There's currently a $75M cap on an oil company's liabilities in the event of an off shore drilling accident. There's a bill now being debated in the Senate that raises that cap to $10 billion and when it came up for a unanimous consent vote today, Alaska Republican Senator Lisa Murkowski blocked it from proceeding.
Ms. Murkowski claimed those damages would prove unbearable for "smaller" companies that wouldn't be able to get insurance and financing, driving them out of the market. Sen. Robert Menendez, one of the bills sponsors, noted the "smaller" companies that Sen. Murkowski is so concerned about are $20B/year corporations themselves. (Video here).
Menendez also raised the obvious question: Who is going to be responsible for the balance of the cost for a clean-up if the cap is set too low?
The details of the costs associated with the Exxon Valdez accident (curiously, in Sen. Murkowski's home state) might be helpful here:
The consequences for Exxon of its two-pronged disaster - the spill and its environmental consequences, alongside its disastrous communications - were enormous. The spill cost around $7B, including the clean up costs. $5B of this was made up of the largest punitive fines ever handed out to a company for corporate irresponsibility. (Link)
(It should also be noted that, in 1989, Exxon had limited liability and only those that had been physically touched by the leaked oil could sue for damages. In 1990, Congress passed the Oil Pollution Act, which lifted that restriction and allowed anyone who was effected to seek damages.)
Just today, British Petroleum announced they've spent $450M so far to fight and contain the spill and some experts have predicted total cost will exceed $8B.
It seems pretty clear that a $75M cap on liability is ridiculously low. Free market advocates like Sen. Murkowski surely agree that if a company, any company, wants to engage in a competitive marketplace, it has to adequately assess risk and benefit, be accountable for its actions, and not rely on the government to come in and bail it out when it screws up.
Recent Comments