More on the Oil Spill   5 comments

The President has said that BP is responsible for the cleanup, and BP is falling all over itself to assure everyone that they’ll foot the bill.  Oh, but it’s Transocean’s fault, not theirs.

Forgive me if I find this to be highly unlikely.  Following up on the last post, the Oil Pollution Act of 1990 limits corporate liability in oil spills.  The remainder of the cleanup comes out of government funds.

The Deepwater Horizon had a gross tonnage of 32,588.  Now, by my reading of Title 33, Chapter 40, Subchapter 1, Section 2704, the cap on liability for a vessel acting as a deepwater port is $350,000,000 (granted, I’m no lawyer).  The Coast Guard site has a different number ($373,800,000), but that’s for deepwater ports that aren’t covered by the previous classification.

Any way you slice it, BP is liable for less than $500,000,000.  Some people are estimating that the total cleanup for this spill will exceed that of the Exxon Valdez, which was $2.2 billion in cleanup costs.

Interestingly, the cap on payouts from the fund is $1 billion, and since we haven’t collected the tax that funds the cleanup fund (see last post for more details), we might not be able to contribute that amount in any event.

$2.2 billion – $350 million – $1 billion = $850 million.

If the CEO of BP actually authorizes the payment of $850 million dollars that the company is not legally obligated to pay, and the board approves such a payment, I’ll eat my hat.

I’ll be less than astonished if, when all the legal wrangling is said and done (likely sometime around 2020 if the Valdez spill is any indicator), we the American taxpayer will have dished out well close to the entire cost of the cleanup, less the $350 million that BP is actually obligated to pay.

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Posted May 3, 2010 by padraic2112 in news, Uncategorized

5 responses to “More on the Oil Spill

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  1. The REALLY interesting thing about this that no one is talking about is the possible terrorism connection. Listen carefully to this:

    Now why is the DoD getting involved? And SWAT teams to each rig in the Gulf of Mexico? You don’t do that if you suspect simple (or even complex) mechanical failure or human error.

    • Even if you assume that terrorists were not involved with this attack, I’m sure that this has given them the idea that a drilling rig is a reasonably soft target with a potentially large impact. Time an attack for a bit closer to the hurricane season…

      I’m not surprised that the DoD is interested.

  2. True, but if this was a terrorist attack, somebody would be claiming responsibility for it. Terrorist do it for the publicity, yo.

  3. Maybe it’s my gaming-fiction mind kicking in, but I can visualize the incident as environmental monkeywrenching gone horribly awry. This is, of course, crazy.

  4. I do remember the $75M cap on damages to be paid by an oil company going into effect after the Exxon Valdez and thinking at the time that it wasn’t a good idea. All we’re doing is transferring the risk from the oil companies (who make money hand over fist) to the US taxpayer and leaving the majority of the upside with the oil companies. We’ve seen how well that worked with investment banking…

    According to WolframAlpha, bp’s profits over the last 10 years has been $91.25 Billion, so they can certainly afford to pay an extra $850M. However, I have to agree with you Pat — they aren’t going to pay if they don’t have to, and the lawyers will drag it out as long as they can.

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