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Quote of the day comes from Florida Senator Ben Nelson. He is one of three Senators introducing legislation to retroactively increase the maximum liability that an oil company is on the hook for, from $75 million to $10 billion.

Here is a LAWMAKER, suggesting that a company be punished beyond what the LAW allows:

BP says it'll pay for this mess. Baloney," said Nelson. "They're not going to want to pay any more than what the law says they have to, which is why we can't let them off the hook.

And for those wondering - yes, it it unconstitutional for Congress to do this, as CBS News reporter Mark Knoller wrote:

Even though the Constitution expressly forbids passage of ex post facto laws, some in Congress and at the White House want to retroactively raise the amount for which British Petroleum is liable in the April 20th oil well calamity.

Ex post facto is Latin for "after the fact." And an ex post facto law is one that is enacted or changed to apply retroactively to a crime or other action.

Under current law, BP is liable up to $75 million for cleanup of the oil spill.

But New Jersey's Democratic Senators Robert Menendez and Frank Lautenberg are co-sponsoring a measure to substantially increase the liability limit to $10 billion.

They seem unconcerned by Article 1, Section 9 of the Constitution which states explicitly:

"No bill of attainder or ex post facto Law shall be passed."

The defense these Senators use is that the courts have upheld unconstitutional laws in the past. How comforting.
Lost on these Senators is that BP (NYSE:BP) and Transocean (NYSE:RIG) have already surpassed that $75 million cap voluntarily - BP has already given $25 million checks to four Gulf states, and plans to do all they can to help with cleanup.
Importantly, that $75 million fund I mentioned above is magnitudes smaller than the $2.7 billion maximum allowed in the Oil Spill Liability Trust Fund, which collects five cents per barrel of oil produced in the USA and imported, for the specific purpose of paying for oil spills and their repercussions. Based on daily US production and imports, and with penalty income and about $550million in transfers from the unused predecessor fund, there should be well over $2billion in this fund to be used for a disaster such as this. It's like a high-risk insurance pool, so that daunting liability worries will not scare off drilling activity.
Oh, hippies can feel free to thank George W. Bush for signing the 2005 Energy Policy Act, which re-instated the liability trust fund. It had been discontinued under the Clinton administration.
I bought shares of RIG yesterday, for several reasons:
  1. Shares are cheap, at 6-8times earnings and a Free Cash Flow Yield of 8%-16% depending on how the next few years shake out.
  2. RIG's (not to mention BP's) liability is massively overstated:

    (Click to enlarge)
  3. The offshore oil industry's outlook is unchanged. Any anti-oil sentiment among politicians will be outweighed by their greed. The fiscal impact to federal coffers from a moratorium on offshore drilling would be enormous, and even if that were to happen, RIG has about 70% of its contracts in non-US waters.
  4. The dividend might be delayed, but when instituted at $3.11 (maybe less in the near term), we've got over a 4% yield.

(Click to enlarge)

And the geographic "diversity" of the company's deepwater floaters:

(Click to enlarge)

Disclosure: Author long RIG

Source: Are Senators Unaware of Oil Spill Liability Trust Fund?