Democrat Keystone Cops look to retroactively raise oil companies’ liability caps

by Rossputin | 5:49 am, May 13, 2010 | Comments Off

In just the latest example of government-by-overreaction, the Obama Administration and their mindless Democrat allies in Congress are looking to pass legislation raising the liability caps for oil companies involved in “catastrophic” evenets from $75 million to an as-yet-undetermined number, with some rumors of a new cap of $10 billion.

There is currently a 8-cent per barrel tax collected by the federal government which goes into a fund to cover potential future damages.

I understand the intent of a liability cap, including allowing smaller oil companies to be able to get affordable insurance, but I have to say that a $75 million cap seems small and represents little more than corporate welfare, redistributing potential liability from multi-million or multi-billion dollar companies to taxpayers to the extent that an event depletes the fund.  Particularly during these days of $80/barrel oil.

The Hill reports that small oil companies would rather see an increase in this tax to then increase the size of the clean-up fund rather than a massive increase in the liability cap.

Even if this plan makes sense, Democrats in DC are likely to ignore it because it doesn’t appear aggressive enough and heaven knows they always want to be seen as “doing something.”

But the biggest problem with the rumored proposal is that it would apply retroactively to BP for the ongoing Gulf of Mexico oil spill.  I’m not here to defend BP in any way, but changing the rules of the game because politicians don’t like how the game is going is unjust.

I’m not a lawyer, but let me clarify one point here:

Many people are writing about the retroactive change in liability as being an ex post facto law.  That is actually not clear because the Supreme Court has ruled at least once that ex post facto impermissibility relates primarily to making something a crime which was not a crime when it was committed.  The application of the concept of ex post facto to civil law and liability is still unclear, although the idea of “punitive intent” has crept into Supreme Court discussion of the issue.  This means that if a case like this got to the Court, the decision might hang on whether it is determined that the increased liability is effectively punishment of BP.

To the extent that the government will argue (and not entirely unreasonably) that the purpose of the measure is simply to recover costs and not to punish, there is a strong chance the retroactive change would be upheld by the Court.  Furthermore, the fact that the increased liability probably doesn’t mean the oil companies will have an even greater incentive to avoid oil spills (because how is an oil company going to argue that they don’t already avoid spills to the greatest possible extent?) also argues against the measure being defined as punitive.

But that doesn’t make changing the rules retroactively OK.  It shows a government of reactive vindictive populists, a rule of men rather than of law, and a tendency to behave in ways which we should expect from Hugo Chavez, not the US Congress.

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