Oil Pollution Act of 1990 & BP Part Deux

The Deepwater Horizon oil spill is still ongoing in the Gulf of Mexico as I write this. What is interesting though is how analysts, journalists, and other people are trying to predict the liability that BP will face. Too many variables are unknown in order to determine how much the true liability will be. Clearly, I think everyone agrees that BP deserves to pay some time of fine. The million or perhaps billion dollar question is how much? The Oil Pollution Act of 1990 was passed after the Exxon Valdez went aground. The legislation prohibited any vessel that had caused a spill of more than 1 million gallons of oil operating in the Prince William Sound. Obviously, this should have been renamed the Exxon Valdez Act of 1990 since the Valdez was the only ship to cause a spill. From March of 1989-2002 the legislation only prevented 18 ships from entering the Prince William Sound. However, what we don’t know is the unintended consequences such as higher costs and logistical problems in terms of oil companies not being able to enter.

Congressional committees are under way to figure out what caused the BP spill and who was at fault. As I have said before, I don’t believe it was solely BP’s fault but most likely a collection of BP, Transocean, and Halliburton. Since The Oil Pollution Act of 1990 limited liability to $75 million it seems as if BP lawyers will use this precedent as a rule. Another lingering question is whether or BP will even be in business. If BP were to file bankruptcy then everyone including the government would be creditors and have to wait in line until the company went through bankruptcy court. Although, I think the probability of BP going bankrupt is l know the probability isn’t 0% since the probability of any company (even Fortune 100 companies have gone bankrupt!) is never 0%. Some people in Congress want to make the Oil Pollution Act of 1990 retroactive before the spill and make the limit $10 billion. What also may be taken into account is that BP will have compensatory and punitive damages that they will face. Not to mention to date BP has spent over more than $1 billion voluntarily to clean up the spill. Will this be credited against liabilities? I am no lawyer but it doesn’t seem to make sense to be able to change laws in order to punish one party. What about the idea that precedent cases are part of the judicial system which makes the law predictable?