Lift Liability Caps, Promote Safety, and Continue Drilling

Nicolas Loris / August 03, 2010

One issue arising out of the Gulf oil spill is liability for the secondary costs that stem from offshore oil and gas accidents. The liable party is responsible for cleanup costs, and that law should remain. Although BP has agreed to cover all legitimate claims, the current system does not sufficiently align risk and liability with individual behavior. It socializes risk by spreading the costs across the entire industry and does not inherently promote safe operations. Raising the cap without more comprehensive reform would fail to fix these problems and could effectively shut down offshore drilling entirely if activities are made unreasonably and artificially burdensome.

The Heritage Foundation’s solution accurately assigns risk, holds oil and gas companies fully liable, promotes safety, and guards against frivolous lawsuits. To achieve this, Congress must:

• Remove the $75 million liability cap and replace with a tiered system that relies on private insurance to cover liability for normal operations up to $1 billion; (more…)