Government Policy Actually Encouraged BP to Underestimate the Odds of a Catastrophe
In a little-noticed provision in a 1990 law passed after the Exxon Valdez spill, Congress capped a spiller’s liability over and above cleanup costs at $75 million for a rig spill. Even if the economic damages — to tourism, fishing and the like — stretch into the billions, the responsible party is on the hook for only $75 million.
Full New York Times Magazine article by David Leonhardt here.
I wish I could say I am surprised to learn this fact. Unfortunately it is consistent with everything else I know about the problem.
It’s amazing to me that such a law could be on the books, given the supposed power of the environmentalist lobby. I suppose they are too wrapped up in saving some bug or in hyperventilating over some harmless threat to be concerned about real threats to our environment.
BP says that it has spent $84 million in compensating people for net income and profits losses through June.
This obviously exceeds the liability cap claimed in this article.
You might want to read this story to really get more details about this law that also placed a tax for a reserve fund that can be used for clean-up. How much is in the Fund? I’ll be checking. But I am disappointed in John because this is very misleading.
http://www.nytimes.com/2010/05/02/us/02liability.html
Sorry if anyone was misled. BP has voluntarily agreed not to be bound by the cap. The point, however, is that all oil companies drilling in the gulf have limited liability and this limit must surely affect their planning and operations before oil spills occur.
For what it’s worth, liability for accidents at nuclear power plants is also capped by the Price-Anderson Act passed in 1957. As of 2004, $300 million in primary insurance coverage was required. If the $300 million is not enough there is a secondary pool funded by retrospective payments. It has limits of $95.8 million per plant per incident.
The reason the law was passed is that private companies were absolutely unwilling to invest in nuclear power without a liability limit.