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Congress Moves to Restrict Drilling Without Curbing Carbon
2010-07-28 04:00:01.2 GMT
(For more on the Gulf oil spill, see {SPILL <GO>.})
By Jim Efstathiou Jr. and Simon Lomax
July 28 (Bloomberg) -- Congressional Democrats proposed
tougher rules for offshore drilling in response to the worst oil
spill in U.S. history, while spurning calls to place a price on
carbon emissions.
House and Senate leaders presented legislation yesterday
rewriting oil and natural-gas drilling rules more than three
months after a rig leased by BP Plc exploded in the Gulf of
Mexico. The bills would strengthen safety and environmental
standards for exploration in federal waters, give Congress
direct oversight of offshore energy production, and require
companies that cause spills to pay all damages.
Pleas from environmental groups and some companies that the
Senate bill include limits on emissions that contribute to
global warming were rejected after Majority Leader Harry Reid, a
Nevada Democrat, said there weren't enough votes for the climate
provisions. The House passed a cap-and-trade bill last year that
would set limits on carbon dioxide linked to global warming and
create a market in pollution allowances.
"We're extremely disappointed that Big Oil and their
allies in the Senate have for now blocked comprehensive clean-
energy legislation," Gene Karpinski, president of the League of
Conservation Voters, said in an interview. "Our job is to make
sure that voters understand which candidates stood with big oil
and which candidates stood for clean-energy jobs, reducing our
dependence on oil and cutting pollution."
Obama's Response
President Barack Obama, who has endorsed cap-and-trade
legislation while not insisting that senators act on it, said
yesterday that the Senate measure is "an important step in the
right direction."
"But I want to emphasize it's only the first step, and I
intend to keep pushing for broader reform, including climate
legislation," Obama said after meeting with congressional
leaders.
White House press secretary Robert Gibbs told reporters he
doesn't think climate-change provisions are "essentially dead
for the year" because they could be restored later in House-
Senate negotiations.
The House and Senate may take up their oil-spill measures
before members leave for their August recess, lawmakers said.
The American Petroleum Institute, an oil industry group,
objected to what made it into the legislation, saying lawmakers
were acting before the cause of the Gulf disaster is known and
imposing penalties that would raise energy prices and kill jobs.
Congressional Democrats called the bill a necessary
response to the spill that began April 20 after an explosion on
the Deepwater Horizon drilling rig leased by BP.
'Protecting the Environment'
"We address safety provisions for offshore drilling by
including independent certifications of critical equipment,"
Representative Nick Rahall, a Democrat from West Virginia who
heads the House Natural Resources Committee, said on a
conference call with reporters. "We provide stiffer penalties
for safety violations."
The Senate measure was stripped of disputed energy
provisions aimed at curbing climate change and setting standards
for the use of renewable energy in a bid to draw support from
moderate Democrats and Republicans, according to Kevin Book, a
managing director at ClearView Energy Partners LLC, a
Washington-based policy analysis firm.
A late addition under which regulators could force
companies to post cash up front to cover legal liabilities from
a spill, as well as the release of a Republican alternative,
make it unlikely that the Senate will pass the measure before
the August break, Book said.
Landrieu on Royalties
The Republican alternative released last week would allow
states to share in drilling-royalty fees. Senator Mary Landrieu,
a Louisiana Democrat, said she may not support the Democratic
bill unless Gulf Coast states are given a share of offshore
drilling revenue.
"It's very unlikely that I can vote for anything related
to the oil spill without making sure the Gulf Coast is
adequately compensated," Landrieu told reporters in Washington
yesterday.
The House bill isn't yet scheduled for debate on the floor,
according to a spokeswoman for Majority Leader Steny Hoyer, a
Maryland Democrat. The House breaks for its August recess on
July 30.
The Senate bill would boost the fee for the federal oil-
spill trust to about 49 cents per barrel, up from 8 cents,
according to a summary released by aides to Reid. The increase
would pay for the cost of the bill, estimated at $15 billion.
The measure provides rebates for cars and trucks that run on
natural gas and for renovations that make houses more energy-
efficient.
Petroleum Institute
Jack Gerard, president of the Washington-based American
Petroleum Institute, said Congress and Obama are overreaching.
Obama has ordered a suspension of deepwater drilling during
inquiries into the BP disaster. Democrats have also proposed
rescinding tax breaks for oil and gas producers.
"There are some proposals that can push the limits or
greatly discourage our ability to produce the energy we need,"
Gerard said on a conference call with reporters.
The House and Senate versions would eliminate the $75
million cap on liability for companies that cause oil spills and
toughen drilling safety standards. When seeking new offshore
leases, companies such as Exxon Mobil Corp., Royal Dutch Shell
Plc and Chevron Corp. would have to prove they can bring leaking
wells under control and clean up any spills.
Barring BP
The House bill would bar BP from operating new drilling
leases in U.S. waters, based on its prior safety record. In a
departure from Senate proposals, it would also bar companies
with leases signed in the late 1990s that don't require royalty
payments to the government from bidding on new tracts if they
decline to renegotiate and pay fees on the earlier contracts.
Both the House and Senate versions would place into law the
Obama administration's decision to scrap the Minerals Management
Service, the Interior Department agency responsible for energy
production on federal leases, and replace it with new agencies
to ensure that revenue collection is kept separate from oil and
gas leasing, environmental protection and safety decisions.
Company executives would have to certify that equipment
such as blowout preventers, devices meant to stop a gusher, are
working. The blowout preventer failed on BP's Macondo well,
5,000 feet below the surface.
The House measure was offered as an amendment to H.R. 3534.
The Senate version hadn't yet been formally introduced.
For Related News and Information:
More on the Gulf of Mexico spill: SPILL <GO>
Top oil, energy news: OTOP <GO>, ETOP <GO>
Nymex crude oil futures curve: CLA <Cmdty> CCRV <GO>
BP results by region: BP/ LN <Equity> FA GEO CHART <GO>
BP income statement chart: BP/ LN <Equity> FA IS CHART
<GO>
--Editors: Larry Liebert, Romaine Bostick
To contact the reporters on this story:
Jim Efstathiou Jr. in Washington at +1-212-617-1647 or
jefstathiou@bloomberg.net;
Simon Lomax in Washington at +1-202-654-4305 or
slomax@bloomberg.net.
To contact the editor responsible for this story:
Larry Liebert at +1-202-624-1936 or
LLiebert@bloomberg.net.
