Coastal Senators Seek Increased Liability for Oil Spills

In the wake of the massive Gulf Coast oil spill, three coastal Senators have introduced legislation entitled the “Big Oil Bailout Prevention Act.” The bill was introduced on May 3, 2010 by Senators Robert Menendez (D – NJ), Frank Lautenberg (D – NJ), and Bill Nelson (D – FL).

Under the current law, the Oil Pollution Act of 1990, liability for economic damages, such as lost business revenues from fishing and tourism, resulting from an oil spill is capped at $75 million, although unlimited damages are available in certain situations, such as a finding that the operator was grossly negligent or violated federal laws or regulations. Once that cap is reached, claimants can seek reimbursement from the Oil Spill Liability Trust Fund, which was created through a tax on produced and imported oil.

The new bill would raise the liability cap from $75 million to $10 billion, and eliminate the $1 billion per incident cap on claims against the Oil Spill Liability Trust Fund. Representative Artur Davis (D – AL) and several colleagues have introduced a companion bill in the House. The legislation, if passed, could pose enormous new liabilities and risks for oil drillers and oil producers. Further, increased scrutiny of drilling and production practices may result in additional regulatory safeguards adding significant costs to offshore operations.