Putting Together a Cohesive Oil Spill Bill
Nicolas Loris /
Congress was unable to pass an oil spill bill in response to the Macondo well blowout last year, and now policymakers are eager to return to the issue.
The largest outstanding issue is undoubtedly the oil spill liability or the secondary costs that stem from offshore oil and gas accidents. The law currently caps liability at $75 million, with up to an additional $1 billion available from the Oil Spill Liability Trust Fund paid for by a per-barrel tax on imported and domestic oil. Both Republicans and Democrats offered knee-jerk responses last year, either removing the cap or lifting it to another arbitrary number ($10 billion the most commonly floated), but neither idea fixes the problems with the current system. The liability structure in place does not sufficiently align risk and liability with individual behavior. It socializes risk by spreading the costs across the entire industry and does not inherently promote safe operations.
Since that time, a number of sensible ideas have been proposed both by Congress as well as members of the President’s oil spill commission report; however, no one tied these good ideas together to create a workable solution. If Congress properly fixes the broken liability system, we won’t need overregulation, drilling moratoriums, permitoriums, and other needless delays that prevent us from accessing our domestic energy supply. Independently, the ideas are good but incomplete.
In August, Heritage developed a plan that addressed these issues and ties them all together to create an integrated market-based system that will satisfy the concerns of all parties. It removes the artificially low cap and creates a framework that protects the taxpayer, promotes safety, and allows drilling to continue if it makes sense to do so. Below are the ideas proposed by Congress and the commission report and how we integrate them.