Tag Archives: regulatory

If you took a barrel of oil and dumped it into a stream on your property you would be fully liable for damage to the property and person of anyone down stream. So when BP’s oil well ruptures, dumping millions of gallons of oil into the gulf the company is fully responsible for the damages it caused and those affected should be fully compensated to be made whole again, right? Unfortunately, the 1990 Oil Pollution Act caps an Oil company’s liability for economic damages relating to an oil spill at $75 million. (As of May 3rd the economic Cost of the BP Oil Spill: was $12.5 Billion, so that only leaves $12,425,000,000 of damages unpaid.) source: http://wonkroom.thinkprogress.org/2010/05/03/oil-spill-cost/ Luckily the Act provides that if the courts determine BP was “grossly negligent or engaged in conduct in violation of federal regulations,” the $75 million cap disappears, so BP is not of the hook yet right? Wrong. Unfortunately, a little known government agency, the Minerals Management Service, “approved BP's application to drill under the Deepwater Horizon and …and approved the blowout preventer that failed to stop the Gulf of Mexico oil spill without assurances that its last-ditch mechanism would work on the drill pipe the company was using.” [1] And the rigs strong track record of passing inspections prompted the regulatory agency to “herald the Deepwater Horizon as an industry model for safety.” [2] The chances of a court finding that BP was “grossly negligent” or in violation of federal regulations, are nil when the very agency that oversees BP not only routinely found the well in compliance with the federal regulations but also hailed it as a model for industry safety. So congress has been caught with its pants down, because the special privilege of a liability cap they created for the oil companies, the judiciary or anyone else can't punish -through punitive damages – or even hold BP liable for more than a fraction of the amount of damage they caused. Which raises an important question: absent a congressional created cap on liability of only $75 million, would BP have drilled an unprecedented 5,000 ft well , without knowledge, technology or experience of capping wells at that depth, if they had unlimited liability and had to pay the actual full amount of the potential damages?($12.5 billion as of May 3.) http://tpmmuckraker.talkingpointsmemo.com/2010/05/oil_spill_liability_whos_on_th… [1.] http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/05/updates_from_oil_rig_e… [2.] http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/05/federal_inspections_on… added by: Dagum