More than four years after the Deepwater Horizon disaster dramatically illustrated the high price tag of cleaning up oil spills, the Obama administration hiked the amount companies must pay to reimburse economic damages from the incidents.The Interior Department's Bureau of Ocean Energy Management on Thursday boosted the liability limit to $134 million from $75 million -- the largest increase it could make on its own, without separate action by Congress.
The move marks the first administrative increase in the liability cap for offshore oil spills since Congress imposed the limit as part of the Oil Pollution Act in 1990. Walter Cruickshank, acting director of the ocean energy bureau, noted that inflation has increased 78 percent in the years since -- while the cap has remained unchanged for offshore oil spills.
"BOEM is taking an important step to better preserve the 'polluter pays' principle of the Oil Pollution Act and further promote safe and environmentally responsible operations," Cruickshank said.
The limit applies only to economic-damage claims, such as lost profits and forgone tax revenue. Companies are still required to pay the entire costs of cleaning up after offshore spills. And the liability limit on economic damages is waived entirely if gross negligence, willful misconduct or other violations led to a spill.
The 24-year-old law requires adjustments every three years to keep up with inflation, but until this year, the only previous change was in 2006 and was directed just at tankers carrying crude. In August, the Coast Guard moved separately to boost the liability limits for spills from onshore facilities.
Although BP said it would not be bound by the liability limits in the Oil Pollution Act during the 2010 spill, it is not clear how smaller companies might behave in the wake of similar disasters. A presidential commission that investigated the Deepwater Horizon disaster urged lawmakers to boost liability, though the group stopped short of specifying what the limit should be and whether it should apply across the board.
Some lawmakers have called for unlimited liability for oil spills, while others have considered approaches that peg liability limits to risk. Sen. Edward Markey, D-Mass., who has pushed legislation to hike the limit, stressed that while the Interior Department raised the limit as much as it could administratively, Congress needs to go further.
"The Obama administration has now done what it can under the law to raise the liability for oil spills, and it is up to Congress to take the next step to hold oil companies fully accountable when they spill oil," Markey said in a statement. "We learned from the BP disaster that the fines and liabilities oil companies face for safety and spill violations amount to slaps on the wrist when compared to the damage they incur and the profits these companies keep."
The ocean energy bureau's power to adjust the limit is limited to addressing significant increases in the consumer price index.
The change will take effect in January.