Issue Brief

Who Bears the Long-Term Costs of Stricter Anti-Spill Policy? It’s Not Who You Think

Aug 6, 2010 | Timothy J. Brennan

In a new policy brief, RFF Senior Fellow Timothy Brennan explains that the long-term costs of ratcheting up liability for oil spills like the recent tragedy in the Gulf of Mexico will primarily be borne not by companies involved in oil exploration. BP has accepted full financial responsibility for clean-up costs and lost wages for all who suffered direct consequences, such as local fishermen. But in the future, two less mobile groups will be hurt when the high cost of complying with tough new regulations push oil exploration elsewhere: local workers and landowners concerned about the threat to the local economy when jobs are lost and all of us taxpayers from the loss of lease fees and taxes paid to the U.S. Treasury.

Balancing all the economic and environmental interests associated with oil extraction in the Gulf remains as hard as it is important. How we make those judgments should not be based on the false assumption that the costs of stricter policies will be borne by widely unpopular oil companies. This is not at all to argue against stricter regulations.

“Oil companies, in making their drilling decisions, should face the costs of the economic and ecological harms that could occur if they choose particularly risky methods in particularly sensitive locations. But that also goes for the decisions we as citizens make to exploit natural resources to make money for the U.S. Treasury. Neither side will take proper account of those whose livelihoods depend on a healthy environment in the Gulf, and who care about the ecosystems that oil spills threaten, with liability rules or regulations that are too weak.”

For more analysis on this issue, visit RFF's 2010 Gulf Coast Oil Spill page.