The Oil Debacle in the Gulf of Mexico: An Alternative to the Coming Flood of Offshore Regulations

Abstract

In the wake of the recent oil disaster in the Gulf, Congress appears poised to impose new bans on offshore drilling along with a strict new regulatory regime. While these measures may meet a widely felt need for swift retribution, there is an alternative policy response that can both correctly assign liability and create stronger incentives for uncompromised safety among offshore operators. This article encourages policymakers to keep perspective on probability and cost of offshore drilling accidents and to avoid the temptation to over-regulate, but instead to have offshore operators bear full liability for accidents by removing the current $75 million liability cap and to require offshore operators to provide insurance guaranteeing full liability coverage.