We’ve been discussing how to make BP pay for the cleanup of the oil spill for a little while. It’s common knowledge by now that BP’s liability is limited to $75M, and the fund that is associated with that liability cap can pay out $1B for the incident. In doing some half-assed research on the subject it looks like cleanup costs the cleanup itself may cost up to $5B and people are throwing out the completely unsubstantiated estimate of about another $6B in lost revenues in the area (this is only talking about a few select industries, so it may go up, but they’re also completely made up, so they may go down). Absolute worst case scenario looks to be about $17B.
This liability cap poses a problem because $1B isn’t nearly enough to cover all of the things that BP is clearly responsible for. At this point the usual suspects come out, congressional actions in the form of bills of attainer and ex post facto laws, much the same as the financial system bailout situation. While we could probably structure a law to sidestep around these issues there are no guarantees that the courts wouldn’t (rightly) strike it down.
In this case though there are some additional tools that are probably much better than unconstitutional laws.
Since 2000 BP has received $9B in defense contracts and operates around 22,000 oil and gas wells in United States controlled areas. This represents $16B in revenue. This financial relationship makes a much different situation from financial firm executive compensation. These significant economic ties make it very easy for the US government to make life hell for BP. A wide range of actions are possible from moving defense contracts to other suppliers to shutting down BP operations for safety violations (of which there is no shortage of legitimate concerns). BP is much smaller than the two other major players in the oil industry, ExxonMobil and Shell, so it’s not like it’s even a two way street. BP needs us more than we need them.
In other words, we have a wide and wonderful variety of methods to make avoiding paying cleanup liabilities more expensive than actually paying out. Whether the Feds have the balls to do it is another story, it would likely take some serious housecleaning in the EPA and MMS to get rid of the people loyal to BP, which seems to be part of the regulatory problems that got us into this mess.