The Obama administration has made it very clear that it intends to force BP to pay all of the costs associated with the massive spill in the Gulf of Mexico. But that might be easier said than done, thanks to a law passed by Congress in the aftermath of the Exxon Valdez spill that puts a $75 million cap on liability for spills.
The costs associated with the Deepwater Horizon spill are numerous. BP is already spending $6 million a day on clean-up efforts. The government is expending millions as the Coast Guard and numerous state and federal agencies rush to provide back-up. The spill has halted local fishing, an industry that brings in $41 billion to the Gulf region every year. It also threatens to seriously harm the region's tourism industry, which brings in $100 billion for Gulf states annually. And then there are damages that are more difficult to measure. The blast killed 11 workers and injured 17 others, and hundreds of gallons of oil are still seeping into the Gulf every day, standing to destroy fragile coastal ecosystems. It's hard to put a dollar figure on such losses.
Not long after the Exxon Valdez spill of 1989, Congress passed the Oil Pollution Act of 1990, which imposed a fee on oil companies—currently 8 cents a barrel—to be paid into the Oil Spill Liability Trust Fund. The federal government uses the fund to cover losses from oil accidents—such as the destruction of wildlife and fisheries—up to $1 billion per incident. It looks very likely that this particular incident will far exceed that limit; current estimates are as high as $8 billion. But the 1990 law also capped the liability of companies at just $75 million for all costs claimed by parties injured in an accident, including individuals, businesses and government agencies.
This means that it could be very hard for the government to force BP to pay for all the expenses stemming from the spill. A trio of anti-drilling senators on Monday introduced the "Big Oil Bailout Prevention Act," a measure that would raise the liability limit on spills to $10 billion per incident.
"Let's be honest, $75 million to BP, that earned $5.6 billion in the last quarter alone, is less than a drop in the bucket," said sponsor Sen. Robert Menendez (D-NJ) on Tuesday. Raising the cap to $10 billion, he said, "gives us real access to the type of money necessary and makes the polluter pay." Menendez also said it would instill more "discipline" on companies to "make sure they've got the safest technology and that it is working." Borrowing language from the debate over financial reform, Menendez said they hope to drive home the point that offshore drilling isn't "too safe to spill."