Following a congressional deadlock, the Obama administration moved to boost the amount companies must pay for oil spills nearly four years after the Deepwater Horizon disaster.
Under the Bureau of Ocean Energy Management’s proposal, the government would boost the current ceiling on economic damages from oil spills from $75 million to $134 million.
While that is far below the unlimited liability many lawmakers proposed after the 2010 spill in the Gulf of Mexico, it represents the first time the Interior Department has moved administratively to raise the liability cap since Congress first established it in 1990.
“This adjustment helps to preserve the deterrent effect and the ‘polluter pays’ principle embodied in the law,” said the Bureau Director Tommy Beaudreau. He called the change “necessary to keep pace with the 78 percent increase in inflation since 1990.”
The oil industry was skeptical of the move, with some lobbyists saying it was unjustified and others warning that it could cause insurance premiums to spike too high for smaller companies working offshore.
Randall Luthi, head of the National Ocean Industries Association, questioned the need for the change and suggested there may not have been instances where costs were not covered or reimbursed solely because of the liability cap.
“Companies are already held accountable in multiple ways and accept their responsibility without question,” Luthi said. “So what does this rule change serve?”
While the 1990 oil pollution statute caps the liability for economic damages at $75 million, the limit ends up waived entirely if there was gross negligence, willful misconduct or other violations. Companies also are required to pay the entire cost of cleaning up after offshore spills.
The 24-year-old law actually requires adjustments every three years to keep up with inflation, but the only previous changes were in 2006 and directed just at tankers carrying crude.
Efforts to boost the liability cap in Congress failed despite early unity on the subject in the weeks and months after the April 20, 2010 blowout of BP’s Macondo well in the Gulf. At the time, Democrats and Republicans broadly agreed that the $75 million liability limit was far too low, but they clashed over where to place a new ceiling.
A presidential oil spill commission that investigated the Deepwater Horizon disaster recommended the limit be significantly raised but did not specify a new cap.
Oil companies and other stakeholders now have 30 days to comment on the ocean energy bureau’s proposal.