Senate panel abolishes $75-million oil spill liability cap

The Senate Environment and Public Works Committee voted today to lift the $75-million liability cap that limits the financial damages drillers can incur for their offshore oil spills. The cap, enacted in 1990 after the Exxon Valdez spill polluted Alaska’s Prince William Sound, holds oil companies liable for economic damages and cleanup costs up to $75 million. Damages over that amount are to be paid for by the government using tax money.

House Democrats have sought to overturn the cap retroactively after the Deepwater Horizon rig exploded and sank in the Gulf of Mexico, creating the largest oil spill and the worst environmental crisis in U.S. history. Economic damages are rippling throughout the Gulf Coast region and are projected by some estimates to reach $100 billion dollars.

Determining the extent of the spill’s environmental and economic impact with any precision is an impossible task as long as the oil continues to gush from the sea floor in unknown quantities. Early in the spill, legislators sought to raise the cap to $10 billion, but the Gulf oil leak soon demonstrated that even that amount would be a small fraction of actual damages. Fishermen and shrimpers from Louisiana to the Florida panhandle have lost their fishing grounds, seafood vendors are going out of business, and charter boat businesses, restaurants, hotels, and property owners are experiencing a dangerous slump in business during the peak season. Massive efforts are underway to save vulnerable wetlands and marine breeding grounds, and the work will almost certainly continue for years.

Additionally, a real possibility exists that the oil could get caught up in the Gulf loop current, which would take the oil around the coast of Florida, over the third largest coral reef in the world, and up the Atlantic coast, spreading environmental damage and economic hardship even further.

BP has insisted that it would cover all “legitimate” costs of the oil spill, but frustration with the claims process has already taken root in many coastal communities. Pressured by the Obama Administration, BP agreed to establish a $20-billion fund for relief expenses to be administered by an appointee of the federal government, but the fund may cover only a part of the total losses.

Senate Republicans blocked earlier efforts to remove the liability cap using a fast-track procedure, arguing that the measure would be detrimental to smaller offshore drillers because it would be more difficult for them to obtain insurance.

Leading Democrats on the Senate panel disagreed. “Shielding companies from responsibility for damages sends the wrong signal,” said Committee Chairman Barbara Boxer, adding that it was wrong to hold taxpayers responsible for BP’s disaster. “No more taxpayer bailouts,” Boxer added.