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Providing coverage of Alaska and northern Canada's oil and gas industry
December 2014

Vol. 19, No. 51 Week of December 21, 2014

BOEM increases offshore oil spill liability

The federal Bureau of Ocean Energy Management has increased the liability limit for oil-spill related damages from an offshore spill on the federal outer continental shelf from $75 million to $134 million, the agency said Dec. 11. This liability cap applies to damages that result from an oil spill, with the cost above the cap being met out of the government’s Oil Spill Liability Trust Fund. However, this limit only applies to damages - the party that causes a spill has unlimited liability for all other spill-related expenses, including the entire cost of cleaning up the spilled oil.

The increase in the liability cap is consistent with recommendations from the National Commission on the BP Deepwater Horizon Oil Spill and other studies, BOEM said.

The statute relating to the oil spill liability limit comes within the Oil Pollution Act of 1990. The previous limit of $75 million was set in the act, but with a provision for increasing the limit in line with inflation. This is the first time that the government has increased that limit since the act was passed. And BOEM has used the increase in the consumer price index since 1990 as the basis for calculating the new cap. The agency said that the increase is the largest that can be applied without new legislation.

“BOEM is taking an important step to better preserve the ‘polluter pays’ principle of the Oil Pollution Act and further promote safe and environmentally responsible operations,” said Walter Cruickshank, acting director of BOEM. “This is the first administrative adjustment since the Oil Pollution Act was enacted in 1990 and is needed to keep pace with inflation, which has increased 78 percent since then.”

- Alan Bailey






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