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Financial Responsibility - Frequently Asked Questions

What is proof of Financial Responsibility?
Facilities that produce, transport or store large volumes of oil have the potential to cause significant financial damage to resources if an oil spill were to occur. Alaska requires certain operators to meet enhanced spill prevention and response standards. Before operating in Alaska, these same operators must meet minimum financial standards to mitigate damages if spill prevention and response fails. This is termed "proof of financial responsibility." An operator’s access to funds can be a key part to supporting a response.
Who needs a Certificate of Proof of Financial Responsibility?
Please see Do I need Proof of Financial Responsibility page for more detail. Here is a general list of facilities that require proof:
  • Oil tank farms
  • Crude oil transmission pipelines
  • Offshore oil platforms
  • Oil and gas exploration projects
  • Oil production facilities
  • Refineries
  • Oil tankers
  • Oil barges
  • Nontank vessels
  • Railroad tank car operators
  • Underground storage tanks
How much proof is required?
Every three years the Department adjusts the required financial responsibility amount for inflation. Per AS 46.04.045, the adjustment is determined using the Anchorage Consumer Price Index (CPI). For the latest amounts please see Current financial responsibility dollar amounts.
What kind of proof is accepted?
Proof may include:
  • Oil pollution insurance
  • Self-insurance
  • Surety bond
  • Letter of credit
  • Certificate of deposit
  • Financial guaranty
  • Protection and indemnity (P&I) coverage
When does my Certificate of Proof of Financial Responsibility expire?
The certificate will have the expiration date on it. It expires on the date of expiration of the bond, insurance, letter of credit, P&I cover, etc. For self-insurance, it expires annually.
Is there a fee?
No fee is required to apply for a Certificate of Proof of Financial Responsibility.
Does the proof I use for my USCG COFR meet Alaska requirements?
Not usually. Most federal COFR policies don’t meet the State of Alaska requirements.
Is a deductible allowed?
Nontank vessels are the only facilities that may have a deductible. The maximum deductible is $50,000. Supplemental coverage is required for a deductible for a nontank vessel over $50,000 or any deductible for all other facilities. Please see 18 AAC 75.271(d) or 18 AAC 75.250(d). Supplemental coverage can be provided by means of other acceptable proof (see “What kind of proof is accepted?”above) A “first dollar” provision for the deductible may be allowable (see 18 18 AAC 75.250(d) or 18 AAC 75.271(d)).
What happens to the proof of Financial Responsibility if there is an oil spill?
It is against the law to spill oil in Alaska. Every person who spills oil is responsible for cleaning up the spill and for pollution damages that may result. Claims for damages may be settled directly or may proceed through the court system. In the case of regulated operators, their proof of financial responsibility may be encumbered until claims have been settled or adjudicated and they may need to post additional proof to meet the requirements.
What is direct action?
Direct action is when a lawsuit is filed against an insured party and also their insurer. In the Alaska courts both the responsible party and the party who provides proof of financial responsibility (insurance company, guarantor, etc.) can be sued in a lawsuit for oil pollution damage claims related to AS 46.04.040. The party who provides proof can only be liable up to the limit of that coverage. The responsible party can be liable for the full cost of all damages - without limit.

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