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61–745 PDF 2010

S. HRG. 111–680 

THE RISKY BUSINESS OF BIG OIL: HAVE RECENT 

COURT DECISIONS AND LIABILITY CAPS ENCOURAGED IRRESPONSIBLE CORPORATE BEHAVIOR? 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JUNE 8, 2010 

Serial No. J–111–96 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

EDWARD E. KAUFMAN, Delaware 

ARLEN SPECTER, Pennsylvania 

AL FRANKEN, Minnesota 

JEFF SESSIONS, Alabama 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

MATT MINER, Republican Chief Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Feingold, Hon. Russell D., a U.S. Senator from the State of Wisconsin, prepared statement ................................................................................................... 67 

Franken, Hon. Al, a U.S. Senator from the State of Minnesota, prepared 

statement .............................................................................................................. 68 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 1 

prepared statement .......................................................................................... 103 

Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama .......................... 3 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 6 

prepared statement .......................................................................................... 108 

WITNESSES 

Coleman, W. Jackson, Managing Partner, EnergyNorthAmerica, LLC, Washington, DC ............................................................................................................. 10 

Galligan, Tom, President and Professor of Humanities, Colby-Sawyer College, 

New London, New Hampshire ............................................................................ 12 

Jones, Christopher K., Baton Rouge, Louisiana ................................................... 8 

SUBMISSIONS FOR THE RECORD 

Clemons, Eric K., Professor, Wharton School, University of Pennsylvania ........ 37 

Coleman, W. Jackson, Managing Partner, EnergyNorthAmerica, LLC, Washington, DC, statement .......................................................................................... 39 

Congressional Research Service, report ................................................................. 55 

Farady, Susan, Direct, Marine Affairs Institute, Roger Williams University 

School of Law, Bristol Rhode Island, statement ................................................ 63 

Galligan, Tom, President and Professor of Humanities, Colby-Sawyer College, 

New London, New Hampshire, statement ......................................................... 70 

Greenstone, Michael, Politico, Arlington, Virginia, article ................................... 96 

Jones, Christopher K., Baton Rouge, Louisiana, statement ................................ 98 

Torgan, John, Narragansett Baykeeper, Providence, Rhode Island, letter ........ 106 

(1) 

THE RISKY BUSINESS OF BIG OIL: HAVE RECENT COURT DECISIONS AND LIABILITY 

CAPS ENCOURAGED IRRESPONSIBLE CORPORATE BEHAVIOR? 

TUESDAY, JUNE 8, 2010 

U.S. SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:07 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Patrick J. Leahy, 

Chairman of the Committee, presiding. 

Present: Senators Leahy, Feingold, Durbin, Whitehouse, Klobuchar, Kaufman, Specter, Franken, Sessions, and Hatch. 

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. 

SENATOR FROM THE STATE OF VERMONT 

Chairman LEAHY. Good morning. I appreciate everybody being 

here. I know this may be an emotional meeting. I would ask everybody to recognize the appropriate degree of decorum. I understand 

we have families who have gone through terrible tragedies and we 

should show the respect due for that. 

It has now been 50 days since BP’s Deepwater Horizon oil rig exploded and oil began gushing into the Gulf of Mexico. Deadly contamination has reached the shores and wetlands of the gulf coast. 

Our Nation faces an environmental catastrophe. Americans are 

angry. 

In fact, the past week when I was home in Vermont, I cannot recall when so many people have come up to me on one issue as this, 

saying, ‘‘What is happening? ’’ 

The American people want to know how and why this happened. 

As Attorney General Holder and others investigate this disaster, I 

am confident that the facts will become known, and if criminal conduct occurred, it should be and it will be prosecuted to the fullest 

extent of the law. 

Senators on both sides of the aisle believe that those responsible 

for this disaster should be held fully accountable. We cannot let big 

oil companies play roulette with our economic and environmental 

resources. A region that has already suffered so much from natural 

disasters has yet another tragedy on their hands, this time at the 

hands of one of the largest oil companies in the world. 

Much attention is being given to the unfolding environmental 

disaster, but I would hope that Americans would never forget the 

11 men who lost their lives—men who have left behind children 

2 

and wives, parents, brothers and sisters. Christopher Jones, whose 

brother Gordon lost his life on the oil rig, is with us here today to 

represent all these men and these families. Mr. Jones, I am glad 

you are here. I know you are accompanied by your father, Keith 

Jones. And I understand from you, Mr. Jones Sr., that the President is having some of the families to the White House later this 

week. Mr. Jones, you and your family have our condolences. I know 

in the discussions I have had with the President, he feels very 

strongly about this. You should feel free to tell him exactly what 

you are thinking and any suggestions you have. He actually wants 

to hear what you have to say. 

But you also have my commitment to work to achieve some fairness under the law for your brother’s family and the families of all 

who lost their lives in this disaster. You deserve a measure of justice. 

Today’s hearing will examine how the applicable laws have 

shaped big oil’s behavior. We have to find out whether our legal 

system itself gives some kind of incentive to big oil companies to 

cut corners. 

We will ask whether the Supreme Court’s decision in the Exxon 

Valdez case and the current liability caps in the Oil Pollution Act 

of 1990 and the Limitation of Liability Act encourage corporate risk 

and misconduct. We are going to ask whether current maritime 

statutes that compensate the survivors of those killed are fair and 

whether the current legal structure tempts corporations to devalue 

human life in their calculus of profitability. No one’s life should become an asterisk in somebody’s cost/benefit analysis. It is immoral. 

The Death on the High Seas Act is the exclusive remedy for the 

families of those killed in international waters. But this law does 

not recognize all that is lost with the death of a loved one, such 

as loss of consortium, care, or companionship. These should not be 

any legal difference between loss at sea and what happens when 

a BP employee is killed while working at a facility on land. The 

disparity adds further insult to the 11 families who are victims of 

this tragedy. 

Ten years ago, Congress amended the Death on the High Seas 

Act to achieve fairness for those who perish in airline crashes over 

international waters. It is time we modernized this law again. 

Later today, I will introduce the Survivors Equality Act to make 

sure these families are treated fairly. 

Another law that Congress should consider updating is the Limitation of Liability Act, which limits a vessel owner’s total liability 

to the post-incident value of the vessel. That law was passed in 

1851, for a different time and before the Civil War. The company 

that owns the Deepwater Horizon, Transocean, wasted no time filing a motion in Federal court to limit its total liability under this 

arcane law to the value of the sunken drilling rig. They want their 

liability limited to the value of what is now a piece of junk sitting 

a mile below the surface. That is perverse, and I think Congress 

should act to avoid this absurd result. 

Then, of course, there is the statutory liability cap of $75 million 

on consequential damages in addition to the costs of clean-up for 

an oil spill, and that needs reexamination. 

3 

Two years ago, an activist Supreme Court in the decision Exxon 

v. Baker created an arbitrary limit on punitive damages in maritime cases. When I chaired a hearing to examine the decision, I expressed my concern at that time that the Supreme Court’s Exxon 

Valdez decision would encourage corporate misconduct. Why? Because it reduced the consequences of their misconduct to a discounted cost of doing business. That is almost like saying we are 

giving you a green light to do whatever you want to do. I cannot 

imagine why anybody would be surprised that after the Supreme 

Court effectively capped damages designed to punish corporate misconduct, oil companies cut corners and sacrificed safety. 

The Exxon Valdez decision was another in a string of businessfriendly Supreme Court decisions in which a narrow majority has 

essentially written new law and disregarded laws enacted by Congress. The impact on the lives and livelihoods of Americans is enormous. Two years ago, we heard from Alaskan fishermen. Now we 

are worried about the livelihoods of shrimpers and oystermen in 

the gulf, people who have spent decades, generations, obeying every 

single rule, building their businesses, having something they can 

leave to their children, and say they followed the rules. And because somebody else does not, they lose it all. 

I have joined Senator Whitehouse’s effort to overturn the Supreme Court’s Exxon Valdez decision. 

I am also looking into legislation to prevent corporations from deducting punitive damage awards from their taxes so that they bear 

the full cost of their extreme misconduct. 

Our laws should encourage safety and accountability. Where they 

do not create the right incentives, we have to change them. Whether as the result of greed or incompetence or negligence, BP’s conduct has devastated the lives and livelihoods of countless people 

and their communities and may threaten the gulf coast’s very way 

of life. 

It has been said by others that BP spends millions and millions 

of dollars writing ads saying how wonderful they are and how environmentally conscious they are. They could spend a lot more money 

helping the families that are suffering. The American people deserve better from all big oil companies who exploit our natural resources for enormous profit. 

So in the months ahead, the people of the gulf coast will work 

to reclaim their coastline, their livelihoods, their wetlands, and 

their fisheries, and many of us here will help them. But, unfortunately, the families of those who lost their lives on that tragic day 

will not be able to reclaim their loved ones. The 11 men who were 

killed on the Deepwater Horizon rig deserved better, and we are 

going to try to make it better. I pledged that to their families. I 

renew that pledge today. 

I thank Senator Whitehouse for co-chairing this hearing and all 

of our witnesses for being here. I am going to yield to Senator Sessions, who actually does represent a Gulf State, and then to Senator Whitehouse. Then we will begin the hearing. 

Senator Sessions. 

4 

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM 

THE STATE OF ALABAMA 

Senator SESSIONS. Thank you, Mr. Chairman. The Deepwater 

Horizon disaster is now and remains a very serious threat to our 

coastal environment, our coastal economy, and particularly, our 

thoughts and prayers remain with those who, like Christopher 

Jones, lost family members on that rig. Eleven wonderful Americans lost their lives. 

I had a long meeting with Governor Riley and Congressman Bonner Friday in Mobile. We talked about the problems that the Nation faces, and we listened to the mayors of Gulf Shores and Orange Beach and Bayou La Batre and people who represented the 

Mobile Bay area and the threats that are being faced there. And 

there is quite a bit of concern, frankly, a lot of intensity of feeling 

that things have not gone as well as they could, and we do need 

to do better. We must do better. And I really want to thank Governor Riley for his personal leadership in leading the effort to coordinate the response with regard to the Alabama area. 

Today marks the 50th day that oil has been pouring into the 

Gulf of Mexico, and it looks like it will be some time before we are 

fully able to comprehend the impact of this spill and the extent of 

the damage to our environment. Stopping this leak, of course, is 

the top priority because defensive measures trying to stop what has 

flowed out will never be able, as I have learned, to completely stop 

the flow into our estuaries and beaches, and even small amounts 

can cause serious damage. 

The Coast Guard, BP, MMS, NOAA, and the EPA continue to 

evaluate and implement sub-sea and sub-surface efforts to stop the 

flow while closely monitoring its effect on the environment. I am 

somewhat encouraged by yesterday’s announcement where Admiral 

Thad Allen confirmed that the capturing by BP of around 462,000 

gallons of oil a day, which is a substantial increase from what was 

occurring Friday, that is a positive step. If this procedure continues 

to work, I am hopeful that the containment cap will begin to successfully collect as much oil as the surface tankers can handle. 

That being said, this is only the first step in what could be a long 

process, and it is without question that the potential environmental 

and economic impact of the accident is unprecedented. BP is a 

multi-billion-dollar international company. As I said shortly after 

this event occurred, they are the responsible party. They are liable 

for the damages up to the extent of their very financial existence, 

and they are not too big to fail. I believed that then, and I believe 

that today. They have made great profits, and so be it. But they 

assume risk. They became and signed as the responsible party, and 

I believe that they are going to have to honor that commitment to 

be the responsible party. In fact, in the first quarter of this year, BP’s profits averaged $93 

million per day. BP is the one that under the law and under the 

procedures of our drilling is the responsible party. So I have questioned those executives, those at Transocean and Halliburton, at 

the Energy Committee, of which I am a member, and administration officials seeking explanations for the cause of this accident and 

confidence and assurance that the responsible parties will accept 

the full responsibility for the damages. 

5 

Officials have repeatedly stated from BP that the company will pay all clean-up costs and that it will ignore the $75 million liability cap established by the Oil Pollution Act of 1990. And, indeed, 

there is no cap on the clean-up costs. Every dollar that is spent 

cleaning up any oil on the beaches and estuaries, that will be— 

there is no cap on that. In addition, there is no cap, as I understand it—and we will perhaps ask our witnesses—on the individual 

lawsuits that can be brought against them under State law. 

Company spokesmen have said they will not seek reimbursement 

from the U.S. Government from the Oil Spill Liability Trust Fund. 

That remains to be seen how that will play out, but it is certainly 

available, if need be. 

Those corporate entities responsible will be held liable for the actions. I think it is appropriate, Mr. Chairman, that we analyze precisely the legal causes of actions that are available and whether or 

not they appropriately fit the circumstances of this case. 

We also need to examine did the Government play an adequate 

role in responding to the disasters. According to the Coast Guard 

logs released by Congressman Darrell Issa, the Ranking Member 

of the House Oversight and Government Reform Committee, the 

administration knew that this was going to be a spill of ‘‘national 

significance’’ within 24 hours of the event. Those logs also show 

discrepancies between the information they contain and the previously released White House timeline of the events. 

While the title of this hearing obviously assumes a level of irresponsible corporate behavior on behalf of entities like BP, we need 

to examine also how well the administration responded to this 

event. Instead of allocating administrations, it appears we have 

had other actions that are less effective. I think an appropriate 

evaluation of possible criminal activity should be conducted, but it 

should be conducted in a fair and just way. 

We must be careful in implementing new policies to address this 

incident. In late May, the President announced he is extending the 

moratorium on permits to drill new deepwater wells for 6 more 

months. I certainly think we need to be careful about that and examine very carefully whether or not and how we should go about 

further deepwater drilling. While this moratorium can be necessary 

to review safety and environmental regulations, it will clearly have 

a negative impact on production, jobs, and revenues to States and 

the Federal Government. 

The offshore industry is responsible for nearly 200,000 jobs 

around the Gulf of Mexico and over $13 billion a year in non-tax 

revenues for the gulf coast producing States. Total revenue collected by the general treasury from all Federal offshore operations 

totaled $5.9 billion in 2009 alone. Drilling on the outer continental 

shelf is an important issue not just for the Gulf States but the entire country. There are several investigations into the cause of this 

rig explosion, and the administration recently established an independent commission to submit a plan to the President within 6 

months providing solutions to prevent and mitigate future spills 

from offshore drilling. 

I hope that we can complete that review and that it will be effective in identifying the dangers and risks involved. But I do hope 

that we will be able then to move forward with greater energy 

6 

independence and self-sufficiency by adopting the kind of plan that 

will allow us to be successful. The greater our dependence on foreign energy, the greater threat to America’s national security. 

Offshore drilling in the Gulf of Mexico supplies 30 percent of 

America’s domestic energy production. Most people do not fully realize that. And 80 percent of the gulf’s oil—and I did not realize 

this—comes from operation in more than 1,000 feet of water. 

Eighty percent. For this reason, we must continue the safe and secure offshore drilling. It is important to our economy, jobs, and national security. 

Mr. Chairman, our communities are hurting. We have got a seafood industry that is basically shut down. Hundreds of low-wage 

workers have lost their jobs. Probably almost half of the rental capacity in our beachfront properties has been lost or is beginning to 

be lost, and so it is a national issue. But also we have thousands 

and thousands of good Americans who are working on those rigs 

every day whose lives are at risk and need to be assured that the 

production that is occurring is safely done. 

Thank you for allowing me to have these remarks. 

Chairman LEAHY. Senator Whitehouse. 

STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. SENATOR 

FROM THE STATE OF RHODE ISLAND 

Senator WHITEHOUSE. Thank you, Chairman Leahy, for holding 

this hearing, and thank you for inviting me to co-chair it. Like you, 

I believe that Congress must do whatever it can to prevent another 

family from having to hear that their loved one has perished on an 

oil rig. Congress must also take every available measure to avoid 

the environmental destruction that we are seeing unfold day after 

day as this spill continues. Gordon Jones and ten other men died. 

The gulf has been devastated. Something has to change. 

How did it come to this? Well, we already know that BP, 

Transocean, and Halliburton failed to meet important safety standards. They undertook risky drilling without a proper degree of 

care—5,000 feet below the surface of the gulf, 18,000 feet to the oil 

reservoir, amid methane hydrate deposits that are highly dangerous when they get inside the drill column. They were irresponsible. The result was tragedy. 

Sadly, key regulatory agencies also appear to have been asleep 

at the switch, shirking their responsibilities to protect our oceans 

and American workers at sea. I am convinced that something was 

fundamentally amiss at the Minerals Management Service at the 

Department of Interior. I strongly suspect that MMS had long since 

been captured by the oil industry and that it had ceased to serve 

the public interest. 

But regulatory agencies, even when functioning properly, never 

have been America’s sole line of defense against disasters. We also 

should make sure that it is in a corporation’s clear economic interests to adhere scrupulously to the law. Meaningful civil and criminal fines and damages are one crucial tool for ensuring that a corporation takes proper precautions to avoid tragic errors. In contrast, a corporation that does not have to pay for its mistakes does 

not have to worry about making them. 

7 

Unfortunately many of our current laws—whether by statute or 

by court decision—cap the liability of big oil corporations, both for 

worker injuries and deaths, and for harms to the environment. 

Rather than making responsible parties pay for harm done, they 

foist this burden onto the families of the lost and onto the American taxpayers. As a result, corporations lack proper market incentives to act responsibly. That must not continue. Congress must 

act. 

These restrictions on liability are, unfortunately, consistent with 

attacks upon the institution of the jury by powerful corporate interests. The Founders put the jury in the Constitution and Bill of 

Rights three times, and for a reason: to ensure that in at least one 

forum of government, the powerful and the powerless have equal 

standing. Not for nothing did de Tocqueville describe the jury as 

‘‘a mode of the sovereignty of the people.’’ That is as true today as 

it was at our Nation’s founding. 

The tide of corporate money that influences politics stops at the 

hard square corners of the jury box. That is why corporations fight 

so hard to attack the institution of the jury. 

You know this as well as anyone, Mr. Chairman, and I am proud 

to cosponsor the legislation you are introducing today. It will eliminate the strange quirks in American law that, left unchanged, 

would result in the survivors of the 11 men killed on the Deepwater Horizon being treated unfairly. The Senate should pass that 

legislation promptly. I also urge my colleagues to support two bills 

that I have introduced. The first would raise penalties for worker 

safety and environmental violations under the Outer Continental 

Shelf Lands Act. The second would overturn the Supreme Court’s 

regrettable Exxon v. Baker decision that capped maritime punitive 

damages at the level of compensatory damages. The Exxon Court 

believed that predictability for corporations was more important 

than deterring misconduct. I disagree. 

The people of my home state Rhode Island—the Ocean State— 

would put our environment and our safety ahead of profits for irresponsible corporations. In fact, that is exactly what Rhode Islanders have done. John Torgan, the Narragansett Baykeeper in Rhode 

Island, has submitted a letter which I will introduce for the record, 

cataloguing the legislative and regulatory reforms put in place 

after the 1996 North Cape/Scandia oil spill off South Kingstown. 

Rhode Islanders know what an oil spill can do to an ecosystem. 

We know just how important penalties and fines are to keeping 

seafarers safe and marine ecosystems healthy. Like my fellow 

Rhode Islanders, I insist that, in the future, oil companies do everything they can to prevent needless deaths and catastrophic environmental harm, whether in the gulf, off the coast of New England, 

or anywhere in our great country. Today’s hearing is an important 

step toward that goal, and I applaud you for holding it, Mr. Chairman. Thank you very much. 

Chairman LEAHY. Thank you very much, Senator Whitehouse. 

Our first witness is Christopher Jones. Mr. Jones is currently a 

partner at the law firm of Keogh, Cox & Wilson in Baton Rouge, 

Louisiana. More important than his professional background, he is 

the brother of Gordon Jones, who was one of the 11 rig workers 

who lost their lives the day of the explosion. 

8 

Gordon Jones is survived by his wife, Michelle, two young sons, 

Stafford and Maxwell. One of the sons, I understand, was born 

very shortly after the accident. Is that correct? 

Mr. Jones, please go ahead. The floor is yours. 

STATEMENT OF CHRISTOPHER K. JONES, BATON ROUGE, 

LOUISIANA 

Mr. JONES. Chairman Leahy, Ranking Member Sessions, and 

other members of the Committee, thank you for the opportunity to 

appear before you today. 

My name is Chris Jones. Seated behind me is my father, Keith 

Jones. Gordon is my only brother. Gordon is survived by his wife, 

Michelle, and two sons, Stafford and Max. Stafford is 2 and Max 

was born 3 weeks ago. Gordon is also survived by a mother, sister, 

in-laws, and other family members and many friends who miss him 

very much. Words cannot describe what Gordon meant to this family. 

I appear before you as a representative of only one family affected by this accident. Unfortunately, there are many more. I 

stood with those other family members at a recent memorial event, 

a service no one should ever have to experience. Although we never 

met before this disaster, I want those other family members to 

know that we grieve for them and are committed to telling our 

story so we can try and correct the inequities in the law and so no 

one else will find themselves in that situation in the future. 

Of course, you are aware that Gordon died aboard the 

Transocean Deepwater Horizon oil drilling rig. He was employed by 

M-I Swaco, a contractor for BP hired to provide mud engineering 

services aboard the rig. He had worked aboard that rig for the past 

2 years and was excelling in his profession. As many rig workers 

do, Gordon expected to gain experience on this rig and continue to 

advance with his company. He never got that opportunity. 

This is a picture of the backyard fort Gordon built, with Stafford’s help, for Stafford and Max. Although you may not be able to 

tell, it is not finished. Gordon planned to finish it when he returned home. He will never get that chance. Certainly, others will 

step in to make sure it is finished and try to fill the tremendous 

void left by Gordon’s death. But this is yet another example of an 

incomplete life and what has been lost. I am at least comforted 

that it will be finished, and Stafford and Max will enjoy it for years 

to come and know their father built it for them. 

The next picture is taken shortly after Max’s birth. Notably absent is Gordon, whose presence in the delivery room was limited 

to a single family photograph. 

Last, I show you possibly the last picture taken of Gordon before 

his death. It is taken just after Gordon gave Stafford his first golf 

lesson, an experience Gordon thoroughly enjoyed. You can see the 

joy in their faces. I am saddened that neither will experience this 

same joy again. 

I want to take this opportunity to address recent remarks made 

by Tony Heyward, CEO of BP. In particular, he publicly stated he 

wants his life back. Well, Mr. Heyward, I want my brother’s life 

back. And I know the families of the other ten men want their lives 

back. We will never get Gordon’s life back, and his wife will live 

9 

a life without a husband and her two children a life without a father. 

At the top of the United States Supreme Court building is the 

phrase ‘‘Equal Justice Under Law.’’ As a United States citizen, and 

as a lawyer, I agree with that principle. Unfortunately, it does not 

exist in the cases of deaths occurring in Federal waters. This is not 

a phrase that applies to Michelle, Stafford, and Max in this instance. That is not right, and I make this request for change for 

my family, the families of the other ten men, and others who may 

find themselves in our same position, and who will quickly learn 

that our current laws do not protect those who need it most. 

I want to be very specific. We are asking you to amend the Death 

on the High Seas Act to allow for the recovery of non-pecuniary 

damages. Currently, Michelle, Stafford, and Max can only recover 

pecuniary damages. 

Stafford and Max will never play in the father/son golf tournament at the local golf course with their Dad, or experience the 

thrill of their first Saturday night in Tiger Stadium with their father at their side. Likewise, Michelle will never again experience 

a quiet dinner at home after a hard day with her true love. She 

will not celebrate another wedding anniversary. The last one would 

have occurred only 3 days after this accident. Most recently, 

Michelle did not have Gordon there to comfort her in the delivery 

room and tell her how much he loves her and the beautiful baby 

we now call Maxwell Gordon. These are all experiences, among 

many, many others, for which there is no compensation under the 

current law for maritime victims. The overwhelming impression I 

have gotten from the parties responsible for Gordon’s death, besides that no one wants to take responsibility for it, is that they 

are immunized by the current law. Under the current law there is 

a finite, maximum amount that Michelle and her boys can recover, 

and nothing more. 

Think of it as a liability cap. While some, but certainly not all, 

of these same parties express their sympathies and claim to want 

to do the ‘‘right thing,’’ they can also hide behind the law and say 

they are protected from doing any more. 

There is, of course, an exception for recovery of non-pecuniary 

damages under DOHSA. This is for victims of commercial airline 

accidents. In response to that event, this Congress passed a retroactive amendment to DOHSA to allow for the recovery of non-pecuniary damages. Currently, while victims of airline accidents are allowed recovery of non-pecuniary damages, victims of all other accidents occurring in Federal waters are not, including aboard cruise 

ships, ferry boats, and in this instance, oil rigs where hard-working 

men make their living to support their families. 

During this past month and a half, I have gained tremendous 

perspective on things. Certain things that I thought were important before April 20th are just not important any more. This is important. This is important to Michelle, Stafford, and Max, and all 

the other families affected by this tragic event. You have an opportunity to make this right and create equal justice under law for 

these families. 

Thank you. My father and I are more than happy to answer any 

questions you may have. 

10 

[The prepared statement of Mr. Jones appears as a submission 

for the record.] 

Chairman LEAHY. Thank you, Mr. Jones. 

Our next witness is—and I will go through all three witnesses, 

and then we will go to questions—Jack Coleman. Mr. Coleman is 

a managing partner for the energy consulting firm 

EnergyNorthAmerica. He has served as counsel for the House Committee on Natural Resources. He is a former senior attorney for 

royalty and offshore minerals for MMS, the Minerals Management 

Service, under Presidents George H.W. Bush and Bill Clinton. 

Mr. Coleman, please go ahead, sir. 

STATEMENT OF W. JACKSON COLEMAN, MANAGING PARTNER, 

ENERGYNORTHAMERICA, LLC, WASHINGTON, D.C. 

Mr. COLEMAN. Thank you, Chairman Leahy, Ranking Member 

Sessions, and Members of the Committee. It is a pleasure to be 

here. I retired about a year ago after 27 years working for the Federal Government, the last 6 years in the House of Representatives. 

During that time, most of my work had been in the area of offshore 

oil and gas, but here on the Hill, it was also more in energy and 

minerals generally. 

Prior to working as senior attorney for royalty and offshore minerals, I also served for 31⁄2 years as a senior attorney for environmental protection for the Department of the Interior. And prior to 

that, I was special assistant to the Associate Administrator of 

NOAA for 31⁄2 years. And I served 4 years on active duty in the 

Army, active duty as a Judge Advocate General Corps officer. I am 

a native of Mississippi. I went to Ole Miss, undergraduate and law 

school. 

The focus of the hearing is, of course, on a variety of liability 

issues related to offshore oil and gas production. The ongoing, tragic oil spill in the Gulf of Mexico—tragic for the families of those 

killed and injured, including the Jones family represented here 

today, to all of whom I extend my deep condolences, but also tragic 

for the environment and the energy security aspirations of the 

American people—is unequaled in size in our Nation’s history and 

has resulted in numerous legislative proposals to amend the Oil 

Pollution Act of 1990 and other applicable laws, and in actions by 

the administration related to offshore oil and gas operations. I will 

focus my testimony primarily on the breach of contract case law for 

Federal offshore oil and gas leases and the potential liability of the 

United States for breach of contract as a result of a few of these 

legislative proposals and executive branch actions. First, I would 

like to go over a few facts—Senator Sessions has mentioned some 

of them—about the importance of offshore energy to the Nation. 

Currently, the United States consumes about 20 million barrels 

of oil a day-–20 million. About 60 percent of that, or 12 million barrels of oil, come from foreign sources. Our largest source is Canada, 

but the majority of the rest comes from overseas. Our yearly 

amount of imported oil totals about 4.2 billion barrels. 

Many times I have heard statements that the United States does 

not have much oil, does not have much natural resources. This 

really needs to be put in the context of our use and the context of 

what is available to us to produce. Certainly we do not have the 

11 

resources that Saudi Arabia has, but we do not need to have the 

resources that Saudi Arabia has to make a very important contribution to our energy security. 

As of the time of the last Department of the Interior Offshore Oil 

and Gas National Assessment in 2006, just over 14 billion barrels 

of oil had been produced from the Federal offshore, but another 15 

billion barrels as of that time had already been discovered and 

were reserves available for production. Further, there were another 

86 billion barrels of oil that are believed to be economically and 

technically recoverable in the offshore that have not yet been 

drilled. And that is just for the oil. So a total of 101 billion barrels 

in the offshore, if these are made reasonably available to the American people for production. 

One of the things I would like to emphasize is this oil belongs 

to the American people, and the bounty and the value of this oil 

cannot be made and accessed for the benefit of the American people 

if it is not made available, and that alone is sufficient, just in the 

offshore, sufficient to take care of all the imported oil needs at the 

current rates of the United States for about 25 years. So that is 

not an inconsequential amount of oil. It would take care of all of 

us, like I said, including displacing all the Canadian oil. 

Similarly, we have similar numbers for natural gas, enough natural gas in the outer continental shelf, to at least—conventional 

natural gas to at least take care of all the natural gas needs for 

the Nation at the current rate for more than 20 years. 

Now, one might ask, What is the value of these reserves and resources to the American people? And, frankly, if you use standard 

pricing based on just the reserves and resources that we have, 

without any other benefits, economic benefits, just the royalties 

and the corporate taxes would bring in about $4.5 trillion from production of that, more than enough to pay off about a third of the 

national debt without any tax increases. When you add in the ability to produce methane hydrates, which now international research 

has shown is likely, that would be another $7.5 trillion. All of those 

methane hydrates, by the way, 99 percent of them, are in the deep 

water, certainly deeper than 2,500 feet. And so if we do not allow 

deepwater drilling, that whole value of that will be unavailable for 

the American people, and that is $7.5 trillion in corporate income 

tax and royalties. So those two together, about $12 trillion. 

Getting to the liability question, I had the honor of being the 

lead attorney for the Interior Department on a case which became 

Mobil v. U.S., which was decided in the year 2000, and this involved a case where a rider, as part of the Oil Pollution Act, the 

Outer Banks Protection Act, was added in 1990, which prohibited 

the Secretary of the Interior from granting any permits to drill off 

North Carolina for more than 13 months. The Supreme Court, Justice Breyer writing the opinion, decided that that was a material 

breach of the leases, that the lessees had a right to rely on the law 

as it existed at the time that the leases were issued. And, therefore, the lessees recovered all of their expenses. 

So this is an important matter, and I would encourage the Committee to consider that when making changes for the Oil Pollution 

Act liability damages. 

12 

[The prepared statement of Mr. Coleman appears as a submission for the record.] 

Chairman LEAHY. And I should note to all witnesses, of course, 

your full statements will be made part of the record, and following 

the questions of the panel, if there are additional things you feel 

that should have been added, we will keep the record open for that. 

Mr. COLEMAN. Thank you. 

Chairman LEAHY. Professor Tom Galligan is the current president of Colby-Sawyer College and a professor of humanities in New 

London, New Hampshire—a neighbor of sorts. I have been many 

times to Colby-Sawyer, and New London, of course, is a beautiful 

community. Prior to joining Colby-Sawyer College, he served as 

dean of the law school at the University of Tennessee. As I recall, 

you taught admiralty law. Is that correct? 

Mr. GALLIGAN. That is right. 

Chairman LEAHY. Thank you. Professor Galligan, please go 

ahead, sir. 

STATEMENT OF TOM GALLIGAN, PRESIDENT AND PROFESSOR 

OF HUMANITIES, COLBY-SAWYER COLLEGE, NEW LONDON, 

NEW HAMPSHIRE 

Mr. GALLIGAN. Chairman Leahy, Ranking Member Sessions, Senator Whitehouse, and other members of the Committee, thank you 

for inviting me to appear before you today. My name is Tom 

Galligan, and I am the president of Colby-Sawyer College in New 

London, New Hampshire. 

The staggering consequences of the oil spill in the Gulf of Mexico 

force us to ask whether our laws are fair, consistent, and up-todate. Do they provide adequate compensation? Do they provide 

proper incentives to ensure efficient investments in safety? Sadly, 

an analysis of the relevant laws reveals a climate of limited liability, under-compensation, and the possibility of increased risk. 

Let me begin with a discussion of wrongful death recovery for 

seamen under the Jones Act and for anyone killed on the high seas 

under the Death on the High Seas Act. Both of those statutes were 

passed in 1920, another era. As you said and as Chris Jones said, 

neither of them, as interpreted, allows recovery for loss of society 

damages to the survivors of those killed in maritime disasters. Loss 

of society are damages for companionship—for the loss of care, 

comfort, and companionship caused by the death of a loved one. 

The majority of American jurisdictions today do recognize some 

right to recover for loss of society damages in wrongful death, but 

not the Jones Act and not DOHSA. A spouse, child, parent, or a 

sibling who loses a loved one suffers a very real loss, and the law 

should recognize that loss. 

As Chris Jones also noted, there is one exception to the rule barring recovery of loss of society damages under DOHSA. In 2000, 

after the Korean Air Line and TWA air disasters, you retroactively 

amended DOHSA to provide recovery of loss of society damages to 

the survivors of those killed in high seas commercial aviation disasters. But for anyone else killed on the high seas—on a cruise ship, 

on a ferry, on a semi-submersible floating rig, or on a helicopter— 

the survivors do not recover loss of society. The law should be the 

same for all, and you can make the law the same for all by amendVerDate Nov 24 2008 10:06 Nov 02, 2010 Jkt 061745 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\61745.TXT SJUD1 PsN: CMORC
13 

ing the relevant statutes to provide recovery for loss of society. As 

I understand, Senator Leahy, your proposed Survivors Equality Act 

of 2010 would remedy that inequity. 

Now, in fact, the climate of limitation fostered by the no loss of 

society recovery rules has been expanded because some courts have 

extended the Jones Act and DOHSA no recovery rules to other 

maritime contexts and to other types of damages. Those courts 

have done so based on your supposed intent in 1920 when you enacted the Jones Act and DOHSA. Those judicial decisions deprive 

injured persons and their relatives of compensation for very real 

losses, and they also adversely impact the deterrent effect of maritime tort law. Amending the Jones Act and DOHSA would reverse 

that trend. 

Now, of course, tort law is concerned with corrective justice, with 

fairness, with consistency, and with compensation. But it is also 

concerned with deterring unsafe behavior that poses risks to people, property, and to the environment. Tort law can encourage efficient investments in safety so that society faces an optimal level of 

risk—no more, no less. But if tort law under-compensates, it underdeters, because when deciding what to do and how to do it, people 

will consider the real anticipated costs of their actions. If the law 

does not force a person to take account of the costs of accidents 

when deciding what to do and how to do it, he or she may well 

under-invest in safety and, therefore, increase risk to people, to 

property, to businesses, and to natural resources. 

Under-compensation and under-deterrence in the maritime setting are exacerbated by the Shipowners’ Limitation of Liability Act. 

Originally passed in 1851, the Act allows a vessel owner to potentially limit its liability to the post-voyage value of the vessel. The 

Act was passed before the modern development of the corporate 

form and before the evolution of bankruptcy law, and its operation 

today can lead to drastic under-compensation for the victims of 

maritime disasters. 

Finally, these cumulative problems of limited liability in maritime law might be alleviated by the recovery of punitive damages, 

and the Supreme Court has twice in the past 21⁄2 years recognized 

the right to recover punitive damages in maritime cases. However, 

the Court has limited the recovery of punitive damages in most 

maritime cases to a 1:1 ratio between the punitive damages awarded and the compensatory damages awarded. The ratio cap deprives 

a judge or a jury of the traditionally available ability to tailor a punitive award within constitutional due process limits to the particular facts of the case, including the level of blameworthiness, the 

harm suffered, the harm threatened, and the profitability of the activity. 

Senator Whitehouse’s proposed bill on maritime punitive damages would restore that traditional ability to tailor a punitive 

award to the facts of the case. 

Thank you, and I am happy to answer any questions. 

[The prepared statement of Mr. Galligan appears as a submission for the record.] 

Chairman LEAHY. Thank you very much, Professor. 

Let me begin, Mr. Jones, with you. Obviously, I thank you for 

your testimony, and you said you are representing one family, but 

14 

it is obvious you are also standing up for all the families that were 

affected by the disaster. 

We have talked a lot about the Death on the High Seas Act as 

one of the few exclusive Federal remedies for the families who lost 

their lives in the Deepwater Horizon. But the law arbitrarily restricts recovery for the very significant loss more than a dozen children in all, more than a dozen parents and many widows are experiencing as a result of what happened. If this had been an accident 

on land, if it had been at a refinery or something on land, there 

would be protection. If left unchanged, if we are unable to change 

the law, what is the practical effect for your sister-in-law and for 

the two young nephews that we just saw in the photographs? 

Mr. JONES. Well, the way the current law is now, if it were allowed to remain in effect as it is, these companies, the parties responsible for Gordon’s death, they want to go out and get an economist, calculate what his earnings would be, subtract out the income 

taxes he would have paid during his earning life, his work life expectancy, subtract out what he would have consumed himself, because that is what the law allows, and they want to write a check 

and walk away. 

Aside from the fact that that may not be enough to support 

Michelle, Max, and Stafford, it does not allow for the recovery, like 

many other laws for United States citizens, to recover for life experiences, for the comfort and care that Gordon would have provided 

his sons, and the support he would have provided to his wife over 

the years. 

Chairman LEAHY. That is something that they could have sought 

had it been an accident on land. You are a lawyer. I am a lawyer. 

Can you tell me any logical reason why it should be any different 

whether it was on the open sea or on land? 

Mr. JONES. Absolutely not. As an example, I will refer to the BP 

explosion that occurred on land in Texas several years ago. I believe that BP paid $1.6 billion to the families of the victims from 

that explosion. I do not even want to speculate what could potentially be recovered by these families, but it is certainly not that 

amount. In Texas, punitive damages were allowed to be recovered, 

and they are not available here. 

Chairman LEAHY. But the deaths are still the same. 

Mr. JONES. Oh, absolutely. Absolutely. 

Chairman LEAHY. In fact, to go back to something Professor 

Galligan said when he talked about how careful you are if you are 

running something like this, there is a direct corollary—my words, 

but basically what you said—to how much liability you might face. 

Would you agree with that? In other words, if you thought, Boy, 

you are really going to have to pay for any screw-up you cause, are 

you going to be a lot more careful? 

Mr. JONES. Of course. And I know this: Having had discussions 

with some of the attorneys involved in this case, they want to pay 

what they are obligated to pay under the law. They want to pay 

it and move on. I will give you an example of another family, a 

family of another victim in this accident. He had no dependents, no 

children, no spouse, and under the Death on the High Seas Act, potentially the only thing that his family can recover is his funeral 

15 

expenses, and because no body was found, that could be $1,000. So 

potentially they could write a check for $1,000 and walk away. 

Chairman LEAHY. Transocean, as we talked about before, wants 

to use the Limitation of Liability Act and say, ‘‘We are only limited 

to the value of our rig.’’ It is down there somewhere about a mile 

below the surface, but that is the value of our liability. I mean, do 

you see any logic in that whatsoever? 

Mr. JONES. Of course not, and I did file that action in Houston, 

Texas, and they represented to the court that the value of the rig 

was zero. They hired an appraiser, an official appraiser, who submitted a report to the court and said it was valued at zero. And 

so they want to limit their liability to the value of the rig and pending freight. That goes for not just the victims—the families of these 

victims, but also all the economic damages. And, realistically, the 

financial and economic impact on the coast and the businesses is 

going to dwarf any recovery potentially by the families. So think 

of it in a bankruptcy context. You know, the families of these victims could ultimately, at least from the rig owner, recover pennies 

on the dollar. 

Chairman LEAHY. Nobody can call that fair. 

Mr. JONES. Absolutely not. 

Chairman LEAHY. And we hear the arguments about the increased liability, the increased regulation is going to make production more expensive. Let us be serious about this. Do you have any 

doubt in your mind that BP could have and should have done a lot 

more to ensure the safety of the people on that rig? 

Mr. JONES. What I am shocked at is their profits. We are talking 

about billions of dollars here, billions of dollars in profit, and for 

something like this to happen and to cause such a dramatic impact 

on the lives of so many people, including the families of the victims 

and all the people that have been impacted along the gulf coast, 

it is mind-boggling how they can throw up their hands and say 

that they could not have anticipated this or not have had the resources in place to prevent it. 

Chairman LEAHY. We will come back to this, but just speaking 

personally, we sometimes forget we let the profit motive outweigh 

the lives of people. And it is not just the 11 people on there. It is 

all those families that have played by the rules generation after 

generation who fish and otherwise use the resources. They played 

by the rules. We expected them to play by the rules. They did what 

they were supposed to do. Somebody did not do what they were 

supposed to do and ruined it for them. 

Senator Sessions. 

Senator SESSIONS. Thank you, Mr. Chairman. 

I agree with you, Mr. Jones, that the size and financial scope of 

this industry, the risk that drilling presents, indicates to me that 

the companies—this company particularly; I do not know about the 

others, but I am worried about it—failed to invest sufficiently in 

ensuring the safety of their employees, and I believe that that is 

something that must change out of this whole experience. 

Mr. COLEMAN., or maybe you, Professor Galligan, the question of 

punitive damages, Mr. Jones says that you are limited only to compensatory damages. The Supreme Court case did hold that punitive 

16 

damages are recoverable but limited that to the economic loss 1:1 

ratio? 

Mr. GALLIGAN. Not just the economic loss, but the compensatory 

damages. Whatever compensatory damages were awarded, the 1:1 

cap is the punitives could not in most cases exceed the award of 

those compensatory damages. 

I think that traditionally—let me expound on this a little bit. 

Traditionally, punitive damages have not been available under the 

Death on the High Seas Act or for a Jones Act seamen. A case 

called Atlantic Sounding, which was decided last summer, may 

open that question up again. But in DOHSA cases, punitive damages may not be available at all, so the 1:1 cap may not even apply 

there. But in other cases, yes, sir, 1:1. 

Senator SESSIONS. Mr. Coleman, I have offered legislation I think 

similar to Senator Whitehouse’s that would raise the $75 million 

cap retroactively. The Congressional Research Service says that is 

constitutional. The Deputy Attorney General, Mr. Perrelli, testified 

recently at the Energy Committee hearing, when I asked him about 

it, that he thought it was constitutional, although the Department 

of Justice had not recommended a retroactive legal policy. But I 

have to say some of my staff doubt that. As a matter of fact, some 

of my staff think it is unconstitutional to retroactively do that. 

So I am a little concerned about it. That is why I asked the Deputy Attorney General about that. What is your view about the ability of Congress to alter the liability, the $75 million limit, although 

I would note that BP has repeatedly and insistently said they will 

not be bound by it and will pay whatever the liability is. 

Mr. COLEMAN. Yes, Senator, with regard to the constitutional 

questions, they are, I think, more difficult than the contractual 

issues. As I remember, the Associate Attorney General said that 

there was more liability potential for the Government in the contractual base than on the constitutional issues. 

I would say I would agree with your staff that there is more risk 

on the constitutional issues than the testimony that you have had 

before the Congress today. However, I am very confirmed that on 

the contractual—on the breach of contract issues, which would 

come into play in the case of a Court of Federal Claims case, that 

any kind of change, material change to the OPA 90 damages $75 

million limitation would be a material breach of the lease and 

would open up the United States to enormous damages. 

Senator SESSIONS. Well, it is just something I think we need to 

wrestle with. I have always believed we should not offer legislation 

that we reasonably believe is not constitutional, even though it 

may sound good at the time and is something we would like to accomplish. So I will continue to review that. 

Professor Galligan, it is generally easier, is it not, on the question of initial liability under the Jones Act for a plaintiff to get into 

court; whereas, if you have an action on the shore that you have 

proof of negligence is very real and can be a complete bar to the 

plaintiff going forward. Traditionally, having been on the gulf coast 

like I have in Mobile for most of my legal career, I have been aware 

that it is easier to make out a case and to avoid dismissal of a case 

or avoid summary judgment under the Jones Act, and that that 

may be—is that a compensating reason for our sudden lack of 

17 

equality in actual damages recovery if you have an easier basis to 

go forward with the lawsuit? 

Mr. GALLIGAN. I have never seen in the legislative history any 

indication at all that Congress thought, when passing the Jones 

Act, that by possibly easing the burden of the plaintiff there was 

some quid pro quo with other recoverable damages. However, I 

would also say this: First you have to establish that you are a seamen, and that is not an easy hurdle to clear. So, first, to have the 

availability of a Jones Act claim, you have to establish that you are 

a seamen. 

What you are talking about is that in an FELA case, Federal 

Employer’s Liability Act case, called Rogers many years ago, the 

court—and the Jones Act incorporates the FELA so they go hand 

in hand. The Supreme Court said you could recover if you could 

prove cause in any way, caused in whole or in part. And that has 

been interpreted to slightly reduce the burden of proof on causation 

for the Jones Act seamen, but first he or she has to establish status, then they have to establish a breach of the duty of reasonable 

care. That same rule does not apply in a general maritime law case 

if the claim is unseaworthiness for a seamen or if it is a general 

maritime tort law claim filed by anyone other than a seamen, nor 

does it apply when the seamen seeks to recover from a third party. 

So it is limited to the Jones Act claim, seamen against employer. 

Senator SESSIONS. Mr. Coleman, do you want to briefly comment 

on that? My time is up, but—— 

Mr. COLEMAN. Senator, I do not have any comment that would 

disagree with what Professor Galligan said. 

Senator SESSIONS. Thank you. 

Thank you, Mr. Chairman. 

Chairman LEAHY. Senator Whitehouse. 

Senator WHITEHOUSE. [Presiding.] Thank you, Mr. Chairman, 

and thank you again for holding this hearing. 

Mr. JONES., could you tell me a little bit more about the circumstances that exist right now between BP and your brother’s 

family? You indicated that he worked for a contractor, a contractor 

to BP presumably. 

Mr. JONES. Correct. Correct. 

Senator WHITEHOUSE. And if you could answer that in the context of the limit on economic damages, that BP has been so noisy 

about saying that it would not be bound by, that it would go beyond the $75 million in economic damages and make sure that everyone affected by this was made whole. I think that has been their 

corporate statement. In terms of its measure against your family’s 

experience, what do they see? 

Mr. JONES. Well, every time I wake up in Baton Rouge and open 

up the Advocate, I see a full-page ad from BP that says that they 

are going to make things right and they are going to pay all legitimate claims, and we sat through a hearing a week and a half ago 

where they continued repeating that saying that they are going to 

pay all legitimate claims. Well, I do not think that they are referring to our family’s claim. I do not think—and they have made no 

overtures to us. We have actually—I have never spoken to somebody from BP. They have made no phone call, no nothing, to make 

any effort to reach out and at least extend their sympathies. 

18 

Senator WHITEHOUSE. Well, wait a minute. Say that again? 

Mr. JONES. Nobody from BP has contacted anybody within our 

family to extend their sympathies. I am not asking them to take 

responsibility, but—they made it to the memorial event a couple of 

weeks ago. I heard that they were there, but we have not heard 

from them. 

Senator WHITEHOUSE. You have not. OK. 

How does the contractual relationship intervening between Gordon and BP affect this, in your view? 

Mr. JONES. First things first, is that I am not a maritime attorney. I have learned about maritime law in the last month and a 

half, of course. It is my understanding that there is an agreement 

between the contractor, M–I Swaco, and BP whereby there is potentially some type of indemnity. But Gordon’s family—— 

Senator WHITEHOUSE. Meaning BP has agreed to indemnify—— 

Mr. JONES. M–I Swaco agrees to indemnify BP, but I am not— 

I cannot really speak on that because I have never seen any documents to that effect. That is just what I have heard. 

As far as Gordon’s family, they have potentially a recovery 

against his employer, M–I Swaco, under the Jones Act, and—— 

Senator WHITEHOUSE. And that is a limited recovery only to the 

formula that you have described based on future earnings. 

Mr. JONES. Of course. And then a claim under the Death on the 

High Seas Act against all parties responsible. However, regardless 

of what claims he has, there is a cap, and he cannot recover anything more than that. And so regardless of who is at fault and 

what percentage does the fault lay, or we ultimately determine 

down the road—and there may be some subrogation claims from 

one party to the next. But there is a cap, and they can pay that 

and go home. 

Senator WHITEHOUSE. And somebody killed in an air travel accident would not face that cap. Somebody killed in a traffic accident 

in Louisiana would not face that cap. Somebody killed—this is a 

cap that narrowly falls on this group of victims. 

Mr. JONES. And it is unfortunate that a catastrophic event is 

what precipitates this legislation, and that is why that specific exception to DOHSA was made and introduced in the past, in 2000, 

after a tragic event much like this one. And that is why we are 

here today, is to ask for that same amendment so that everybody 

who perishes in Federal waters is protected equally under the law 

and is allowed to recover non-pecuniary damages, in which case 

there is no cap. That cap is determined by the jury. 

Senator WHITEHOUSE. Do you have any reaction to Mr. Coleman’s suggestion that efforts to make things right for Gordon’s 

family would amount to a substantial impairment of the contract 

that BP has with the U.S. Government and we should not address 

it for that reason? 

Mr. JONES. Well, like I said, I anticipate that all the companies 

involved and responsible for Gordon’s death are more than happy— 

I mean, I heard that they made a grant of $500 million to LSU to 

fund conservation research and mitigation efforts. I am sure they 

are more than willing to pay what they are obligated to pay under 

the law to the families. As far as, you know, everything else, I do 

not really have much of a comment. I have personal thoughts, but, 

19 

you know, that is generally how I look at it, is that they want to 

pay what they are obligated to pay under the law. It is almost like 

they are restrained from doing any more and they are hiding behind that. 

Senator WHITEHOUSE. Well, I appreciate that. 

Senator Feingold. 

Senator FEINGOLD. Thank you, Mr. Chairman, for holding this 

hearing. I want to thank all the witnesses for joining us. And, Mr. 

Jones, I want to express my most sincere condolences to you and 

your family for the tragic loss of your brother. 

This tragedy, which resulted in the loss of 11 lives and now the 

biggest environmental disaster in United States history, highlights 

the need for improved regulation and updated laws. For starters, 

as the witnesses have indicated, we need to ensure that the oil 

companies can be legally liable for their actions. 

One way to deter wrongdoing and encourage the kind of responsible, careful drilling we need is to increase the unrealistically low 

liability caps for damages caused by oil spills, and in that vein, I 

am a cosponsor of Senator Menendez’s legislation to do just that, 

and I appreciate the witnesses’ additional valuable suggestions. 

But it is not enough to hold big oil accountable. We also have to 

end the cozy relationship between the Federal Government and the 

oil companies it is supposed to regulate and oversee. That means 

getting rid of unjustified taxpayer-funded giveaways for the oil and 

gas industry, and it means making sure the regulators are not simply acting as a rubber stamp. Unfortunately, too often the Federal 

Government ends up listening more to the powerful industry it is 

supposed to be regulating than to the consumers it is supposed to 

be protecting. So whether it is Wall Street or big oil who are calling 

the shots, the result is rarely good for my constituents in Wisconsin. 

There are many other actions we need to take, such as passing 

my ‘‘use it or lose it’’ legislation to ensure that oil companies are 

diligently exploring the Federal leases they currently have and restoring the Clean Water Act, which is the main statute used to 

prosecute polluters who dump oil into the waters of the United 

States. 

Mr. Galligan, in your testimony you discuss the need for these 

strong laws to deter risky actions. Attorney General Holder recently announced that the Department of Justice is undertaking a 

criminal investigation of the gulf oil spill, and the Clean Water Act 

is the main law for imposing criminal penalties for oil spills and 

other pollution violations. 

Given the oil company’s sizable annual profits, does a maximum 

$25,000 per day fine, as the Act provides, appear to you to be an 

effective deterrent? 

Mr. GALLIGAN. I think when you analyze deterrence, Senator, 

you have to look at the whole package of deterrent measures that 

are in place. So you have to look at criminal laws, you have to look 

at regulations and regulatory fines, and you have to look at civil 

liability. 

I am not an expert in administrative law; however, $25,000 a day 

does not sound like an awful lot of money in light of the terrible 

20 

things that we have seen in this and other environmental disasters. 

Senator FEINGOLD. Mr. Galligan, on another topic, I wanted to 

ask you about Mr. Coleman’s testimony that there are breach of 

contract concerns with retroactively increasing liability caps. Senator Sessions also inquired about this issue. The Oil Pollution Act 

contains a provision that seems to give the Federal Government 

the authority to retroactively modify the $75 million damages cap 

without raising breach of contract or constitutional concerns. Section 1018(c) of the Oil Pollution Act states that, ‘‘Nothing in this 

Act shall in any way affect or be construed to affect the authority 

of the United States to impose additional liability or additional requirements relating to the discharge of oil.’’ 

Mr. Galligan, do you agree that this is a significant provision? 

And what is your response to Mr. Coleman’s argument? 

Mr. GALLIGAN. I do agree that it is a significant provision. I am 

not an expert on energy law contracts, so I cannot express an opinion on the contractual issues. On the constitutional issues, it is my 

understanding that as long as a piece of legislation that is being 

retroactively imposed does not otherwise violate a fundamental 

right, it will be reviewed by courts under a rational basis test. And 

you ask yourself then, would any retroactive enactment be rational? And where do you look? You look at the policy reasons that underlie the decision to apply retroactively. 

Here, just let us take the Death on the High Seas Act amendment. Here, to make the law modern, to make it fully compensatory, and to make it consistent would seem to me to be rational 

bases for a retroactive amendment. 

Senator FEINGOLD. I agree with that and I thank you for that. 

Let me ask that a May 12th memorandum from CRS on this 

question be entered into the record, Mr. Chairman. 

Senator WHITEHOUSE. It will be. 

Chairman LEAHY. [Presiding.] Without objection. 

Senator FEINGOLD. I got a double approval there. 

[The letter appears as a submission for the record.] 

Senator FEINGOLD. Mr. Jones provided some very personal moving testimony on the need to update our maritime laws, and, Mr. 

Galligan, you have made several suggestions for how Congress can 

update the laws. So you think changes should apply broadly to all 

vessels or narrowly target drilling rigs? 

Mr. GALLIGAN. I personally think that they should apply to all 

vessels on the high seas because that would encourage consistency. 

But God forbid there should be some disaster involving a cruise 

ship, but it would seem to me it would be tragic if in 5 years that 

happened, another group of people were before you explaining why 

cruise ship victims were treated less fairly than commercial aviation disaster victims or victims of maritime environmental disasters. 

Senator FEINGOLD. I thank you, Professor. 

Thank you, Mr. Chairman. 

Chairman LEAHY. Thank you. 

Senator Durbin. 

Senator DURBIN. Thanks, Mr. Chairman. 

21 

Mr. Jones, I have been on this Committee for 12 years, and we 

have considered this issue, capping the damages, issues of medical 

malpractice, issues relating to mesothelioma and lung cancer from 

asbestos, and there has been strong sentiment on this Committee 

for a long period of time that we should limit the amount that a 

jury could award in those cases. I have never accepted it and have 

fought it for 12 years. I want to tell you that the appearance of 

your father and yourself and your testimony in 5 minutes did more 

to make the case than I have ever made in 12 years. Showing those 

photos of your brother’s family and your brother, photos that would 

be shown to a jury, I hope will start to convince some in Congress 

who believe that we should cap the amount of money that could be 

awarded to a family like that for the loss of your brother’s life. So 

if for no other reason, I thank you for coming today. I think you 

have had a profound impact on all of us. I sincerely regret your loss 

under these circumstances, and I do believe that your brother’s 

family is entitled to full recovery for their loss in this, although 

money just will not buy your brother back. You know that as well 

as I do, in your testimony. 

Mr. Coleman, I am troubled. You have got a tough responsibility 

here arguing a position which is not that popular, so I respect you 

for coming here and giving it your best professional effort. But I 

would say that there is one sentence in your testimony that troubles me, particularly troubles me. You say on page 15, ‘‘I hope that 

our political leaders will not implement what I believe to be reckless policies that would imperil such an enormous source of jobs 

and revenue.’’ 

I want to tell you what I have heard. The leaders of major oil 

companies other than BP are telling Members of Congress and this 

administration privately that what BP did in this circumstance was 

to materially misrepresent their capacity to stop this type of blowout in the permits filed with the Federal Government; and, further, 

to engage in what I consider to be reckless misconduct in establishing a blowout preventer that was not redundant, clearly failed, 

and now has contaminated one of the most magnificent bodies of 

water in the world today. 

So I would like you to balance for a moment that reckless misconduct, as I see it, on the part of BP with what you characterize 

as the possibility that we will enact reckless policies—reckless policies like offering to Ms. Jones’ family the loss of companionship, as 

this father and husband is gone for the rest of their lives; reckless 

policies like suggesting that the current cap on liability does not 

even come close to measure the loss that is going to be part of this 

disaster in the Gulf of Mexico. 

Can you really put these in the same level, the conduct of BP 

and their reckless misconduct and what we are suggesting as 

changes in the law? 

Mr. COLEMAN. Senator, thank you for asking the question. I am 

also a native of the gulf coast, the State of Mississippi, and have 

enjoyed the gulf coast my entire life. Certainly my comments in my 

testimony were not directed toward the Jones Act issues. They 

were dealing with the Oil Pollution Act question of lifting the $75 

million damages limitation. In my testimony, I did not come out 

against an increase in that for future leases. I was dealing with it 

22 

from a contract law point of view and the great damage to the industry that would come about from a $10 billion cap or unlimited 

cap on damages in addition the full restitution—full response cost. 

Senator DURBIN. Well, let me ask you this question: If we followed your logic here and did not increase the cap on liability, and 

what you characterize as a small or medium-size drilling operation 

engaged in the same type of activity as BP, resulting in the same 

level of damages, who do you think should pick up the cost of that? 

Mr. COLEMAN. Senator, as you know—and, actually, I was involved in reviewing the various drafts of the Oil Pollution Act at 

the time and helping the Department of the Interior determine 

what its position should be. I was part of the team evaluating the 

impact of the Exxon Valdez and looking at the liability opportunities for the Government to go after Exxon. So this is not a matter 

that is new to me. But I do have to say that—and I do believe that 

the caps potentially that were set in 1990, which the Government— 

which the Congress gave the executive branch the ability to increase over time by regulation, which they failed to do, they probably should be raised some. But the question—— 

Senator DURBIN. Who is going to make up the difference? Who 

makes up the difference if a small or medium-size company does 

the same type of drilling operation, incurring the same type of 

damages as BP, who then—are you saying taxpayers have to pay 

for it? 

Mr. COLEMAN. Under the Oil Pollution Act, above the damages 

limitation the excess claims go to the Oil Spill Liability Trust 

Fund. 

Senator DURBIN. What is the current balance in that fund? 

Mr. COLEMAN. The current balance I understand is $1.6 billion. 

Senator DURBIN. And once we have exhausted that, who pays for 

the difference? 

Mr. COLEMAN. Under the law, that is the end of it. 

Senator DURBIN. That is not the end of it, no. It is the taxpayers 

that step in. 

Mr. COLEMAN. But I will add, though, as we have had discussion 

today earlier, this is just dealing with the Federal claims, under 

Federal law. The State law claims are unlimited, and those particularly in this case are probably likely to be larger than even the 

Federal claims. 

Senator DURBIN. Mr. Chairman, thank you for giving me an additional minute here. I happen to believe that if you are engaged 

in drilling and can create this level of damage, it carries with it a 

responsibility that you accept liability for the damage. If you cannot accept that liability, stay the hell out of the business. 

Thank you, Mr. Chairman. 

Chairman LEAHY. Especially a business where you may end up 

with billions of dollars of profits. 

Senator Klobuchar. 

Senator KLOBUCHAR. Thank you very much, Mr. Chairman. 

Mr. Coleman, I wanted to follow up with Senator Durbin’s points, 

which I thought were very well taken, and he was talking about 

going forward and how the liability caps would work. But you actually argue that retroactively you do not believe that we can change 

this $75 million cap. Is that right? 

23 

Mr. COLEMAN. You can do it. Congress can do it. It is just that 

you cannot do it without paying for it. There will be a contractual 

price to doing it. This is similar to what the Supreme Court said 

in the Mobil case. Congress changed the law after the fact, which 

they had the perfect right to do, but there were contractual repercussions, contractual damages that the Government incurred by 

that Congressional action. 

Senator KLOBUCHAR. Mr. Galligan and others disagree with that, 

but I just again wanted to clarify along the lines of Mr. Durbin’s 

points that if, in fact, we do not change this, if we are unable to 

be doing this retroactively, who do you think is going to pay for 

this $8, $10 billion that BP caused damages? 

Mr. COLEMAN. Well, once again, the OPA 90 damages limitation 

retroactively against the lessees, it is my firm belief would be a 

breach of contact. However, there are other options. One of them 

has been suggested by Senator Vitter to consider the BP written 

offer, basically an offer to change their liability limits on this contract, so Congress could enact a law which accepts that offer. 

Another one is, of course, the Oil Spill Liability Trust Fund. That 

does not raise contractual—— 

Senator KLOBUCHAR. But isn’t this the one that you just told Senator Durbin has the $1.6 billion in it, and we are looking at 

over almost $10 billion for this right now. 

Mr. COLEMAN. You could adjust that and make it retroactive, and 

claims from this accident could be paid out of that, and you could 

provide additional fees or taxes to support that fund. 

Senator KLOBUCHAR. Well, let me just give you some other facts 

that make us concerned about just, you know, having BP tell us 

they are going to do something. I am looking back at the Exxon 

Valdez spill. I am familiar with this case because actually the law 

firm that represented the fishermen was in Minnesota. And BP 

said it is going to pay all legitimate economic claims, but Exxon 

made the same statement after the oil spill in Alaska. It then proceeded to litigate the claims brought against it for nearly two decades. 

What do you think we can do to ensure that families like the 

Joneses will have a swift resolution of legitimate claims against 

BP, Transocean, and other subcontractors? Because Exxon was saying the exact same thing. 

Mr. COLEMAN. I am certainly not involved in the claims process, 

Senator. I did happen to see the testimony at the House Judiciary 

Committee from the BP representative. Basically, what is understand is that these claims are filed with BP. If they pay them, then 

they pay them. If they do not, they are rejected and sent to the 

Coast Guard for payment under the Oil Spill Liability Trust Fund. 

I am not sure what else you might be asking. 

Senator KLOBUCHAR. It is just that people make claims, companies make claims, and they take big ads out and say things, and 

then unless we have a way to hold them to it, we cannot ensure 

that the Joneses and other families are going to be compensated. 

That is what we are trying to do here. 

Mr. Galligan, I wonder if you would respond to some of the statements that Mr. Coleman made, and then also I am troubled by the 

fact that Transocean has already filed a motion in Federal court in 

24 

Houston seeking to limit its liability under the Limitation of Liability Act, that 1851 law, that would limit Transocean’s liability to 

$26 million, as has been discussed. Is there any good reason to 

keep this law on the books? Should we repeal it? And how do you 

respond to some of the things that Mr. Coleman has said? 

Mr. GALLIGAN. Let me start by saying what I said before, which 

is that I really cannot respond to what he said about the breach 

of contract claims. When I was speaking about retroactivity, I was 

speaking more from the constitutional sense. 

Let me also add, when you talk about claims—and I do not think 

anybody has said this yet, and it is really important—OPA 90 does 

not apply to personal injury and wrongful death claims. OPA 90 

does not apply to personal injury and wrongful death claims. That 

would be maritime law and maritime tort law solely. 

As to the Limitation of Liability Act, I mentioned in my statement it was passed in a very, very different historical context. It 

was passed in 1851 to encourage investment in maritime shipping 

and commerce. The corporate form had not developed. Bankruptcy 

law had not developed. So you ask yourself today, Is that law still 

salient from a policy perspective? And what happens is the shipowner starts a concursus proceeding in a Federal court somewhere, 

and it means everybody who has a claim has to then file that claim 

in that Federal court. What then happens is they say we want to 

go back to State court for some issues, and they enter into stipulations and they go back to State court. Then they come back to Federal court. It is an expensive, time-consuming, slow process. 

Senator KLOBUCHAR. OK. Mr. Jones, I am sure that is not good 

to hear, and I just want to assure you that we will do everything 

we can to help your family. 

I was just struck by Senator Whitehouse’s questions about BP. 

So they were at the memorial service, but they never contacted 

you. Did you get anything in writing from them? How long had 

your brother worked for them? 

Mr. JONES. Well, he had worked for his particular employer, M– 

I Swaco, for about 5 years. He had worked on that particular rig, 

which was operated by BP, for about 2 years. And for that time he 

had helped BP make a lot of money. 

The only reason I had heard that the BP executives were at the 

memorial event—I did not see them until after when they were 

running out the back door into dark-tinted-window SUVs to avoid 

the media. 

Senator KLOBUCHAR. So you never got anything in writing or a 

phone call. 

Mr. JONES. No. 

Senator KLOBUCHAR. Did any of the other people killed on that 

day get any—have you heard if they have gotten any communication? 

Mr. JONES. Really since—well, I came face to face with several 

of the families. It was a very awkward, uncomfortable situation. I 

have had some discussions with some of the family members, not 

all, and so I cannot really speak for them. 

Senator KLOBUCHAR. All right. I am so sorry for your loss. Thank 

you for being here today. It made a difference. 

Chairman LEAHY. Thank you very much. 

25 

Senator Franken. 

Senator FRANKEN. Thank you, Mr. Jones, and all of us appreciate 

your being here, and we express our condolences to you and your 

Dad and your entire family. 

Mr. Coleman, as I understand from your written testimony, you 

are saying that if we change our liability laws, it is going to place 

an unacceptable, prohibitive cost on oil companies, but someone 

needs to bear these costs. So basically you are saying that the costs 

should be borne by Mr. Jones and his family, by the fishermen, by 

the oystermen, by the homeowners along the coast. 

Don’t you think that the oil companies who make such huge profits should be the ones bearing these costs? 

Mr. COLEMAN. Senator, I appreciate the question. As Professor 

Galligan mentioned, the question of the loss and the claims of the 

family of Gordon are not involved in the issue that I was addressing, which is the damages liability cap under the Oil Pollution Act. 

However, of course, lost income from fishermen and other economic 

activities is involved in that. Certainly I am very concerned 

about—extremely concerned about the loss of income not only for 

the individual—— 

Senator FRANKEN. Well, you write of non-pecuniary and pecuniary damages and say that if those were allowed, the loss of comfort and those kind of things, it would impose a burden on the oil 

companies, on mom-and-pop companies. That is what I get from 

your testimony. 

Mr. COLEMAN. I did not address that issue at all in my testimony, Senator. 

Senator FRANKEN. Well, in your written testimony you question 

whether offshore drilling really poses ‘‘an unacceptable threat’’ 

under ‘‘current conditions’’ that would justify a moratorium. Are 

you saying that the BP rig was operating in such an irresponsible 

and reckless fashion, that it was run in such an egregiously negligent manner that it would be irrational to put on a 6-month moratorium on new deep-sea drilling? 

Mr. COLEMAN. Once again, thank you for the question. My statement with regard to that had nothing to do with the facts of the 

BP case, because I do not know the facts. I am not the investigator 

of it, and—— 

Senator FRANKEN. And you write that—— 

Mr. COLEMAN. Those will be determined. 

Senator FRANKEN. Here you write, ‘‘Further, a blanket 6-month 

additional drilling moratorium because ‘under current conditions 

deepwater drilling poses an unacceptable threat of serious and irreparable harm or damage to wildlife and the environment’ is highly questionable.’’ What current conditions are referenced here that 

causes deepwater drilling to pose an unacceptable threat? What is 

an unacceptable threat? Is the fact that many thousands of deepwater wells have been drilled before—you are speaking exactly to 

that. And what I am asking you is the BP—is what we have just 

seen here such an outlier that we should not have a 6-month moratorium? 

Mr. COLEMAN. That is exactly what I was discussing, Senator. 

You are exactly right. 

26 

Senator FRANKEN. Well, you just said you were not discussing 

that. 

Mr. COLEMAN. Well, I did not discuss exactly what happened 

with BP, but it is an aberration, and that is the point—— 

Senator FRANKEN. It is an aberration. Let me ask you this: If 8 

weeks ago someone had said we should put a moratorium on deepwater drilling, would you have said yes? 

Mr. COLEMAN. I would absolutely say no, and I still say no because—— 

Senator FRANKEN. Have you been looking at what is happening 

in your beloved coast? 

Mr. COLEMAN. I absolutely have. But what we have—— 

Senator FRANKEN. So, in retrospect, you would not have stopped 

that drilling. I am asking you if 8 weeks ago you would have 

stopped that drilling, and you say no. 

Mr. COLEMAN. I would not because we have to be bound, Senator, 

and the administration has to be bound by the regulations in place 

and the contractual rights of the lessees, and—— 

Senator FRANKEN. Look, we are responsible—— 

Chairman LEAHY. Just a minute. I want to hear the end—I want 

to hear the rest of Mr. Coleman’s answer. 

Mr. COLEMAN. What matters from a contractual point of view— 

and this was an issue. What did the notice to lessees say in the 

Mobil case? That was extremely important before the Supreme 

Court. If you take away a contractual right based on a regulation 

that you cite and says it means one thing and it does not mean 

that, then you have not followed the law. So what I have been addressing in those questions that I included there are—they cited 

that there is an unreasonable threat and risk of damages. If that 

is what the statute—if that is what the outer continental shelf statute mean, the provision that they are citing to in that regulation, 

then we could never have any wells drilled at all, because there is 

always a risk of a blowout. 

So that is the point that I was trying to make. There have been 

3,000 or 4,000 wells in this water depth, or similar to it, without 

ever having a blowout. So is that an unreasonable risk? And I 

would say from my legal judgment it is not an unreasonable risk 

to allow more drilling. 

Chairman LEAHY. Senator Franken, I interrupted there. Please 

go ahead. 

Senator FRANKEN. I am sorry, it is just that we have so little 

time in these questions. 

Chairman LEAHY. I have just given you more time. 

Senator FRANKEN. Yes, I understand. 

Mr. Jones, if 8 weeks ago you were asked should we put a moratorium on drilling, in retrospect what would you say now? 

Mr. JONES. Eight weeks ago, before the explosion, of course. 

Then Gordon would still be here. 

Senator FRANKEN. Right. So there is a very different perspective, 

isn’t there? I mean, I do not understand your reaction. You know, 

there are other BP deep wells, and what I am asking you is: Is the 

conduct of the way this rig was run so different from all the others 

that it does not warrant a look at and a moratorium on this kind 

27 

of drilling so that we learn our lessons from this and prevent it 

from happening again? Or are you willing to let this happen again? 

Mr. COLEMAN. Senator, what I was saying is that we have had 

thousands of these, similar types of wells drilled. There obviously 

is something very unusual that happened on this one case. Obviously, it needs to be fully investigated, and whatever adjustments 

need to be, they need to be made. But we have through our experience shown that this type of drilling is, in the scope of, you know, 

comparable things, a very safe way of producing energy. 

Senator FRANKEN. Thank you. I have used my time. 

Chairman LEAHY. Senator Kaufman. 

Senator KAUFMAN. Thank you, Mr. Chairman, for holding this 

hearing. 

Just to follow up on that thought, I think if you had 3,000 wells 

out there and a well went down, you would say it is 1 in 3,000. 

But, you know, your testimony is quite eloquent in talking about 

incentives, that we have to have the proper incentives for offshore 

drilling. It seems to me that the one thing that I have noticed 

about the way things could happen in our present society is we just 

do not have disincentives for bad behavior. And I think what Senator Durbin said earlier is—one of the things many of us are concerned about is how do we get the disincentive for the bad behavior. And could you just give me your thoughts about how you think 

that there should be a disincentive—if we sent a message after this 

example that BP can really get away with this thing for relatively 

minor, are you concerned that a corporate boardroom somewhere in 

the future—and I am not talking about bad people. I teach a course 

at Duke Law School with MBAs and law students, and the MBAs 

are always very concerned about the fact that, you know, you have 

got to look out for the shareholders’ money, you have an obligation. 

So if you are sitting there and you are BP and you are looking 

at what is going to happen if, in fact, you do not do the proper safety and you do not put in the proper things, you do not have the 

people out there, you do not take the chance—which BP has been 

accused of in a number of cases of just saying go ahead, we need 

this well, we need it fast, we need it producing, do not worry about 

the concrete, do not worry about the—do not worry about what we 

are going to do if something goes wrong, do not worry about doing 

a relief well, let us just go ahead and do it. Does that concern you 

at all in terms of our present liability structure? 

Mr. COLEMAN. Senator, I am a strong believer in regulation, inspections, aggressive inspections. I do have questions as to whether 

the inspections were handled properly in this situation. Certainly 

one of the things that could be done is to send out the inspectors 

to be there when they test the blowout preventers and make sure 

that that works before you start drilling. I think that would be a 

commonsense—just one thing, and there are many others that 

could be done. 

Certainly civil penalties are available under numerous statutes 

for failure to perform in accordance with the regulations as direct. 

Senator KAUFMAN. What about kind of a private sector—I mean, 

you are a private sector guy. I am a private sector guy. What about 

a private sector approach which says, well, the Government is 

going to do all that, but why don’t we have some trial attorneys out 

28 

there trying to make sure that this happens, and that in order to 

get them involved, you have to have hard damages? What is your 

feeling about that? 

Mr. COLEMAN. I must say I have found that the private sector 

bar is very adept at doing—you know, taking on that role. They do 

it aggressively, and I do not have a criticism of lawyers taking the 

opportunity to see that the Government and others in the private 

sector implement the laws, and—— 

Senator KAUFMAN. So you would not be opposed—I mean, you 

think the idea—there is an idea out there that maybe there is liability that the private sector could operate against, punitive damages and things like that, that may have a value, whether we are 

talking about the economic value or not, just the idea that there 

is a disincentive to a corporation sitting around deciding what they 

are going to do, if, in fact, they know the payoff is going to be 

greater. And isn’t that important in terms of this BP case? Isn’t it 

important that we send a clear message that—taking your approach, which is these are all wells, probably 3,000, no problem, 

but we have this one, it really went bad. So if you are in the oil 

business and you are out drilling in the gulf and you drill a well 

and you do not do the proper things, you do not do the things that 

have been raised here, and others, that you are going to have to 

pay a major price for that—just that alone, not counting the really 

most important thing which has been raised here, Mr. Jones’ brother and the families and all the rest of that, the fishermen, the 

things that Senator Franken raised. Isn’t there an economic, 

straight up economic reason that BP should pay a major price for 

this problem? 

Mr. COLEMAN. Well, I agree from a public policy point of view 

there needs to be a major price to be paid for this kind of accident. 

And I would submit to you that there is—I think everyone is seeing 

that there is a major price. Not only has their share value gone 

down tremendously, they are projecting—I have seen projections of 

up to 30-some-odd billion dollars that may have to be paid under 

current law by BP for what has happened here. 

So I do think the idea that there is not enough—or that there 

is not a significant price to pay is not accurate. 

Senator KAUFMAN. But you do say it should be a significant price 

to pay when you make a mistake like this, and that there should 

be disincentives, because incentives are an important part—there 

are incentives for drilling in the gulf, and there are disincentives 

if you make a mistake. 

Mr. COLEMAN. I agree, and our current law sets up those very 

significant prices to pay. 

Senator KAUFMAN. Thank you. 

Mr. Jones, as with others, I am sorry about your loss, and I think 

it does bring home much of what we are talking about here. It 

comes down to people, and I think that this is—your testimony is 

incredibly important. Just from talking to the survivors’ families, 

do you have any anecdotes you can say of how they thought safety 

was handled on that rig? 

Mr. JONES. Well, I have not had really much of an occasion to 

speak to a lot of them, and those that would have known about 

that are no longer here. We have had some discussions with some 

29 

of the survivors, some of the folks who were rescued that came 

through the visitation line, which was not really an appropriate 

time for us to discuss that. And to be quite honest with you, we 

have not had a whole lot of time in the last month and a half to 

really have a lot of those discussions. I have a lot of anecdotal evidence, e-mails, comments that have been made by a lot of different 

sources as to what happened, and, you know, mentioned the BOPs, 

but the BOPs did not cause this. The BOPs failed to prevent it. 

So there is a lot of stuff that went wrong well before that ever 

happened. So, you know, there is a lot that is going to play out in 

the months and, unfortunately, years before there is ultimately a 

result here, and that, you know, Michelle and her boys and the 

other families can move on. 

Senator KAUFMAN. You know, we heard a lot of testimony—Senator Feingold raised it—about how much this is like Wall Street, 

and there is one kind of common theme that weaves its way 

through this thing. You know, it was Washington’s fault. We did 

not have the proper rules, we did not have the proper regulators, 

we did not do the rest of that. We heard it from Washington Mutual when we had the hearings on that. It is almost like—and I 

agree that we do not have regulators. I agree. One of the big problems is we do not have regulators. You hit it right on the nail. 

But, you know, sometimes it is like cops on the beat. You know, 

because there is not a cop on the street corner does not mean you 

can break a window and go in a jeweler’s and steal the stuff right 

out of the thing. And the idea there were not regulators, you know, 

I just always kind of—I am big on the fact that we have not regulated and we have to regulate, it is important, just like we need 

cops on the beat, just like we need referees on the football field. 

And we went through a period where we had—where we just did 

not need to do that. And so—but it does bother me when—and I 

know—Mr. Coleman, I am not accusing you of making this argument, but the argument that is constantly made is, well, you have 

got to understand it was Washington’s fault. And because there 

was not a cop on the beat, we could go in there and do whatever 

we wanted. We could not worry about safety. We could not do these 

other things. 

So I think it is important to keep the fact we have a responsibility of doing this, but I think corporate America did not have the 

ability to go in and do what they did because there were not regulators on the beat, and there clearly were not regulators on the 

beat. 

Thank you, Mr. Chairman. 

Chairman LEAHY. Thank you. 

Senator Whitehouse, do you have further questions? 

Senator WHITEHOUSE. A few. 

Professor Galligan, is it reasonable to assume that corporations 

act in a way to maximize their own economic self-interest? 

Mr. GALLIGAN. I think that is what they exist for. Obviously, 

they are concerned with societal interests, but the definition is to 

make a profit, and there is a duty to the shareholders to do so. 

Senator WHITEHOUSE. Specifically, they are under a duty to their 

shareholders to act in a way to maximize their own economic selfinterest as a matter of law. Correct? 

30 

Mr. GALLIGAN. Correct. 

Senator WHITEHOUSE. If we switch to the question of criminal 

restitution, I view this as a lay-down hand, really, from a criminal 

point of view under the Rivers and Harbors Act. It is a misdemeanor, but it triggers penalties and restitution and other criminal consequences. 

Is there anything that prevents, under the various doctrines that 

govern criminal restitution, the restitution in the criminal case 

from supplementing areas in which there is an untoward or unnecessary, inappropriate cap or restraint on liability that is revealed 

by these facts, for instance, to the Gordon Jones family? 

Mr. GALLIGAN. Well, I am not a criminal lawyer, but I am not 

aware of any limits. But at the same time, I am not aware of any 

creative cases in which that kind of restitution has been liberally 

extended, because there are constitutional issues about a criminal 

defendant. 

Senator WHITEHOUSE. Mr. Coleman, the Exxon decision cut very 

favorably toward the oil industry by limiting what had heretofore 

been unlimited punitive damages. Did that affect any existing 

agreements? And should the Government have renegotiated at that 

point existing agreements because of a material change in its contractual relationships? 

Mr. COLEMAN. I do not see that that affected the contracts that 

the Government has with any—— 

Senator WHITEHOUSE. All right. Let us hypothesize that we were 

here putting a restriction on liability, that we were reducing—saying $75 million applied not just to economic damages but to other 

damages as well. If that were the argument that was being made 

here, if we were considering a piece of legislation to reduce liability, would you be here arguing that that was a material impairment of the contractual relationship between the Government and 

the corporations and that, therefore, the Government was in a position now to renegotiate with all the corporations affected by that 

change? 

Mr. COLEMAN. Senator, if the Congress were to have reduced this $75 million down to $35 million or something like that, then the 

$75 million remains the contractual deal, but from a legal perspective, they would not have to pay more than $35 million. And so it 

would not be any—— 

Senator WHITEHOUSE. So what you are suggesting is, in fact, a 

one-way ratchet that works in favor of the corporations and against 

the Government in every circumstance in which the Government 

acts with respect to a corporate—the Congress acts with respect to 

a contract with the Government? 

Mr. COLEMAN. Well, there would be some exceptions, and this 

would require lengthy briefs. 

Senator WHITEHOUSE. But generally—— 

Mr. COLEMAN. But generally—— 

Senator WHITEHOUSE [continuing.] That is true, you would create 

with your policy a one-way ratchet that worked only in favor of the 

corporations and not in favor of the Government when Congress 

changed the terms of a contract. 

Mr. COLEMAN. It is a question of two parties to a contract, Senator, and if one makes a unilateral change—the same would be if 

31 

the private sector party to the contract said they were going to 

make a change, and they could repudiate the contract just as the 

Government does. The Government would be entitled to damages. 

So it is not a one-way street. It works both ways. 

Senator WHITEHOUSE. Well, it works only one way from Congress’ perspective, and that is in favor of the corporations under 

your theory. 

The final question I will ask is for Mr. Jones. You mentioned the 

blowout preventer. We are told that in Norway and in Brazil and 

in places where there is considerable drilling, there is a device 

called an acoustic switch that is required, that is a safety device 

that encourages the operation of blowout preventers—it might actually have been helpful in this particular case—and that the industry argued vociferously against it because it costs $500,000 for 

that piece of equipment. I just want to put that in the context of 

BP’s first quarter earnings this year. You also mentioned those. 

They earned $5.6 billion in the first quarter of 2010. For that, they 

could have bought 11,000 of these devices that are required in 

other States. Instead, they argued against being required to buy 

one. 

How do you feel that the incentives and the economics work in 

terms of how this affected the safety out on the Deepwater Horizon? 

Mr. JONES. Well, from a purely economic perspective, I personally feel that if you are going to play and you are going to make 

billions and billions and billions of dollars, then you need to pay 

to avoid the threat that Mr. Coleman mentioned. You know, even 

though this is an aberration, it is not an aberration in my life. It 

is not an aberration in Michelle and the boys’ lives. You know, any 

threat is too much from my perspective. I know that other people 

think differently about that. I do not. Sitting here today, for the 

reason that I am here, I do not think that way. And I think half 

a million dollars is nothing compared to the loss that we have experienced and all the other families have experienced. 

Senator WHITEHOUSE. Thank you, Mr. Jones. 

Thank you, Mr. Chairman, again. 

Chairman LEAHY. Senator Klobuchar, do you have any further 

questions? 

Senator KLOBUCHAR. Yes, I do. Thank you, Mr. Chairman. 

Chairman LEAHY. Go ahead, and then Senator Franken. 

Senator KLOBUCHAR. Thank you again. I was going back to—my 

last questions were more on specifics of how the law works, but I 

was thinking about this $75 million cap, and obviously we are 

going to try very hard to lift it retroactively to find other ways to 

do this. But the question I keep going back to is whether or not 

BP would have acted so recklessly if it knew that there was not 

a $75 million limit, if they could have foreseen the damages, and 

that maybe they were in a comfort zone because they knew that 

things—their maximum liability would only be for so much. And, 

you know, would they have put in a back-up blowout preventer, 

considered other safety measures that would have prevented this 

disaster? 

And so I am looking at this as how do we best incentivize in a 

free market these companies to do the right thing. Obviously, we 

32 

want them to do their work, but we want them to do the right 

thing and be incentivized not to cause damages to the taxpayers. 

And, to me, if you really have a free market, then they pay for 

those damages. 

Mr. Galligan, Professor, do you want to start with that? 

Mr. GALLIGAN. I will, yes. The whole law and economics theory 

of tort law is based on what you just said, which is that for there 

to be an effective, optimal deterrence scheme in tort law, you have 

to face the full costs of your activities, because when you decide 

what to do and how to do it, if you do not have to pay a cost, if 

you see a cap, if you see a liability limitation, it is rational as an 

economic factor to not consider that cap. That is the basis of Judge 

Calabrese’s work on law and economics; it is the basis of Judge 

Posner’s work on law and economics. And law and economics, as 

you know, has become one of the prevalent theories, along with corrective justice, for modern tort law. 

Senator KLOBUCHAR. I know that. I attended the University of 

Chicago Law School, Professor. 

Mr. GALLIGAN. You do indeed know that, then. 

Senator KLOBUCHAR. I took a class from Professor Easterbrook, 

so that is what I am—— 

Chairman LEAHY. I wondered if you were going to point that out. 

Senator KLOBUCHAR. So I just keep going back to that, and this 

seems the antithesis of it. I am also thinking, being from the Midwest with our ethanol industry, they have to get insurance so they 

buy insurance, but—I mean, I will check it out, but I am not aware 

that they have some major law put in place that if an ethanol plant 

blew up in the middle of the cornfield that they would suddenly 

have the Federal Government coming in and protecting them with 

a liability limit. You know, I want to look at it. But it does not— 

I know they have to get insurance, but I have not heard that they 

have the protection of these liability caps. So it almost seems like 

we are picking one industry over another. 

Are there other energy industries that have these liability caps, 

Professor Galligan? 

Mr. GALLIGAN. I cannot—none that I am aware of to this extent. 

Of course, I am really an expert in maritime law and maritime tort 

law. But I think one thing you see here is the accident of time. A 

statute passed in 1851, statutes passed in 1920 that have not really been reexamined and reconsidered, except in limited contexts. 

And now is a chance to look at them comprehensively. 

Senator KLOBUCHAR. OK. And then this issue of smaller oil and 

gas producers, you know, we do not want to everyone be big. We 

want to have smaller ones as well. Mr. Coleman said that they 

could not meet the liability. But I cannot help but think sometimes 

if you have a smaller company, then they have a different role to 

play in exploration. Maybe they are doing things that are less risky 

so that they can afford the insurance, because in the end it seems 

inconsistent with free market principles to allow companies to externalize the risk of an oil spill and pass it on to society. 

Do you want to comment on the size issue, Mr. Galligan? 

Mr. GALLIGAN. I think you are right on the size issue because I 

think the key issue is not size but safety, and if—whether large or 

small—the entity is unable to adequately and efficiently invest in 

33 

safety, then I think we want to deter those operations, because we 

want to have a sufficiently safe world. We have expectations about 

risk, and we want those expectations to be consistent with fairness. 

So I think the size issue goes hand in hand with the safety issue. 

Senator KLOBUCHAR. Mr. Coleman, do you want to respond to 

any of this? 

Mr. COLEMAN. Yes, I would, Senator. Thank you. 

You know, with all due respect, all these things—the world is 

filled with risk, and so, you know, if we stop doing things that have 

risk to them, then we will not do much. There are many industries 

and many activities in the commercial world that have limitations 

on liability. Certainly the nuclear industry has limitations on liability, shipping industries. It is all a matter of balancing. I understand the difficult role that people in Congress—— 

Senator KLOBUCHAR. Ethanol, solar, wind, do they have limits? 

Mr. COLEMAN. Well, I am not sure whether the ethanol. I do not 

think that the solar and wind folks do. But they are not in a particularly highly risky endeavor. 

Senator KLOBUCHAR. Interesting. That is probably true. 

Mr. COLEMAN. But even what the wind people—the impacts of 

wind are extremely serious to many people considering the amount 

of birds that are killed every year by windmills. 

So everything has its own—if you do not have this offshore oil 

and gas production in the United States, 1.7 or 1.8 million barrels 

a year, you are going to have a lot more tankers bringing that oil 

into this country. That is just a flat out matter of the way it is 

going to be for decades. And so the fact is the National Academy 

of Sciences says that is a more dangerous way for the environment 

to have this oil brought to this country. 

Senator KLOBUCHAR. And, you know, Mr. Coleman, two things. 

One is that I do not think we should stop doing things that are new 

and taking risks. I just think we have to protect the taxpayers from 

taking those risks, because it was not their decision to go down 

5,000 feet and take this risk. And I think we need to protect Mr. 

Jones’ family from that. And so it is a free market decision of how 

to make money. 

So I am not saying that you should ban oil drilling. I am not saying that we should take risks. I am just saying that we have to assess what the potential damages are and make sure that the people 

who are taking those risks pay them. And there may be other 

places to drill—in North Dakota, I mean, you know—that would 

come with it, with less risk that these smaller businesses can do. 

Finally, I am just sorry, but comparing the birds and the windmills to the damage that we are seeing to not just the wildlife but 

to Mr. Jones’ family, I just do not think it is an equal comparison. 

Thank you. 

Chairman LEAHY. We are supposed to wrap this up by 12, but, 

Senator Franken, please go ahead. 

Senator FRANKEN. Thank you for indulging me. 

Chairman LEAHY. You will have the last questions. Go ahead. 

Senator FRANKEN. OK. I will take up Amy’s point. I have never 

seen a solar panel or a wind turbine kill 11 people. I have never 

seen a 50-day ethanol spill. And I think that we have to rethink 

34 

our entire energy portfolio and what we are doing to drive the demand for oil. And I think that this is a wake-up call. 

You say that the American people, in your testimony—this is 

from your written testimony—that the American people continue to 

strongly support offshore oil and gas drilling. There is a CBS poll 

that says 51 percent oppose it. You cite a Rasmussen poll or statistic that 58 percent of the American public supported offshore 

drilling as of June 1st. Did the survey ask people whether they 

supported deep offshore drilling? 

Mr. COLEMAN. I am not certain, Senator. 

Senator FRANKEN. The one you cited. 

Mr. COLEMAN. I think the question was: Do you support continued offshore oil and gas drilling? 

Senator FRANKEN. And do you hear the President saying we 

should suspend all offshore drilling? 

Mr. COLEMAN. The President has suspended everything except in 

500 feet of water, and 92 percent of the oil that we have yet to get 

is beyond that. So, in essence, he has basically said he is putting 

92 percent off limits as of the current time. 

Senator FRANKEN. But the survey that you cited, you do not even 

know—you cited a survey, but you do not know what the questions 

on the survey were? 

Mr. COLEMAN. I have read—I read the previous survey that they 

asked, and this is a follow-on. I assume it was the same question. 

It was just generally offshore drilling. Offshore oil and gas, do you 

support that? 

Senator FRANKEN. The question was: Do you think offshore drilling should be allowed? 

Mr. COLEMAN. Well, that is—— 

Senator FRANKEN. And, obviously, the President thinks offshore 

drilling should be allowed. So the President would be part of that 

58 percent, right? 

Mr. COLEMAN. Senator, I think the implication is that the American people—they are talking about—they are seeing in context 

this accident in 5,000 feet of water. That I think is the most reasonable interpretation that they are thinking about that kind of 

drilling. 

Senator FRANKEN. I do not necessarily buy that at all. OK. There 

are some people who say that—you say that most of the oil is in 

deep water. Right? 

Mr. COLEMAN. Yes, sir. 

Senator FRANKEN. Ninety-two percent. 

Mr. COLEMAN. According to the Government. 

Senator FRANKEN. OK. We have been hearing from certain quarters that the environmentalists caused the deep-sea drilling. But 

isn’t it true that the deep-sea drilling is done because that is where 

the oil is? 

Mr. COLEMAN. Senator, as I said in my testimony, you need to 

be allowed to be able to go where the oil is, and 92 percent—— 

Senator FRANKEN. Right. I just want to speak to this. We have 

heard in certain quarters, from William Kristol, from Sarah Palin, 

that the environmentalists caused this spill because they forced the 

oil companies to drill in deep water. You seem to be an expert on 

deepwater drilling. Would those statements be true? 

35 

Mr. COLEMAN. I can just say I do not know where they got their 

talking points from, Senator. They did not get them from me. In 

my view, the reason we are in deep water is because the United 

States offshore oil and gas industry has driven the development of 

technology to produce oil and gas. And as we have driven the technology, we have been able to go further and further in the offshore—— 

Senator FRANKEN. OK. So we are in agreement here. We are in 

agreement here. I want to end on that. 

Mr. COLEMAN. That would be great. 

Senator FRANKEN. OK. 

[Laughter.] 

Senator FRANKEN. So we are in agreement here that those people 

who say that environmentalists caused this spill because they 

forced the oil and gas industry to drill as far away from shore as 

possible is maybe, oh, poppycock? Would you agree with that? 

Mr. COLEMAN. I would not agree with that completely, Senator. 

I would say—— 

Senator FRANKEN. Really? 

Mr. COLEMAN. But I—— 

Senator FRANKEN. So you think environmentalists caused this 

spill? 

Mr. COLEMAN. I do not believe that—I just did not agree with 

your ‘‘poppycock’’ comment. 

Senator FRANKEN. But you do not think that is poppycock? 

Mr. COLEMAN. No, sir. 

Senator FRANKEN. OK. That is interesting. OK, so environmentalists—maybe we do not end up agreeing with each other. 

Thank you. 

Chairman LEAHY. Can I just interject? If it is not poppycock, 

what is it? 

Mr. COLEMAN. I think the environmentalists have had impacts 

on offshore oil and gas drilling. I do not say that it is—to say that 

they have not had any impact on how far from shore that you drill 

would not be accurate. They have absolutely pushed to a degree 

getting further away from shore. There are many—I can tell you 

many—— 

Senator FRANKEN. But you say that 92 percent of the oil is in 

deep water, and then you say that you have to drill where the oil 

is, but then you say it is the environmentalists’ fault? 

Mr. COLEMAN. I never said that. 

Senator FRANKEN. But then you would say that it is not poppycock to say it is the environmentalists’ fault. This does not make 

sense to me. 

Mr. COLEMAN. If I could, the—— 

Senator FRANKEN. I am sorry, Mr. Chairman. I know you need 

to go, and I apologize for—I think I should wrap up right here. 

Please. 

Chairman LEAHY. I am reminded of the question, and I whispered to Senator Whitehouse, when Willie Sutton was finally arrested from his bank robbery spree, they said, ‘‘Why do you rob 

banks? ’’ He said, ‘‘That is where the money is.’’ 

Why do you drill deep? That is where the oil is. 

Thank you. We will stand in recess—— 

36 

Senator WHITEHOUSE. Mr. Chairman, may I ask that two documents—one, a letter to me from John Torgan, the Narragansett 

Baykeeper in Rhode Island, and the other a letter from Professor 

Susan Faraday at the Roger Williams University School of Law 

Marine Affairs Institute—be made a part of the record of this proceeding. 

Chairman LEAHY. Without objection. 

[The letters appears as a submission for the record.] 

Chairman LEAHY. As I said before, if Senators have further follow-up questions based on an answer given or if any of the three 

testifying wish to add to their answers, they will be given that opportunity. 

We stand in recess. I thank you all very, very much. 

[Whereupon, at 12:08 p.m., the Committee was adjourned.] 

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