Drill Baby... Spill Baby: How the Oil Pollution Act's Economic-Damage Liability Cap Contributed to the Deepwater Horizon Disaster

• Date: 01 November 2010

40 ELR 11132 ENVIRONMENTAL LAW REPORTER 11-2010

Drill Baby . . . Spill Baby: How

the Oil Pollution Act’s Economic-

Damage Liability Cap Contributed

to the Deepwater Horizon Disaster

by Keith J. Jones

Keith J. Jones is General Counsel to the National Association of Clean Water Agencies in Washington, D.C.

On April 20, 2010, the Deepwater Horizon oil rig

exploded o the coast of Louisiana. e explosion

and subsequent re killed 11 workers and injured

several others, and started the release of millions of g allons

of oil into the Gulf of Mexico from more than one mile

beneath the surfac e of the water. It is still too early to tell,

but it may very well be the biggest environmental disaster in

the histor y of the United States. Was it foreseeable? Was it

preventable? Did a federal law enacted two decades earlier in

response to a prior environmental catastrophe set t he stage

for international oil company executives to pursue dangerous

deepwater drilling practices with little fear of economic lia-

bility? It will take years and probably many lawyers, judges,

and juries to answer these questions, but it is not too early to

start asking them.

I. The Oil Pollution Act

On August 18, 1990, a fter yea rs of stalling, the U.S. Con-

gress eventually passed comprehensive oil spill legislation in

the form of the Oil Pollution Act (OPA) of 1990.1 Congress

was nally motivated to take this step because of growing

public outrage resulting from another environmental trag-

edy that had occurred the year before. On March 24, 1989,

the Exxon Valdez oil tanker struck the Bligh Reef and spilled

millions of ga llons of oil into the Prince William Sound,

resulting in irreparable damage to formerly pristine sections

of the Alaskan coastline. e Exxon Valdez incident resulted

in years of litigation. It a lso raised for the rst time numer-

ous issues regarding economic-damage liability related to

environmental harm arising from a major oshore oil spill.

With the enactment of the OPA, Congress was attempting to

address many of the liability issues raised in the innumerable

1. 33 U.S.C. §§2701-2761, ELR S. OPA §§1001-7001.

legal actions that were part of the calamitous legacy of the

Exxon Valdez spill.

Presumably, Congress started o with the best of inten-

tions, having been mobilized to act in response to genuine

public concern over t he environmental threats presented by

possible future oil spills. At the time, t he U.S. Senate stated:

“What the Nation needs is a package of complementary

international, national, and State laws that will adequately

compensate victims of oil spills, provide quick, ecient

cleanup, minimize damage to sheries, wildlife and other

natural resources and internalize those costs within the oil

industry and transportation sector.”2 However, as is often the

case, as the legislation progressed, it became watered down

through compromise. During conference between the Senate

and the U.S. House of Representatives, amendments were

added, including one to “establish limitations on liability

for damages resulting from oil pollution.”3 Nevertheless, the

OPA was ultimately enacted, and its general purpose is to

make sure that:

[E]ach resp onsible party for a vessel or a fa cility from

which oil is discha rged, or which poses the substantia l

threat of a discharge of oil, into or upon the navig able

waters or a djoining shorelines or the exclusive economic

zone i s liable for the remova l costs and dama ges .. . that

result f rom such incident.4

e OPA goes on to dene damages to include injury or

loss of use of natural resources; destruction of real or personal

property; loss of subsistence use of natural resources; net loss

of taxes, royalties, rents, fees, or net prot shares that shall

be recoverable by federal, state, or local government; prof-

its or impairment of earning capacity that shall be recover-

able by any claimant; and net costs of providing increased or

additional public ser vices during or after removal activities,

2. S. R. N. 101-94, at 2 (1989).

3. H.R. C. R. 101-653, at 1 (1989).

4. 33 U.S.C.A. §2702(a).

Author’s Note: Many thanks to Pace University School of Law student

Dani Schreiber for her research and editing assistance.

Copyright © 2010 Environmental Law Institute®, Washington, DC. reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.