Anchors Aweigh: Damage to Submarine Cable Caused by Barge Anchor Results in Significant Oil Pollution Act Liability

In a case of first impression, the Court of Appeals for the Second Circuit ruled that submarine cables containing dielectric fluids and other oils are "facilities" under the Oil Pollution Act.  Consequently, vessel operators that damage submarine cables could face significant liability for any resulting releases of oil.

In Power Authority of the State of New York v. M/V Ellen S. Bouchard, et. al, a barge under tow dropped anchor and struck a submarine cable owned and operated by the Power Authority of New York.  The submarine cable was one of four high-voltage transmission cables that spanned the Long Island Sound.  The cables were filled with pressurized dielectric fluid comprised of a petroleum-based oil used for insulation, lubrication, and cooling.  Each cable could hold approximately 2,500 gallons of dielectric fluid at any one time. To make matters worse, after the anchor strike the Power Authority had to maintain positive oil pressure in the cable in order to prevent sea water from entering and damaging the cable further.  Eventually, the damaged portion was located and capped.  By this time, however, several thousand gallons of oil had been released into the Sound, and the Power Authority had expended over $9.8 million in remediation costs.  The Power Authority then brought an action to recover its costs against the two vessels and their corporate owners pursuant to the Oil Pollution Act.

The Oil Pollution Act (OPA) was passed in response to the Exxon Valdez oil spill with the goal of creating a comprehensive legal framework governing oil spills and responses.  Under OPA, "responsible parties" are strictly liable for the removal costs and damages resulting from discharges of oil up to certain statutory liability limits.  OPA permits a responsible party to shift liability to third parties in instances where the spill is "caused solely by an act or omission of one or more third parties."  In such cases the third party becomes the "responsible party" for the purpose of OPA.   Statutory liability limits are based the type of facility or vessel.  Even with statutory limits, however, liability under OPA can be substantial, and a responsible party can face liability ranging from hundreds of thousands to millions of dollars depending on the size of the spill and resulting damage.

The central question in the Power Authority case was whether the cable was a "facility" under OPA.  The District Court initially ruled that the submarine cable was not a "facility" because the cable was not "primarily" or "substantially" used for the storage, handling, or transfer of oil.  On appeal, the Second Circuit rejected the District Court's reading of "facility."  The Court of Appeals held that OPA did not require that the facility's primary purpose be the storage, handling, or transfer of oil, only that the facility was used for one or more of those purposes.  Since the cable was used to convey dielectric fluid along its length from shore-based pressurization plants, this was sufficient to meet the definition of "facility."

This case is the first to hold that submarine cables containing dielectric fluid and other oils are a "facility" as defined in OPA, and it should give vessel operators pause when operating in the vicinity of submarine cables that may contain petroleum-based oil, such as high voltage submarine transmission lines.  Vessel operators that conduct activities at or near the bottom, such as fishing or dredging, should be especially careful when submarine cables may be present.  In addition, vessel operators should be aware that OPA's statutory limits do not apply in cases of gross negligence, willful misconduct, or violations of federal safety, construction, or operating regulations.