Senate OCS foes introduce bill to raise spill liability limit

Three US Senate Democrats opposed to expanded oil and gas activity on the US Outer Continental Shelf introduced a bill on May 3 that would raise the liability limit for a company deemed responsible for an offshore spill to $10 billion from $75 million.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 3 -- Three US Senate Democrats opposed to expanded oil and gas activity on the US Outer Continental Shelf introduced a bill on May 3 that would raise the liability limit for a company deemed responsible for an offshore spill to $10 billion from $75 million.

The measure is a response to the Apr. 20 Gulf of Mexico semisubmersible drilling rig accident and subsequent oil spill, according to its sponsor, Robert Menendez (NJ). Bill Nelson (Fla.) and Frank R. Lautenberg are cosponsors.

“We’re glad that the costs for the oil cleanup will be covered, but that’s little consolation to the small businesses, fisheries, and local governments that will be left to clean up the economic mess that somebody else caused,” Menendez said. “We can’t let the burden fall on the taxpayers—we should ensure that those who cause the damage are fully responsible. There is no such thing as a ‘Too Big to Spill’ oil well, which is why we need this economic protection in place.”

Menendez said the measure would also eliminate a $1 billion/incident incident cap on claims against the Oil Spill Liability Trust fund and give community responders access to the fund immediately instead of making them wait to be reimbursed. If damage claims exceed the amount in the fund (currently $1.6 billion, the senator said), claimants could collect from future revenues with interest under the bill. It also would eliminate a $500 million cap on natural resources damages.

Requests inquiry
Earlier in the day, Nelson asked Mary L. Kendell, the US Department of the Interior’s acting inspector general, to investigate US Minerals Management Service regulations covering offshore wells’ blowout preventers and control systems, and whether the oil and gas industry unduly influenced the rules’ formulation. Nelson said on Apr. 29 that he was preparing a bill that would suspend development of a new federal OCS 5-year program and any new OCS oil and gas activity until the accident and spill investigation is completed.

US Interior Secretary Ken Salazar announced on Apr. 30 that DOI will establish a new OCS safety oversight board, fully review offshore drilling safety and technology issues, and further tighten oversight of industry equipment testing.

The board’s recommendations and findings of the US Coast Guard and US Minerals Management Service’s joint investigation of the accident and spill will help guide implementation of the 5-year OCS strategy which the Obama administration announced on Mar. 31, he said. But it will be some time before the accident and spill’s full impacts on federal OCS policies can be determined, Washington observers generally agreed.

Frank A. Verrastro, senior vice-president and director of the energy and national security program at the Center for Strategic and International Studies, suggested it is too early to speculate beyond a likely increase in regulatory scrutiny, calls for more redundant systems and testing, and enhanced spill containment plans.

‘Thoughtful, pragmatic’
“While some groups and politicians have used the accident to reinforce calls for reimposing a moratorium on further offshore drilling, the Obama administration has taken the thoughtful and pragmatic approach of delaying new leasing decisions pending a determination of what really caused the accident and a spill of this magnitude,” he said. “It should be commended for doing so in the face of political pressure.”

Michael D. Olson, a former deputy US Interior secretary for lands and minerals management who now is counsel at Bracewell & Giuliani’s Washington office, said it’s also important to consider what actually was in the Obama administration’s Mar. 31 OCS program announcement.

“The mainstream media interpreted it as a big expansion into new areas. That’s not exactly what the president did,” he told OGJ. “In reality, it was basically the identification of a certain number of areas which the administration would study and analyze for purposes of proceeding with development of a 5-year program.”

Olson said the accident and spill’s causes will affect federal OCS oil and gas policies. “But the bottom line is that the analyses the administration and president announced will take 2 years, and no drilling was going to take place before 2014,” he continued. “There were going to be a significant number of environmental analyses before the Deepwater Horizon incident.”

Contact Nick Snow at nicks@pennwell.com.

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