Liability Caps and the Oil Industry (Part B)

Government Authority Regarding Liability and Liability Caps

The federal government has the authority to adjust the $350 million liability caps for onshore facilities as long as the adjustment is by regulation. Investigations may also be conducted to determine if offshore facilities are maintaining evidence of financial responsibility of $150 million, with vessels and deepwater ports required to provide evidence up to the maximum applicable liability caps amount.

State government has the authority to enforce the Oil Pollution Act requirements for evidence of financial responsibility and are given access to federal funds up to $250,000 per incident for oil spill disasters. States also have the authority to impose additional liability, funding mechanisms, requirements for removal action, fines and penalties for responsible parties. These extra penalties may exceed the liability caps.

What Do the $75 Million Liability Caps Really Cover?

The $75 million liability caps placed on oil companies by the Oil Pollution Act only account for the liability claims from businesses and organizations effected by the spill. Liability caps for the oil industry have nothing to do with the cleanup costs - they only consider the liability claims from third parties impacted by the oil spill.

Once the liability caps are exhausted, the Oil Spill Liability Trust Fund covers the next $1 billion in damages. The only financial recourse after that is on the taxpayer's shoulders. Luckily in the case of the April 2010 Deepwater Horizon spill, the responsible company, BP, has pledged a $20 billion fund to compensate victims of the spill.

Unfortunately this may not always be the case. A lot of oil companies try to let things like this slip through the cracks, BP is one of the rare cases. Liability caps are putting the responsibility of your average oil company on you, the tax payer - how does that sound? Just think about it. 

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