Federal Law May Limit BP Liability in Oil Spill

By Erica Werner | May 5, 2010

A federal law may limit how much BP has to pay for damages such as lost wages and economic suffering in the Gulf Coast oil spill, despite President Barack Obama’s assurances that taxpayers will not be on the hook.

A law passed in response to the 1989 Exxon Valdez spill in Alaska makes BP responsible for cleanup costs. But the law sets a $75 million limit on other kinds of damages.

Economic losses to the Gulf Coast are likely to exceed that. In response, several Democratic senators have introduced legislation to raise the liability limit to $10 billion, though it was not clear that it could be made to apply retroactively.

White House press secretary Robert Gibbs said Monday the administration’s commitment was for BP to pay for all costs associated with the spill.

Obama said the same thing during a tour of the area Sunday. “Let me be clear: BP is responsible for this leak; BP will be paying the bill,” the president said.

Kenneth Baer, spokesman for the Office of Management and Budget, also noted that if BP were found to have acted negligently in the spill or to have violated federal laws, the damages cap under the Oil Pollution Act would be lifted.

Baer said BP could also be held liable under additional federal or state laws.

“You can be sure that BP will be held accountable to the full extent of the law,” he said.

Nevertheless, the existence of the liability cap might complicate Obama’s commitments to make BP pay for numerous costs anticipated in the Gulf such as shortened fishing seasons and lost tourism. It is not clear how high those costs could rise.

“We’re glad that the costs for the oil clean up will be covered, but that’s little consolation to the small businesses, fisheries and local governments that will be left to clean up the economic mess that somebody else caused,” said Sen. Robert Menendez, D-N.J., a sponsor of the legislation raising the cap, which the administration said it supported.

BP issued a fact sheet Monday committing to pay “all necessary and appropriate cleanup costs” as well as “legitimate and objectively verifiable claims for other loss and damage caused by the spill.” A company representative did not immediately return a phone message seeking comment on whether claims would be paid out over $75 million.

Beyond the $75 million in law, the federal government also maintains an Oil Spill Liability Trust Fund supported by industry fees. It can make a total of $1 billion in payouts per incident to individuals, businesses and governments.

Roughly 2.6 million or more gallons has spilled into the Gulf since the April 20 blast that sunk an oil rig and killed 11 workers.

On Monday afternoon top administration officials, including Interior Secretary Ken Salazar, Homeland Security Secretary Janet Napolitano, economic adviser Lawrence Summers and energy adviser Carol Browner, met with BP CEO Tony Hayward and BP America Chairman and President Lamar McKay at the Interior Department.

The 90-minute meeting was closed to reporters, but officials said discussion centered ongoing response efforts, as well as an update on BP’s mitigation plans for potentially affected Gulf Coast states. It was the latest in a series of meetings between administration officials and BP.

BP officials said little as they left the session.

“Very constructive dialogue,” Hayward told reporters as he and other BP officials got into a car.

Summers and Browner declined to comment.

Associated Press writers Matthew Daly and Frederic J. Frommer contributed to this report.

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Latest Comments

  • May 10, 2010 at 6:59 am
    JO BLOW says:
    I hope BP was listed as additional insured with Haliburton's insurance company. IF this be the case. And the fact is something did go wrong and BP is definately liable. THIS I... read more
  • May 10, 2010 at 6:53 am
    Sheltowe says:
    BP bought their legislation and own the capital and liquidity to be self insured. Are you implying that the reason they capped their losses at $75 million is because there is ... read more
  • May 10, 2010 at 11:27 am
    good hands says:
    There are 2 issues on the table. Liability and negligence. STRICT liability is capped at $75 million. Liability as a result of negligence, an issue for the courts, the gloves ... read more
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