Offshore InjuryBlog

Oil Spill Liability Cap Boosted by BOEM

On December 11, the Interior Department's Bureau of Ocean Energy Management (BOEM) boosted the previous liability limit on oil spills from $75 million to $134 million. This came four years after the tragic Deepwater Horizon incident, which served to prove just how pricey major oil spills can be. Currently, companies are required under the law to pay for the clean-up after a spill; the new boosted liability cap deals only with claims for economic damages such as lost profits for businesses that have to shut down after a spill. According to the BOEM Acting Director, the increase is designed to "to better preserve the 'polluter pays' principle of the Oil Pollution Act," which was signed into law in response to the Exxon Valdez incident.

About the Oil Pollution Act (OPA)

In August 1990, the Oil Pollution Act (OPA) was signed into law, providing the nation with the better ability to prevent oil spills, as well as properly respond to them. Under the OPA, the Oil Spill Liability Trust was also designed to provide up to $1 billion per spill incident. All in all, the OPA was intended to provide the money and resources necessary for the federal government to act effectively after a spill.

The law, which is now 24-years-old, states that adjustments should be made every 3 years to keep current with inflation; however, the latest liability cap boost is only the second change ever made. The BOEM Acting Director stated that the recent adjustment "is needed to keep pace with inflation, which has increased 78 percent since then." Prior to this boost, the only other adjustment was in 2006, which was directed at tankers carrying crude oil. In August, the Coast Guard moved to boost the liability limits from onshore facility spills.

Response to Oil Spill Liability Caps

BP has stated that they would not attempt to invoke the liability caps following the tragic Deepwater Horizon spill; however, it is not currently clear how other companies will react. Currently, there are some lawmakers who are campaigning to have the liability completely unlimited, while others are taking a more moderate approach that would tie together liability limits with the inherent risk. This current struggle has lasted for several years. Following the 2010 BP Macondo well blowout, there was a flurry of activity to raise the liability cap; however, Congress failed to pass anything despite Republicans and Democrats widely agreeing that the liability limit was too low.

Many in the oil industry are skeptical about the attempts to raise the liability limits, pointing to a spike in price for insurance premiums that may be enough to cripple smaller companies. Back in February when the BOEM proposed the limit, the head of the National Ocean Industries Association raised questions about the purpose of the boost, stating that oil companies already hold themselves accountable for any spills. Still, there are many who are praising the raised liability cap as a step in the right direction. The new change will go into effect in January 2015.

If you have further questions about how this may affect your oil spill case, contact our maritime lawyers.

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