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Pollution Cost Recovery Procedures

National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances

1. Introduction

1.1 The purpose of this procedure is to provide assistance to agencies seeking remimbursement from the Australian Maritime Safety Authority (AMSA) under Australia’s National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances (“the National Plan”) for costs incurred in relation to responding to pollution incidents where the polluter is either not identified or costs are not able to be recovered.

1.2 The National Plan is a national integrated Government and industry organisational framework enabling effective response to marine pollution incidents. AMSA manages the National Plan, working with State/Northern Territory governments and the shipping, oil, exploration and chemical industries, emergency services and fire brigades to maximise Australia’s marine pollution response capability.

1.3 Responsibilities of the National Plan participants are clearly defined in the Intergovernmental Agreement on the National Plan (IGA).

1.4 Paragraph 21 of the IGA sets out the following three funding principles for the National Plan:

Preparedness for marine pollution incidents should be funded on the basis of the principle that the potential polluter pays;
Response to marine pollution incidents should be funded on the basis of the principle that the polluter pays; and
Agencies responding to and incurring costs in relation to pollution incidents where the polluter is not identified, or costs are not recoverable, will be reimbursed by AMSA on the basis of the potential polluter pays, as set out in paragraphs 22 to 29 of Schedule 1 of the IGA.

2. Background

2.1 International arrangements exist that will generally ensure that the cost of combat and clean up of spills originating from oil tankers will be recovered. These arrangements are set out in two international conventions to which Australia is a signatory:

International Convention on Civil Liability for Oil Pollution Damage 1992 (CLC); and
International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1992 (Fund Convention).

2.2 Two further international conventions apply similar arrangements to ships other than oil tankers, although neither convention has yet entered into force internationally:

International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996; and
International Convention on Civil Liability for Bunker Oil Pollution Damage 2000.

2.3 When these Conventions enter into force they will cover spills of hazardous and noxious substances and spills of bunker oil from ships other than oil tankers respectively.

2.4 While there are currently no mandatory international arrangements for ships other than oil tankers, ships operating in Australian waters are also covered by general liability regimes operated by Protection and Indemnity (P&I) Clubs. The Commonwealth Protection of the Sea (Civil Liability) Act 1981 requires ships of 400 or more gross tons carrying oil as cargo or bunkers to have appropriate insurance in place when entering an Australian port.

2.5 The ability to utilise the cost recovery arrangements set out above relies on the ability to identify the polluter and to prove that the polluter has appropriate insurance cover. The only exception to this is where it can be demonstrated that a so-called “mystery” spill originated from an oil tanker, then the Fund Convention mentioned above may meet clean up costs and compensation.

2.6 Where agencies are unable to recover costs that have been incurred in responding to pollution incidents in Australia, AMSA will reimburse such operational costs as set out in Schedule 1 to the IGA.

2.7 Circumstances where recovery is impossible most commonly arise where the polluter cannot be identified. Other common circumstances might include:

Legal action (criminal and/or civil) against an identified vessel is unsuccessful;
The owner/operator of a vessel is unable to meet their financial obligations;
The international arangements provide an exemption for the particular incident; and
Unforseen technical issues regarding any applicable cost recovery legislation, such as a drafting oversight or error.

3. Inter-Governmental Agreement

3.1 The IGA provides that a State/NT Statutory Agency will use best endeavours to recover all reasonable costs incurred in responding to an incident in its jurisdiction including, to the extent it is practicable to do so, the institution of criminal or civil proceedings for recovery from the owner or the master of the ship which caused the pollution (including costs and expenses incurred by a Statutory Agency on its behalf or an assisting agency). Statutory Agencies are the agencies having statutory authority for marine pollution matters in their area of jurisdiction and are responsible for the institution of legal proceedings and the recovery of clean up costs on behalf of all participating agencies.

3.2 Any amount recovered by a State/NT Statutory Agency will be deducted from the amount payable by AMSA. If, however, the agency has already been paid the full amount of such costs and expenses by AMSA, the agency will pay the amount recovered to AMSA.

3.3 AMSA will be responsible for recovery of all costs incurred in assisting the State/NT to respond to the spill. This includes, but is not limited to, all AMSA direct costs and the costs of any assistance provided or arranged by AMSA under National Plan arrangements such as transport of National Plan, industry or overseas equipment and the provision of a National Response Team, or overseas personnel involved in the response. Unless an agreement is reached with the shipowner and the insurer in respect of a specific incident, all accounts will be lodged with the shipowner.

3.4 The key provision in terms of cost recovery from AMSA is paragraph 23 of Schedule 1 to the IGA. This provides that AMSA will replace consumable materials used and reimburse the reasonable costs and expenditure incurred by a Statutory or Combat Agency and any assisting agency in the prevention and clean up of marine pollution from ships where the value of the materials and total reasonable costs and expenditure incurred in responding to oil spills during a financial year exceeds $5000. Where response costs in respect of a single incident exceed $5000 and the polluter cannot be identified, AMSA will also reimburse the first $5000.

4. Geographic Scope

4.1 These Procedures apply to claims submitted to AMSA by any Statutory Agency arising from an incident within their area of jurisdiction.

5. Response Issues

5.1 In general, costs and expenditure for the purposes of the IGA relate to reasonable measures taken to combat pollution by oil or chemical at sea, to defend sensitive resources and to clean shorelines and coastal installations.

5.2 Major expenses may be incurred for the use of aircraft, vessels, specialised equipment, heavy machines, trucks or personnel. Some of these may be government-owned; others may be the subject of contractual arrangements. Combat Agencies should keep comprehensive records of all operations and expenditures resulting from an incident.

5.3 Supervisory personnel should daily record:

the operations in progress;
the equipment in use, where and how it is being used,;
the names and number of personnel deployed, how and where they are deployed; and
the materials consumed.

5.4 Standard work sheets are useful for such records. For major incidents it is essential to appoint a Finance and Administration Officer to keep adequate records and control expenditure (see paragraph 2.9.1.6 of the National Marine Oil Spill Contingency Plan)

5.5 Claims for cleanup operations should include details of the cost for:

personnel and equipment, including the hire of equipment and materials, and purchase of consumables used in a response.
cleaning and repairing clean-up equipment.
replacing materials consumed during the operations.
temporary storage (if applicable) and final disposal of recovered oil and oily material.

5.6 Where known, the Protection and Indemnity Club (P&I Club) representative is to be notified as soon as possible and kept advised of all oil spill response strategy and general operations.

5.7 Costs and expenditure which will not be reimbursed by AMSA under the terms of the IGA includes;

post spill monitoring (other than Type 1 monitoring, see below) and environmental impact assessment;
the costs of patrol, search and surveillance or other activities not directly related to a particular incident, actual or reported, or not approved by the incident controller or delegate;
a payment made pursuant to legislation relating to workers' compensation, other than the premium for insurance directly relevant to persons involved in a particular incident;
the payment of compensation or damages for the death or injury to a person or the loss of or damage to property; and
legal costs associated with action other than recovery of clean up costs.

Type I monitoring

5.8 Type 1 monitoring is defined as the collection of information about the oil and hazardous substances spill, in particular the extent and quantity of contamination and effectiveness of clean up for the purposes of aiding decision making during shoreline clean up and on-water operations. These programmes are an integral part of the response and as such are funded from the same sources as other components of the response.

5.9 By contrast, type II monitoring relates to non-response objectives and includes short term environmental damage assessments, longer term damage assessments (including recovery), purely scientific studies, and all post response monitoring activities. These costs will not be reimbursed under the terms of the IGA.

5.10 For additional information on Type 1 and Type II monitoring, see “Oil Spill Monitoring – Background Paper” (AMSA and Maritime Safety Authority of New Zealand, 2003) and “Oil Spill Monitoring Handbook" (AMSA 2003), available by contacting AMSA by email at Environment Protection

Analytical and Legal

5.11 Where the costs of clean up for any one incident exceed $20,000, the responsible Statutory Agency may seek reimbursement from AMSA for analysis of oil and chemical spill samples and legal costs not otherwise recoverable which have been incurred in the effort to recover clean up costs. Such claims will need to be clearly documented. This does not include legal costs incurred in mounting a prosecution, which will be the responsibility of the appropriate State/NT or Commonwealth Government depending on jurisdiction of the area of the spill.

International arrangements

5.12 While the international conventions mentioned above have similar applications in terms of directly incurred costs of pollution response, the conventions are overall designed to be far broader than the National Plan arrangements. Types of claims that may be accepted under the international conventions that are not part of the National Plan arrangements include:

Consequential loss - loss of earnings suffered by the owners or users of property contaminated as a result of a spill, for example a fisherman’s loss of income as a result of his nets being contaminated;
Pure economic loss - loss of earnings sustained by persons whose property has not been polluted, for example a hotelier whose premises are closed due to a contaminated public beach;
Damage to property, such as repair or cleaning of boats not involved in response activity, cost of repairing roads or jetties damaged by clean-up operations;
Environmental damage.

5.13 The cost recovery arrangements under the National Plan does not affect the rights of any claimant in Australia to pursue these types of claims under the international conventions, P&I insurance arrangements, through the courts or any insurance policy held by a claimant.

6. Submitting a Claim – Unidentified polluter or “mystery spill”

6.1 Under the terms of the IGA, the State/NT Statutory Agency is required to furnish AMSA with a report of every incident which will include details of the methods used to determine whether the pollution came from a ship source and the preventative and clean up measures taken. Where reimbursement of costs is being sought, the Report should attach a claim setting out details of the equipment, dispersant and other materials used and costs and expenses incurred.

6.2 Wherever possible, the Report should be submitted within three months, but no later than twelve months, of completion of a response to:

The Manager
Environment Protection Response
Australian Maritime Safety Authority
GPO Box 2181
CANBERRA ACT 2601

6.3 It needs to be borne in mind that unlike P&I Club representatives who are more often than not on site at ship sourced spills where the polluter is known, or at ship based incidents with potential to result in a spill, AMSA does not, in the majority of cases, have a presence at State/NT managed incidents involving “mystery” spills that may lead to a claim for reimbursement. For this reason alone a State/NT report needs to provide sufficient information to support any claim for reimbursement submitted to AMSA. A comprehensive report with supporting documentation is required in order to assist the Authority determine the reasonableness of the actions taken and associated costs. It is essential that supporting documentation shows how the expenses for clean-up operations are linked with the actions taken at specified work sites.

6.4 In summary, a report that includes a claim for costs needs to clearly set out:

What? Summary of events, including a description and justification of the work carried out at sea, in coastal waters and on shore, together with an explanation of why the various working methods/response options were selected, any supporting advice or opinions from technically qualified third parties.
When? Dates/times when decided, implemented, and terminated.
Where? Delineation of the area affected, describing the extent of the pollution and identifying those areas most heavily contaminated, for example using maps or nautical charts, supported by photographs or video.
By whom? Government/port agencies, industry, contractors, volunteers, military.
How much? Include a detailed list with supporting documentation such as receipts and tax invoices for items such as:
- Personnel – names and roles of each person attending the incident, function and location of activities, daily charge out rate, time sheets showing hours and dates of duty
- Travel and transport – mode of travel, dates, times and class
- Meals – information/receipts to show numbers catered for
- Accommodation information, including names, information/receipts to show numbers accommodated
- Goods and services
- Equipment – times, dates used, location of use, rate of charge e.g. standby or in use, cleaning and/or repair costs.
- Miscellaneous information

7. Submitting a Claim – Identified / Suspected Polluter

7.1 Costs of putting in place contingency arrangements, e.g. deployment of personnel and equipment, in response to potential pollution incidents involving an identified polluter (i.e “pure threat” situations, such as the grounding of a vessel with no loss of oil) will not be reimbursed by AMSA where cost recovery cannot be undertaken by the Statutory Agency through legal process because of a known deficiency in applicable cost recovery legislation.

7.2 A claim where a polluter is identified but costs cannot be recovered, for reasons other than a known deficiency in applicable cost recovery legislation, should cover all of the items in paragraphs 6.1 to 6.4 above, as well as,

The circumstances of the spill, including analytical and/or other evidence linking the pollution with the ship involved in the incident, such as chemical analysis of oil samples, relevant wind, tide and current data, observation and plotting of floating oil movements.
Details of actions taken by the Statutory Agency in attempts to recover the costs from the identified or suspected polluter, including, as appropriate:
- Outcome of legal proceedings;
- Legal advice regarding appropriate action based on available evidence.

7.3 Claims of this nature will only be considered for vessels that are subject to payment of the pollution levy imposed by the Protection of the Sea (Shipping Levy) Act 1981. In summary, these are ships that:

at any time during a calendar quarter, had on board a quantity of oil in bulk weighing not less than 10 tonnes; and
have a tonnage length of not less than 24 metres.

8. Assessment of Claim

8.1 AMSA addresses the claims from a standpoint of normal audit requirements and reasonableness, ie it will apply the same general criteria used by P&I Clubs and their correspondents when assessing the reasonableness of claims for reimbursement of costs incurred in responding to an oil spill, or potential oil spill. In general, costs will be considered “reasonable” if they result from actions that:

Were undertaken on the basis of a technical appraisal of the incident;
Sought to enhance the natural processes of recovery; and
Were not undertaken purely for public relations reasons.

8.2 Claims will be addressed as quickly as possible and the Statutory Agency will be contacted within three weeks of the claim being received and advised of progress, any issues of concern and likely timeframe for payment.

8.3 The fact that a government or other public body decides to take certain measures does not in itself mean that the measures are reasonable for the purpose of the IGA. The technical reasonableness is assessed on the basis of the facts available at the time the decision is made to take a specific measure.

8.4 Claims for costs are not accepted when it could have been foreseen that the measures taken would be ineffective. On the other hand, the fact that the measures prove to be ineffective is not in itself a reason for rejection of a claim for the costs incurred. The costs incurred, and the relationship between these costs and the benefits derived or expected, should be reasonable. In the assessment, AMSA takes account of the particular circumstances of the incident.

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last updated: January 2007