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U.S. Senate Energy Bill Stalls Amid Oil Spill Liability Dispute
2010-08-03 21:56:32.719 GMT
By Simon Lomax
Aug. 3 (Bloomberg) -- U.S. Senate Majority Leader Harry
Reid dropped plans for a vote on energy legislation this week as
Republicans and some Democrats called the bill too harsh on
companies that didn't cause the Gulf of Mexico oil spill.
"We are not giving up on energy," Reid, a Nevada
Democrat, told reporters in Washington today.
Reid said the energy bill, which eliminates the $75 million
liability cap for oil spills, toughens offshore oil and gas
drilling regulation, offers federal incentives for vehicles that
run on natural gas and gives rebates for energy-efficient home
renovations, will be debated after Congress returns in September
from a monthlong break.
The U.S. House passed legislation last week that also
eliminated the liability cap and overhauled offshore drilling
regulations in response to the BP Plc oil spill in the Gulf.
While Reid blamed Republican opposition for the decision to push
back a vote, some Democrats said they worried the bill would
unfairly punish some oil companies for BP's spill.
If Congress removed rather than raised the $75 million
spill liability cap in place since 1990, higher insurance costs
would squeeze small- and medium-sized oil companies out of
offshore drilling, Senator Byron Dorgan, a North Dakota
Democrat, told reporters.
Under the "unlimited liability" proposals in the House
and Senate oil spill bills, "you would probably have only a
handful of majors that would be able to drill," Dorgan said.
Pooled Insurance
Dorgan said a "pooled insurance" alternative from Senator
Mary Landrieu, a Louisiana Democrat, was a better idea. Under
this plan, companies would pay into a "mutual insurance fund"
based on how much oil and gas they produce from the U.S. Outer
Continental Shelf, Aaron Saunders, Landrieu's spokesman, said in
an e-mail.
Companies that caused an oil spill would pay the first $250
million in damages and the insurance fund would pay the next $10
billion. The company that caused the spill would be responsible
for any damages in excess of $10.25 billion, Saunders said.
This plan would keep the offshore drilling commercially
"viable," especially for independent producers, Landrieu told
reporters. The Louisiana Democrat said she couldn't support
Reid's energy bill unless the liability plan was changed, Gulf
states were offered a share of federal oil and gas revenue and
the Obama administration's moratorium on deep-water offshore
drilling was lifted.
'More Competition'
Senator Mark Pryor, an Arkansas Democrat, said his "big
concern" with the energy bill Reid unveiled last week was that
unlimited oil-spill liability may "end up running the medium-
size and small-size companies out of the business of deepwater
drilling."
"More competition is good," Pryor said.
The concerns of these Democrats echoed those expressed in a
letter sent to senators from American Petroleum Institute
President and Chief Executive Officer Jack Gerard. He said
unlimited liability "could force most oil companies out of the
Gulf of Mexico, extending the economic harm already being felt
in the region."
Reid's decision to delay a vote is "a sign of strength for
the pro-drilling bloc in the Senate" and opens the way for
negotiations on a compromise during lawmakers' summer break,
Benjamin Salisbury, an analyst at FBR Capital Markets, said in a
report. While it's "more likely than not" that the Senate will
pass an oil-spill bill this year, "the content of that
legislation is now in flux," Salisbury said.
Republican Alternative
Reid pushed back a vote because a number of Democrats were
"seriously considering" voting for an alternative bill written
by Republicans, said Robert Dillon, a spokesman for Alaska
Senator Lisa Murkowski, the senior Republican on the chamber's
Energy and Natural Resources Committee.
On the liability issue, the Republican alternative included
higher caps that were calculated "based on risk factors such as
water depth and the operator's safety record," Dillon said in
an e-mail. The Republican bill also included "an industry-
funded risk pool" to pay for the damages caused by future oil
spills, he said.
Peter Lehner, executive director of the Natural Resources
Defense Council, blamed the Senate's failure to pass oil-spill
legislation before leaving for its summer break on "Republicans
and industry-friendly Democrats."
"When our elected leaders return from their summer
holiday, they must come back ready to break the grip Big Oil has
over Congress," Lehner said in an e-mail.
For Related News and Information:
Top energy stories: ETOP <GO>
Top oil news: OTOP <GO>
--Editors: Richard Stubbe, Kim Jordan.
To contact the reporter on this story:
Simon Lomax in Washington at +1-202-654-4305 or
slomax@bloomberg.net
To contact the editor responsible for this story:
Bill Banker at +1-212-617-2313 or bbanker@bloomberg.net
