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Democrats Propose Massive Increase in Oil Company Liability

May 10th 2010

Energy Topics - Gulf oil spill

Congressional Democrats are pushing their first legislative response to the Gulf Coast oil spill, proposing to vastly raise the liability cap on companies that are responsible for offshore disasters.

With anger at BP mounting by the day, the legislation has clear populist inspiration and could win expedited passage in Congress, officials say. The bill swiftly earned the backing of House Speaker Nancy Pelosi (D-Calif.) a day after the White House said it “strongly supports” efforts to significantly increase the oil pollution liability cap.

The measure, introduced in both the House and Senate, would raise the cap on economic damages for oil spills from $75 million to $10 billion, meaning companies like BP would be forced to pay more than 133 times what they are now required to. That money would be in addition to the direct costs of cleanup, which the responsible party already must pay.

Seizing on voters’ weariness of financial bailouts, lawmakers cast the bill as a way to save taxpayers money, in that the companies themselves would have to pay significantly more. They titled it the “Big Oil Bailout Prevention Act.”

“In a fair and just world, companies like BP should pay for every last cent of the mess they’ve made, not taxpayers, not the tourism industry, not the fishing industry, not small businesses,” a lead co-sponsor, Rep. Rush Holt (D-N.J.), said. “Our bill is clear: The buck stops with oil companies; it shouldn’t spill over to taxpayers.”

Eight Democrats from coastal states joined Holt in introducing the bill. Three of them—Reps. Paul Hodes (N.H.), Artur Davis (Ala.), and Kendrick Meek (Fla.)—are running in statewide campaigns this fall. The House leadership highlighted the measure’s introduction. “The Speaker supports this legislation and hopes it will come to the floor quickly,” Pelosi spokesman Drew Hammill told The Hill. A similar version of the legislation was introduced Tuesday by Sens. Bill Nelson (D-Fla.), Robert Menendez (D-N.J.), Frank Lautenberg (D-N.J.) and others. Majority Leader Harry Reid (D-Nev.) told reporters he supports the legislation but does not know when he might bring it up for a vote. He noted the existing queue of legislation and nominations that the Senate must act on and blamed Republicans for slowing the chamber’s work. “When you’re dealing with the ‘party of no,’ it’s hard to figure out how you’re going to move on things,” Reid said.

Nelson said Wednesday the liability legislation could be added to an upcoming tax extenders bill. “We started talking about it today as putting it as a part of the very necessary tax extenders bill that we’re going to pass to keep some of those tax cuts in place for middle-income people,” he told MSNBC. President Barack Obama has said BP will “pay the bill” for the spill in the Gulf. But the current law is complicated. The company would have to pay for direct cleanup and containment costs, but the cap on other economic damages, such as lost business and tax revenue, is $75 million. If the company is found to be negligent or to have willfully violated federal regulations, however, there is no limit to what it could pay under the Oil Pollution Act of 1990.

In a posting on the White House website Tuesday, communications director Dan Pfeiffer said the administration strongly supports the legislative effort to change the law and “will aggressively pursue compensation from BP for any damages from this spill. Changing the Oil Pollution Act so that its cap does not limit our ability to collect damages would increase our chances of collecting adequate compensation,” Pfeiffer wrote. He added that the administration is also considering additional fines and damages that BP could be liable for under other federal and state laws.

A spokesman for House GOP leader John Boehner (Ohio) reacted cautiously to the Democrats’ new proposal. “BP was clearly responsible, and must pay for the cleanup,” said Michael Steel. “But before we talk about new legislation, Congress should find out exactly why this happened, what it will cost and how we can best prevent future accidents.”

BP spokesman Toby Odone said the liability cap is “obviously up to the policymakers. It’s a matter for the U.S. government to decide.” BP CEO Tony Hayward has said in recent days that the oil giant will pay all “legitimate claims” for damages from the spill, which threatens the Gulf Coast’s seafood and fishing industries and other sectors. The spill stems from the April 20 explosion of the Deepwater Horizon rig that BP had leased from owner Transocean for drilling a deepwater prospect. “I think it is inevitable that the [liability] cap will be exceeded,” he said Tuesday.

The oil industry’s top lobbying group, the American Petroleum Institute, said it is reviewing the legislation. The proposal to raise the liability cap was not the only legislation put forward Wednesday in response to the oil spill. Nelson, Meek and several others unveiled a measure to bar new offshore oil exploration until the Gulf spill investigation is complete and a full report issued. “The long-term impact of this spill and potentially others on Florida could be absolutely devastating. An immediate moratorium is the only way to go,” said Meek.

The bill would halt any new exploration, development and production in federal waters, including seismic tests. Lawmakers are also looking into legislation that would toughen offshore safety requirements in an effort to prevent future spills. Several House and Senate hearings are scheduled on the issue in the coming weeks.

Russell Berman and Ben Geman write for The Hill's E2 Wire, from which this article was adapted. Alexander Bolton and Vicki Needham also contributed to this article.

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