US Sen. Mark Begich (D-Alas.) proposed draft legislation to move discussions forward on developing alternatives to eliminating offshore oil spill liability limits. His action came 3 days after Majority Leader Harry M. Reid (D-Nev.) and other Democratic leaders postponed debate on their energy bill with a liability limit provision until after Labor Day.
The draft is designed to demonstrate progress in good faith negotiations among senators and to gather necessary comments from oil and gas producers, the insurance industry, fellow lawmakers, and the public, Begich said on Aug. 6.
He said the proposed bill would set an initial level of individual company liability and require all companies operating on the US Outer Continental Shelf to share the cost of damages above that amount. The measure would ensure multiple levels of liability protection between spillers and taxpayers, he indicated. "While most agree the current $75 million liability cap for economic damages is too low, simply lifting the cap is not a solution," Begich said. "This bill strikes a balance between encouraging independent American producers with proven track records to continue to produce offshore oil and gas and holding all development companies liable for spills. As we have witnessed in the Gulf of Mexico in recent months, the market strength of a company doesn't dictate its safety record."
Both the Senate's proposed bill and the oil spill measure the US House approved on July 30 include elimination of liability limits. Independent producers have said that this would effectively drive them from the Gulf of Mexico and elsewhere along the domestic OCS because it would make it impossible for them to get insurance.
Minimum of $250 million
Under Begich's concept draft, producers operating on the OCS would be required, as a leasing condition, to carry insurance to a level determined by the US Interior secretary through a public rulemaking process, subject to a minimum of $250 million. Beyond the $250 million of individual company liability, all OCS producers would collectively share liability for up to $20 billion in damages. Lessees would pay collectively for economic damages based on their level of production and the number of acres under lease.
If economic damages from a catastrophic spill exceeded $20 billion, liability for the portion above that amount would return to the individual company. The Interior secretary would have the ability at that point to require a spiller to deposit funds covering any further outstanding liability into an escrow account so taxpayers would not be liable for the damages, Begich said. He said that his proposal also would give the secretary broader powers to use the existing Oil Spill Liability Trust Fund, which is financed by an excise tax on all crude oil entering the US, to assist citizen claimants by allowing him to borrow from the US Treasury if the fund's balance was not sufficient.
"The shared liability under this bill gives all OCS operators an incentive to argue for U.S. laws and safety regulations to be the best in the world," Begich said. "We can protect our oceans, wildlife and the public's pocketbooks while protecting good-paying American oil and gas jobs."
Sen. Mary L. Landrieu, meanwhile, reintroduced her May bill aimed at restoring Mississippi Delta ecosystem sustainability and protection late on Aug. 5 with a provision to eliminate liability limits while facilitating a mutual insurance system to spread the risk fairly among offshore operators. This would enable smaller independents to continue to operate offshore while ensuring that taxpayers would never have to pay the costs of a spill, she said.
In addition to the original bill's proposal to accelerate the sharing of federal oil and gas revenue with affected coastal states, her latest proposal also would lift the Obama administration's deepwater drilling moratorium, start construction of new coastal restoration projects, and facilitate processing of claims from the $20 billion fund which BP PLC established after its leaders met with President Barack Obama.
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