As lawsuits continue to mount against oil giant, BP, and drilling contractor, Transocean, both companies are engaging in full scale efforts to limit their liability for the explosion of the Deepwater Horizon rig on April 20th that has claimed the lives of several workers, injured many others and left unknown thousands whose livelihoods depend on the Gulf in financial ruin.
After the Exxon Valdez Oil Spill in 1989, the Oil Pollution Act was passed to hold oil companies such as Exxon and BP responsible for the cleanup costs associated with oil spills. Under the act, compensation must also be provided to local and state governments, businesses and residents who have been affected by the oil spill. The total damages under the act were capped at $75 million dollars. Its clear, however, that the economic and environmental damages associated with the Deepwater Horizon explosion will far surpass the $75 million dollar cap that was proposed 20 years ago.
Several legislators have realized the need for a greater cap and have proposed that the liability cap for oil companies be increased to $10 billion. The attempt to increase the cap was rejected by some legislators who fear that increasing the cap will put smaller oil companies out of business. Despite this setback, proponents of increasing the cap have vowed to reintroduce this issue in upcoming Senate Committee hearings.
Similarly, Transocean, the owner of the Deepwater Horizon rig has submitted a petition in a Houston federal court claiming that its liability for the accident is limited to $27 million under the Limitation of Liability Act, a maritime law enacted in 1851. Under the Act, a vessel owner can limit its liability to the value of the vessel and its freight.
Transocean asserts that the current value of the Deepwater Horizon rig is $27 million and thus, under the law, its liability must be limited to that figure. However, this law was passed 160 years, before insurance companies began offering coverage to seafaring vehicles and Transocean has already received a payout of $400 million from its insurance provider. Allowing it to limit its liability to $27 million would actually allow Transocean to potentially profit from the oil spill.
BP America Chairman Lamar McKay stated yesterday in Congress that BP would pay for all "legitimate claims" resulting from the Deepwater Horizon explosion. However, actions speak louder than words. Transocean and BP's attempts to limit their liability for the damage caused from this incident demonstrates that neither company is ready or willing to take full responsibility for this catastrophic event.
It has also become clear that new laws need to be enacted to hold these companies accountable. The legal system currently in place has some disturbing loopholes permitting those companies that are responsible for this disaster to skip out on the tab of one of the largest oil and gas related disasters this country has ever seen.