Center for Progressive Reform

CPR's CatastropheWatch

Weakened Regulatory, Tort Systems Hobble Response

Before it was finally capped in mid July 2010, BP’s failed Macondo oil well unleashed more than 4.9 million barrels of oil into the Gulf of Mexico, resulting in an oil slick that, at its peak, covered a surface area roughly the size of South Carolina. The Deepwater Horizon explosion itself killed 11 workers, and the ensuing spill fouled beaches in four states, killed thousands of animals, damaged numerous ecosystems, and disrupted entire communities along the Gulf Coast. The full extent of this damage won’t be known for many years, or perhaps more than a decade.
The BP oil spill is powerful evidence that market forces alone are insufficient to deter bad, even disastrous, behavior by corporations. Indeed, virtually all of the market incentives at work in the BP case pushed the company to ignore risks and cut corners, with catastrophic results. 

Vigorous Regulation and Accountability in Court Offer Solution

To accomplish what the market does not – incentivize companies to protect health and the environment, and to hold them accountable to those they harm – U.S. law has developed a two-track system: one track is regulation; the other is tort law, or litigation.

Explore CPR's CatastropheWatch Interactive Map of the BP Oil Spill to see how hollowed regulation and hobbled law combined to help cause the BP spill and then complicate recovery.

The regulatory system seeks to prevent harm to people and the environment by requiring corporations to take certain steps to ensure safety and protect the environment. Inspections or reporting combined with a threat of fines or other penalties provide corporations with strong incentives to abide by the applicable regulatory requirements.

Of course, regulations cannot be perfect, because regulators cannot always foresee all the possible ways that corners might be cut, or problems might otherwise arise. And that’s where the tort system comes in. It gives those harmed by corporate misdeeds a chance to recover some measure of the damages they’ve suffered. That in itself is worthwhile, and something that the regulatory system, nor even the criminal just system, accomplishes. But it also serves as a powerful disincentive to corporate misadventures, thereby reinforcing the regulatory system’s efforts by seeking to discourage harm before it occurs.

Dysfunctional Systems Contribute to BP Oil Spill

In recent years, the regulatory and tort systems have grown increasingly dysfunctional, and not by accident. Years of attack by the anti-regulatory and tort reform movements, both funded by industry dollars, have left the systems in varying states of disrepair, contributing, as intended, to an increasing lack of accountability for corporations so far as environmental health and safety are concerned. In a 2011 report, CPR Member Scholars Alyson Flournoy, Sidney Shapiro, William Andreen, and Thomas McGarity, joined by CPR Policy Analyst James Goodwin, explained how that played out in the case of the BP Oil Spill in The BP Catastrophe: When Hobbled Law and Hollow Regulation Leave Americans Unprotected (CPR White Paper 1101). And check out our Interactive Map of the BP Oil Spill for a bird's-eye view. Read the news release, and Sidney Shapiro's blog post on the report.

Reviewing the Failures that Contributed to the BP Disaster

A remarkable pattern of regulatory and tort failures preceded the BP oil spill, demonstrating the weak oversight that the regulatory and tort systems have provided for deepwater offshore drilling. For example, the regulatory agency formerly in charge of preventing offshore oil rig disasters, the Minerals Management Service (MMS), offers as clear and compelling an example of regulatory capture as could be imagined. Because of its close relationship with regulated oil companies like BP, the agency failed to ensure that oil drilling operations employed adequate safety measures or developed proper response plans in the event that a catastrophe did occur.

Similarly, the Death on the High Seas Act—an old maritime law from 1920—significantly limits the damages that families of workers killed three or more nautical miles offshore can collect, prohibiting them from seeking wrongful death remedies they could otherwise seek under state and federal laws for deaths closer to shore or on land. In practice, the law reduces the potential deterrent effect of tort law. Though clearly antiquated in an age of offshore drilling many miles off U.S. coasts, the law nonetheless survives because its restrictive provisions are warmly embraced by the offshore drilling industry and others.

BP’s troubling corporate culture—which willingly sacrificed worker safety and environmental protection in pursuit of ever-greater profits—thrived thanks to this pattern of regulatory and tort system failures. In the months, weeks, and days, leading up to the Macondo well/Deepwater Horizon blowout, BP repeatedly cut corners on safety in order to save time and money, including failing to properly maintain the blowout preventer—a critical piece of safety equipment for drilling wells—and neglecting to perform a crucial designed to check the quality of the cement job used to seal the well. Each of these shortcuts increased the likelihood of a blowout, leading to a catastrophic oil spill.

From Katrina to the Massey Mine to BP

That same basic dynamic has been at work time and again in recent years, as a series of disasters have struck in the United States, the respective effects of which would have been far less severe given a functional regulatory structure and/or a more muscular tort system. For example, Hurricane Katrina would have been less devastating if the regulatory system had done a better job of protecting against degradation of wetlands and prevented construction that funneled flood waters right to the heart of New Orleans. The Massey mine disaster in April 2010 would likely have been avoided if regulators had followed up on the mine’s many known safety failures, or if the company perceived that the costs it would have to pay in court in the event of a disaster were steep enough.

The purpose of CPR’s Catastrophe Watch is to identify and explain the important complementary roles that regulatory and tort law plays in preventing catastrophes. CPR Member Scholars will seek to educate the public about the various regulatory failures and lost tort opportunities due to procedural and statutory constraints. The Member Scholars will also use this project to monitor the legislative and administrative response to the BP oil spill to determine whether appropriate reforms are being implemented in order to revitalize the regulatory and tort systems so that they are better able to help avoid the recurrence of similar catastrophes in the future.

More of CPR Member Scholars’ CatastropeWatch work:


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