A Congressional Solution to Rudimentary Oil Spill Cleanup Technologies

Today, BP, responsible for the disastrous Deepwater Horizon explosion in the Gulf of Mexico, said its efforts to seal the leaking well are over for the time being. That means thousands of gallons of oil will continue to seep into the Gulf, killing marine life and destroying livelihoods on the coast.

Now, Washington is looking to take punitive and compensatory actions against BP — and the costs might run the British oil giant out of business. Attorney General Eric Holder this afternoon announced that the government has started to look into criminal and civil charges against the company. (If it is found grossly negligent, the government’s liability cap no longer applies.) And Congress is starting to take a hard look at regulatory legislation surrounding the oil industry as well. Sen. Patrick Leahy (D-Vt.) said the Senate Judiciary Committee, which he heads, will hold a hearing next week “to examine how recent court decisions and federal liability caps influence corporate behavior, affect American taxpayers, and provide justice to victims.”

New laws are coming. One option would be to address the negative externality of cleanup costs: taxing all oil companies and processors in the United States, and forcing them to use the funds to explore new technologies to be used in the event of a disaster. For even if BP had managed to prevent the Deepwater Horizon incident, another catastrophic oil spill would have happened somewhere else, sometime soon. The technologies used to contain and clean up oil remain rudimentary and highly ineffective, particularly those used at sea — top kill, bags of hair, faulty seals. (Of all the well shut-down methods I have seen, it is distressing that the Russians’ controlled nuclear explosion has seemed most promising.) The next conflagration will take light at some point. It would be useful to force the companies at fault to invent the fire hydrant before then.

How to structure the tax? I leave it to the public policy experts to figure that out. But I would imagine either requiring oil companies’ U.S. subsidiaries to spend one or two percent of profits on cleanup and prevention research, then allowing them to license or sell their products to one another; or taxing the oil companies’ U.S. subsidiaries, putting the funds into a pool and having the government disburse the money to vetted research organizations.