As cascading waves of oil-slick seawater wash over America’s Gulf Coast, the shattered ecosystems and vanishing wildlife left behind by this disaster continue to wreak havoc on the local Gulf economies. When fishermen have no fish and the beachside hotels have no beaches, millions of people are in danger of losing their livelihoods. But it is British Petroleum (BP), not these vulnerable citizens, who imposed this cost on society, and they are the ones who should be forced to pay.
To their credit, the oil company BP has acknowledged this fact from the beginning, promising to pay all “legitimate” claims rather than hiding behind an outdated federal law that would limit their liability for lost economic activity to a meager $75 million. BP’s actions have backed their words–they have issued a $70 million grant to help Southeastern states promote tourism, paid out an additional $29 million in damages and provided over $625 million so far to aid clean-up efforts.
But the federal government must not let up, and Congress must ensure that BP will be held accountable for every American dollar lost because of this calamitous oil spill. Anything less would be inviting catastrophe to repeat itself. Furthermore, reports have surfaced that the deepwater well was capped by a relatively cheap form of casing because BP considered that “the best economic case.” That means someone at the company weighed the relative cost of risking an oil spill against the benefit of saving money and concluded that the riskier option was better. BP must be made to see that the greatest economic risk they face is the continuation of oil spilling into the Gulf. The more BP has to pay, the less likely it will be that other companies take similar risks in the future.
One bill introduced in Congress aims to do this by raising the cap on BP’s liability for lost profits and wages to $10 billion. The Big Oil Bailout Prevention Act, introduced by Sen. Robert Menendez (D-N.J.), combines several buzzwords and an effort to score political points with a sound premise that BP must take responsibility. But many experts caution that the rush to pinpoint an arbitrary number might be premature. With an estimated $5.4 billion in damages to the Louisiana fishing and Florida tourism industries alone, the total costs might rise far above this number. As Sen. Jeanne Shaheen (D-N.H.) rightly asked, “Should we have a cap at all?”
A competing proposal from Senators Lisa Murkowski (R-Alaska) and David Vitter (R-La.) would have BP cement its promise to pay by submitting a legal contract defining which claims it would take responsibility for. In theory, it makes sense to outline a set of standards instead of an arbitrary number for claims, but the motivations behind this legislation make it a dubious proposition. Both Murkowski and Vitter have expressed concerns about the impact of high costs on the oil industry, indicating that the details of their bill might actually shield BP from a high payout.
A third proposal would raise a tax on oil to put $11 billion over the next decade into an Oil Spill Liability Trust Fund that currently holds about $1.5 billion. But the Editorial Board believes that forcing oil companies into this form of insurance actually creates the wrong type of incentive. With a bigger Trust Fund, every oil company has less–even nothing–to lose by causing a spill. If a risk is protected, it is no longer a risk.
The only policy choice that will decrease the odds of another disaster is one that makes BP pay the full cost of its mistakes. With $16.6 billion in annual profits, it is very doubtful that being forced to pay the total cost of the damages would bankrupt BP. Even so, if, as some experts suggest, BP does go bankrupt, then so be it. And if, as others fear, the prospect of that risk drives companies out of the deep-water drilling market, then drilling that deep should not be happening at all. There is no evidence that BP has made any egregious transgressions and we do not support an angry crusade against oil companies as a policy response. But it makes sense that a gaffe capable of bringing down an entire region’s economy could be enough to knock out the company that caused it. Perhaps then other oil companies will think twice about probing the depths of the ocean at unsafe levels or, at the very least, spend the money to buy better casing.