[Senate Hearing 111-680]
[From the U.S. Government Publishing Office]


                                                        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

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

61-745 PDF                       WASHINGTON : 2010 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 



















                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin       CHARLES E. GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         JON KYL, Arizona
RICHARD J. DURBIN, Illinois          LINDSEY GRAHAM, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHN CORNYN, Texas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
ARLEN SPECTER, Pennsylvania
AL FRANKEN, Minnesota
            Bruce A. Cohen, Chief Counsel and Staff Director
                  Matt Miner, Republican Chief Counsel
















                            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


    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 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.
    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 
business-friendly 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.

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.
    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 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.
    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.
    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 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.
    [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 3\1/2\ 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 3\1/2\ 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 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.
    [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-to-date. 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 amending 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 under-deters, 
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 2\1/2\ 
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 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 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 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 
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.
    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, 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 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.
    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 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?
    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 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.
    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.
    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 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 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 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 self-interest as a matter of law. Correct?
    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 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 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 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 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?
    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----
    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.]
    [Submissions for the record follow.]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                                 
