BP May Not Be Liable for ALL Oil Spill-related Costs

May 5, 2010

A new buzz around BP: there may be a federal law limiting the amount of money BP has to pay in damages, including lost wages and economic suffering, as a result of the recent Gulf Coast oil spill, despite President Obama’s assurances that taxpayers will not be liable.

A 1989 law, passed in response to the Exxon Valdez spill in Alaska, makes BP responsible for cleanup costs, but it also sets a $75 million limit on other kinds of damages. Gulf Coast economic losses are likely to far exceed that, and in an attempt to intervene, several Democratic senators have introduced legislation to increase the liability limit for such incidents to $10 billion, though it may not apply retroactively.

On Monday, White House press secretary Robert Gibbs said that the administration was committed to making BP pay for all costs associated with the spill, echoing a statement made by the President on Sunday, during a tour of the affected area. “Let me be clear: BP is responsible for this leak; BP will be paying the bill,” the President said.

According to Kenneth Baer, spokesman for the Office of Management and Budget, if BP were found to have violated federal laws, or was negligent with regard to the spill, the cap for damages under the Oil Pollution Act would no longer apply. He also said that the company could be held liable under other federal or state laws. “You can be sure that BP will be held accountable to the full extent of the law,” Baer said.

Even so, the existence of the liability cap could complicate the President’s plans to make BP pay for numerous costs like shortened fishing seasons and decreased tourism – costs that have not yet begun to be estimated, and could rise incredibly high.

Senator Robered Menendez (D-NJ), one of the sponsors of the cap-raising legislation, which the administration has said it supports, told the press, “We’re glad that the costs for the oil clean up will be covered, 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.”

Also on Monday, BP issued a fact sheet, promising to pay, “…all necessary and appropriate cleanup costs…” as well as “…legitimate and objectively verifiable claims for other loss and damage caused by the spill…” Whether or not claims above $75 million would be paid was not addressed.