• ’80s oil-spill liability deal caps BP’s Gulf disaster damages Wednesday, May 12, 2010

    It may have seemed to some like a good idea at the time, but a deal cut in the 1980s to swap a tax on oil for a damages cap in the event of a spill means that BP‘s exposure for the Gulf disaster is $75 million. Total. All those fishing boats sitting idle. Whatever damages to private property that might still get hit buy the sheen. Louisiana. Mississippi. Alabama. Not a penny more than $75 million will come from BP and its insurers.

    So, where’s the outrage? Lost, I suspect, in the Congressional sleight of hand more than 20 years ago.

    Image courtesy of the Image Science & Analysis Laboratory, NASA Johnson Space Center.

    Image courtesy of the Image Science & Analysis Laboratory, NASA Johnson Space Center.

    As the New York Times reports here, seemingly missing the key detail of who pays, the Oil Pollution Act of 1990 (it was hammered out in the 80s but signed into law in August 1990) set the $75 million cap in return for the oil companies paying eight cents a barrel to go into a special Oil Spill Liability Trust Fund, from which clean up costs would be paid. The Times piece notes that the tax added a tenth of a percent to the cost of a barrel of oil.

    But it’s a tax that the consumers ultimately pay. Which means users of the oil are the ones who’ve been building the leaky-day fund, not the companies most likely to be responsible for any spills. The government can still go after BP for fines and clean-up reimbursements, but the deal that set up the system means individuals will be running up against that $75 million cap in whatever actions are filed against BP and others involved in the spill.

    As the story points out, liabilities in spills have exceeded the cap at least 51 times.

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