May 26, 2010

Senate Energy Committee Debates Eliminating Damage Cap for Oil Spills

Legislation introduced to ensure BP pays full cost of cleanup and damages

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At a May 25th hearing of the Senate Energy and Natural Resources Committee on liability for the Deepwater Horizon disaster in the Gulf of Mexico and other similar catastrophes in the future, U.S. Associate Attorney General Thomas Perrelli, speaking on behalf of the Obama Administration, called for raising the cap on damage claims from oil spills, or, in the case of high-risk activities such as deepwater drilling, eliminating it entirely. Also, Senator Lisa Murkowski (R-Alaska) introduced legislation to insure that BP pays all costs and claims from the spill.

Currently the cap on damages, not including cleanup costs is $75 million, but some Democratic lawmakers have suggested raising it as high as $10 billion. Interior Secretary Ken Salazar and some members of Congress said that raising the cap to such a level would have a negative impact on smaller, independent drilling operations who might not be able to afford insurance premiums on that kind of liability.

Congress set the current cap on damages in 1990 under a law that called for an adjustment to the cap at least every three years in order to reflect changes in the Consumer Price Index, but that has never been done.

BP says it has spent nearly $800 million on the cleanup effort so far, including $30 million in damage claims, mostly for lost income. The multinational oil giant has also stated on numerous occasions over the more than five weeks since the spill that it would pay for the cleanup as well as all legitimate claims.

Murkowski and her co-sponsor Senator David Vitter (R-Louisiana) are not the only legislators who seem reluctant to take the company at its word. "The idea that we can simply trust BP because they say that they cover all the damages is not enough," Senator Bernie Sanders (I-Vermont) was quoted as saying after the session. "We've got to lift the cap; we've got to lift it now. The taxpayers should not be asked to pay one penny for the cleanup costs."

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