How Much Should BP Pay for the Gulf Oil Spill?

Published on May 21st, 2010 | by

Money will not fix the problems facing the Gulf of Mexico as a result of the massive oil spill, but clean up is certainly expensive.  As the magnitude of the oil spill is still being discovered and British Petroleum (BP) is being accused of falsifying blowout preventer safety tests, Congress is examining the amount of damages the oil giant should be penalized.  Unfortunately, the current liability cap leaves taxpayers largely responsible for clean up that could be 100 times the amount BP will pay under the current law.

Photo by NASABP's Gulf of Mexico oil spill captured by Nasa satellite image on May 17, 2010
BP's Gulf of Mexico oil spill captured by Nasa satellite image on May 17, 2010

Senators Menendez (NJ), Lautenberg (NJ) and Nelson (NE) have introduced a measure to increase the amount BP will have to pay for the catastrophe in the Gulf.  Environment California explains:

Recent reports indicate that BP didn’t accurately show the severity of the oil spill, and that oil is being pumped into the ocean up to 10 times the rate BP originally claimed — possibly 2.8 million gallons every day…

But there is currently a $75 million limit on damages under current law. That’s chump change to BP, whose first quarter profits alone were 80 times that, $6 billion. Worse, unless we raise the limit on damages, the rest of us could be stuck with the bill to clean up their mess.

The new measure would increase the liability cap to $10 billion, but Senator Murkowski (AK) opposes any increases. She explained, “I don’t believe that taking the liability cap from $75 million dollars to $10 billion dollars… 133 times the current strict liability limit, isn’t where we need to be right now.”  Fire Dog Lake further explains:

Just now, as expected, Robert Menendez sought unanimous consent for the Big Oil Bailout Prevention Liability Act of 2010, which would raise the liability cap on oil spills from $75 million up to $10 billion. And it would have surely passed. Big Oil needed one Senator to raise an objection and fend off those who want fair compensation for people unwittingly affected by the underwater gusher in the Gulf and other disasters in the future. And they found her in Lisa Murkowski: amazingly, the Senator from Alaska, the site of the last major oil spill in America, the Exxon Valdez disaster.

Along with destroying the environment, oil spills have political ramifications.  The Exxon-Valdez spill prompted the Oil Pollution Act, which set the current cap and was signed into law by President Bush in 1990.  President Obama supports raising the liability cap in light of the recent spill without specifying an amount. Although he still supports offshore drilling, the president has put the program on hold. California Governor Schwarzenegger has removed his support for coastal drilling, and support amongst Republicans across the country is divided.  It is a shame that it takes a catastrophe of this nature to spur political action and reflection on the consequences of offshore oil drilling.  Prevention would be a better strategy.


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