Addressing BP’s Willingness to Pay for the Oil Spill

Nicolas Loris / May 27, 2010

It will be a long time before we know how much the oil spill is going to cost in terms of total economic damages, but it is certain to be higher than the $75 million liability cap set by the 1990 Oil Pollution Act and could even be higher than the additional $1 billion provided through the Oil Spill Liability Trust Fund. BP has said it will pay all legitimate claims beyond the $75 million limit yet politicians are understandably skeptical, and so want their promise put in writing..

Some Members of Congress have proposed to raise the liability cap arbitrarily to $10 billion or remove it altogether, which raised concerns that smaller, independent oil companies would be unable to get insurance. Whether to raise the cap and by how much, and all the related particulars, is a matter needing careful thought. The issue at the moment is BP and the Deepwater Horizon oil spill specifically.

To deal with the immediate issue, Senators David Vitter (R-LA) and Lisa Murkowski (R-AK) introduced legislation that would codify BP’s commitment to pay all legitimate costs. By essentially creating a contract with BP, the Vitter-Murkowski bill gets around complicated legal issues of retroactivity and breaching existing lease contracts. It would also expedite the claims process and protect against fraudulent. (more…)