US Senate Republican joins Democrats on BP liability issue

19 May 2010 19:51  [Source: ICIS news]

WASHINGTON (ICIS news)--A key Senate Republican on Wednesday joined Democrats seeking to raise the financial liability cap for offshore oil spills in the wake of the BP disaster in the Gulf of Mexico, but voiced concern over a proposed $10bn (€820m) liability cap for cleanup costs.

Senator Lisa Murkowski of Alaska, the ranking Republican on the Senate Energy and Natural Resources Committee, said that she and committee chairman Jeff Bingaman (Democrat-New Mexico) have agreed to hold a hearing on the liability issue next Tuesday, 25 May.

Murkowski’s action followed a statement by President Barack Obama, who said he was disappointed that Democrat-sponsored legislation that would impose much greater liability on energy companies for offshore spills had been “stalled on a partisan basis”.

“I urge the Senate Republicans to stop playing special interest politics and join in a bipartisan effort to protect taxpayers and demand accountability from the oil companies,” Obama said on Tuesday.

Murkowski and Senator James Inhofe (Republican-Oklahoma) had earlier blocked the Democrat bill, warning that the measure would make it financially impossible for anyone other than major oil companies and state-owned energy giants to drill for oil in US waters of the Gulf of Mexico.

The “Big Oil Bailout Prevention Act”, (S-3305) sponsored by Democrat Senators Robert Menendez and Frank Lautenberg of New Jersey and Bill Nelson of Florida, would raise the liability cap for oil spill cleanup costs from its current $75m (€61.5m) to $10bn.

Menendez, Lautenberg and Nelson have long opposed all offshore drilling and have called for a permanent ban on energy development in the US outer continental shelf (OCS) regions. Some Senate Democrats have called for an unlimited liability provision for energy companies pursuing offshore oil and gas resources.

Murkowski said that “setting the cap arbitrarily at $10bn might sound good on TV, but it could do significant harm to the nation’s energy security and the ability of American firms to compete against large nationalised oil and gas companies”.

A $10bn liability provision would require energy companies to secure insurance equal to that amount before they could risk offshore drilling, Murkowski’s office noted, which would price all but the largest private and state-owned energy companies out of the field.

A drilling liability insurance policy typically costs 3% of the face amount, or $300m for $10bn worth of coverage.

“The irony is that under such a bill only BP and other foreign supermajors - most of them nationalised companies such as Saudi Aramco, the Chinese National Oil Company, Russia’s Gazprom and Venezuela’s state-owned oil giant PDVSA - could produce America’s offshore resources,” Murkowski said.

She and Inhofe both noted that Interior Department Secretary Ken Salazar also voiced concern about the proposed $10bn liability cap, saying that setting the liability target too high would quash competition in the Gulf.

Murkowski said that Bingaman has agreed to hold a hearing on the matter next Tuesday to try to determine how liability obligations for offshore energy development could be increased without crowding out smaller energy firms.

“We need to give careful consideration to where and how the strict liability cap should be set to avoid any unintended consequences,” she said.

($1 = €0.82)

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