The BP Oil Spill: Hollow Regulation Meets Hobbled Law

by Sidney Shapiro

March 11, 2011

This coming April 20 will mark the one-year anniversary of the first day of the BP Oil Spill – a three-month polluta-polluza that eventually became the largest accidental marine oil spill in the history of the world. That was the night that a long series of failures finally came to a head: failures aboard the Deepwater Horizon by BP and its contractors, failures in the enforcement of regulations intended to prevent such disasters or at least limit the damage from them, failures in the crafting of the regulations governing the process by which BP won approval to drill, and failures in the drafting of the legislation from which flowed the regulations.

For the 126 workers on the Deepwater Horizon that night, the sounds and images of those failures must have been terrifying beyond imagining. Eleven of them didn’t make it home alive, and another 17 were severely injured. The rest escaped in lifeboats or by jumping into oily seawater while a fire raged overhead. Nearly three months later, after an estimated 4.9 million barrels of oil had spewed into the Gulf of Mexico, the damage spanned hundreds of miles of shoreline and thousands of square miles in the Gulf. Clean-up efforts continue to this day, and will for some time, although oil along the bottom of the ocean is unreachable.

The BP Oil Spill was not just a really unlucky break, as the oil industry would like us to think it was, but was the product of corner-cutting by industry, with the tacit approval of government. If the agency then called the Minerals Management Service (MMS) had been serious about its job of reviewing safety plans to make sure they would work, BP might never have gotten approval to drill. But that wasn’t how MMS worked. It saw its role as helping to keep the oil flowing, not making sure that BP and the rest of the industry took their safety obligations seriously.

There were other regulatory failures, as well, and CPR Member Scholars have meticulously documented them in our October 2010 report, Regulatory Blowout: How Regulatory Failures Made the BP Disaster Possible, and How the System Can Be Fixed to Avoid a Recurrence. But there’s another failure, an ongoing failure, at work in the Gulf as well, one that’s making it harder for the victims of the BP Spill – the survivors, the relatives of those killed, businesses and employees who lost their livelihoods as a result of the damage, and others – to recover.

For years, the “tort reform” movement has worked to undercut the nation’s civil liability laws, making it more difficult for victims to sue the companies that have done them harm. In this movement, tort reform consists of limiting or rolling back existing opportunities for victims to sue in court, and the business trade associations behind the movement have had some success. As a result, the survivors and economic victims of the spill are confronted with significant constraints on their ability to seek compensation in court for the harm done to them.

A new report issued this morning by CPR, The BP Catastrophe: When Hobbled Law and Hollow Regulation Leave Americans Unprotected, notes that U.S. law relies on two complementary approaches to deter companies from taking the risks that led to the disaster in the Gulf: regulations establishing environmental and worker safety standards, and civil liability that serves both to discourage reckless corporate behavior and to compensate its victims. In the case of the BP spill, lax regulation and enforcement made the spill possible, and outdated, overly corporate-friendly statutes could significantly limit what victims can force BP to pay in damages.

The new report highlights how the deck has been stacked against spill victims seeking to recover damages in federal or state courts. According to the report, a number of federal and state laws have left some of the victims unable to recover the full extent of the damages they have suffered in either state or federal courts. At the federal level, according to the report:

  • The Jones Act, a 1920 statute covering “seamen” aboard the Deepwater Horizon, offers only partial compensation to victims’ surviving families. A different law, the Longshore and Harbor Workers’ Compensation Act, covers “harbor workers” aboard the Deepwater Horizon. Harbor workers’ families will find litigation preempted by a federal workers’ compensation system that uses a damages schedule that severely under-compensates disabled harbor workers or the survivors of harbor workers killed. Surviving family members of harbor workers are eligible only for economic losses, and up to $3,000 in funeral expenses.  The result is that the amount that a surviving family members can recover hinges on the specific job their loved one held.
  • The Death on the High Seas Act bars estates of dead workers from seeking damages for pre-death pain and suffering, meaning that families of harbor workers will have no avenue to recover such damages, while families of seamen will be able to seek such damages under the Jones Act.
  • The Oil Pollution Act of 1990 (OPA) will likely restrict compensation for individuals and businesses along the coast for damage to natural resources and property. OPA establishes a process for settling claims out of court – for victims, trading some compensation in exchange for quicker resolution. OPA also establishes a $75 million liability cap for damages, which would not apply if BP is deemed to have acted with gross negligence or in violation of federal safety regulations. Finally, OPA includes a complex “presentation” requirement that forces victims to gather evidence of damages, present it to BP, and then wait for an indeterminate period of time before filing suit – effectively allowing BP to decide when a plaintiff may sue.

In addition, various state statutes restrict victims’ ability to recover damages in state courts. Louisiana law bars punitive damages, for example. In addition, Louisiana, Mississippi and Alabama law bars recovery of damages for pure economic loss, in the absence of personal injury or property damage, preventing commercial fishermen and the tourism industry from suing in state court. By contrast, Florida places comparatively few restrictions on victims’ ability to recover damages in state court.

The victims of the BP spill deserve compensation.  But beyond than that, BP and its contractors – and for that matter, their competitors – need to know that if they cut corners with the stakes so high, they can expect their bottom line to suffer. Regulation should be strengthened to help prevent these disasters, and the civil justice system should be unshackled. Together the two systems can help avoid a recurrence of this tragedy.

I’m pleased to note that CPR’s CatastropheWatch project has launched an Interactive Map of the BP Oil Spill. It’s chock full of information about regulatory failures that led to the disaster and hobbled law that is now making it difficult for victims to recover damages.

Finally, I want to give credit to my many co-authors on the new BP report. They are CPR Member Scholars Alyson Flournoy (University of Florida Levin College of Law), William Andreen (University of Alabama School of Law), Thomas McGarity (University of Texas at Austin School of Law), and CPR Policy Analyst James Goodwin.

Tagged as: BP Oil Spill tort
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Sidney A. Shapiro holds the Fletcher Chair in Administrative Law at the Wake Forest University School of Law and is the Associate Dean for Research and Development. He is a member of the board of directors of the Center for Progressive Reform.

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