Why We Need to Raise or Eliminate the Oil Spillers’ Liability Cap

Testimony Before the House Transportation and Infrastructure Committee

CAP Action’s Kate Gordon testifies before the House Transportation and Infrastructure Committee. Read the testimony (CAP Action)

The issue of oil industry liability for oil spills is critical in light of the current disaster in the gulf. I am glad to be able to share my and the Center for American Progress Action Fund’s fundamental belief that the liability cap for damages must be raised, and other measures put in place, to more realistically account for the actual costs of oil spills to the environment and economy. I look forward to your questions and comments.

The Oil Pollution Act of 1990, or OPA, was put into place after the Exxon Valdez oil spill, which focused national attention on the oil industry’s responsibility to plan for, prevent, and eventually clean up its oil spills. As everyone on this committee knows, the OPA imposes several limits on the liability of a vessel or drilling facility owner in the event of a spill. These liability limits depend, for vessels, on the size of the vessel and whether it is a single- or double-hulled vessel; for facilities, the limits depend on whether the facility is onshore or offshore. For the purposes of the current disaster, the OPA provides that the facility owner is liable for all cleanup costs, but that its liability for longer-term effects on natural resources and the economy are limited to $75 million. Beyond this, damages are paid out of the Oil Spill Liability Trust Fund, which itself has a spending cap of $1 billion per incident, of which no more than $500 million may be paid for natural resource damages. Beyond that, the costs are ultimately the responsibility of the taxpayers and communities affected, sometimes for decades, after an oil spill.

These are big numbers. But they do not even come close to the likely cost of the current disaster, or in fact, to most modern oil spills. Each year, the Coast Guard submits an annual report to Congress assessing the year’s oil spills and their impact on the Oil Spill Liability Trust Fund. In its August 2009 report, the Coast Guard found that 51 spills or near-spills that had occurred since the OPA’s enactment had resulted in damages that exceeded statutory liability limits. The overall cost of these spills to the trust fund, which must cover damages that exceed the liability caps, was $1.5 billion. Not one of these spills was anywhere near the scale of Exxon Valdez or the BP Deepwater Horizon disaster; the majority were from fishing vehicles and small cargo vessels. The report concluded that for vessels containing “substantial fuel oil”, the liability limits likely do not account for actual costs of cleanup and damages.

CAP Action’s Kate Gordon testifies before the House Transportation and Infrastructure Committee. Read the testimony (CAP Action)