Oil Companies Face Unlimited Spill Liability in Bill Passed by U.S. House
Ships assist in clean up and containment near the source of the BP Deepwater Horizon oil spill. Photographer: Chris Graythen/Getty Images
Oil companies drilling in U.S. waters would face unlimited liability and BP Plc would be barred from new offshore leases under legislation passed by the House three months after the worst spill in U.S. history.
House Democrats on a 209-193 vote yesterday pushed through the overhaul of drilling safety and environmental rules over Republican opposition. The bill also puts into law the Obama administration’s elimination of the Minerals Management Service, the Interior Department agency cited for lax oversight.
Gulf Coast lawmakers and oil-industry officials say lifting the liability cap will hurt companies, and Republicans say the measure would make the U.S. more dependent on imports. The Senate may act on its version of oil-spill legislation next week.
“The House bill passed today will kill jobs, threaten our fragile economic recovery and place our energy security at risk,” Jack Gerard, president of the Washington-based American Petroleum Institute, said in a statement after yesterday’s vote. “The unlimited liability provisions will drive the vast majority of American companies out of U.S. waters because they will not be able to obtain insurance coverage.”
The bill includes an amendment, adopted 216-195, that would set aside President Barack Obama’s suspension of deep-water drilling as rigs meet new safety standards. Republicans said the measure didn’t go far enough to eliminate the ban. The House also passed legislation that would shield oil-rig workers who report health or safety concerns from retaliation by their employers.
‘Cozy Relationships’
The Gulf disaster began April 20 when the Deepwater Horizon drilling rig, which BP leased from Transocean Ltd., exploded and caught fire, causing it to sink and killing 11 workers. The well gushed from 35,000 barrels to 60,000 barrels of oil a day before it was stopped on July 15.
“While we may not know the exact cause of the incident, we clearly know what contributed to it,” Representative Nick Rahall, the West Virginia Democrat who sponsored the bill, said yesterday. “A culture of cozy relationships that had regulators interviewing for jobs on the same rigs they were supposed to be inspecting. Drilling plans that were rubber-stamped in a matter of minutes with only the most cursory environmental reviews.”
In hearings and in debate on the House floor, Republicans accused Democrats of taking advantage of the Gulf crisis to pass provisions unrelated to the spill. Two Republicans voted for the measure.
‘Far Beyond’ Drilling
“This bill is supposed to be about the Gulf oil spill, yet it goes far, far beyond offshore drilling,” said Representative Doc Hastings, a Washington Republican. The legislation would impose a $22 billion tax on Americans and raise spending by $30 billion, Hastings said.
The administration has said the pause in deep-water drilling is needed until it’s determined that companies can operate safely and contain and clean up accidents.
The moratorium may be adjusted to allow some new wells to go forward before it is scheduled to end Nov. 30, Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said this month at a hearing in New Orleans. Bromwich has scheduled public hearings beginning Aug. 4 in New Orleans to determine what additional safety measures are needed.
The amendment, sponsored by Representative Charles Melancon, a Louisiana Democrat, would lift the July 12 suspension for companies that meet requirements set by Interior Secretary Ken Salazar.
‘Sounds Good’
While the proposal “sounds good,” it ultimately gives new authority to Salazar to continue the drilling ban, said Steve Scalise, a Louisiana Republican who opposes the drilling pause.
BP objected this week to language disqualifying from new offshore leases companies with safety violations greater than five times the industry average in the past seven years, or that have had more than 10 fatalities at exploration and production facilities in the same period.
The provision “would harm the ongoing effort to increase America’s energy independence,” David Nagel, executive vice president of BP America, said in a July 28 letter to House Speaker Nancy Pelosi, a California Democrat, and House Republican Leader John Boehner of Ohio.
Representative George Miller, a California Democrat who drafted the provision, said BP wouldn’t qualify for new leases based on its past violations.
‘Americans’ Expectations’
“BP does not fit Americans’ expectations of how a responsible company should act,” Miller said in a statement.
Under the House bill, companies such as Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp. would have to prove they can bring leaking wells under control and clean up any spills when seeking new leases.
House Republicans say scrapping liability limits would shut down smaller, independent drillers that can’t insure themselves against potential spill costs. A Senate version also would lift the limits.
Other amendments would impose civil penalties on chief executive officers who give false information about a company’s ability to prevent a spill, and require manufacturers to disclose the chemical formulas of dispersants used to fight oil spills.
The bill is H.R. 3534.
To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net.
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