Liability in the Gulf
What is BP’s liability in regard to the gulf oil spill? At face value it seems like a simple question. They are liable for the damage cause by their spill right? How do we measure that damage and how far does that liability extend? No one doubts the fishermen along the gulf have been hurt by the disaster. Fishing being a significant part of the gulf economy has depressed sales across the board from groceries to entertainment, to restaurants and bars and countless other businesses large and small along the gulf. These businesses have suppliers and manufacturers and distributors who are depressed and losing business as well. Publically traded companies along the coast have taken hits to their bottom line hurting infinitely more Americans through investments and in a weak economy there is no doubt this has had a negative effect on the US economy as a whole. A weakened US economy undermines the global economy so where in all of this does BP’s liability end? In 1990 after the Exxon Valdez disaster law established a cap of $75 million dollars for economic and punitive damages. This law however does not set any limits for civil claims against a company. As of July 10th, 2010 BP has received 103,013 claims making good on 48,785 claims for a total cost of almost $163 million. Max McGhan a BP spokesman was stated, “We want to pay everyone out in full. We’re desperate to do so. We absolutely want to compensate everyone for their damages, but we do need documentation to be able to do that.” This may be the proper rhetoric for the situation but is it really possible to “compensate everyone for their damages?” What qualifies as damages?
Alan Levine Louisiana’s Health and Human Services Secretary requested $10 million for mental health services to those affected by the oil spill. It will be impossible for BP to deny the request from a PR perspective but does this qualify as damages? Should mental health services be paid for by individuals from the compensation BP is already providing? Should BP pay resorts for a poor vacation season? What about Bars that feast on tourism or the small shops selling knick knacks and memorabilia? Should BP pay small businesses along the coast for lost sales? What about large publically traded businesses along the gulf coast, do they owe them money or their investors?
What is government’s liability in all this? In an ABC News/Washington Post poll released June 7th 69% of Americans had a negative view of the government’s response to the oil spill compared to 62% who viewed negatively government’s response to Katrina. As information becomes more available it has become apparent that Federal regulators failed to do their job leading up to the oil spill. BP has admitted it failed to comply with a federal regulation requiring drilling companies to certify that their blowout preventers are able to block a runaway well. The Minerals Management Service, the agency in charge of offshore drilling, never asked BP to comply. The Obama administration blames this on the cozy relationship between “big oil” and MMS while Obama claimed in his June 15th speech, “When Ken Salazar became my Secretary of the Interior, one of his very first acts was to clean up the worst of the corruption at this agency. But it’s now clear that the problems there ran much deeper, and the pace of reform was just too slow.” Obama seems to believe he can blame MMS and “big oil” for their cozy relationship while simultaneously claiming to have cleaned up MMS. There are 56 million gallons of oil in the gulf wondering how much Ken Salazar cleaned up MMS. Does government hold any liability for this massive failure of regulation?
What about government’s liability for its reaction to the spill? Most notably the federal government has failed to suspend the Jones Act to allow foreign skimmers to help clean up efforts along the coast. In the first two weeks after the spill 13 foreign governments offered their assistance to clean up the gulf. Belgian dredging group DEME has offered vessels and claims it could clean up the spill in three to four months which is about five months faster than the nine month estimate. The A-Whale, the world’s largest skimmer was allowed to be tested July 3rd after sitting idly in a VA port. Its owners estimate that it could clean up to 21 million gallons of water a day but the EPA needs to okay its use because the water pumped back into the gulf could contain trace amounts of crude. Governor Jindal in Louisiana has fought with limited success for barrier islands to protect its coast and now has had the Coast Guard shut down vacuum boats sucking up oil off its coast. Workers cleaning up the shore pick up tar balls for 15 minutes and then break for 45 minutes thanks to OSHA. The Federal Government couldn’t enforce regulations to prevent the spill but there is no shortage of red tape in the clean up effort.
I wish there was an easy answer for all these questions but it will take years to sort it all out. It took until 2008 for a partial settlement of the Exxon-Valdez case, a mere 19 years after the spill. BP is responsible for making this right but there isn’t enough money in the world to give everyone what they want. There could be environmental repercussions for any number of years. How long do you pay an out of work fisherman before you expect them to relocate or find other work? How long do you pay for lost tourism and how do you even put a realistic dollar amount on a subjective number? How much can BP pay before they go bankrupt? Does government have financial obligations since it failed to do its job to prevent the spill and has been the biggest road block to cleaning up the spill? I expect to have answers to these questions around 2029.
Tyson Bam
July 16th, 2010
