Case: 10-41108 Document: 00511674499 Page: 1 Date Filed: 11/22/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 22, 2011
No. 10-41108 Lyle W. Cayce
Clerk
BUFFALO MARINE SERVICES INCORPORATED; LIMIT (NO 2)
LIMITED; NEW YORK MARINE & GENERAL INSURANCE COMPANY,
Plaintiffs-Appellants
v.
UNITED STATES OF AMERICA,
Defendant-Appellee
Appeal from the United States District Court
for the Eastern District of Texas
Before JONES, Chief Judge, and HIGGINBOTHAM and SOUTHWICK, Circuit
Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
This appeal arises out of an oil spill on the Neches River. Appellants
challenge the National Pollution Funds Center’s final claim determination
denying reimbursement for costs arising from the spill. The district court
rejected appellants’ challenge to the agency’s claim determination. We affirm.
I.
In August 2004, a barge and a tug owned by appellant Buffalo Marine
Services, Inc. (“Buffalo Marine”) attempted to dock alongside the TORM MARY,
a large tanker ship, in order to deliver fuel that had been ordered by entities
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responsible for the tanker ship (collectively, “the Torm”). The fuel delivery never
took place. Buffalo Marine’s barge collided with the TORM MARY, rupturing
the vessel’s skin and adjacent fuel-oil tank. As a result of the rupture,
approximately 27,000 gallons of heavy fuel oil spilled into the Neches River.
Buffalo Marine, the Torm, and their insurers coordinated the clean-up effort,
assessed at a cost of $10.1 million.
The Oil Pollution Act of 1990 (“OPA”) creates a strict-liability scheme for
the costs of cleaning up oil spills: “each responsible party for a vessel . . . from
which oil is discharged . . . is liable for the removal costs and damages . . . that
result from such incident.”1 The “responsible party” for a vessel is “any person
owning, operating, or demise chartering the vessel.”2 The liability of the
responsible party is capped at a dollar limit that is set by statute; the limit is
based on the gross tonnage of the responsible party’s vessel.3 If the cleanup
costs exceed the statutory limit, the responsible party can seek to have those
excess costs reimbursed by the Oil Spill Liability Trust Fund.4 In this case,
because the oil spilled from the TORM MARY, the Torm was the “responsible
party” under the OPA’s strict liability scheme.
However, a responsible party may have a complete defense to liability
under § 2703(a)(3) if it “establishes, by a preponderance of the evidence,” that
the oil spill was “caused solely by . . . an act or omission of a third party, other
than . . . a third party whose act or omission occurs in connection with any
contractual relationship with the responsible party.”5 Section 2703(a)(3) also
1
33 U.S.C. § 2702(a).
2
Id. § 2701(32)(A).
3
See id. § 2704(a)(1)–(2).
4
See id. §§ 2708, 2013.
5
Id. § 2703(a)(3).
2
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requires a showing that the responsible party exercised due care with respect to
the spilled oil and that it took precautions against the foreseeable acts or
omissions of the third party to whom it is attempting to shift liability.6
On March 16, 2007, the owners and insurers of the three vessels involved
in the spill jointly submitted a request for reimbursement of their cleanup
expenses to the Coast Guard’s National Pollution Funds Center (“NPFC”), which
is the agency charged with administering the Oil Spill Liability Trust Fund.7
The request sought to declare Buffalo Marine the sole “third-party” cause of the
spill, exonerate the Torm, substitute Buffalo as the formal “responsible party”
for cleanup costs, and limit Buffalo Marine’s liability to $2 million – the
approximate value of the barge – pursuant to the OPA.8
On November 8, 2007, the NPFC denied the claim, concluding that the
claimants had not established by a preponderance of evidence that Buffalo
Marine’s acts were not “in connection with any contractual relationship with the
responsible party.” The NPFC denied the claimants’ motion for reconsideration
of its decision. Buffalo Marine and its insurers then sought review of the
NPFC’s decision in the district court. After the parties filed cross-motions for
summary judgment, the district court granted the government’s motion for
6
Id. § 2703(a)(3)(A)–(B).
7
See United States v. Ex-USS CABOT / DEDALO, 297 F.3d 378, 380 n.2 (5th Cir.
2002) (citing 33 U.S.C. § 1321(s)); 40 C.F.R. § 300.5, at 12.
8
The TORM MARY is much larger than the barge and hence would have been liable
for the first $36 million of clean-up costs, an amount far in excess of the $10.1 million that the
Torm and Buffalo Marine allege was spent on clean-up. Because the OPA allows a responsible
party to bring a civil action for contribution against any other person who shares responsibility
for the spill, see 33 U.S.C. § 2709, Buffalo Marine likely would have faced liability for its role
in the spill even if the Torm had not submitted a third-party affirmative defense claim to the
NPFC. But if the NPFC had granted the claimants’ request to substitute Buffalo Marine as
the “responsible party,” it would have then reimbursed Buffalo Marine for approximately $8.1
million of the $10.1 million the claimants purportedly spent on the cleanup.
3
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summary judgment and denied the plaintiffs’ motion for summary judgment.
Buffalo Marine and its insurers timely appealed.
II.
At the heart of this case are the contractual relationships formed in the
course of the transaction through which the Torm purchased the fuel that was
being delivered when the spill occurred and through which Buffalo Marine
attempted to deliver the fuel to the TORM MARY. Four parties were involved
in the fuel-purchase transaction: the Torm, the end buyer of the fuel; Bominflot,
Inc. (“Bominflot”), the seller of the fuel; LQM Petroleum Services, Inc. (“LQM”),
the broker that acted as an intermediary between the Torm and Bominflot; and
Buffalo Marine, the delivery agent hired by Bominflot to deliver the fuel to the
Torm.
Appellants argue that the NPFC’s decision should be overturned, and the
district court reversed, because the Torm and Buffalo Marine did not have a
“contractual relationship” and because the Torm satisfied the other elements of
its third-party defense. The government argues that the Torm and Buffalo
Marine had at least an indirect contractual relationship and that the acts that
allegedly caused the spill occurred in connection with that contractual
relationship, precluding a successful third-party affirmative defense under
§ 2703(a)(3). Alternatively, the government argues that if this court rejects its
position, we should remand the case to the agency so that it can determine
whether the Torm satisfies the other elements of its defense.
III.
We review a grant of summary judgment de novo, applying the same
standard as the district court.9 The Administrative Procedure Act (“APA”)
allows a federal court to overturn an agency’s ruling “‘only if it is arbitrary,
9
Wilson v. Sec’y, Dept. of Veterans Affairs, 65 F.3d 402, 403 (5th Cir. 1995).
4
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capricious, an abuse of discretion, not in accordance with law, or unsupported by
substantial evidence on the record taken as a whole.’”10 The court starts from “a
presumption that the agency’s decision is valid, and the plaintiff has the burden
to overcome that presumption by showing that the decision was erroneous.”11
The agency’s factual findings are reviewed to determine only “whether they are
supported by substantial evidence.”12 The agency’s legal conclusions are
reviewed de novo, except for questions of statutory interpretation, where the
court owes “substantial deference to an agency’s construction of a statute that
it administers.”13 Review is “highly deferential to the administrative agency
whose final decision is being reviewed.”14
IV.
This case turns on two issues: (1) whether the NPFC’s interpretation of
33 U.S.C. § 2703(a)(3) deserves deference and (2) whether the NPFC’s
determination in this case, given the NPFC’s interpretation of the statute, was
arbitrary, capricious, not in accordance with law, or unsupported by substantial
evidence. Because we find that the agency’s interpretation of the statute is
entitled to deference and that its determination that the Torm is not entitled to
a third-party defense was not arbitrary, capricious, or otherwise unreasonable,
we need not reach the other arguments raised by the parties.
10
Tex. Clinical Labs, Inc. v. Sebelius, 612 F.3d 771, 775 (5th Cir. 2010).
11
Id.
12
See Alwan v. Aschcroft, 388 F.3d 507, 510–11 (5th Cir. 2004).
13
Id. at 511 (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,
842 (1984)).
14
Tex. Clinical Labs, 612 F.3d at 775.
5
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A.
We first consider whether the NPFC’s interpretation of the OPA deserves
deference. To determine whether a “responsible party” is entitled to a complete
defense based on the act or omission of a third party, the NPFC must evaluate
whether the alleged third-party “act or omission occur[red] in connection with
any contractual relationship with the responsible party.”15 The NPFC interprets
the phrase “act or omission occur[ring] in connection with any contractual
relationship” to include acts or omissions occurring in connection with an
indirect contractual relationship with the responsible party. Thus, the NPFC
has concluded that the phrase includes acts occurring in connection with a
commercial fuel delivery even where “a chain of agents or contracts stands
between the party delivering the fuel and the party receiving the fuel.”16 Direct
privity of contract is not required.
Deference to an agency’s interpretation of a statute “is governed by the
classic two-step framework from Chevron USA v. Natural Resources Defense
Council, Inc.: If Congress ‘has directly spoken to the precise question at issue,’”
the reviewing court “‘must give effect to [Congress’s] unambiguously expressed
intent,’” but “‘if the statute is silent or ambiguous,’” the court “must defer to the
agency’s interpretation so long as it is ‘based on a permissible construction of the
statute.’”17
At Chevron step one, Congress has not spoken directly to the precise
question at issue. Although the OPA states that “[f]or purposes of subsection
(a)(3) . . . the term ‘contractual relationship’ includes, but is not limited to, land
contracts, deeds, easements, leases, or other instruments transferring title or
15
33 U.S.C. § 2703(a)(3).
16
Appellants’ Br. at 19.
17
Tex. Clinical Labs, 612 F.3d at 775 (citation omitted) (quoting Chevron, 467 U.S. at
842-43).
6
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possession,”18 with certain exceptions not applicable here, it does not explicitly
define the phrase “any contractual relationship.” In addition, the statute does
not specify whether a third party must be in direct privity of contract with the
responsible party for an act or omission of the third party to occur “in connection
with [a] contractual relationship with the responsible party.”19 “Nor is its
language so clear as to only permit a single interpretation.”20 Therefore, we
proceed to Chevron step two.
At Chevron step two, we find that the NPFC’s interpretation of the phrase
“in connection with any contractual relationship with the responsible party” is
based on a permissible construction of § 2703(a)(3) for at least four reasons.
First, appellants’ argument that the NPFC’s interpretation does not
deserve deference presumes that the phrase “contractual relationship” is
interchangeable with the term “contract.” While the drafters of the statute could
have used the phrase “in connection with a contract between the responsible
party and the third party,” they did not do so. The exception to the general rule
of strict liability for the party responsible for the vessel that spilled the oil
applies where the spill resulted from “an act or omission of a third party, other
than . . . a third party whose act or omission occurs in connection with any
contractual relationship with the responsible party (except where the sole
contractual arrangement arises in connection with carriage by a common carrier
by rail).”21 The adjective “contractual” is not defined by the OPA. Webster’s
Collegiate Dictionary defines “contractual” as “of, relating to, or constituting a
18
33 U.S.C. § 2703(d)(1) (emphasis added).
19
Id. § 2703(a)(3).
20
Tex. Clinical Labs, 612 F.3d at 775.
21
33 U.S.C. § 2703(a)(3).
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contract.”22 While some contractual relationships are themselves contracts,
other contractual relationships merely relate to contracts. The fact that no
contract exists between two parties does not preclude the parties from having a
“contractual” relationship. The language used to describe the exception-to-the-
exception to the defense – “except where the sole contractual arrangement arises
in connection with carriage by a common carrier by rail” – reinforces the
inference that Congress chose not to limit the exception to the third-party
defense to cases in which there was a contract between the responsible party and
the third party.
Second, the statute specifies that the third-party defense does not apply
where the third party’s act or omission occurred “in connection with any
contractual relationship with the responsible party.” If the word “any” is given
its ordinary meaning, the phrase “any contractual relationship” must encompass
all varieties of contractual relationships.23 We find no reason to conclude that
the phrase “any contractual relationship” excludes indirect contractual
relationships. Indeed, in a third-party defense provision virtually identical to
the one at issue here, the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”) specifies that the defense does not
apply where the third party’s “act or omission occurs in connection with a
22
Merriam Webster’s Collegiate Dictionary (10th ed. 1996). This court has noted that
“dictionaries are a principal source for ascertaining the ordinary meaning of statutory
language.” United States v. Orellana, 405 F.3d 360, 365 (5th Cir. 2005) (quotation marks,
alteration, and citation omitted).
23
See Mocklin v. Orleans Levee Dist., 877 F.2d 427, 429 (5th Cir. 1989) (noting that in
United States v. James, 478 U.S. 597, 604 (1986), the Supreme Court gave “[t]he use of the
words ‘any damage’ [in 33 U.S.C. § 702c] . . . a meaning consistent with the ordinary meaning
of th[o]se words” and found that the phrase “include[s] all different kinds of damages”); see
also G.M. Trading Corp. v. Commissioner, 121 F.3d 977, 981 (5th Cir. 1997) (“We find the use
of the word ‘any’ to be significant.”); Rekant v. Desser, 425 F.2d 872, 880 n.15 (5th Cir. 1970)
(relying on the broad scope of the ordinary meaning of “any”).
8
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contractual relationship, existing directly or indirectly, with the defendant.”24
Given the common purposes and shared history of CERCLA and the OPA,25 the
use of the phrases “any contractual relationship” and “a contractual relationship,
existing directly or indirectly” in parallel, similarly worded provisions is
particularly significant.26
Third, the legislative history confirms that Congress meant to encompass
indirect contractual relationships within the phrase “any contractual
relationship.” The version of the OPA originally passed in the House simply
referred to “a contractual relationship with a responsible party.”27 The Senate
version, however, copied the language used in the parallel provision in CERCLA,
allowing the third-party defense where a spill resulted from “an act or omission
of a third party other than . . . one whose act or omission occurs in connection
with a contractual relationship, existing directly or indirectly, with the
defendant.”28 The phrase “any contractual relationship” was added at
conference. The conference report explains:
The Conference substitute adopts the Senate language on complete
defenses to liability. The substitute refers to any contractual
arrangement rather than direct or indirect contractual relationships
24
42 U.S.C. § 9607bd)(3) (emphasis added).
25
See, e.g., GE v. United States DOC, 128 F.3d 767, 769-70 (D.C. Cir. 1997) (noting that
prior to passage of the OPA, “natural resource damages resulting from oil spills were assessed
pursuant to [CERCLA]”).
26
Cf. Int’l Marine Carriers v. Oil Spill Liability Trust Fund, 903 F. Supp. 1097, 1105
(S.D. Tex. 1994) (noting that “[t]he OPA section 2703(a)(3) defense is analogous to the
CERCLA section 9607(b)(3) third-party defense” and concluding that the agency’s broad
interpretation of the phrase “any contractual relationship” was based on a permissible
construction of § 2703(a)(3)).
27
Oil Pollution Act of 1989, H.R. 1465, 101st Cong., § 1003(a)(2)(C) (as passed by the
House, Nov. 9, 1989).
28
Oil Pollution Liability and Compensation Act of 1989, H.R. 1465, 101st Cong.,
§ 102(b)(1)(C) (as passed by the Senate, Nov. 19, 1989).
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as referred to in the Senate amendment and to responsible party
rather than defendant as in the Senate amendment.29
In other words, although the final version of the OPA substituted the phrase
“any contractual relationship” for the phrase “a contractual relationship, existing
directly or indirectly,” Congress’s use of “any contractual relationship” reflected
the adoption of the Senate version of the third-party defense provision, which
emphasized the breadth of the “contractual relationship” limitation.
Appellants suggest that the revision of 33 U.S.C. § 2703 in 2004 to include
a definition of “contractual relationship” cuts against an inference that Congress
intended to impose a broad “contractual relationship” limitation to the third-
party defense. However, the “Definition” merely specifies that “the term
‘contractual relationship’ . . . includes, but is not limited to, land contracts, deeds,
easements, leases, or other instruments transferring title or possession.”30 This
definition replicates the definition of “contractual relationship” that appears in
CERCLA.31 If the definition were meant to exclude indirect contractual
relationships, then Congress would not have provided, in CERCLA, that the
third-party defense does not apply where the third party’s act or omission
“occurs in connection with a contractual relationship, existing directly or
indirectly.”32 The amendment to § 2703, passed as part of the Coast Guard and
Marine Transportation Act of 2004, reinforces the inference that Congress
intended the “contractual relationship” limitation to the third-party defense
29
H.R. REP. NO. 101-653, at 5 (1990) (Conf. Rep.), reprinted in 1990 U.S.C.C.A.N. 779,
782-83.
30
33 U.S.C. § 2703(d)(1) (emphasis added).
31
See 42 U.S.C. § 9601(35)(A) (“The term ‘contractual relationship[,’] for the purpose
of section 9607(b)(3) of this title, includes, but is not limited to, land contracts, deeds,
easements, leases, or other instruments transferring title or possession . . . .”).
32
Id. § 9607(b)(3).
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available under the OPA to be as broad in scope as CERCLA’s limitation.33
Fourth, allowing responsible parties to escape liability even when the third
party’s act was in connection with an indirect contractual relationship with the
responsible party would risk allowing the exception (the third-party defense) to
swallow the rule (strict liability for the vessel discharging the oil). To determine
the meaning of a statute, “we look not only to the particular statutory language,
but to the design of the statute as a whole and to its object and policy.”34 As the
district court observed, the interpretation advocated by appellants “would allow
contracting parties in cases such as this to avoid liability by the simple expedient
of inserting an extra link or two in the chain of distribution.”35 The NPFC’s
understanding of the third-party defense as inapplicable where the third party’s
act or omission occurs in connection with an indirect contractual relationship
with the responsible party is consistent with the strict liability policy at the
center of the statutory scheme.36
33
See Coast Guard and Marine Transportation Act of 2004, Pub. L. No. 108-293,
§ 703(c), 108 Stat. 1028, 1072 (2004). The conference report states:
The purpose of [Section 703] is to provide to innocent purchasers, municipalities
and lenders the same protection against liability from oil discharges under the
Oil Pollution Act of 1990 as are provided for such entities under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended. To the extent that differences in the language exist, these
are either technical in nature or were necessary to fit with the terminology used
in the Oil Pollution Act.
H.R. REP. NO. 108-617, at 82 (2004) (Conf. Rep.), reprinted in 2004 U.S.C.C.A.N. 936, 963.
34
Crandon v. United States, 494 U.S. 152, 156-58 (1990).
35
Buffalo Marine Servs. Inc. v. United States, No. 1:09-cv-01013-RC, at 12 (E.D. Tex.
Oct. 13, 2010).
36
Cf. United States v. LeBeouf Bros. Towing Co., 621 F.2d 787, 789 (5th Cir. 1980)
(endorsing a narrow interpretation of the third-party defense in the Federal Water Pollution
Control Act (Clean Water Act) in part because “[t]he statute’s comprehensive scheme for
preventing and cleaning up oil spills would be undermined if barge owners like LeBeouf could
escape strict liability merely by hiring out their operations to tugs and independent
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We conclude that the NPFC’s interpretation of the phrase “in connection
with any contractual relationship with the responsible party” in 33 U.S.C.
§ 2703(a)(3) is based on a permissible construction of the statute.
B.
Having determined that the NPFC’s interpretation of the OPA is entitled
to deference, we find that the agency’s determination that the Torm was not
eligible for the third-party defense should be upheld, as it was supported by
substantial evidence and not arbitrary, capricious, or otherwise not in
accordance with law.
It was the claimants’ burden to establish by “a preponderance of evidence”
that the Torm was entitled to a complete defense.37 In their claim letter, the
claimants alleged that “the sole cause of the discharge at issue was the act
and/or omission of [Buffalo Marine’s barge], whereby it collided with [the TORM
MARY], and resulted in the pollution incident.”38 To succeed in their claim, the
claimants thus had to show by a preponderance of evidence that the act or
omission of the barge whereby it collided with the TORM MARY was not in
connection with any contractual relationship with the Torm.39
Here, the e-mails and other communications exchanged among the Torm
and its agents, Bominflot, and Buffalo Marine support the agency’s conclusion
that Buffalo Marine’s tug and barge “approached the TORM MARY to perform
a prearranged delivery of bunkers.”40 The claimants acknowledged that the
Torm, through its agent, contracted with Bominflot to deliver fuel bunkers to the
contractors”).
37
See 33 U.S.C. § 2703(a).
38
Administrative Record at 277.
39
See 33 U.S.C. § 2703(a)(3).
40
Administrative Record at 268.
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TORM MARY and Bominflot arranged for the bunkers to be delivered by Buffalo
Marine’s barge. Buffalo Marine and the Torm thus were linked by “a promise
of bunkering services in return for payment.”41 While the contractual
relationship between the Torm and Buffalo Marine may have been an indirect
one, involving a chain of intermediaries, the NPFC reasonably concluded that
the arrangement whereby Buffalo Marine’s barge delivered the bunkers to the
TORM MARY “squarely falls under the meaning of ‘any contractual
relationship.’”42
As the NPFC noted, the record also included evidence of “a more direct
aspect” to the contractual relationship between the Torm and Buffalo Marine.43
For example, in the hours leading up to the collision, the master of Buffalo
Marine’s tug and the master of the TORM MARY communicated by radio to
coordinate the planned delivery. In addition, as Buffalo Marine’s barge and tug
were approaching the TORM MARY, the TORM MARY’s chief engineer was
preparing the documents that the Torm and Buffalo Marine would have to sign
so that the fuel-transfer operation could take place. One of these documents,
mandated by 33 C.F.R. § 156.150, was a “Declaration of Inspection.”44 Though
the spill prevented the parties from ever signing the declaration of inspection,
by law, they could not have completed the fuel transfer without signing the
41
Id.
42
Id.; see also id. at 685-86 (noting that while the claimants supplemented the record
on reconsideration, the NPFC still did not have “complete documentation of the chain of
relationships between the various interests that arranged the bunkering operation,” and
finding again that it was “reasonably clear that [the] alleged third party acts were clearly in
connection with a contractual relationship with the responsible parties for the TORM MARY”).
43
Id. at 268, 686.
44
Cf. Int’l Marine Carriers, 903 F. Supp. at 1105 (finding that the Declaration of
Inspection signed by the chief engineer of a vessel and the dockman at the fuel terminal was
evidence of a contractual relationship between the vessel and the fuel terminal).
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declaration.45 Buffalo Marine puts much stock in the fact that, because the fuel
delivery was not completed, the parties never signed the declaration of
inspection. However, as the NPFC observed, the mere fact that the bunkers
were not ultimately delivered “does not affect the contractual nature of the
relationship [between the Torm and Buffalo Marine] as the approach and
collision occurred.”46
Given the evidence on record and the concessions of the parties, we find
no error in the NPFC’s conclusion that the claimants failed to establish by a
preponderance of evidence that the acts or omissions of Buffalo Marine’s barge
in approaching and colliding with the TORM MARY were other than those
occurring in connection with a contractual relationship with the responsible
party for the TORM MARY. Because the claimants failed to demonstrate by a
preponderance of evidence that the sole cause of the spill was a third-party act
or omission that did not occur in connection with any contractual relationship
with the responsible party, the Torm’s third-party affirmative defense could not
succeed. Thus, we also find no error in the NPFC’s failure to decide whether the
claimants could satisfy the additional requirements in § 2703(a)(3)(A) and (B).
V.
We conclude that the NPFC’s interpretation of 33 U.S.C. § 2703 is entitled
to deference and that appellants have not demonstrated that the NPFC’s denial
of the Torm’s third-party affirmative defense claim should be overturned under
the standard set forth in the APA.
AFFIRMED.
45
See 33 C.F.R. § 156.150(a) (“No person may transfer oil or hazardous material to or
from a vessel unless each person in charge . . . has filled out and signed the declaration of
inspection form described in paragraph (c) of this section.”).
46
Administrative Record at 268; see also id. at 686.
14