Obama backs call to raise BP liabilities cap

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The White House on Tuesday backed Democratic senators’ efforts to make BP liable for as much as $10bn in damages relating to the Gulf of Mexico oil spill, exponentially increasing the compensation that local fishermen and state governments could claim.

BP is responsible for – and has said it will meet – the costs of containment and clean-up from the oil spill resulting from the April 20 rig explosion.

However, moves are under way to raise the cap on other damages from the current $75m (£49.5m, €58m) to $10bn.

“The administration . . . strongly supports efforts on Capitol Hill to raise the oil pollution act damages cap significantly above $75m,” Dan Pfeiffer, White House communications director, said in a blog on Tuesday.

Under the oil pollution act passed following the 1989 Exxon Valdez spill in Alaska, the companies responsible for the spill are obliged to pay all the clean-up costs.

However, the law sets the $75m liability cap on other damages, part of a deal brokered at the time in return for oil companies paying 8 cents a barrel – or about 0.1 per cent at today’s prices – into an oil spill liability trust fund to pay the costs associated with such disasters.

Three Democratic senators on Monday launched an effort to raise that cap to $10bn, although it is unclear whether such a change could be made retrospectively.

No cap would apply if BP was found to be grossly negligent, to have engaged in wilful misconduct or conduct in violation of federal regulations.

Analysts say the cap has been exceeded more than 50 times since the law was enacted.

But BP says that the limit is academic in this case because it will honour small damages claims quickly and has posted claim forms on the disaster response website.

“We would expect to pay more than the [oil pollution act] and we are willing to do so,” the company said. “We don’t think the cap is particularly relevant.”

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