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Key senators call for lifting of oil liability caps

By the CNN Wire Staff
The White House has endorsed plans to lift the cap on damages that oil companies must pay for a spill.
The White House has endorsed plans to lift the cap on damages that oil companies must pay for a spill.
  • Top Senate Democrats call for removal of current liability caps in wake of Gulf oil disaster
  • Senators blast 2008 Supreme Court ruling cutting award to victims of Exxon Valdez spill
  • Senators criticize a law limiting BP's liability to $75 million
  • A top Republican warns of economic damage caused by deepwater drilling moratorium

Washington (CNN) -- Top Senate Democrats called Tuesday for a sweeping overhaul of the nation's corporate liability laws in the wake of the Gulf of Mexico oil disaster, arguing that companies currently have little incentive to make safety and environmental concerns a top priority.

Specifically, the senators blasted a 2008 U.S. Supreme Court ruling that cut the amount of punitive damages a jury awarded to victims of the 1989 Exxon Valdez oil spill by $2 billion. They also criticized the 1990 Oil Pollution Act, which would potentially limit BP's liability for economic damages incurred by the Gulf spill to $75 million. Critics note that the amount is a small fraction of the cost a major oil spill like the Gulf disaster will inflict on communities.

At the same time, the senators sharply questioned an 1851 law limiting shipowners' post-accident liability to the value of a sunken vessel. Rig owner Transocean used the law in the days immediately following the April 20 explosion to attempt to limit its liability to $26 million.

The various measures were the focus of what became a heated hearing conducted by the Senate Judiciary Committee.

"No one's life should become an asterisk in somebody's cost-benefit analysis," said Sen. Patrick Leahy, D-Vermont, the committee's chairman. "Americans are angry. ... We cannot let big oil companies play roulette" with the country's environment and economy.

"If you're engaged in drilling and can create this level of damage, it carries with it a responsibility that you accept liability for damage," said Sen. Richard Durbin, D-Illinois. "If you cannot accept that liability, stay the hell out of the business."

The government needs to ensure it's in a company's financial interest "to adhere scrupulously to the law," declared Sen. Sheldon Whitehouse, D-Rhode Island. Right now, "corporations lack proper market incentives to act responsibly."

The emotional high point of the hearing came when the brother of one of the 11 workers killed in the Deepwater Horizon explosion blasted BP chief Tony Hayward. Christopher Jones, who had been asked to testify before the committee, highlighted Hayward's recent remark that he wants his "life back."

"Mr. Hayward, I want my brother's life back," Jones said. "We will never get (his) life back."

Critics of the current laws are largely backed by the White House, which has endorsed plans to lift the cap on damages that oil companies must pay for a spill.

"Oil companies should have every incentive to maximize safety, and arbitrary caps on liability create a disincentive to achieve that goal," White House spokesman Ben Labolt said Monday.

BP has said it will waive the cap on damages and pay "all legitimate claims" as a result of the Gulf spill, the largest in U.S. history. It says it has already spent more than $1 billion trying to corral the spilled crude.

iReport: Share your views on the oil disaster

The Judiciary Committee's top Republican, Alabama Sen. Jeff Sessions, also slammed BP on Tuesday, noting that the company racked up an average daily profit of $93 million in the first quarter of 2010. BP should be liable "up to the extent of (its) financial existence," he said. "They are not too big to fail."

Sessions, however, also tried to turn the focus of criticism to the Obama administration, attacking the White House's decision to implement a six-month moratorium on deepwater drilling.

The offshore drilling industry is responsible for nearly 200,000 jobs and $13 billion in annual non-tax revenues for states along the Gulf Coast, Sessions said. Offshore drilling in the Gulf accounts for 30 percent of America's domestic energy production, he noted, and most of the drilling is done at depths of over 1,000 feet.

Deepwater drilling is important to our "economy, jobs, and national security," Sessions said. He urged the White House to accelerate an ongoing review of safety procedures in order to allow for a more rapid resumption of drilling.