The BP Catastrophe: When Hobbled Law and Hollow Regulation Leave Americans Unprotected

Abstract

Every year, a number of major industrial catastrophes occur in the United States. They often result in tragic losses in terms of human life and environmental degradation. They also produce substantial losses for the U.S. economy, sidelining industrial capacity and wasting millions, if not billions, of dollars. While such catastrophes are not entirely preventable, two bedrock U.S. legal institutions – the regulatory and civil justice systems – offer powerful tools for avoiding them, if they are permitted to function effectively. In recent years, however, both the regulatory and civil justice systems have been marked by dysfunction and constraints. Years of attack by the anti-regulatory and tort reform movements, respectively, have left these systems unable to fulfill their respective functions, and set the stage for major catastrophes like the BP oil spill. Unless these systems are reinvigorated and freed from unnecessary constraints, the likelihood of another industrial catastrophe will remain unacceptably high.

This white paper carefully examines the BP oil spill as a case study in regulatory failure and the erosion of tort law. The paper first explains how the regulatory and civil justice systems form a complex and dynamic partnership for protecting both people and the environment. Next, it reviews both regulatory failures and civil justice constraints that affected the offshore oil drilling industry, and how they enabled BP’s corporate culture – which willingly sacrificed worker safety and environmental protection in pursuit of ever-greater profits – to thrive. The paper concludes by exploring potential legal reforms that could reduce or eliminate some of the civil justice constraints that contributed to the BP oil spill.

While regulatory failures and civil justice constraints contributed to the BP oil spill, the civil justice system still has a chance to help remedy the situation by holding BP accountable for its negligent or perhaps reckless behavior, and by adequately compensating the victims of this catastrophe. At the moment, it appears that the Gulf Coast Claims Facility (GCCF) – the BP-established $20 billion alternative settlement fund being administered by Ken Feinberg – will serve as the primary mechanism by which many of the oil spill victims will seek compensation. It is still unclear how well this settlement process or the more traditional civil justice system will fulfill their corrective justice functions in this case. However, if these legal mechanisms are going to deter unreasonably risky action by oil companies in the future, it is imperative that they play their corrective justice roles well by compensating the victims for all of their losses in the months and years to come. The effective functioning of these compensation mechanisms, along with the implementation of the reforms discussed in this paper, will help us to better avoid industrial catastrophes in the future.

Keywords: regulatory safeguards, access to justice