Spill cleanup costs expected to hit at least $61 million

Zachary Coile, Chronicle Washington Bureau
Wednesday, December 19, 2007

The Coast Guard's commandant, Adm. Thad Allen, told Congress Tuesday he expects the cost of cleaning up the San Francisco Bay oil spill to hit at least $61 million - and is likely to climb even higher.

The $61 million figure is significant because it's what the owner of the Cosco Busan, which spilled 58,000 gallons of fuel after striking the Bay Bridge on Nov. 7, is required to pay under federal law. Allen said the costs will rise to finish the cleanup and restore coastal areas and sensitive wildlife habitat.

But those liability limits, set by the Coast Guard for each type of ship, can be waived if the Justice Department determines a spill was caused by gross negligence. Allen hinted that's a strong possibility in this case, in which investigators believe the bar pilot and the ship's captain might have made crucial mistakes that led to the collision.

"You can waive the limits of liability under certain circumstances," Allen said at a Senate Commerce subcommittee hearing on the spill. "Quite frankly, we are discussing that now."

The Coast Guard said $54.7 million has been spent on the cleanup as of Saturday, an average of about $770,000 per day. The liability limit for the Cosco Busan is $61.8 million, the agency said.

After some previous spills, the companies that owned the ships waived the liability limits voluntarily and agreed to pay all the costs, Allen said.

Already federal, state and local authorities have filed civil suits against the ship's owner, Regal Stone Ltd.; its insurer, Shipowners' Insurance & Guaranty; and the bar pilot who was at the helm, Capt. John Cota, to recover their costs.

The ship was supposed to leave San Francisco for South Korea for repairs Friday, but negotiations with the Coast Guard hit a snag and the Cosco Busan has not yet been allowed to leave port.

Darrell Wilson, a spokesman for the Hong Kong-based Regal Stone, said the company is already paying for private cleanup crews who have been skimming oil and cleaning beaches. He said the firm will meet its legal responsibilities, but would not say whether it would agree to pay the entire bill if it exceeds $61.8 million.

"Our main concern and priority is the environmental response," Wilson said. "From the very beginning, we've been financially committed to the cleanup."

Allen made his remarks at a hearing of the Senate Commerce Subcommittee on Oceans, Atmosphere, Fisheries and the Coast Guard, which has been probing the Coast Guard's response to the spill.

Sen. Maria Cantwell, D-Wash., who chairs the subcommittee, said the San Francisco spill showed that federal laws need to be strengthened to prevent spills not just by oil tankers like the Exxon Valdez but by cargo ships such as the Cosco Busan.

"The incident brought to light how vulnerable our oceans are to oil spills from non-tank vessels that carry massive amounts of oil not as cargo, but as fuel," Cantwell said.

Several lawmakers said one way to address the issue is to raise the liability limits for cargo ships to the same level as oil tankers. Currently cargo ships have lower liability limits, even though many cargo ships carry hundreds of thousands of gallons of fuel, like the heavy bunker fuel that fouled San Francisco Bay.

Allen said Tuesday he's in favor of raising the liability limits because federal rules have not kept pace with the rising number of cargo ships carrying large amounts of fuel, increasing the risk of big spills. His agency is adjusting the limits, but the new regulations are still being written.

Federal law requires that most of the costs be paid by the ship's owner and the operator responsible for the spill. But if the amount goes above the liability limit for the ship, the costs are often paid out of Oil Spill Liability Trust Fund, which is funded by a 5-cent per barrel fee on imported and domestic oil.

A recent Government Accountability Office report found that those responsible for the spills had paid between 72 and 78 percent of the costs of cleanup for spills since 1990, while the fund paid the rest - about $240 million.

Lawmakers at the hearing called on the Coast Guard to step up its efforts to prevent oil spills. California Democratic Sen. Barbara Boxer urged Allen to add new incentives to persuade ship owners to move toward double-hulled ships. Allen said new rules, taking effect for ships delivered after August 2010, will require double hulls or other measures to reduce the risk of spills.

Boxer is pushing a separate measure with Sen. Dianne Feinstein, D-Calif., that would require the Coast Guard's Vessel Traffic Service, which guides ships in U.S. harbors, to order ships to reduce speed or shift course in hazardous conditions, such as the dense fog that limited visibility for the Cosco Busan.

The Coast Guard has been cool to the idea, saying the service is not equipped or trained to guide ships the way air traffic controllers direct planes. One witness, William Deaver, president of Totem Ocean Trailer Express, a cargo carrier that operates in the Pacific Northwest, expressed skepticism about whether the Coast Guard was up to the job.

"In an area like San Francisco Bay, I think it would be very difficult to have someone in the (Vessel Traffic Service) office giving directions, settings for the vessel or speed on an ongoing basis," Deaver said.

E-mail Zachary Coile at zcoile@sfchronicle.com.

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