Update (11:16AM): Robert Menendez says his bill lifting the liability cap to $10 billion would apply retroactively to BP. If Congress passes it, his legislation would go a long way to preventing a massive taxpayer bailout of BP.
Original post:
Politico's Josh Gerstein reports the administration now acknowledges that the ability for individuals to recover economic damages from British Petroleum will be hampered by a 1990 law limiting the liability of oil companies under Federal law for economic damages from spills to $75 million.
“Let's be clear: BP is responsible for — and will be held accountable for — the very significant clean-up and recovery costs,” Office of Management and Budget spokesman Ken Baer said Monday evening. “If BP is found to be grossly negligent or to have engaged in willful misconduct or conduct in violation of federal regulations, then there is no cap under the Oil Pollution Act for damages. In addition, BP could be liable for damages under additional applicable federal and state laws. You can be sure that BP will be held accountable to the full extent of the law.”
As Baer says, this cap does not apply to clean-up and recovery costs, it won't stop claims from being filed in state courts, and the caps would be waived if BP were found to have willfully violated laws and regulations.
While it is still unclear how much economic damage the spill will ultimately cause, $75 million won't even begin to cover it. Up to $1 billion in additional funds from the Oil Spill Trust Fund could be used to pay for damages, but that fund was financed through a tax on oil, the cost of which was borne by consumers.
Yesterday, Robert Menendez joined Frank Lautenberg and Bill Nelson in offering legislation that would lift the liability cap to $10 billion, but that would only apply to future spills and probably won't be large enough to cover damages in worst-case scenarios. As long as there's going to be offshore drilling, there should be no liability limit protecting oil companies from compensating for economic damages caused by their operations. Oil companies must know that if they want to enjoy unlimited profit, then they must be willing to risk the failure of their company.
Otherwise we're stuck with oil company bailout socialism, and you can be damn sure you'll never hear Sarah Palin or Jim DeMint complain about it.
In the meantime, we can't ignore the current crisis. The administration, Congress, and state and local officials must continue to insist that BP make good on its promise to fully compensate those who suffer economic damages from the Deepwater Horizon spill. In the narrow context of the Oil Pollution Act of 1990, BP's liability might be limited, but given that BP cannot operate in the United States without the support of Federal and state governments, we've got the leverage to make them honor their word.