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Member, Beacon International Group, Ltd.
REP. RUSH HOLT, D-N.J. calls the Oil Pollution Act of 1990's liability cap of $75 million for offshore facilities “laughable.”
We couldn't agree more. The cap should be raised, and raised significantly. But as Congress considers legislation offered by Rep. Holtwho wants to raise the cap to $10 billionand others to change the cap, we hope they proceed carefully and do not allow the understandable anger directed at BP P.L.C. for the monster oil spill fouling the Gulf of Mexico to dictate the terms of reform.
It would be a mistake to replace even a ludicrously low cap like the OPA's with unlimited liability, as some lawmakers propose. Subjecting offshore drilling operators to limitless liability might make perfect political sense, but it falls a bit short in economic sense.
Unlimited liability would discourage domestic exploration. It also would raise the possibility the companies would go bankrupt before they covered all of their legitimate claims, leaving the taxpayers to pick up the tab. It's far better to allow a polluter to stay in business and pay every cent of the bill than to take the politically appealing step of subjecting the polluter to a corporate death sentence.
Congress should raise the OPA's liability cap. But, hard as it will be to do in today's atmosphere in Washington, lawmakers should do so in a measured rather than emotional manner. Raise it high enough so it hurts, but does not kill, the offender. The existing cap is indeed laughable, but eliminating it could have consequences that are no laughing matter at all.