TITLE:	Use of Oil Spill Liability Trust Fund for Administrative Costs of Processing Oil Pollution Act,
BNUMBER:	    B-289209
DATE:		    May 31, 2002
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Use of Oil Spill Liability Trust Fund for Administrative Costs of
Processing Oil Pollution Act,  B-289209, May 31, 2002

 B-289209


May 31, 2002


The Honorable Lane Evans
Ranking Democratic Member
Committee on Veterans' Affairs
House of Representatives

Subject:  Use of Oil Spill Liability Trust Fund for Administrative Costs of
Processing Oil Pollution Act Claims

Dear Mr. Evans:

This responds to your letter of October 9, 2001, written jointly with The
Honorable Corrine Brown, concerning the Coast Guard's use of the Oil Spill
Liability Trust Fund (the Trust Fund), as created by the Oil Pollution Act
(the Act), Pub. L. No. 101-380, 104 Stat. 484 (1990).  The Act established a
no-year appropriation for payment from the Trust Fund of uncompensated
claims for damages and removal costs arising from oil spills.  33 U.S.C. ï¿½ï¿½
2712(a)(4), 2752(b).  It also authorized annual appropriations, not to
exceed $25 million per year, to be derived from the Trust Fund, for payment
of the Coast Guard's "operating expenses" under the Act.  33 U.S.C. ï¿½ï¿½
2712(a)(5)(A), 2752(a).

Congress appropriates funds annually out of the Trust Fund for use as part
of the Coast Guard operating expenses appropriation.  For fiscal year 2002,
for example, the total "operating expense" appropriation is about $3.4
billion for the "necessary expenses for the operation and maintenance of the
Coast Guard," of which $24.9 million came from the Trust Fund.  Pub. L. No.
107-87, 115 Stat. 833, 835 (2001).  Nevertheless, since 1998, the Coast
Guard has used the Act's no-year appropriation to pay not only the
uncompensated claims, but also its costs of processing those claims,
including the salaries of adjudicators and the other administrative expenses
associated with payment of the claims.  You asked for our opinion on whether
the no-year appropriation is available for these purposes.
For the reasons given below, we conclude that the no-year appropriation is
not available to pay the salaries of adjudicators and the other
administrative expenses associated with payment of uncompensated claims for
damages and removal costs arising from oil spills.  Accordingly, the Coast
Guard must adjust its records to charge the expenses at issue to the correct
accounts.  The Chief Counsel of the Coast Guard provided GAO with
information that the Coast Guard expended $23,729,000 of no-year funds for
these purposes between November 1998 and November 2001.  In enclosures to
this opinion, we have summarized that information (Enclosure 1) and included
a table portraying those expenditures, which the Coast Guard provided us
(Enclosure 2).

BACKGROUND

The Act establishes liability for damages and costs resulting from oil
spills, requiring the party responsible for a vessel or facility from which
oil is discharged, or which threatens to discharge oil, to reimburse injured
parties for the removal costs and damages resulting from a spill.[1]  33
U.S.C. ï¿½ 2702.  In certain circumstances, however, uncompensated claims for
removal costs and damages may be presented to the Coast Guard for payment
from amounts appropriated from the Trust Fund.  33 U.S.C. ï¿½ï¿½ 2712(a)(4),
2713.  The Act provides that the Trust Fund is available for "the payment of
claims . . . for uncompensated removal costs determined by the President to
be consistent with the National Contingency Plan or uncompensated damages."
33 U.S.C. ï¿½ 2712(a)(4).  The Act created a no-year appropriation for payment
of these claims.  33 U.S.C. ï¿½ 2752(b).

The Act also authorized the appropriation of not more than $25 million per
year for the Coast Guard's "operating expenses" under the Act.  33 U.S.C.
ï¿½ 2712(a)(5)(A).  Amounts in the Trust Fund are available for this purpose,
however, "only as provided in annual appropriation acts."  33 U.S.C. ï¿½
2752(a).  Since the Act became law, Congress has enacted annual
appropriations from the Trust Fund for the Coast Guard's operating
expenses.  For fiscal year 2002, Congress appropriated a lump sum $3.4
billion for Coast Guard operating expenses--$24,945,000 of which was derived
from the Trust Fund.  Pub. L. No. 107-87, 115 Stat. 833, 835 (2001).

The 1998 Memorandum

In March 1998, the Chief Counsel of the Coast Guard opined that the Act's
no?year appropriation was available to pay not only the uncompensated
claims, but also the indirect expenses incurred by the Coast Guard in
processing the claims.[2]  He noted
that, as a consequence of a September 1997 opinion of the Justice
Department's Office of Legal Counsel,[3] the Coast Guard expected to receive
and process additional claims for uncompensated damage and removal costs.
The new claims would require new policies, new procedures, and as many as 30
new employees.  For this reason, the Chief Counsel had been asked about
"funding the claims division (both for natural resources damage and other
type of claims) from the [Trust Fund] rather than from the Operating Expense
account."  The Chief Counsel agreed to the proposal.  He found that the
words, "payment of claims," as used in section 2712(a)(4), are "subject to
more than one reasonable interpretation.  [T]he term can be narrowly
interpreted to mean only the amount to be paid to a claimant.
Alternatively, it can be broadly interpreted to encompass any amount
necessary to effect payment of a claim."  He concluded that Congress
intended the latter.  1998 Memorandum.

For support, he relied on another part of the Act, section 2713, and its
legislative history.  Section 2712(a)(4) refers to "the payment of claims in
accordance with section 2713."  33 U.S.C. ï¿½ 2712(a)(4).  Section 2713
requires the President to promulgate procedures for the "presentation,
filing, processing, settlement, and adjudication of claims under [the
Act]."  33 U.S.C. ï¿½ 2713(e).  According to the Chief Counsel, the reference
to section 2713 "serves to bring all costs of claims processed under
[section 2713] within the exception from the requirement of an
appropriation."  1998 Memorandum.  He supported this conclusion with a
quotation from the Act's legislative history:

"In implementing this section [2713], the President may use the facilities
and services of private insurance and claims adjustment organizations or
State agencies in processing claims against the Fund and may contract to pay
compensation for those facilities and services.  The Conferees also intend
that the President may make advance payments to the contractor to be used
for the payment of claims."

H.R. Conf. Rep. No. 101-653, at 117.  In the Chief Counsel's view, this
shows that Congress meant the phrase "payment of claims," as used in section
2712(a)(4), "to be broadly construed to include all costs associated with
claims payments."  1998 Memorandum.  According to the Chief Counsel, these
costs would include the indirect costs, such as salaries and contracting for
damage assessments, of paying for the claims.

He also found that "the cost of establishing a system for processing claims
is [not] an 'administrative, operational' cost necessary for the
'implementation' and 'administration' of [the Act]" within the meaning or
scope of section 2712(a)(5).  As stated above, section 2712(a)(5) authorizes
not more than $25 million per year from the Trust Fund for operating
expenses.  The Chief Counsel asserted, without explanation, that "payment of
claims" does not fall into the "categories" found in section 2712(a)(5),
which apply to "implementation, administration, and enforcement."  Instead,
he found that setting up a claims process is an "essential and integral
element" of paying claims.  He concluded that all of those costs were
payable from the no-year money made available for "the payment of claims
under section 2712(a)(4) of the Act."  1998 Memorandum.

Recently, we asked the Chief Counsel to confirm that he continues to support
the position taken in the 1998 Memorandum.[4]  In a letter dated November
29, 2001, the Chief Counsel did so, saying:  "[T]he Act does permit the
payment of all costs, direct and indirect, necessary to process and pay
claims under section [2712(a)(4)], including a claims processing system and
staff salaries, notwithstanding section [2712(a)(5)]."[5]

DISCUSSION

At issue here is which of two appropriations is available to pay the
adjudicator salaries and other administrative expenses related to processing
claims under section 2712(a)(4) of the Act-the no-year appropriation for
payment of claims under section 2712(a)(4) or the fiscal year appropriations
for operating expenses.  As noted above, the Act's no-year appropriation, to
which the Coast Guard presently charges its costs of processing claims for
uncompensated removal costs and damages, is available for "the payment of
claims . . . for uncompensated removal costs determined by the President to
be consistent with the National Contingency Plan or uncompensated damages."
33 U.S.C. ï¿½ï¿½ 2712(a)(4), 2752(b).

If section 2712(a)(4) were the only statutory provision involved, we might
agree with the Chief Counsel's assertion that the necessary and incidental
costs of processing claims are captured in this section's use of the phrase
"payment of claims."  See generally 36 Comp. Gen. 745, 746 (1957)
("Manifestly, legal services are necessary in the settlement of these claims
and the cost of such legal services are properly to be regarded as part of,
or incident to the claim and consequently would be allowable as a proper
expense [of the claim]."); B?140736, June 1, 1961.  However, the Chief
Counsel's arguments fail to give any weight to the fact that there is
another appropriation which makes specific provision for the Coast Guard's
administrative expenditures in connection with the Act.  As a general rule,
an appropriation for a specific object is available for that object to the
exclusion of a more general appropriation which might otherwise be
considered for the same object.  65 Comp. Gen. 881, 884 (1986).  The Act
makes up to $25 million from the Fund available for payment of Federal
administrative, operational, and personnel costs and expenses necessary for
implementation and administration of the Act.  33 U.S.C. ï¿½ 2712(a)(5)(A).
Pursuant to 33 U.S.C. ï¿½ 2752, Congress has annually appropriated this amount
from the Fund to the Coast Guard's "operating expense" account.  Here,
section 2712(a)(4) permits payment of claims for uncompensated removal costs
from a no-year appropriation from the Trust Fund, but says nothing about the
administrative costs, including salaries of personnel.  However, the more
specific provision of the Act, section 2712(a)(5)(A), does contemplate the
availability of the Fund for payment of operating expenses in implementing,
administering, and enforcing the Act, including administering the Fund, but
"only as provided in annual appropriation acts."  As noted earlier, Congress
has implemented this provision by appropriating money from the Fund on a
fiscal year basis.  33 U.S.C. ï¿½ 2752.  The provisions of sections 2712(a)(5)
and 2752, read together, plus Congress' implementation of this scheme, make
clear that Congress did not intend the no-year appropriation to be used to
pay the administrative expenses of implementing the Act.

In similar circumstances, we held that the Federal Emergency Management
Agency (FEMA) was required to pay the administrative expenses of its
disaster relief program from its "salaries and expenses" appropriation
rather than the President's "disaster relief" appropriation because the
administrative expenses were made specifically available for the
administrative costs of implementing the disaster relief program.

B-222009-O.M., Mar. 3, 1986.  The disaster relief appropriation was
available for grants, subsidies and contributions, and direct assistance to
disaster victims and was silent as to administrative expenses.  FEMA argued
that it could charge its administrative expenses attributable to specific
disasters to the disaster relief appropriation.  We disagreed.  Id.  We
explained that the Congress had enacted the salaries and expenses
appropriation for all of FEMA's administrative expenses.  The salaries and
expenses appropriation, we concluded, was the more specifically applicable
appropriation for that purpose.  Id.

In the case at hand, Congress specified that operating expenses, which
include the personnel costs, were to come from the annual appropriation.  In
fact, the Coast Guard previously used its annual operating expense
appropriations to pay the necessary and incidental costs of processing
claims under section 2712(a)(4).  See 1998 Memorandum.  It was the Coast
Guard's anticipation of additional claims, requiring new policies, new
procedures, and new employees which caused it to look into switching from
the annual operating expense appropriation to the no-year appropriation
established by the Act.  However, as noted, the annual appropriation for
operating expenses for payment of administrative and personnel is for the
costs of implementing the Act, including the costs of processing claims
under section 2712(a)(4).

The Chief Counsel argues that sections 2712(a)(4) and 2713 read together
bring all the costs of claims processing under section 2712(a)(4).  We
disagree.  As noted above, section 2712(a)(4) provides for the payment of
claims pursuant to section 2713.  However, section 2713 merely requires the
President to promulgate procedures governing the process by which the Coast
Guard is to pay claims under the Act.  Neither of these sections, either
separately or together, addresses the administrative costs of processing and
paying claims, or the appropriation from which those costs should be paid,
and there is nothing in the legislative history of section 2713, on which
the Chief Counsel relies, which lends any support to the Chief Counsel's
position.

The Chief Counsel also asserts that the costs of establishing a system for
processing claims do not qualify as "administrative, operational, and
personnel costs and expenses reasonably necessary for and incidental to the
implementation, administration, and enforcement" of the Act under section
2712(a)(5).  The Chief Counsel's position ignores the obligation to give the
Act's words their plain and ordinary meaning.  E.g., Mallard v. United
States District Court, 490 U.S. 296, 301 (1989); B-271845, Aug. 23, 1996.
By paying uncompensated claims under section 2712(a)(4) of the Act, the
Coast Guard is in fact both "implementing" the payment provision and
"administering" the Act through a claims process.  All of the activities the
Chief Counsel calls indirect cost" - salaries for personnel, contract
support, information and technology, and administrative costs - are
administrative costs under 2712(a)(5).  Rather than apply the plain language
of section 2712(a)(5), the Chief Counsel concludes that the general language
of section 2712(a)(4) necessarily and implicitly applies to the exclusion of
the explicit language of section 2712(a)(5).  We do not agree.  B-271845,
Aug. 23, 1996 (the clear intent of Congress must be determined by giving all
language of the statute its plain meaning).  See also, e.g., Auburn Housing
Authority v. Martinez, 277 F.3d 138, 144 (2d Cir. 2002) ("[T]he preferred
meaning of a statutory provision is one that is consonant with the rest of
the statute.").

CONCLUSIONS

The Coast Guard's operating expenses appropriation is the appropriation
specifically available for Coast Guard's claims processing costs.  Congress
enacted a specific appropriation for operating expenses, which generally
includes all administrative costs of the Coast Guard.  Claims processing
costs such as adjudicator salaries are administrative costs that would
normally be funded under operating expenses, and that the Coast Guard funded
from its operating expenses appropriation until 1998.  The Act clearly
contemplates that the Coast Guard would pay the "operating expenses" of
implementing the Act, in whole or in part, from annual appropriations
derived from the Trust Fund.  33 U.S.C. ï¿½ï¿½ 2712(a)(5), 2752(a).  Thus, of
the appropriations available to it, the Coast Guard must pay the
administrative costs of processing claims for uncompensated removal costs
and damages from the annual "Operating Expenses" appropriation.
In view of our conclusion, the Coast Guard should adjust its accounting
records.  The Coast Guard should deobligate the adjudicator salaries and
other administrative expenses charged to the no-year appropriation since
1998 and charge them instead to the annual operating expense appropriations
in effect at the time those expenses were incurred.  Then, the Coast Guard
must determine whether those adjustments

result in any violations of the Antideficiency Act, 31 U.S.C. ï¿½ 1341(a).[6]
To the extent that there was insufficient budget authority, the Coast Guard
should report the deficiency in accordance with the Antideficiency Act.
Sincerely yours,

Anthony H. Gamboa
General Counsel
Enclosures

cc:       The Honorable John D. Ashcroft, Attorney General
            Rear Admiral R.F. Duncan, Chief Counsel, U.S. Coast Guard
Mr. Kenneth Mead, Inspector General, Department of Transportation
Enclosure 1:  Use of The No-Year Appropriation for Operating Expenses1
As of November 2001, the Coast Guard expended $23,729,000 from the Act's
no-year appropriation pursuant to the Chief Counsel's 1998 Memorandum.  The
Coast Guard identified $1.2 million of those expenses as "direct processing
costs," and $22.5 million as "indirect costs."  The Coast Guard accounts for
the indirect costs in four categories:  "1) pay and benefits for all
positions supporting claims; 2) information technology; 3) program
management costs; and 4) administrative support."

Using these funds, the Coast Guard created a "Claims Processing System"
which, the Coast Guard reports, is now "partly operational."  It includes a
number of administrative offices and processes, including the "National
Pollution Funds Center" (NPFC), and two subdivisions, the "Natural Resource
Damage Claims Division" (NRD), and the "Non-NRD Claims Division."  Since
1998, the NPFC has adjudicated nearly 6,400 claims for uncompensated damages
and removal costs with a claimed value of $105 million.  Of those, about
2,000 claims have been paid a total of about $34 million.  An additional 254
claims for uncompensated damages and removal costs (with a claimed value of
$90 million) were awaiting processing.

The NPFC has contracted for "program management services" to support the new
NRD Division, and for "ongoing business improvement support for all of [its]
claim processes."  NPFC staffing is nearly complete.  The Coast Guard
expects that indirect costs of processing claims will remain relatively
constant in the future, with only modest increases due to inflation.  On the
other hand, direct costs of processing claims are expected to increase.
This expectation is based on a number of factors, including anticipated
increases in the size and complexity of future claims.
Enclosure 2:  Expenditures From Oil Spill Liability Trust Fund, 1998-2001


B-289209

DIGEST

The Coast Guard may not pay the administrative costs of processing and
paying claims for uncompensated damages and removal costs arising from oil
spills under the Oil Pollution Act, Pub. L. No. 101-380, 104 Stat. 484
(1990), from the Act's no-year appropriation because its annual "operating
expenses" appropriations are explicitly available to pay the "necessary
expenses for the operation and maintenance of the Coast Guard," and the
provisions of the Act make clear that Congress did not intend the Coast
Guard to use the no-year funds for that purpose.


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

[1] The Act was intended, among other things, "to consolidate and improve
Federal laws providing compensation and establishing liability for oil
spills."  S. Rep. No. 101?94, at 1 (1989).

[2] Memorandum entitled "Payment from OSLTF:  Costs Connected to Claims and
Claims Process" from Paul Blayney, Chief Counsel, Commandant, United States
Coast Guard, to Director, National Pollution Funds Center (Mar. 2, 1998)
(hereafter cited as 1998 Memorandum).

[3] Memorandum entitled "Funds Available for Payment of National Resource
Damages Under the Oil Pollution Act of 1990," from Randolph D. Moss, Deputy
Assistant Attorney General, Office of Legal Counsel, to Frank W. Hunger,
Assistant Attorney General, Civil Division (Sept. 25, 1997).

[4]We also asked the Attorney General for his views on this matter.  The
Justice Department's liaison to GAO informally advised us that the Attorney
General would not be responding to our request.

[5] Letter from R. F. Duncan, Chief Counsel, United States Coast Guard, to
Thomas Armstrong, Assistant General Counsel, GAO (Nov. 29, 2001).
[6] The Antideficiency Act prohibits making expenditures or incurring
obligations in excess or in advance of appropriations available for that
purpose.  31 U.S.C. ï¿½ 1341(a).  See, e.g., 42 Comp. Gen. 272, 275 (1962).
The Antideficiency Act also requires the head of the agency involved to
report immediately to the President and the Congress all violations of this
act, together with a statement of the relevant facts and the actions taken
in response to the violation.  31 U.S.C. ï¿½ 1351.
1 This enclosure summarizes expenditures reported by the Coast Guard in a
letter from R. F. Duncan, Chief Counsel, United States Coast Guard, to
Thomas Armstrong, Assistant General Counsel, GAO (Nov. 29, 2001).  GAO has
not verified this information.