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Direction on the oil spill liability cap

By Kate Sheppard

The Obama administration today finally weighed in on the question of how high the liability cap should be raised for oil spills, arguing that there should be no limit at all -- at least for drilling in deep waters and at least for future spills. The administration was still hesitant to offer direction on whether legislation should act retroactively for the BP spill and whether it should include all offshore drilling operations.

Still, a new measure in the Senate that would have eliminated the cap, offered after the administration's comments, failed Tuesday as Republicans blocked Democrats from bringing it up under unanimous consent. A measure to raise the cap to $10 billion had been blocked twice previously. Republicans continue to protest that raising or eliminating the cap would bar smaller companies from entering the market.

Thomas Perrelli, an associate attorney general in the Department of Justice, told the Senate Energy and Natural Resources Committee that the administration would support a cap with no "arbitrary limit" on how much an oil company would be forced to pay out for damages resulting from a spill. But he didn't give much in the way of direction on the how legislation to remove the cap should deal with the current spill. "Our proposal to lift the cap is focused on the future," he said, though he noted that it would be possible to cover this spill. "Congress legislates retroactively all the time," he said. "I think we would have a very strong argument."

He affirmed his belief that BP will pay the full costs, based on their commitments so far, and said the Justice Department and the administration are "committed to recovering every cent." But he admitted, in an at times heated exchange with Senate Democrats, that
he "cannot say whether" BP's verbal and written commitments "will be binding in a court of law in the future."

The informal commitment from BP is not enough for those backing the Senate bill to raise the cap. "The idea that we can simply trust BP because they say that they cover all the damages is not enough," Sen. Bernard Sanders (I-Vt.) told reporters in the Capitol on Tuesday. "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."

Kate Sheppard covers energy and environmental politics inMother Jones' Washington bureau. For more of her stories, see here, and you can follow her on Twitter here.

By Washington Post editor  |  May 25, 2010; 3:45 PM ET
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*Republicans continue to protest that raising or eliminating the cap would bar smaller companies from entering the market.*

Isn't that a good thing? Off shore drilling is supposed to be a means of giving the US more access to domestic oil (futile, since we don't have much) and providing tax revenue (probably a useful when oil prices are high). It's not supposed to be a means of diverting venture capital funds towards oil exploration startups or an employment program for people with fossil-fuel-related job skills. If small companies that can't assume the liability of oil spill disasters can't enter the market, I do not see why this is a problem.

Posted by: constans | May 25, 2010 4:06 PM | Report abuse

Republicans will do anything to shill for their corporate clients

Posted by: nathanlindquist | May 25, 2010 4:21 PM | Report abuse

what in G-d's name can you say about any person who can watch this spill grow larger and larger everyday, on british petroleum's watch and still is voting against raising liability to "at least" 10 billion dollars.
under george w bush, werent republicans screaming that we must keep our soil free from all terrorist acts? this is worse than a terrorist act, in terms of its potential harm to our country.
how can moderate republicans stand their party anymore?
sarah palin like a diabolical pied piper, rand paul speaking out against the civil rights act, dick cheney and his ties to halliburton and "boots and coots." their cronies create the spill, and they come in as well-paid contractors to clean it up. now, republicans voting against compensation to americans against a company that cared less about the safety and well-being of the american people and the ocean that surrounds us, than they cared about making a buck.
it is really sinful. what more can one say.

Posted by: jkaren | May 25, 2010 4:25 PM | Report abuse

Rep. Edward J. Markey (D-Mass.) who pushed BP to release a live feed of the spill has just announced that his office has learned that BP will kill the live feed during the "top kill" proced

"It is outrageous that BP would kill the video feed for the top kill. This BP blackout will obscure a vital moment in this disaster," said Rep. Markey, who chairs the Select Committee on Energy Independence and Global Warming and the Energy and Environment Subcommittee in the Energy and Commerce Committee. "After more than a month of spewing oil into the Gulf of Mexico, BP is essentially saying to the American people the solution will not be televised."

how can they be permitted to do this????
how can salazar, napolitano and chu permit this to happen?
how dare british petroleum stop a live feed video of the placing of the topkill.
president obama should demand a live video for the american people, by executive order.
how will we know if it is working. because they will tell us it is working, just like they told us how much oil was spewing, and they lied about it to us?
we are going to suffer economic and environmental consequences because of this. they have no right to kill a video of this. they are obligated to the american people, for us and our geologists and scientists to see what they are doing.

Posted by: jkaren | May 25, 2010 4:36 PM | Report abuse

Tragedy of the commons everyone. It's great when you're the one using the resource, not so great if you're the one who gets hurt. We've found this out a few times.

I wonder if we'll start listening to the common people and stop listening to the exploiters of the resources.

Posted by: ChaseD | May 25, 2010 4:44 PM | Report abuse

It is bizarre that anyone would argue on behalf of any cap. Why are the taxpayers ever the responsible party?

Make an arbitrary cap, and then the bigger the disaster, the bigger the proportion of the cost that goes to the public instead of the responsible party. Then if you are an oil company, you may as well have a giant spill rather than a medium-size accident if you are Exxon or BP, because your exposure is the same. We should liquidate the oil companies to extract every last possible dime if needed. Any company that drills should be exposed to strict liability, and payment of damages should not have to wait through court battles and appeals that are stretched over decades, as happened with Exxon Valdez.

Agree with jkaren, the public should be allowed to see everything the company can see down at "ground zero" on the ocean floor, especially during attempts at solutions like tomorrow's "top kill."

BP is operating under federal permits on publicly leased territory, they have no business hiding the ongoing results of their own negligent abuse of the permits we extended to them.

Posted by: Patrick_M | May 25, 2010 4:53 PM | Report abuse

I know this has been said before, but it bears repeating: If you favor free enterprise, then you cannot support an arbitrary damages cap for oil companies. That's government intrusion into the market, pure and simple. If the true cost of doing business means certain companies can't compete, then those companies don't compete. Period.

Anyone who complains about "socialism" or "big government" or anything like that, and supports keeping this cap in place, is intellectually incoherent.

Posted by: simpleton1 | May 25, 2010 4:58 PM | Report abuse

BP cannot pay for ALL the damage this will cause any more than they can own the wind and the water.

Posted by: grat_is | May 25, 2010 5:12 PM | Report abuse

What I hear is that companies who cannot pay for the damage they do should still be allowed a chance to do that damage.

Posted by: grat_is | May 25, 2010 5:14 PM | Report abuse

There was an earthquake, a tsunami, hurrcanes and disasters. Oh how we cry and send our donations... THIS IS US. THIS IS NOW. where are our scientist, research professors, volenteers,. SALVATION ARMY, GREEN PEACE WHERE ARE YOU. Gather informaiton, donations, volenteers. Do you not think every person in this country would do everything in its power to stop this? WHERE ARE OUR GREAT MINDS. Stop worrying about the almighty dollar. (some expression). Heres a hint America. UNITED WE STAND - DIVIDED WE FALL.

Posted by: louann92 | May 25, 2010 5:16 PM | Report abuse

First and foremost; Article 1, Section 9 of the Constitution forbids the passage of "ex post facto" laws. So, whatever new limits Congress passes can not apply to BP.

Second, in the end the people of the US will pay for this. Clearly, if BP goes bankrupt the government will step in. And, if BP does try to pay all or even a large percentage of the costs, they will be bankrupt.

This is shaping up to be the worst environmental catastrophe in US history. No private corporation in the world will ever be able to pay for the secondary (fishing, wildlife) and tertiary costs of this catastrophe. My bet is that just stopping this spill may well bankrupt BP.

And, I have no sympathy for them or their contractors and sub-contractors.

Whatever the flaws in the reaction of both private enterprise and the public sector, people have to realize that this is an unprecedented event. It probably should have been prevented but, the fact that it is 5,000 feel below the ocean means the repair people are encountering problems they have never seen.

Posted by: rfyork | May 25, 2010 5:34 PM | Report abuse

"My bet is that just stopping this spill may well bankrupt BP."

Works for me.

Posted by: Patrick_M | May 25, 2010 5:56 PM | Report abuse

if anything good can come of this tragedy i hope it's more accountability and greener government, and finally a focus on ending our addiction to oil. if BP turns off the live feed tomorrow people need to get out there with cameras and continue to track their every move, like the amazing citizen journalists and the people at Ocean Futures:

Posted by: rinla | May 25, 2010 6:22 PM | Report abuse

Scientists weigh in on what happens when the oil in the Gulf encounters a hurricane (hurricane "season" officially begins on June 1):

see also:

Posted by: Patrick_M | May 25, 2010 7:44 PM | Report abuse

constans is right. It's hard to see why the potential inability of smaller companies to drill in the Gulf is such a problem. If it's profitable to drill, someone will drill it. That's the magic of the market.

Posted by: dasimon | May 25, 2010 10:31 PM | Report abuse

Small companies take on big risks all the time. That's why we have an insurance industry. If insurors don't want to cover the risk, that tells you something about the actual expected return.

(Oh, and just to get the scale right: BP records $10 billion in profits in less than a year. Paying for this cleanup and the economic costs of the spill will ding them, but not nearly as badly as subprime did any of the big banks.)

Posted by: paul314 | May 26, 2010 10:18 AM | Report abuse


"First and foremost; Article 1, Section 9 of the Constitution forbids the passage of "ex post facto" laws. So, whatever new limits Congress passes can not apply to BP."

In all likelihood the Courts will only strike down the law as "ex post facto" if it modifies criminal penalties and procedures. In the case of civil penalties, Congress could likely pass the changes without risking a reversal by the Courts (Calder v. Bull 1798).

I agree though that taxpayers are likely going to get stuck with a portion of the tab. Many claims will likely be tied up in the Courts for years and many people will need relief before BP antes up.

One big stick that the Feds have is control over permits for BP plus government contracts -- it's my understanding that terminating those permits and the contracts can be done if a company demonstrates a patter of gross negligence (three major incidents in less than a decade would certainly seem to qualify). The consequence of terminating those contracts would be $10 to $15 billion a year for BP from here to perpetuity.

Posted by: JPRS | May 26, 2010 10:58 AM | Report abuse

hi folks,
maybe a look in the mirror would reveal the real ones to blame?
got petrol? lol...
keep buying gas and keep blaming BP lol...
do you pay taxes?
do you claim that the USA represents you?
well then it is you that encouraged BP and all the rest to do what they do, its called national security lol...
a class action law suit should be filed against the USA, not BP lol...
get real or get dead from your own life style choices...
fix your gov and you'll fix the leak lol...
fix yourselves and the world will follow...
good luck...killers...

Posted by: lbm_aintdeadyet | May 26, 2010 11:13 AM | Report abuse

"maybe a look in the mirror would reveal the real ones to blame?"

Did my company turn an $11 billion profit last year?

Did I get $120 million as a going away present?

Your argument is a little like blaming a drunk driving crash on people who eat wheat.

Posted by: JPRS | May 26, 2010 11:34 AM | Report abuse

I think we are missing the bigger picture here. Raising or eliminating the cap does not solve the problem. If we are drilling off our shores we should already have procedures in effect to clean any spill up immediately or at least contain it until it can be cleaned up. The law should be more stringent on these procedures. There is no excuse for BP to have not been able to at least contain this spill by now. This means they were not prepared for something like this which is inexcusable.

Raising or eliminating the cap does nothing to prevent future disasters. I would also bet that BP probably has insurance to cover this kind of catastrophe so they financially will most likely not feel the full impact of this disaster. Meanwhile the Insurance companies that share this risk would have to pay for the damages. Since there is a cause and effect to everything this would most likely also translate to higher insurance rates for our personal insurance as well. Everything is connected.

You can not financially repair the environmental and ecological damage that will remain for years to come from this spill.

Therefore, laws of prevention to mimimize future damage should be enacted by enacting these types of laws the financial and ecological cost of clean up would also be significantly decreased. If we don't have the technology to be able to prevent these disasters before they occur or to quickly contain the disaster with minimal impact to our environment then we should not be drilling off our shores.

You can not financially repair the environmental and ecological damage that will remain for years to come from this spill. Let this be a lesson to us so that laws are enacted to prevent this from happening again.

Posted by: vconroy | May 26, 2010 3:27 PM | Report abuse

Agree 100% with vconroy.

The single most appalling fact about Deepwater Horizon is that there is no technology in existence to quickly repair such a leak, and yet the government permits drilling and Obama actually still believes it should be expanded, subject to tighter saftey precautions.

You can talk all you want about additional precautionary measures, and about higher liability caps, but there is no such thing as failsafe technology, and there is no amount of money that will undo the lasting damage done when the technology fails.

The lesson here is that this drilling should be stopped, and we should not even consider resuming it, at least until there is overwhelming evidence that proven technology to stop such leak has been invented, and that it can be deployed immediately at every well.

And if that day ever comes, then there should no cap on liability. The taxpayers should not be made to subsidize the negligent destruction of the environment for any reason under any circumstances.

Posted by: Patrick_M | May 26, 2010 5:04 PM | Report abuse

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