June 9, 2010
BP May Be Innocent Until Proven Grossly Negligent
Law.com reports that some energy experts are warning about possible breach of contract claims against the federal government if Congress were to remove the $75 million liability limit "for an offshore facility except a deepwater port" provided in the Oil Pollution Act of 1990, 33 U.S.C. § 2704. The claim is that the oil and gas companies purchased leases from the federal government, and those leases are contracts that were signed with certain liability expectations.
The Oil Pollution Act of 1990 carries an exception to the $75 million limit. Specifically, the liability limit
does not apply if the incident was proximately caused by--
(A) gross negligence or willful misconduct of, or
(B) the violation of an applicable Federal safety, construction, or operating regulation by, the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party (except where the sole contractual arrangement arises in connection with carriage by a common carrier by rail).
Thus, if BP were found to be grossly negligent or if the incident were caused by a violation of an applicable Federal regulation, the cap doesn't apply to BP, anyway.
I don't like the cap because I think it clearly underestimates the potential cost of remediation and compensation, but frankly, if BP doesn't fall into the exceptions, we, through our representative democracy, signed up for such a cap. I find that appalling, and I have a hard time believing the exception doesn't apply in this case, but I have been appalled by a number of laws on the books. My (or our collective) outrage doesn't make such laws not applicable.
There may be other bases for liability, even if the exception doesn't apply (some of which I may discuss later). Regardless, the cap needs to change and BP needs to stop the spill and clean up the mess as soon as possible.
June 9, 2010 | Permalink
Interesting -- though they're still liable for EPA fines under the Clean Energy and Water Act, I believe. At $4,300/barrel, and estimates putting the total damage well north of 100,000 barrels, BP has some worrying accounts payable.
More interesting to me, however, is Cameron's handling of the situation. A lot of Brits depend on BP through their pension funds, personal investing, etc. How much support will he be willing to fork over to BP? I'm betting on anything necessary. After all, BP is otherwise a solid company with $135 billion in net assets and strong cashflow. Any liquidity provided through loans is all but guaranteed to be paid back handsomely.
Posted by: Jason DaCruz | Jun 11, 2010 12:41:02 AM