Britain’s oil companies face the doubling of the maximum payment for third-party costs resulting from pollution, amid concerns that the current limits are inadequate after BP’s massive oil spill in the Gulf of Mexico.

In the UK, individual companies are responsible for environmental or other material damage if their installations fail. There is no legislative cap on their liabilities for any clean-up.

But if they default on their payments, then under a voluntary industry agreement the rest of the industry guarantees to deal with the costs for any pollution damage and for the reimbursement of public authorities. The current liability limit is $120m per incident and UK Oil and Gas, the industry association, is proposing to raise that to $250m (€196m, £160m) in the wake of the BP disaster.

Scrutiny of offshore drilling safety regimes has intensified since the explosion of the Deepwater Horizon rig on April 20 that killed 11 workers and led to 4.9m barrels of oil spewing into the waters of the gulf. No new oil has flowed into the gulf since July 15, when the well was capped. BP announced last week that its own costs for cleaning up the spill and compensation payments had risen to $6.1bn so far.

UK Oil and Gas said that the proposed increase would be voted on at an emergency meeting by signatories to the Offshore Pollution Liability Agreement, or Opol, on Wednesday. Under the agreement, which was signed in 1974, each member undertakes to maintain a financial obligation to Opol of $120m for any one incident, thus guaranteeing the payment of any claim from a party that cannot meet its own obligations.

via FT.com / UK / Business – UK liability limits to double after BP spill.