Under the leading Republican plan for BP's post-spill economic liability, those affected would receive potentially as little as $150 million due to the oil giant's expected record loss in this latest quarter.
On Monday evening, BP announced that, in the wake of the massive spill in the Gulf, it would report $17 billion in losses for the past quarter. The company insisted in a webcast presentation for investors that the sobering bottom line would lead to management changes.
As for spill victims in the Gulf, the news wasn't entirely bad. The losses reported by BP would have no effect on the billions the company is setting aside for the escrow account to help them. In addition, there still are legal and political avenues available to recoup economic-related damages from the company.
Under current law, the economic liability for a company responsible for a spill is $75 million. Democrats have, since the BP crisis began, tried to lift that amount, first to ten billion dollars and then, simply, by removing the cap altogether. The latter version passed through committee and is waiting consideration on the Senate floor but it has failed on several occasions to make it into law via unanimous consent (i.e. with no senator objecting). That's because Republicans contend it will either put oil companies responsible for spills out of business -- in which they couldn't pay their liability at all -- or will make it economically prohibitive for smaller oil companies to even consider drilling offshore.
Instead, the GOP has rallied around a counter-proposal, authored by Sen. David Vitter (R-La.) that would cap an oil company's liability at an amount equal to its profits of the last four quarters. If the company had not made a profit in the past four quarters, it would be liable for $150 million (or twice the current cap).
To be sure, BP still has a chance to turn around its profit margin during the next three quarters. But in terms of net earnings, it is now operating out of a $17 billion hole. If Vitter's version of economic liability legislation were the law of the land, there would be open concern about the damage payments that Gulf residents would end up recouping. As a Democratic operative working on the issue notes:
When Vitter introduced the bill, we pointed out that one of the co-owners of the Deepwater Horizon rig, Andarko, had not made a profit in the last year. But with this news today, if BP doesn't overcome this quarter's losses, next year they could be responsible for a disaster as bad as or worse than the one in the Gulf and they would only be liable for $150 million if Vitter's bill were law.
UPDATE: An astute reader points out that another Senate candidate, Rep. Roy Blunt (R-MO), has sponsored legislation similar to Vitter's in the House.