HOLDING BP ACCOUNTABLE FOR COSTS OF OIL SPILL COULD BE A SLIPPERY PROPOSITION | Dallas, Texas Personal Injury Attorney Blog

As the massive oil slick from the BP oil well approaches the Gulf Coast, the concerns about the costs of the clean up, the damage to the environment, and to the economy grow as does the need to hold those responsible for the incident. While the President of the United States and White House press secretary Robert Gibbs said Monday the administration’s commitment was to hold BP responsible to pay for all costs associated with the spill, BP did not commit to that level of accountability. President 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 question is which bill. It might be just the bill for the costs of the clean up and only a small portion of other damages that are going to be incurred by thousands of people whose businesses and property have been or will be impacted by the oil spill. The reasons is that BP may escape being held fully accountable for its actions is that under a federal law, BP may be able to limit how much BP has to pay for damages such as lost wages, lost profits and other economic damages suffered by individuals and companies along the Gulf Coast.

The concern about whether or not BP will have to pay for all damages it has caused is heightened by BP’s rather cryptic response to inquiries about BP’s intent to pay for damages. In response to inquiries, 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.” According to the Associated Press, BP company representatives did not immediately return a phone message seeking comment on whether BP would agree to pay legitimate and objectively verifiable claims once BP has paid out$75 million. Needless to say, for anyone who has been or will be damaged as a result of this incident, it is important to get those claims in to BP as soon as possible as all estimates are projecting damages far in excess of $75 million.

In 1989, in response to the Exxon Valdez oil spill in Alaska, Congress enacted the Oil Pollution Act that holds oil companies responsible for the full costs of cleaning up the oil spill, but which also limited the oil company’s responsibility to pay for other economic damages related to oil spills only up to $75 million. Considering that the scope of the economic damages that are expected by everyone to greatly exceed $75 million, there is a real concern that BP will try to limit its exposure by claiming the cap limits its liability for such damages under federal law.

While several Democratic senators have now introduced legislation to raise the liability limit to $10 billion, it is difficult to see how such a change in the law could be made to apply retroactively.

Fortunately, there is good reason to believe that the cap on BP’s liability will not apply as the company cannot claim the right to cap their responsibility if it is found that:

1. BP’s negligence caused the spill or if

2. BP is found to have violated federal laws.

While the specific cause of the explosion that has led to the massive oil spill is still unknown, it appears that Rick Perry, the Governor of Texas, is the only one lobbying for BP by claiming BP responsible for the oil spill as the incident may have been an “Act of God.” While Governor Perry has not explained how he learned of this divine intervention or how he has ruled out all other causes of this catastrophe, it appears that the people involved in the incident believe that there was negligence involved.

Tony Hayward, The CEO of BP, is casting the blame for the Gulf oil spill squarely on the owner of the rig: Transocean. Hayward claimed on the Today show that “the drilling rig was a Transocean drilling rig. It was their rig and their equipment that failed, run by their people, their processes.”

Meanwhile, industry experts have weighed in on BP’s efforts to shift all of the responsibility to Transocean. Bob Bea, a Berkeley engineering professor and industry vet who studies oil rigs, said that Hayward’s claim that Deepwater Horizon was run exclusively by Transocean’s people and processes defies belief. BP was the lease operator of the Deepwater Horizon rig that exploded. As the lease operator, BP most likely did have a role in decision-making aboard the drilling vessel. In addition, there were six BP employees were on the rig when it exploded April 20, 2010. Ted Bourgoyne, professor emeritus in petroleum engineering at Louisiana State University explained that BP would typically have an “operator’s representative” on the rig, “who basically has to go through the procedures the company wants to follow, and has to work with the rig crew.” In addition, Bourgoyne says there is also a daily safety meeting, which includes the operator’s rep, in which “everyone will go through the procedure and go through any questions and make sure everyone understands what their role is and what they’re supposed to do” that day.

While each state may also have laws that would allow affected people and businesses to make claims against BP, there is a concern that BP will claim that those state laws are “pre-empted” by the federal Oil Pollution Act. If that is the case, then the states do not have the right to enact laws to govern this situation since federal law would control.

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. However, even $1 billion in additional funds is not likely to cover all of the losses that result from this incident.

The oil slick has forced the shutdown of several fishing grounds and that shut down may also cause shipping lanes at the mouth of the Mississippi River to run on a substantially reduced scale as ships will have to have their hulls cleaned to avoid polluting the Mississippi River. If the shipping lanes are closed, cargo vessels that move millions of tons of fruit, rubber, grain, steel and other commodities and raw materials in and out of the nation’s interior will be tied up or delayed in making their shipments. When a tanker and a tugboat collided near New Orleans two years ago, oil cascaded down the river and some 200 ships stacked up, unable to move for several days while the Coast Guard had the vessels scrubbed. Millions of dollars were lost.

The impact of the disaster is directly related to the importance of the Port of New Orleans to so many industries. In 2008, the Port of New Orleans handled 73 millions tons of cargo, including coffee from South America and steel from Japan, Russia, Brazil and Mexico. More than 245,000 tons of coffee came through the port in 2008, second only to the New York-New Jersey port. And last year, it imported nearly 260,000 tons of rubber from such countries as Indonesia and Malaysia, making it nation’s No. 1 gateway for natural rubber.

Upriver is the Port of South Louisiana, the nation’s busiest port with 224 million tons of cargo a year – mostly grain, other agricultural commodities and chemicals. Farther east lies Mississippi’s Port of Gulfport, the nation’s second-largest importer of green fruit. Central American bananas from Chiquita and Dole account for a big chunk of its cargo.

About 60 percent of the grain exported from the U.S. goes through the Southwest Pass. If the spill delays barge traffic going down the Mississippi, prices for corn, soybeans and wheat could rise quickly on global markets, said Greg Wagner, a commodity analyst. Experts predict that grain prices within the U.S. could actually fall, harming farmers, if shipments are unable to leave the U.S. and the grain begins piling up at silos in the U.S.

In addition to damage to the fishing and shipping industries, other businesses such as restaurants, hotels, casinos and other coastal businesses from Florida to Texas are expecting to be impacted by the oil slick. As summer approaches, tourists are not expected to flock to oil covered beaches.

Regardless of whether or not BP or Transocean are eventually held responsible to pay for all of the damages they may have caused, this incident has points out that artificial limits of liability are not good for the people of any state. Whether it is a cap on medical malpractice claims or on the damages an oil company is liable for when its negligence causes a disaster such as this one, those responsible for the harm should be held accountable to pay the full amount of the damages they cause.

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