Proposed spill penalty: A year of profits

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- Companies responsible for oil spills could be forced to give up a year's worth of profits under a bill introduced in the Senate on Thursday.

The Oil Spill Response and Assistance Act was proposed in response to BP's Gulf of Mexico oil spill. The bill would double the current $75 million cap on economic damages to $150 million or expose a company to damages equal to the last four quarters of its profits, whichever is greater. (See correction below.)

"Making a company at fault pay their last four quarters of profits is a much more effective way to ensure that energy companies actually pay for their mistakes without chasing many of them out of business," said Sen. David Vitter, R-La., who introduced the bill with Sen. Jeff Sessions, R-Ala.

For BP, the new law would result in a $20 billion liability cap, equal to its last four quarters of profits, according to Vitter's office. Costs to clean up an oil spill are not capped.

The proposal to raise the liability limit is the latest effort in Congress to crack down on companies found to be responsible for oil spills.

"As it stands, the cap on damages is too low, which leaves taxpayers exposed to the risk of paying the steep costs of cleaning up oil spills," said Vitter.

In addition, Vitter and Sessions proposed that oil companies be required to have more containment barriers, or booms, to be used in the event of a spill.

The deepwater oil well owned by BP (BP) is 40 miles off the coast of Louisiana. It is now leaking some 200,000 gallons of crude a day following an explosion April 20 that claimed 11 lives.

The bill would also force all agencies involved with the BP spill to submit "thorough" reports on the incident by Sept. 1.

Earlier, other lawmakers in the House and Senate introduced bills raising the liability cap from $75 million to $10 billion.

Some lawmakers have expressed doubt that Congress can make such changes retroactively. Others, however, point to the Superfund, a major environmental cleanup law passed in the 1980s that forced polluters to reimburse the government for past toxic cleanups.

A bill that would raise the cap to $10 billion, sponsored by Sens. Bill Nelson, D-Fla., Robert Menendez, D-N.J., and Frank Lautenberg, D-N.J., was blocked Thursday after the three lawmakers pushed for Senate approval.

But given the public outrage over the spill, and the fact that it's an election year, there's a good chance the cap will eventually be raised.

At the same time, some experts warn that an increase in the liability cap could force all oil companies to pay more for insurance to drill offshore.

Correction: An original version of this article mischaracterized the liability cap under the Vitter-Sessions bill. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 10:27pm ET
Company Price Change % Change
Bank of America Corp... 16.15 0.00 0.00%
Facebook Inc 58.94 0.00 0.00%
General Electric Co 26.56 0.00 0.00%
Cisco Systems Inc 23.21 0.00 0.00%
Micron Technology In... 23.91 0.00 0.00%
Data as of Apr 17
Sponsors

Sections

General Mills has scrapped a controversial change to its fine print that some read as eliminating customers' right to sue the company. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Office for iPad move is a symbolic victory for Nadella's Microsoft, but the company is still weighed down by many of the same old issues. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

As Detroit moves closer to reaching a bankruptcy deal, retired civilian workers are poised to be left worse off than firemen and police officers. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.