As work continues to battle the oil spill in the Gulf of Mexico (GOM), Democratic lawmakers representing coastal states have introduced legislation that would raise the cap on an oil producer’s liability for economic damages from a spill to $10 billion from the current $75 million (see Daily GPI, May 4).
In addition to raising the liability cap to $10 billion the legislation, sponsored by New Jersey Sens. Robert Menendez and Frank Lautenberg and Florida Sen. Bill Nelson, would eliminate the $1 billion per incident cap on claims against the Oil Spill Liability Trust Fund and would allow community responders to access the fund for preparation and mitigation up front, rather than waiting for reimbursement later; if damage claims exceed the existing balance ($1.6 billion) of the trust fund, then claimants can collect from future revenues of the fund, with interest; and would eliminate the $500 million cap on natural resources damages.
Senate Majority Leader Harry Reid (D-NV) was noncommittal on the bill’s future, CQ Today reported.
“The bottom line is that oil spills can leave massive holes in the economy. If you spill it, you should have to fill it. We’re glad that the costs for the oil clean-up will be covered [by BP plc], but that’s little consolation to the small businesses, fisheries and local governments that will be left to clean up the economic mess that somebody else caused. We can’t let the burden fall on taxpayers,” Menendez said.
“The oil companies must be held responsible for every cost related to an oil spill — and that includes both the environmental and economic damages,” Lautenberg agreed.
“BP says it’ll pay for this mess. Baloney. They’re not going to want to pay any more than what the law says they have to, which is why we can’t let them off the hook,” said Nelson.
Menendez and Lautenberg are avowed opponents of drilling anywhere near the coast of their home state of New Jersey, while Nelson has fought tooth and nail to keep drilling away from Florida. The New Jersey senators are concerned with the Obama administration’s plan to allow a lease sale off the coast of Virginia in 2012 and its potential effects on the New Jersey shore. Menendez pointed out last week that oil spills do not respect state boundaries.
Virginia Gov. Bob McDonnell Tuesday indicated that, while he was “deeply concerned about the environmental impact” of the oil to the shoreline and wildlife in the GOM, he still would pursue drilling off the coast of Virginia. “While no industry is perfectly safe, the technology in use in modern drilling efforts has an excellent track record. This accident should not stop us from pursuing an industry in offshore energy exploration in Virginia that has the potential to contribute so much to economic growth,” said McDonnell spokeswoman Taylor Thornley.
The lawmakers believe that BP can afford the higher liability limit, pointing out that the producer’s profits in the first quarter were $5.6 billion, up 133% from the first quarter of 2009. BP also is self-insured for such accidents.
The Oil Spill Liability Trust Fund was set up by Congress in 1986, but it was not financed until after the Exxon Valdez ran aground in Alaska in 1989. In exchange for the liability limits, the oil companies pay eight cents for every barrel that they produce in the U.S. or import.
Under existing law, BP is liable for all of the costs for cleaning up the oil spewing from the sunk Deepwater Horizon platform. But the producer would face not more than $75 million in liability for damages that might be claimed by individuals, companies or the government.
And up to $1 billion of the trust fund’s existing balance of $1.6 billion could be used to compensate for losses from the spill, such as damages to natural resources like fisheries and other wildlife habitats.
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