Obama hikes ceiling for corporate oil-spill compensation


Hearst Newspapers

February 21, 2014

WASHINGTON -- The Obama administration on Friday took the unprecedented step of moving to hike the amount companies must pay for oil spills, amid a congressional deadlock on the issue nearly four years after the Deepwater Horizon disaster.

Under the Bureau of Ocean Energy Management's proposal, oil companies would be required to pay as much as $134 million in economic damages from oil spills, including lost profits and foregone tax revenue, up from $75 million now.

While that is far below the unlimited liability many lawmakers proposed after the 2010 spill in the Gulf of Mexico, it represents the first time the Interior Department has moved administratively to raise the liability cap since it was first established by Congress in 1990.

"This adjustment helps to preserve the deterrent effect and the 'polluter pays' principle embodied in the law," said the bureau's director, Tommy Beaudreau. He called the change "necessary to keep pace with the 78 percent increase in inflation since 1990."

The oil industry was skeptical of the move Friday, with some lobbyists suggesting it was unjustified and others warning that it could cause insurance premiums to spike too high for smaller companies working offshore.

Randall Luthi, head of the National Ocean Industries Association, questioned the need for the change and whether there were, in fact, instances where costs were not covered or reimbursed solely because of the liability cap.

"Companies are already held accountable in multiple ways and accept their responsibility without question," Luthi said. "So what does this rule change serve?"

While the 1990 oil pollution statute caps the liability for economic damages at $75 million, the limit is waived entirely if there was gross negligence, willful misconduct or other violations. Companies also are required to pay the entire costs of cleaning up after offshore spills.

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