Who Pays, When, and How Much?: A Primer on Oil Spill Liability Law

Jun 3, 2010 | Peter Nelson

The legal consequences of the ongoing BP Deepwater Horizon oil spill, now the largest in U.S. history, will reverberate for years to come. There will be a host of difficult-to-measure economic, social, and environmental costs associated with the spill, but disentangling the diverse strands of applicable liability laws further complicates who bears the cost of damages. Three new RFF backgrounders delve into these issues, focusing on the range of costs associated with spills, the state of existing liability law, and methods for deterring such accidents.

In “A Taxonomy of Oil Spill Costs: What are the Likely Costs of the Deepwater Horizon Spill?,” Vice President for Research Mark Cohen classifies the range of private and external costs associated with the gulf disaster and reviews the damages paid for the Exxon Valdez oil spill in Alaska.

Visiting Scholar Nathan Richardson explains the effect of legal regimes from new statutes to old state common law doctrines, and how these are likely to interact in “Deepwater Horizon and the Patchwork of Oil Spill Liability Law.”

In “Deterring Oil Spills: Who Should Pay and How Much?,” Cohen details how different incentives impact oil companies’ efforts to avoid spills, including the roles of civil and criminal law, insurance, and firm reputation.

Together, these papers illustrate the complex landscape of damage costs, laws, and private and public interests that will determine who pays, how much, and when.