Can anyone think of legitimate reasons to cap damages for the oil spill still ongoing after 36 days in the Gulf of Mexico?
Sen. Robert Menendez (D-N.J.) is set to introduce on Tuesday afternoon a bill that would fully eliminate any cap on the amount of economic damages that oil companies would have to pay for spills they’ve caused.
The New Jersey Democrat is revising an earlier version of legislation he introduced which would have raised the cap from $75 million dollars in liability to $10 billion. Now, the cap will be effectively unlimited, an aide said.
The revised legislation, which ups the ante a bit in the oil-spill debate, will get its first floor hearing on Tuesday afternoon as Senate Democratic leadership is expected to call for unanimous consent. In all likelihood, a Republican senator will object (they have objected twice already to Menendez’s $10 billion cap) forcing Democrats into another course of action. It should be noted, as well, that the Obama White House has refused so far to endorse an actual dollar figure for where they’d like a liability cap to be, though they have expressed support for raising it.
The $75 million dollar cap was apparently enacted 20 years ago in the wake of the Exxon Valdez disaster in the Oil Pollution Act. I honestly don’t see a good reason. Is it consistent with some sort of international accord?
Talk about moral hazard. $75 million is a pittance. I can see why BP self-insures for this kind of event. It’s a fly speck on their balance sheet.
Note that this is corporate welfare. In the absence of the law there would be no limitation on liability.
Well, here’s a reason. BP may be subject to a $60 billion dollar fine above and beyond any civil damages:
NEW YORK, May 25 (Reuters) – Just how many barrels of oil are gushing into the Gulf of Mexico from the Deepwater Horizon spill is a billion dollar question with implications that go beyond the environment. It could also help determine how much BP (BP.L) and others end up paying for the disaster.
A clause buried deep in the U.S. Clean Water Act may expose BP and others to civil fines that aren’t limited to any finite cap — unlike a $75 million limit on compensation for economic damages. The Act allows the government to seek civil penalties in court for every drop of oil that spills into U.S. navigable waters, including the area of BP’s leaking well.
As a result, the U.S. government could seek to fine BP or others up to $4,300 for every barrel leaked into the U.S. Gulf, according to legal experts and official documents.
Capping civil damages while exacting substantial fines amounts to a $60 billion transfer from the private sector to the public sector. I guess that’s one way to tax oil without enacting an explicit tax at the pump.