

(b) A vessel that is not a tank vessel (non-tank vessel) is subject

to the following implementation schedule:

(1) Until December 28, 1997, a non-tank vessel is required to carry

a Certificate issued under parts 130 and 132 of this chapter, as may be

applicable to that vessel, unless that vessel carries a Certificate

issued under this part. On or after December 28, 1997, each non-tank

vessel subject to this part must carry a Certificate issued under this

part.

(2) A Certificate is issued, on and after December 28, 1994, and

before December 28, 1997, under parts 130 and 132 of this chapter only

to replace a lost Certificate or to replace a Certificate due to a

vessel or operator name change (a change of legal identity, such as

reincorporation or other reorganization, is not considered a name

change). The expiration date that will appear on the replacement

Certificate will be the same as the expiration date of the Certificate

being replaced. During that three-year time period, with respect to

part 132 of this chapter, the expiration date that will appear on a

Certificate being replaced, or on an existing Certificate being

renewed, will be adjusted to coincide with the expiration date of the

Certificate, if any, for that vessel issued under part 130 of this

chapter.

(3) A non-tank vessel that has a Certificate issued before December

28, 1994, under part 130 of this chapter is not required to carry a

Certificate under this part until the date of expiration of the

Certificate issued under part 130 of this chapter.

(4) Except as provided in paragraph (b)(5) of this section, a

Certificate issued on and after July 1, 1994, and before December 28,

1994, under parts 130 and 132 of this chapter is issued with an

expiration date three years from the date of issuance.

(5) If a Certificate issued under part 130 of this chapter with an

expiration date of December 28, 1994, or later is surrendered, and a

new Certificate is requested for the same non-tank vessel before

December 28, 1994, the new Certificate will have the same expiration

date as that of the surrendered Certificate.

(c) On or after July 1, 1994, a vessel that is subject to either

part 131 or 132, or both, of this chapter but that is not subject to

part 130 of this chapter because the vessel is 300 gross tons or less

is not required to comply with part 131 or 132 of this chapter, unless

that vessel is subject to this part under Sec. 138.12(a)(1).

Sec. 138.20 Definitions.

(a) As used in this part (including the appendices to this part),

the following terms have the same meaning as set forth in--

(1) Section 1001 of the Oil Pollution Act of 1990 (33 U.S.C. 2701),

respecting the financial responsibility referred to in

Sec. 138.10(b)(1): claimant, damages, discharge, exclusive economic

zone, navigable waters, mobile offshore drilling unit, natural

resources, offshore facility, oil, person, remove, removal, removal

costs, and United States; and

(2) Section 101 of the Comprehensive Environmental Response,

Compensation, and Liability Act (42 U.S.C. 9601), respecting the

financial responsibility referred to in Sec. 138.10(b)(2): claimant,

damages, environment, hazardous substance, navigable waters, natural

resources, person, release, remove, removal, and United States.

(b) As used in this part (including the appendices to this part)--

Acts means OPA 90 and CERCLA.

Applicant means an operator who has applied for a Certificate or

for the renewal of a Certificate under this part.

Application means ``Application for Vessel Certificate of Financial

Responsibility (Water Pollution)'', as illustrated in Appendix A of

this part.

Cargo means goods or materials on board a vessel for purposes of

transportation, whether proprietary or nonproprietary. A hazardous

substance or oil carried solely for use aboard the carrying vessel is

not ``cargo''.

CERCLA means title I of the Comprehensive Environmental Response,

Compensation, and Liability Act, as amended (42 U.S.C. 9601 et seq.).

Certificant means an operator who has been issued a Certificate

under this part.

Certificate means a ``Vessel Certificate of Financial

Responsibility (Water Pollution)'' issued under this part, unless

otherwise indicated.

Director, NPFC, means the head of the U.S. Coast Guard National

Pollution Funds Center (NPFC).

Financial responsibility means statutorily required financial

ability to meet liability under the Acts.

Fish tender vessel and fishing vessel have the same meaning as set

forth in 46 U.S.C. 2101.

Fuel means any oil or hazardous substance used or capable of being

used to produce heat or power by burning, including power to operate

equipment.

Guarantor means any person who provides evidence of financial

responsibility, under the Acts, on behalf of a vessel owner, operator,

and demise charterer. A vessel operator who can qualify as a self-

insurer may act as both a self-insurer of vessels it operates and as a

financial guarantor of other vessels, under Sec. 138.80(b)(4).

Hazardous material means a liquid material or substance that is--

(1) Flammable or combustible;

(2) Designated a hazardous substance under section 311(b) of the

Federal Water Pollution Control Act (33 U.S.C. 1221); or

(3) Designated a hazardous material under section 104 of the

Hazardous Material Transportation Act (49 App. U.S.C. 1803).

Incident means any occurrence or series of occurrences having the

same origin, involving one or more vessels, facilities, or any

combination thereof, resulting in the discharge or substantial threat

of discharge of oil into or upon the navigable waters or adjoining

shorelines or the exclusive economic zone.

Insurer is a type of guarantor and means one or more insurance

companies, associations of underwriters, shipowners' protection and

indemnity associations, or other persons, each of which must be

acceptable to the Coast Guard.

Master Certificate means a Certificate issued under this part to a

person acting as vessel operator in its capacity as a builder,

repairer, scrapper, or seller of vessels.

Offshore supply vessel has the same meaning as set forth in 46

U.S.C. 2101.

OPA 90 means title I of the Oil Pollution Act of 1990 (33 U.S.C.

2701 et seq.).

Operator means a person who is an owner, a demise charterer, or

other contractor, who conducts the operation of, or who is responsible

for the operation of, a vessel. A builder, repairer, scrapper, or

seller who is responsible, or who agrees by contract to become

responsible, for a vessel is an operator.

Owner means any person holding legal or equitable title to a

vessel. In a case where a Certificate of Documentation or equivalent

document has been issued, the owner is considered to be the person or

persons whose name or names appear thereon as owner. For purposes of

CERCLA only, ``owner'' does not include a person who, without

participating in the management of a vessel, holds indicia of ownership

primarily to protect the owner's security interest in the vessel.

Public vessel means a vessel

Owned or bareboat chartered by the United States, or by a State or

political subdivision thereof, or by a foreign nation, except when the

vessel is engaged in commerce.

Self-elevating lift vessel means a vessel with movable legs capable

of raising its hull above the surface of the sea and that is an

offshore work boat (such as a work barge) that does not engage in

drilling operations.

Tank vessel means a vessel (other than an offshore supply vessel, a

fishing or fish tender vessel of 750 gross or less that transfers fuel

without charge to a fishing vessel owned by the same person, or a

towing or pushing vessel (tug) simply because it has in its custody a

tank barge) that is constructed or adapted to carry, or that carries,

oil or liquid hazardous material in bulk as cargo or cargo residue, and

that--

(1) Is a vessel of the United States;

(2) Operates on the navigable waters; or

(3) Transfers oil or hazardous material in a place subject to the

jurisdiction of the United States.

Total Applicable Amount means the amount determined under

Sec. 138.80(f)(3).

Vessel means every description of watercraft or other artificial

contrivance used, or capable of being used, as a means of

transportation on water.

Sec. 138.30 General.

(a) The regulations in this part set forth the procedures whereby

an operator of a vessel subject to this part can demonstrate that it

and the owner and demise charterer of the vessel are financially able

to meet potential liability for costs and damages in the amounts

established by this part. The owner, operator, and demise charterer are

strictly, jointly, and severally liable for the costs and damages

resulting from an incident or a release or threatened release, but

together they need only establish and maintain an amount of financial

responsibility equal to the single limit of liability per incident,

release, or threatened release. Only that portion of the evidence of

financial responsibility under this part with respect to--

(1) OPA 90 is required to be made available by a guarantor for the

costs and damages related to an incident where there is not also a

release or threatened release; and

(2) CERCLA is required to be made available by a guarantor for the

costs and damages related to a release or threatened release where

there is not also an incident. A guarantor (or a self-insurer for whom

the exceptions to limitations of liability are not applicable),

therefore, is not required to apply the entire amount of financial

responsibility to an incident involving oil alone or a release or

threatened release involving a hazardous substance alone.

(b) Where a vessel is operated by its owner, or the owner is

responsible for its operation, the owner is considered to be the

operator and shall submit the application for a Certificate. In all

other cases, the vessel operator shall submit the application. A time

or voyage charterer that does not assume responsibility for the

operation of the vessel is not considered an operator for the purposes

of this part.

(c) For a United States-flag vessel, the applicable gross tons or

gross tonnage, as referred to in this part, is determined as follows:

(1) For a documented U.S. vessel measured under both 46 U.S.C.

Chapters 143 (Convention Measurement) and 145 (Regulatory Measurement).

The vessel's regulatory gross tonnage is used to determine whether the

vessel exceeds 300 gross tons where that threshold applies under the

Acts. If the vessel's regulatory tonnage is determined under the Dual

Measurement System in 46 CFR part 69, subpart D, the higher gross

tonnage is the regulatory tonnage for the purposes of the 300 gross ton

threshold. The vessel's gross tonnage as measured under the

International Convention on Tonnage Measurement of Ships, 1969

(``Convention''), is used to determine the vessel's required amount of

financial responsibility, and limit of liability under section 1004(a)

of OPA 90 and under section 107(a) of CERCLA.

(2) For all other United States vessels. The vessel's gross tonnage

under 46 CFR part 69 is used for determining both the 300 gross ton

threshold, the required amount of financial responsibility, and limit

of liability under section 1004(a) of OPA 90 and under section 107(a)

of CERCLA. If the vessel is measured under the Dual Measurement System,

the higher gross tonnage is used in all determinations.

(d) For a vessel of a foreign country that is a party to the

Convention, gross tonnage, as referred to in this part, is determined

as follows:

(1) For a vessel assigned, or presently required to be assigned,

gross tonnage under Annex I of the Convention. The vessel's gross

tonnage as measured under Annex I of the Convention is used for

determining the 300 gross ton threshold, if applicable, the required

amount of financial responsibility, and limit of liability under

section 1004(a) of OPA 90 and under section 107(a) of CERCLA.

(2) For a vessel not presently required to be assigned gross

tonnage under Annex I of the Convention. The highest gross tonnage that

appears on the vessel's certificate of documentation or equivalent

document and that is acceptable to the Coast Guard under 46 U.S.C.

chapter 143 is used for determining the 300 gross ton threshold, if

applicable, the required amount of financial responsibility, and limit

of liability under section 1004(a) of OPA 90 and under section 107(a)

of CERCLA. If the vessel has no document or the gross tonnage appearing

on the document is not acceptable under 46 U.S.C. chapter 143, the

vessel's gross tonnage is determined by applying the Convention

Measurement System under 46 CFR part 69, subpart B, or if applicable,

the Simplified Measurement System under 46 CFR part 69, subpart E. The

measurement standards applied are subject to applicable international

agreements to which the United States Government is a party.

(e) For a vessel of a foreign country that is not a party to the

Convention, gross tonnage, as referred to in this part, is determined

as follows:

(1) For a vessel measured under laws and regulations found by the

Commandant to be similar to Annex I of the Convention. The vessel's

gross tonnage under the similar laws and regulations is used for

determining the 300 gross ton threshold, if applicable, the required

amount of financial responsibility, and limit of liability under

section 1004(a) of OPA 90 and under section 107(a) of CERCLA. The

measurement standards applied are subject to applicable international

agreements to which the United States Government is a party.

(2) For a vessel not measured under laws and regulations found by

the Commandant to be similar to Annex I of the Convention. The vessel's

gross tonnage under 46 CFR part 69, subpart B, or, if applicable,

subpart E, is used for determining the 300 gross ton threshold, if

applicable, the required amount of financial responsibility, and limit

of liability under section 1004(a) of OPA 90 and under section 107(a)

of CERCLA. The measurement standards applied are subject to applicable

international agreements to which the United States is a party.

(f) A person who agrees to act as a guarantor or a self-insurer is

bound by the vessel's gross tonnage as determined under paragraphs (c),

(d), or (e) of this section, regardless of what gross tonnage is

specified in an application or guaranty form illustrated in the

appendices to this part. Guarantors, however, may limit their liability

under a guaranty of financial responsibility to the applicable gross

tonnage appearing on a vessel's International Tonnage Certificate or

other official, applicable certificate of measurement and shall not

incur any greater liability with respect to that guaranty, except when

the guarantors knew or should have known that the applicable tonnage

certificate was incorrect.

Sec. 138.40 Where to apply for and obtain forms.

(a) An operator shall file an application for a Certificate and a

renewal of a Certificate together with fees and evidence of financial

responsibility, with the Coast Guard National Pollution Funds Center at

the following address: U.S. Coast Guard, National Pollution Funds

Center (cv), 4200 Wilson Boulevard, Suite 1000, Arlington, VA 22203-

1804, telephone (703) 235-4813, Telex 248324 (Answerback CGNPFC UR),

Telefax (703) 235-4835.

(b) Forms may be obtained at the address in paragraph (a) of this

section, and all requests for assistance, including telephone

inquiries, in completing applications should be directed to the U.S.

Coast Guard at that same address.

Sec. 138.50 Time to apply.

(a) A vessel operator who wishes to obtain a Certificate shall file

a completed application form, evidence of financial responsibility and

appropriate fees at least 21 days prior to the date the Certificate is

required. The Director, NPFC, may waive this 21-day requirement.

(b) The Director, NPFC, generally processes applications in the

order in which they are received at the National Pollution Funds

Center.

Sec. 138.60 Applications, general instructions.

(a) The application for a Certificate (Form CG-5585) is illustrated

in Appendix A of this part. An application and all supporting documents

must be in English. All monetary terms must be expressed in United

States dollars.

(b) An authorized official of the applicant shall sign the

application. The title of the signer must be shown in the space

provided on the application.

(c) The application must be accompanied by a written statement

providing authority to sign, where the signer is not disclosed as an

individual (sole proprietor) applicant, a partner in a partnership

applicant, or a director, chief executive officer, or any other duly

authorized officer of a corporate applicant.

(d) If, before the issuance of a Certificate, the applicant becomes

aware of a change in any of the facts contained in the application or

supporting documentation, the applicant shall, within five business

days of becoming aware of the change, notify the Director, NPFC, in

writing, of the change.

Sec. 138.65 Issuance and carriage of Certificates.

Upon the satisfactory demonstration of financial responsibility and

payment of fees, the Director, NPFC, issues a Vessel Certificate of

Financial Responsibility (Water Pollution), the original of which

(except as provided in Secs. 138.90 (a) and (b) and 138.110(f)) is to

be carried aboard the vessel covered by the Certificate. The carriage

of a valid Certificate or authorized copy indicates compliance with

these regulations. Failure to carry a valid Certificate or authorized

copy subjects the vessel to enforcement action, except where a

Certificate is removed temporarily from a vessel for inspection by a

United States Government official.

Sec. 138.70 Renewal of Certificates.

(a) An operator shall file a written application for the renewal of

a Certificate at least 21 days, but not earlier than 90 days, before

the expiration date of the Certificate. Except as provided in paragraph

(c) of this section, a letter may be used for this purpose. The

Director, NPFC, may waive this 21-day requirement.

(b) The applicant shall identify in the renewal application any

changes which have occurred since the original application for a

Certificate was filed, and set forth the correct information in full.

(c) An applicant that applies for the first time for a Certificate

issued under this part to replace a Certificate issued under part 130

of this chapter shall submit an application form illustrated in

Appendix A of this part. An applicant is not required to pay an

application fee under Sec. 138.130(c) for this first-time application.

Sec. 138.80 Financial responsibility, how established.

(a) General. In addition to submitting an application and fees, an

applicant shall submit, or cause to be submitted, evidence of financial

responsibility in an amount determined under Sec. 138.80(f). A

guarantor may submit directly to the Director, NPFC, the evidence of

financial responsibility.

(b) Methods. An applicant shall establish evidence of financial

responsibility by one or more of the following methods:

(1) Insurance. By filing with the Director, NPFC, an insurance

guaranty form CG-5586, illustrated in Appendix B of this part (or, when

applying for a Master Certificate, a master insurance guaranty form CG-

5586-1, illustrated in Appendix C of this part), executed by not more

than four insurers that have been found acceptable by and remain

acceptable to the Director, NPFC, for purposes of this part.

(2) Surety bond. By filing with the Director, NPFC, a surety bond

guaranty form CG-5586-2, illustrated in Appendix D of this part,

executed by not more than four acceptable surety companies certified by

the United States Department of the Treasury with respect to the

issuance of Federal bonds in the maximum penal sum of each bond to be

issued under this part.

(3) Self-insurance. By filing the financial statements specified in

paragraph (b)(3)(i) of this section for the applicant's last fiscal

year preceding the date of application and by demonstrating that the

applicant maintains, in the United States, working capital and net

worth each in amounts equal to or greater than the total applicable

amount calculated in accordance with Sec. 138.80(f), based on a vessel

carrying hazardous substances as cargo. As used in this paragraph,

working capital means the amount of current assets located in the

United States, less all current liabilities anywhere in the world; and

net worth means the amount of all assets located in the United States,

less all liabilities anywhere in the world. After the initial

submission, for each of the applicant's fiscal years, the applicant or

certificant shall submit statements as follows:

(i) Initial and annual submissions. An applicant or certificant

shall submit annual, current, and audited non-consolidated financial

statements with the associated notes, certified by an independent

Certified Public Accountant. These financial statements must be

accompanied by an additional statement from the Treasurer (or

equivalent official) of the applicant or certificant certifying both

the amount of current assets and the amount of total assets included in

the accompanying balance sheet, which are located in the United States.

If the financial statements cannot be submitted in non-consolidated

form, a consolidated statement may be submitted if accompanied by an

additional statement prepared by the same Certified Public Accountant,

certifying to the amount by which the applicant's or certificant's--

(A) Total assets, located in the United States, exceed its total

(i.e., worldwide) liabilities; and

(B) Current assets, located in the United States, exceed its total

(i.e., worldwide) current liabilities. This additional statement must

specifically name the applicant or certificant, indicate that the

amounts so certified relate only to the applicant or certificant, apart

from any other affiliated entity, and identify the consolidated

financial statement to which it applies.

(ii) Semiannual submissions. When the applicant's or certificant's

demonstrated net worth is not at least ten times the total applicable

amount of financial responsibility, the applicant's or certificant's

Treasurer (or equivalent official) shall file affidavits covering the

first six months of the applicant's or certificant's fiscal year. The

affidavits must state that neither the working capital nor the net

worth have, during the first six months of the current fiscal year,

fallen below the applicant's or certificant's required amount of

financial responsibility as determined in accordance with this part.

(iii) Additional submissions. An applicant or certificant--

(A) Shall, upon request of the Director, NPFC, submit additional

financial information; and

(B) Who establishes financial responsibility under paragraph (b)(3)

of this section shall notify the Director, NPFC, within five business

days of the date the applicant or certificant knows, or has reason to

believe, that the working capital or net worth has fallen below the

amounts required by this part.

(iv) Time for submissions. All required annual financial statements

must be received by the Director, NPFC, within 90 days after the close

of the applicant's or certificant's fiscal year, and all affidavits

required by paragraph (b)(3)(ii) of this section within 30 days after

the close of the applicable six-month period. Upon written request, the

Director, NPFC, may grant an extension of the time limits for filing

the annual financial statements or affidavits. An applicant or

certificant that requests an extension must set forth the reason for

the extension and deliver the request at least 15 days before the

statements or affidavits are due. The Director, NPFC, will not consider

a request for an extension of more than 60 days.

(v) Failure to submit. The Director, NPFC, may revoke a certificate

for failure of the certificant to submit any statement, data,

notification, or affidavit required by paragraph (b)(3) of this

section.

(vi) Waiver of working capital. The Director, NPFC, may waive the

working capital requirement for any applicant or certificant that--

(A) Is a regulated public utility, a municipal or higher-level

governmental entity, or an entity operating solely as a charitable,

non-profit making organ

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