IPAA: Excessive liability limits will drive independents from gulf

Independent oil and gas producers that have operated safely in the Gulf of Mexico for 40 years should not be pushed out of there by dramatically higher spill liability limits, Independent Petroleum Association of America Pres. Bruce H. Vincent said.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 19 -- Independent oil and gas producers that have operated safely in the Gulf of Mexico for 40 years should not be pushed out of there by dramatically higher spill liability limits, Independent Petroleum Association of America Pres. Bruce H. Vincent said.

“Unfortunately, some in Congress are quickly moving forward with legislation which will have profound, negative consequences for independent producers,” said Vincent, who also is president of Swift Energy Co. in Houston. “They are proposing changes that would increase offshore liability limits to unrealistic levels under the 1990 Oil Pollution Act—$10 billion, $20 billion, no liability limit.”

At a May 18 US Senate Environment and Public Works Committee on the gulf oil spill response, committee member Frank R. Lautenberg (D-NJ), said: “We’re hearing that some smaller companies are concerned they couldn’t afford the insurance with a higher liability limit. If they can’t afford it, they shouldn’t be out there.” Lautenberg, who has cosponsored a bill to raise the spill fund’s liability from $75 million to $10 billion, also called for a permanent halt to all oil and gas activity on the US Outer Continental Shelf.

“Make no mistake: Independent producers that operate in the offshore are not ‘mom-and-pop’ operations; they are well funded organizations that have been responsible operators in the offshore for more than four decades,” said Vincent in response to views expressed by other supporters of such legislation. “However, these liability legislative proposals will empower multinational and foreign oil companies while creating an impossible financial challenge to other American companies who compete with these corporations in the offshore.

“It will result in thousands of lost American jobs and increased reliance on foreign oil,” Vincent warned. “The proposals do not achieve any of our national security, domestic energy, or economic priorities, namely to provide for more American-produced energy, jobs and fewer oil imports.”

Vincent said IPAA is working with Congress to clarify that the 1990 OPA law imposes liability on offshore producers for spill removal costs and $75 million of damages; that independents must rely on insurance to meet this obligation which would not be available at the $10 billion level; and that offshore spill insurance for independents is near its worldwide capacity.

Noting that independents produce 30% of the crude oil in the gulf and 60% of the natural gas recovered there, Vincent said that not being able to get insurance would force upstream independents out of there and other US offshore areas, which not be justified based on their performance there.

“IPAA is also working to remind Congress that a significant aspect of OPA 90 was the creation of a trust fund filled by crude oil taxes that is intended to be used by injured parties to compensate them for economic damages instead of requiring lengthy litigation,” said Vincent. The association and its members support expansion of this industry-wide fund to ensure that future spill costs and claims are covered, he indicated.

Contact Nick Snow at nicks@pennwell.com.

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