British Petroleum’s Impending Liability: When the Oil Driller Gets Drilled

Following BP’s recently failed attempts to plug up its leaking oil well in the Gulf of Mexico, the economic and environmental impacts associated with the leak have reached a historically unprecedented level. By comparison, the 1989 Exxon Valdez oil spill in Alaska ended with a $500 million dollar judgment against Exxon, drastically lowered from $5 billion on the ruling of the United States Supreme Court. However, the potential losses the BP leak will impose on the 5 Gulf States alone affected by this leak are staggering. Estimates of anticipated liability associated with BP’s oil leak have already been suggested to fall anywhere from $20 to $50 billion dollars in actual damages, not including punitive damages.

Currently, the leaked oil has coated the ocean’s surface forming an area about 130 miles long and 70 miles wide and spreading, according to the National Oceanic & Atmospheric Administration. Traces of oil have already been reported to have entered the Florida Keys, and it is foreseeable that oil may reach the coast of Cuba.

As the law makers down south are debating whether the liability cap on oil companies should be increased from $75 million to $10 billion dollars, many stakeholders are preparing to join major class actions to recoup losses incurred as a result of the oil disaster. For example, thousands of commercial fishers have experienced  the crippling of their industry as a result of oil seeping into shrimp and oyster grounds. In addition, charter boat captains and resort operators are taking action against BP as a result of losses sustained from trip cancellations. Outdoor recreationalists deprived of being able to enjoy the wetlands for fishing and hunting have also brought numerous claims against BP.

It was also interesting to hear about how BP preemptively tried to cut cost corners by circulating settlement agreements amongst Gulf Coast residents in the wake of the April 20, 2010 oil leak offering payments of up to 5 thousand dollars in exchange for agreeing not to sue the company. Of course, this was before the true significance of the damage was realized. At the time many of these residents were willing to agree to the terms out of desperation. However, this legal strategy to limit liability was later described by BP as a “Misstep” after realizing the true extent of damages.

BP earns an estimated $20 billion dollars a year, and should have little difficulty paying out its impending liability over time. However, the ability for the environment to recover from this disaster could take decades if at all. But one thing remains certain,  it is only a matter of time before the driller gets a taste of its medicine through the drills of justice.

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