British Petroleum, Plc., or BP, owns the site and manages the operation as a whole. Transocean, Ltd. is the owner and operator of the Deepwater Horizon drilling rig, and Halliburton Co. provided well services. When all three companies were put under the spotlight by the U.S. Senate Committee on Energy and Natural Resources, they turned to the business leader next to them and blamed the other guy.
High stakes in BP oil spill
What is at stake, for all involved, is billions of dollars in liability claims. The company that is found responsible for the continuing oil spill in the Gulf would be responsible for billions of dollars in clean-up costs, actual damage to equipment, including the oil rig, and additional economic costs. The real costs, though will come from these additional economic costs.
Based on questions and statements made by the Senators during the grilling of the CEOs, these costs could far exceed any of the other claims. Senator Mary Landrieu (D-LA) made it a point to highlight that the economic costs to local business owners would be quite significant, and would very likely exceed a $75 million cap, instituted by the Oil Pollution Act of 1990, on economic damages to private owners, like fishermen or tourism related businesses.
Why a cap on damages?
The cap, which does not include clean-up costs, was instituted as a way of preventing over-the-top abuse of the tort system and as a means of protecting smaller oil companies from being completely wiped out by an accident. In a spill like the one currently in the Gulf of Mexico, the cap seems rather ridiculous when the company posted a $6 billion profit in just the first quarter of 2010.
BP not turning away from spill, but may be posturing
To their credit, BP America, Inc.’s President and Chairman Mr. Lamar McKay did say that the $75 million cap was “irrelevant” to the current situation and that BP is prepared to “pay all legitimate claims.” This did not sit well with the Senators on the Committee, though. Senator Robert Menendez (D-NJ) attacked Mr. McKay to define what a “legitimate” claim would be, but Mr. McKay would not budge from his statement.
The fear is that BP is positioning itself to wiggle out of compensatory damages from small businesses. While the company has been saying from multiple fronts and representatives that they will pay all “legitimate claims,” it is beginning to sound over-rehearsed, like someone beckoning an unwitting person to stand on an “X” on the ground so a water balloon will land on them.
For their part, the Obama administration is pushing to raise the cap up to $10 billion. Smaller drilling companies are against the measure, though, because an accident would cause a collapse of their company, essentially making the oil business the sole domain of the major corporations, similar to an oligopoly. The point may be moot, in the end, because the cap ceases to offer any protection if the company in question is found to have been negligent in their actions.
