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Environmental Lawyers Weigh BP’s Liability in Leak

June 8, 2010 at 12:00 AM EDT
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Fifty days into the Gulf oil spill, officials still don't have a firm answer on how much oil is escaping from the damaged well or how long it could continue. Jim Lehrer talks to two environmental law professors about the legal ramifications of the spill for BP.
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JIM LEHRER: On this day 50 of the Gulf disaster, officials still don’t know how much oil is escaping from the damaged well or where it’s headed.

A mile deep, a containment cap over the blown-out well head is now pumping even more of the leaky crude to the surface. At a news conference in Washington, Coast Guard Admiral Thad Allen said the device captured more than 600,000 gallons yesterday, up from 460,000 on Sunday.

But the government’s point man said he wasn’t optimistic.

ADMIRAL THAD ALLEN, U.S. Coast Guard commandant: I have never said this is going well. But we’re throwing everything we have got at it. This is the largest oil spill response in the history of the country. I have said time and time again nothing good happens when oil is on the water. And we’re making no illusions that this is anything other than a catastrophe. And we’re addressing it as such, and we will continue to do that.

JIM LEHRER: Still, criticism of the government’s handling of the spill continues to mount. An ABC News/Washington Post poll shows 69 percent of Americans have a negative view of the government’s response to the spill.

U.S. PRESIDENT BARACK OBAMA: Here is what I can say: that we have responded with unprecedented resources.

JIM LEHRER: On NBC’s “Today Show” this morning, President Obama defended both his administration’s actions and his own personal reaction to the spill.

BARACK OBAMA: I was down there a month ago, before most of these talking heads were even paying attention to the Gulf. A month ago, I was meeting with fishermen down there, standing in the rain, talking about what a potential crisis this could be.

And I don’t sit around just talking to experts because this is a college seminar. We talk to these folks because they potentially have the best answers, so I know whose ass to kick, right? So, you know, this is not theater.

JIM LEHRER: That strong language comes just a day after officials said the slick has broken up into thousands of oily patches. Thick oil has enveloped endangered birds in Louisiana.

Tar balls have washed ashore in Alabama, and a sheen has dotted the Florida coast. And now the head of the National Oceanic and Atmospheric Administration has confirmed what some scientists have suspected: There are oil plumes deep below the surface more than 40 miles from the gushing well.

JANE LUBCHENCO, administrator, National Oceanic and Atmospheric Administration: The analyses of those water samples, which we now have in hand — we have just gotten them — indicate that there is definitely oil subsurface. It’s in very low concentrations. I mentioned 0.5 parts per million.

JIM LEHRER: Put together, oil above and below the Gulf’s waves will take months to clean up and will impact the region for years. The 1990 Oil Pollution Act sets no limit on cleanup costs, and BP has committed to paying those. Company officials said they will ignore the law’s $75 million liability cap. So far, they have paid out $49 million in damages and face more than 150 lawsuits.

On “The Today Show,” President Obama had harsh words for BP’s CEO, Tony Hayward, who has been quoted saying the spill’s environmental impact would be very, very modest.

BARACK OBAMA: He wouldn’t be working for me after any of those statements.

And I don’t want to prejudge it, but the initial reports indicate that there may be situations in which not only human error was involved, but you also saw some corner-cutting in terms of safety. And that BP is a multibillion dollar corporation — it’s talking about paying $10.5 billion in dividends just for this quarter.

JIM LEHRER: At a news conference today in Alabama, BP executive Doug Suttles said the company is moving quickly to compensate those affected by the spill.

DOUG SUTTLES, COO, Global Exploration, BP: I think there’s a perception that somehow we’re designing this process so it doesn’t compensate people who have had an impact. That’s not the purpose at all. We’re trying to get money into the people’s hands who had a legitimate impact.

JIM LEHRER: Meanwhile, the Senate Judiciary Committee held a hearing on the question of liability today. Christopher Jones, whose brother was killed when the doomed rig exploded in April, said he couldn’t understand why a company with so much money can’t stop the gusher.

CHRISTOPHER JONES, brother of Rig Explosion Victim: It’s mind-boggling how they can throw up their hands and say that they could not have anticipated this or not have had the resources in place to prevent it.

JIM LEHRER: Officials hope the containment cap’s performance continues to improve. BP plans to switch to a larger one soon in an effort to capture even more oil.

President Obama will make another visit, his fourth, to the Gulf next week, according to a White House statement released late today.

More on the liabilities question now from Tracy Hester, a professor of environmental law, director of the University of Houston Law Center’s Environment, Energy, and Natural Resource Center, and Noah Hall, a professor of water and environmental law at Wayne State University Law School.

Professor Hester, in general, are there any real limits on BP’s liability for this oil spill?

TRACY HESTER, University of Houston Law Center: Well, there are limits for one particular subset of claims that can be brought against BP, which would be $75 million for claims brought for damages under the Oil Pollution Act.

That cap does not apply, however, for direct removal costs, getting the oil actually out of the water. That amount is unlimited under the Oil Pollution Act. And that cap doesn’t apply to state law tort lawsuits, and it obviously would also not apply to civil or criminal penalties that the United States or state governments might want to pursue.

JIM LEHRER: So, the answer is yes, there’s no real limit? Because, even under the $75 million cap, there are ways to even raise that, are there not, depending on allegations? The president was saying there was corner-cutting on safety and things like that?

TRACY HESTER: Well, if there’s a cap, it’s a pretty leaky one.

The $75 million cap only applies if there is a situation where there hasn’t been gross negligence or willful misconduct or failure to comply with federal safety or operational regulations. If any of those get proven in litigation, even that $75 million cap comes off.

JIM LEHRER: Professor Hall, you agree with that in general, that there’s no limit — there are no limits on BP at this point?

NOAH HALL, Wayne State University Law School: Absolutely.

The $75 million cap has probably been an overplayed issue. And it’s really a non-issue. BP has said that it’s not going to worry about the $75 million cap, nor should they, because I think, as Professor Hester pointed out, it’s almost certain that BP is going to be shown to have violated some federal health, safety, occupational standard, some negligence on BP’s part, so they won’t have the benefit of the $75 million cap.

And they’re facing liabilities of billions and billions of dollars here.

JIM LEHRER: Now, Professor Hall, when they talk about liabilities and claims, BP, as we reported, has already gotten and paid out 150 — or there are 150 lawsuits, but there are thousands of claims that have already been paid out.

What are the standards for determining whether or not a person’s job or a person’s income or a — any injury to a person, beyond physical injury, which is obvious, is actually the result of this BP oil spill? How do they go about determining this?

NOAH HALL: Well, the short answer is, there’s going to be a lot of disputes, a lot of litigation, and for many of these claims, the victims really won’t see justice for many years to come. It’s not always immediately apparent who has been hurt, whose business has suffered because of the oil spill, which fishermen have lost their catches for the season.

And even health damages often don’t appear right away. There’s a lot of latent effects of pollution that we don’t see for many years to come. So, there’s going to be quite a bit of litigation and controversy over what disputes — over what claims should be properly paid out.

BP is going to say that many of the claims aren’t proper, that the injuries aren’t total — don’t total to the amount of money that the victims are seeking. But at the end of the day, that’s what lawyers are very good at fighting over, how much money is needed to compensate somebody’s claims.

JIM LEHRER: Professor Hester, what does the record indicate about liability for prior events in terms of how close you have to be to the damage, say, an example I read today where a travel agent in Boston might say, well, wait a minute, I’m losing money because I had some tourists who were going to go to Louisiana who now can’t go because of the oil spill?

Give us some feel for that.

TRACY HESTER: I think it’s going to be a question of proximity, the — and Professor Hall is right — it’s going to have to be sorted out in litigation.

It’s going to be fairly straightforward and easy to have claims processed for people who are geographically close to the spill, who can show a direct nexus to how the spill has affected the way that they live their — make — live their livelihood or any personal injuries.

But, as you spread out further in time and location, that ripple is going to get harder and harder to prove. And that’s where a lot of the litigation is probably going to be the most fierce. Unfortunately, it’s not something that we have had a lot of case law on yet to really give us a bright line on.

JIM LEHRER: What about the record from the Exxon Valdez spill?

TRACY HESTER: Exxon Valdez — sorry.

JIM LEHRER: What happened then?

TRACY HESTER: Exxon Valdez, we actually had litigation on the tort claims that actually stretched on for up to 20 years. Much of that fighting was over punitive damages, which originally were at $5 billion for Exxon, but were ultimately trimmed down in a U.S. Supreme Court decision last year to only $500 million.

Given the fact that we have a spill here that actually impacts multiple states, a wide variety of economic activity, and the fact that we’re dealing with a spill that’s now under new laws that weren’t in place when the Valdez spill took place, we’re probably looking at an even longer period of litigation and probably much more complex legal issues.

JIM LEHRER: You see it the same way, Professor Hall?

NOAH HALL: Yes.

I don’t want to minimize the impact that Alaska felt after the Exxon Valdez spill, but what we’re seeing in the Gulf is an order of magnitude different. It’s not just the number of states affected, the miles of coastline affected, but the economics of the Gulf region are very closely tied to the quality of the waters in the Gulf itself.

And, as those waters become polluted, as the beaches start becoming covered in oil, you’re going to see a ripple effect through the entire Gulf region economy that’s going to make computing damages very difficult, very controversial and frankly very expensive for the lawyers to sort out.

You’re going to see property owners up and down the Gulf Coast claiming loss of value to their investments, to their real property, thousands and thousands of businesses. What we saw in Alaska after the Exxon Valdez spill gives us a small taste for what this is going to be like, but it’s really a much smaller-scale event than what we’re seeing in the Gulf.

JIM LEHRER: Professor Hester, President Obama has already made a big thing of the fact that the U.S. — the federal government has already presented a bill to BP for several million dollars.

Is that just as simple as it appears? The United States government sends them a statement and says, you now owe us $65 billion — million dollars or whatever it is, and the federal government pays?

TRACY HESTER: Well, or BP pays.

JIM LEHRER: Yes, I mean BP pays, yes, right. Sorry.

TRACY HESTER: No, absolutely, the idea is that the federal government has already designated BP as the responsible party for this spill as a leaseholder for the, you know, mineral underneath the spill.

And, frankly, their — probably, the presentation of that bill is in the hope that BP will voluntarily pay it. But, if, for some reason, BP chose not to, the federal government would still have to go to court and pursue that claim.

Given the circumstances, though, it would — it would probably not be a good tactical call on BP’s part to fight over the legalities of that presentation.

JIM LEHRER: Professor Hall, finally, on the criminal liability issue, the — there was a big flurry about that when Attorney General Holder went to the Gulf a few days ago, or went last week. What are the realistic possibilities there? And what does the record tell us about that?

NOAH HALL: Well, I think we have got a pretty good sense of what the possibilities are for criminal action, criminal prosecution against BP and the other companies involved in the spill.

For folks who want to see BP executives put in jail, the criminal process is going to be very unsatisfying. What we’re much more likely to see are significant fines, probably in the hundreds of millions of dollars, imposed under a variety of federal statutes, such as the Clean Water Act, the Oil Pollution Act, even some old treaties like the Migratory Bird Treaty Act.

But BP as a company will pay those fines, probably reach some type of negotiated plea deal. And those — those criminal fines are really going to be pretty small in comparison to the economic damages that BP is going to be paying out over the next years and maybe even decades.

JIM LEHRER: Do you agree with that, finally, Professor Hester? Probably no — nobody is going to go to jail; they’re just going to spend, pay out a lot of money?

TRACY HESTER: Absent some very unusual new facts coming to light, I would agree with Professor Hall.

The real consequences of any criminal conviction actually may not be the fine that gets paid as it might be restitution payments that get made as part of a criminal settlement or in debarment from federal contracts that BP might or others might otherwise have.

JIM LEHRER: OK. Gentlemen, thank you both very much.

TRACY HESTER: Thank you.

NOAH HALL: Thank you.