Responsible Companies Try Wriggling Out of Paying Oil Spill Costs

The companies responsible for the ongoing Gulf Coast oil spill have begun looking for ways to duck paying costs associates with the disaster.

Transocean Ltd, the company which owned the offshore rig known as Deepwater Horizon, which exploded in April and caused what has become the worst oil spill in U.S. history, allegedly is trying to hide behind an obscure, century-and-a-half old law to avoid paying damages.

Meanwhile, President Obama last week specifically called out BP, the energy giant that leased Deepwater Horizon, for trying to stiff a shrimp processing plant in Louisiana — even though BP promised Congress that it would pay all legitimate claims.

The federal government has identified Transocean and BP as the responsible party for the monster spill, which is destroying fisheries and wildlife, causing other environmental damage, and threatening economic devastation along a wide swath ofthe Gulf Coast.

By law, the two companies must pay all of the costs of the spill cleanup, no matter what the total ends up being. The Obama administration last week announced that it had presented BP and “other responsible parties” with a bill for more than $69 million just to reimburse the federal government for its spill response so far.

The federal Oil Pollution Act also says BP and Transocean are liable for damages caused as a result of the spill, up to $75 million. Many lawmakers believe $75 million is much too low a ceiling to cover the magnitude of the current disaster, so some Senate Democrats have introduced legislation to raise that cap to $10 billion. Republicans are blocking that bill, the Big Oil Bailout Prevention Act, from coming to a vote, however.

Regardless of legislative wrangling over the liability cap, BP and Transocean would not be protected by any cap if it is found that one, or both, of the companies caused the spill through negligence or other wrongdoing.

Also, BP America Chairman and President Lamar McKay last month promised Congress that his company would not try and seek protection under damage-liability caps. “We recognize that beyond the environmental impacts there are also economic impacts on the people of the Gulf Coast states. BP will pay all necessary clean up costs and is committed to paying legitimate claims for other loss and damages caused by the spill,” McKay told the Senate Energy and Natural Resources Committee.

Associate Attorney General Thomas Perrelli was met with skepticism, however, when he reminded members of the committee about McKay’s pledge a week later.

“You may be one of the few people in America that trusts them,” Sen. Bernie Sanders (I-Vt.) told the No. 3 official in the Justice Department.

Sanders says that Congress should lift the current $75 million cap on oil company liability for economic damages. “It is beyond comprehension that you have an oil company making over $5 billion in profits in the first quarter of this year at the same time as you have the nation running a record-breaking deficit that the taxpayers of this country should be asked to pay one nickel in costs,” Sanders says.

Saying One Thing, Doing Another?

Recent actions by BP and Transocean may be proving doubters like Sanders right.

Transocean filed a complaint in U.S. District Court in Houston under the Limitation of Liability Act, to ask that its liability for all damages that resulted from the rig disaster be limited to a mere $27 million, according to Sen. Chuck Schumer (D-N.Y.), who now wants to repeal that law, which dates to 1851.

Schumer says that the “Limitation of Liability Act” was put in place before sufficient means existed to insure sea vessels and to promote shipbuilding for a then growing industry. Deepwater Horizon, a moveable rig, qualifies as a vessel under the act. If successful, Transocean could end up paying just a small fraction of clean-up costs that it would otherwise be liable for, and American taxpayers could be on the hook for the remainder. BP estimates that the cost of clean-up per day from the Gulf oil spill is roughly $16 million.

“It’s completely outrageous for a company that shares responsibility for the single largest and most expensive oil spill in American history to think it is going to get away with paying mere pennies of the total cost of the clean-up,” says Schumer. “I am calling for an immediate repeal of this antiquated law that would provide legal cover to a foreign company that has a tremendous amount of liability for this accident.”

Meanwhile, Obama complained Friday in a visit to the spill site that BP may be saying one thing, but doing another when it comes to paying all damages it owes.

“My understanding is, is that BP has contracted for $50 million worth of TV advertising to manage their image during the course of this disaster. In addition, there are reports that BP will be paying $10.5 billion — that’s billion with a B — in dividend payments this quarter,” Obama says.

“Now, I don’t have a problem with BP fulfilling its legal obligations. But I want BP to be very clear, they’ve got moral and legal obligations here in the Gulf for the damage that has been done. And what I don’t want to hear is, when they’re spending that kind of money on their shareholders and spending that kind of money on TV advertising, that they’re nickel-and-diming fishermen or small businesses here in the Gulf who are having a hard time,” the president adds. “We’ve assigned federal folks to look over BP’s shoulder and to work with state and local officials to make sure that claims are being processed quickly, fairly, and that BP is not lawyering up, essentially, when it comes to these claims.”

Obama cites an example of a local shrimp processing plant that’s nearly going under due to the spill, but has met with resistance from BP when the shrimp plant put in a claim.

“They’ve got a bunch of shrimp on ice, so they’re selling inventory, but they’re not bringing any new product in. And BP says to them, well, you know what, your sales don’t seem to have declined,” the president recounts. “And they try to explain, yes, but we’ve had to lay off all our workers because we’re not bringing any new shrimp in and our cupboards are going to be bare in the next several weeks — BP has got to be able to anticipate that.”

The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.

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