Senate Democrats include spill provisions in broader energy bill

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, July 29 -- US Senate Democrats took a different approach than their counterparts in the House and included provisions responding to the Gulf of Mexico well blowout, rig explosion, and crude oil spill in a larger energy bill on July 27. Republicans immediately criticized the proposal to remove liability limits, which they said would push independent producers out of offshore operations, and offered their own measure to address other spill-related issues.

The Democrats’ bill also would invest $5 billion in the Home Star energy efficiency program, promote manufacturing and deployment of natural gas and electric vehicles, and fund the federal Land and Water Conservation Fund for 5 years, Senate Majority Leader Harry M. Reid (D-Nev.) said.

The measure did not contain a carbon cap-and-trade section or any other provision to address global climate change. “This bill does not address every issue of importance to our nation’s energy challenges, and we have to continue to work to find bipartisan agreement on a comprehensive bill to help reduce pollution and deal with the very real threat that global warming poses,” Reid said. “But this is a good bill that deserves bipartisan support, and continues us along the path toward a clean energy future.”

The bill was prepared in secret and worked out behind closed doors instead of openly and transparently, Lisa Murkowski (R-Alas.), the Senate Energy and Natural Resources Committee’s ranking minority member, charged in a July 28 floor speech. “The phrase ‘rush to judgment’ has been used a lot in this chamber in recent years, but I challenge my colleagues to find a more flagrant example than this bill,” she declared.

Like HR 3534 in the House, the Senate Democrats’ Clean Energy Jobs and Oil County Accountability Act would remove the $75 million limit on liability for damages from an offshore oil spill. It also would increase the federal Oil Spill Liability Trust Fund’s $1 billion cap to $5 billion and raise the amount oil companies are required to pay into the fund to 49¢/bbl. Leaseholders also would be required to have financial protection covering legal liability arising from an oil discharge.

Additional provisions
It also aims to improve claims processing under the 1990 Oil Pollution Act, specify oil spill response plan requirements, establish a federal inter-agency oil pollution research coordinating committee, codify reorganization of the former US Minerals Management Service, and require a study of the deepwater drilling moratorium’s impacts on Gulf of Mexico employment and small businesses. Penalties for violating federal water pollution laws would be increased “to appropriately account for the actual harm to the public and the environment.” Antiquated maritime and admiralty laws would be amended to reflect modern operations more accurately, including offshore oil and gas exploration and production.

Murkowski said that the Republicans’ bill includes S. 3516, the Outer Continental Shelf Reform Act which the Energy and Natural Resources Committee unanimously passed on June 30. Their measure also would codify US Interior Secretary Ken Salazar’s reorganization of MMS as the Bureau of Offshore Energy Management, Regulation and Enforcement; establish new liability limits for each offshore project based on a range of relevant risk factors; create a bipartisan commission to investigate the Apr. 20 Macondo well blowout, rig explosion, and subsequent crude oil spill; and return a small share of federal production revenue to coastal states.

The Democrats also inserted a provision requested by Robert P. Casey Jr. (Pa.) into their final bill which would make oil and gas producers and service companies disclose ingredients used in hydraulic fracturing fluids. “The entire universe of additives used in the fracturing process is known to regulators and the public, as is mandated as such under federal rules enforced by [the Occupational Safety and Health Administration],” responded Lee O. Fuller, executive director of Energy in Depth and vice president of government relations at the Independent Petroleum Association of America.

“The problem with this provision is that it has the potential to create a series of legal responsibilities that operators, and even service companies, might not be able to fulfill, especially under a scenario where folks are asked to post information that doesn’t even belong to them,” he continued. “The amazing thing is this provision appears to be moving ahead even as [the US Environmental Protection Agency] and Congress continue to study the issue. It raises the question of why they’re doing the study in the first place if policymakers don’t appear to be all that interested in learning anything from it.”

‘A jobs killer’
American Petroleum Institute President Jack N. Gerard also criticized the Senate Democrats’ bill. “The liability provision sticks out as a jobs killer,” he maintained. “Requiring an unattainable level of insurance coverage for domestic energy producers on the OCS will force the vast majority of American companies out of US waters, according to insurers. Even those that could self insure operations would see costs skyrocket, driving investments out of the United States, further hurting our economy, employment and energy security, according to a recent analysis by Wood Mackenzie.”

Gerard said that API was pleased that the bill included an analysis of the deepwater drilling moratorium’s economic impacts, but added that a better approach would have been to repeal it. “Majority Leader Reid suggests his bill will create 150,000 new jobs, but our analysis indicates that failing to develop in the deepwater of the Gulf of Mexico will cost more than that – 175,000 jobs, the majority of them in already hard-hit Gulf Coast communities. Clearly, that is not a win for Americans,” he said.

House Republicans, meanwhile, blasted Democrats on that side of the Capitol for dropping a provision establishing a commission including oil and gas experts to investigate the Apr. 20 accident and spill from their final bill. “By deleting the bipartisan, independent oil spill commission that’s received bipartisan support in both House and Senate committees, Democrats have shown they are more interested in protecting the president than getting independent answers to what caused this tragic Gulf spill,” said Doc Hastings (Wash.), the Natural Resources Committee’s ranking minority member.

“Some of the biggest failures that contributed to the gulf disaster are the direct responsibility of the federal government and by deleting this bipartisan, independent commission, Democrats ensure that only the President’s hand-picked commission will be digging into any failures of his own Interior Department appointees,” he continued. “There is widespread agreement that no member of the president’s commission possesses technical expertise in oil drilling, and several are on the record in opposition to offshore drilling and support a moratorium that will cost thousands of jobs.”

“To investigate what went wrong and keep it from happening again, the commission must include members who have expertise in petroleum engineering. The president’s commission has none,” added Bill Cassidy (La.), a Natural Resources Committee member. “It defies common sense that this amendment passed unanimously in committee, only to be deleted in the speaker’s office.”

Contact Nick Snow at nicks@pennwell.com.

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