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Wednesday, June 16, 2010

Constitutional Issues Raised by Pending Bills to Increase Retroactively a Liability Limit in the Oil Pollution Act

Robert Meltz
Legislative Attorney

This memorandum looks at the constitutional issues implicated by two recently introduced bills -- S. 3305, titled the "Big Oil Bailout Prevention Liability Act of 2010," and H.R. 5214, titled the "Big Oil Bailout Prevention Act of 2010." The constitutional issues are raised by the retroactive increase each of these bills would effect in the oil spill liability limit now in section 1004(a)(3) of the Oil Pollution Act (OPA).1 That limit applies to each responsible party, per oil spill incident, at an offshore facility and covers damages (not including "removal costs") resulting from the incident. Section 1004(a)(3) currently sets this limit at $75 million,2 though the limit is lifted (liability is unlimited) if any of several exceptions apply.3 The bills, in identical language, would simply strike the $75 million figure and replace it with $10 billion, thus preserving the exceptions.

S. 3305 and H.R. 5214, introduced May 4 and May 5, 2010 respectively, state that they take effect on April 15, 2010. Thus, they are plainly retroactive; even if, under the bills, a responsible party's payments over the current $75 million cap all go toward damages incurred after the bill is enacted, those damages stem from a pre-enactment incident and thus satisfy a common definition of retroactivity. The intent of making the increased liability limit retroactive to April 15, 2010 is presumably to displace the existing $75 million liability limit on damages that would otherwise apply to any responsible party in connection with the Deepwater Horizon blowout in the Gulf of Mexico on April 20, 2010. Even in the absence of this pre-enactment effective date, however, the bills could be said to be retroactive if they apply to oil and gas leases entered into pre-enactment, notwithstanding that an oil spill at one of those lease locations occurs after enactment.

This memorandum surveys the constitutional issues raised by this proposed retroactive increase in the $75 million liability cap, where no exceptions operate to eliminate the cap, and does not speak to the breach of contract arguments related to British Petroleum's offshore lease. The retroactive nature of the cap increase invites examination of five constitutional provisions. The memorandum concludes that claims based on three of these – the Takings Clause, Substantive Due Process, and Bill of Attainder Clause – appear to have at best a modest chance of success, while claims under two others – the Impairment of Contracts Clause and Ex Post Facto Clause -- seem to have almost no chance of success. It must be immediately stressed, however, that how the legislative history of an enacted law characterizes the predecessor bill – especially whether a broad and legitimate public purpose for the bill is convincingly set forth – may affect the analysis, especially with regard to the Bill of Attainder Clause (see discussion below). That legislative history, of course, does not yet exist. The reader is further cautioned that prediction of how courts will rule when applying the broadly worded tests of constitutional law is always attended by some uncertainty, particularly where, as here, the analysis must proceed without full knowledge of the relevant facts.

Date of Report: May 12, 2010
Number of Pages: 10
Order Number: M-051210
Price: $29.95

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