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Raising Liability Costs Could Help BP, GOP Warns

3 years ago
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Among the many efforts in Congress to rein in large oil companies in the wake of the BP oil spill in the Gulf of Mexico is a proposal by several Democrats to raise or even eliminate the cap on liability costs for oil companies drilling off the coast of the United States.

As the law is now written, companies like BP must pay to clean up any oil they spill, but their liability costs are capped at $75 million if they are not found guilty of gross negligence or willful misconduct. In recent weeks, Senate Democrats have introduced bills to exponentially raise oil companies' liability to $10 billion or even eliminate the caps altogether, thus forcing the companies to pay unlimited sums to anyone adversely affected by the spill, including individuals, businesses and local governments.

But Republicans have blocked those efforts three times, and each time Democrats have accused the GOP senators of protecting big oil companies.

"This is really about whose side do you stand on?" Sen. Robert Menendez (D-N.J.) charged after a recent round of Republican objections to his bill. " Do you stand up with the taxpayers or with multibillion-dollar oil companies?"

But Sen. Lisa Murkowski (R-Alaska), the top Republican on the Senate Energy Committee, has argued the opposite -- that raising the liability caps to $10 billion or more will actually give BP and other large oil companies a greater monopoly in the industry. (She has, however, introduced a bill to waive BP's liability protection for the Gulf spill, and would be open to some increase in overall caps.)

"This would give all of America's offshore oil resources to the biggest of big oil," Murkowski said on the Senate floor. "It would be impossible or near impossible for any energy company that is smaller than the 'super-majors,' smaller than the national oil companies, to operate in the Outer Continental Shelf."

She added that if independent companies cannot afford to insure themselves to explore for oil, they won't be able to get financing to operate. The result would leave leaving the drilling to the Chinese, Russian and Saudi nationalized gas companies, Exxon and of course BP, the largest operator in American waters. Out of luck would be smaller companies like Anadarko Petroleum, Marathon Energy Company, Devon Energy, or Conoco Phillips, which collectively produce one-third of oil and two-thirds of natural gas from the OCS.

A letter to Menendez from John Lloyd, the chief executive of London-based Lloyd Partners insurance company, supports Murkowski's argument, saying that oil companies will not only face higher premiums, in some cases they could not get insurance to operate with unlimited liability. Only multibillion-dollar companies like BP, ones that can afford to pay out of pocket for billions of dollars in damages, will remain in the market.

But whether small companies stay in the offshore drilling business is immaterial to some Democrats, including Sen. Frank Lautenberg (D-N.J.), who said that companies that can't afford to pay damages after a spill should not be operating in the first place.

"If a smaller entity was doing this and actually created the spill in the Gulf, under the view that (Republican senators) have expressed several times, they should have more limited liability," Lautenberg said. "It really means that when you hit oil and it all goes well, the oil company keeps the profit. But when it spills, the taxpayer pays. We think that's fundamentally wrong."

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41 Comments

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thakhanman

Why do we commonly see the consideration of insurance prices as an issue in politics? The issue here is clear: We need to focus on regulating the insurance industry. When compared to the United Kingdom, Australia and New Zealand, we Americans pay ridiculous amounts on insurance premiums and our insurance companies walk away with huge profits. Why is the issue here with how much money the oil companies will pay in insurance premiums? Surely not every exploration will result in a disaster and hence the insurance companies are walking away with near-criminal profit margins.

May 31 2010 at 9:13 PM Report abuse rate up rate down Reply
dragonstiger42

It is obvious that BP, as all involved including wall street, congress, and corporations. That we as energy consumers need to face the fact, that oil is a liability to our american lives and others around the world. We compromise common sense in every aspect of our energy and foriegn policies. The Fact is we have all the facts. We need to change our energy policies period. BP and all involved in the current spill were never really prepared to deal with this type of environmental tragedy. This is unacceptable and an outrage. The contengency plan is failing. The effects on the southern states of the USA will be crippled for years. It is time to wake up AMERICA. It is time time to change. For the better of all and not put our heads in the sand. We have the technology and drive still as a americans to set a course of dramatic change on how we will hand this planet to our children. We can VOTE these solutions and representatives into congress and get back to the real democratic way. YOU ARE THE GOVERMENT SO WE NEED TO TAKE ACTION by getting involved with legitimate reprensentation, free from special interest.

May 27 2010 at 3:38 PM Report abuse +1 rate up rate down Reply
CHROBO42

Americans want BP to accept full financial responsibility for this disaster and I don\'t think any of us are in the mood to pay for their mess. If the Republicans pursue this line of thinking it WILL come back to haunt them.

May 27 2010 at 11:29 AM Report abuse +3 rate up rate down Reply
tholslag

Reading articles like this is why I don\'t and never will vote Republican. They\'re the party of the rich and big business and always have been. They suckered the religious right for years to vote for them. However today, many evangelical Christians are waking up to their greedy ways. I too have money in the stock market but when companies like BP are responsible for big messes, like this current one, that they created in the Gulf that will impact people\'s lives and the environment for years, they need to pay for \'all\' of it no matter how burdensome it might be! The Republicans better watch out because come November their is a decent silent majority out their that will answer them at the polls. Not that the Democrats are perfect, because they\'re far from it, but at least they\'re the party trying to fight for the common man or woman. T.Holslag

May 27 2010 at 11:19 AM Report abuse rate up rate down Reply
mrbillybear

I think that big oil should pay for all damages, no matter the amount of the cost. 75 million is nothing! The gulf has probably suffered more in damages than the 75 million. Taking into account the small and large fishing business. The eco system may never recover. Remember Valdez? they are still cleaning up that mess. I think the government should go after BP and any other oil company for full cost of clean up.

May 27 2010 at 11:06 AM Report abuse +3 rate up rate down Reply
Mike

Whats the old saying......You have to DO something in order to Fail at it.

May 27 2010 at 11:05 AM Report abuse -1 rate up rate down Reply
pookeybren

The long term effects from this oil spill will be with us for meny years. BP and the other oil companies need to spend billions to clean it up and for research into technology to prevent spills and to cleanup the environment. The amount of groundwater pollution from past leaking underground storage tanks at gasoline stations, refineries and storage facilities, residential and commercial underground oil tanks combined is greater then all the onshore and offshore oil spills combined. the chemical pollution, from leaking UST\'s into groundwater is to blame for a large amount of cancer in my professional and educated opinion. The cost of groundwater cleanup past and present must be in the billions alone.

May 27 2010 at 10:59 AM Report abuse +1 rate up rate down Reply
jeh0530

There is a more logical way to handle this......rather than legislate this, the permit process should include a provision that requires a third party (Lloyds or a consortium of insurance companies) to underwrite this drilling. Obviously, the premium would be enormous, but the oil companies returns are as well. The amount of coverage would be determined by the government based on a worse case senario. This would eliminate the GOP\'s argument that this would hurt smaller companies. Unless the operation was considered a risk to the environment....a permit could be issued without this condition. Finally, the consortium will become another set of eyes on the drilling operations....they will get their own experts to advise them on the degree of risk. Obviously, the government agency is too corrupt. What Congress should legislate is if it is determined the spill is criminal negligence.....some prison time will make these large international companies think a little more with their brains rather their balance sheets and bonuses.

May 27 2010 at 10:55 AM Report abuse +2 rate up rate down Reply
Suzanne

If congress wanted to raise the liability above 75 million, it should have been done before this disaster. Making a change retroactive is unfair. And moot, because you know the company is going to be found negligent and then the cap doesn\'t apply anyway. We are all so righteously enraged by this, but I\'ll bet we all drove our cars to work today, complain when gas prices go up, and don\'t want any drilling in our backyards.

May 27 2010 at 10:53 AM Report abuse -5 rate up rate down Reply
dredselw

If you kill the goose there won\'t be any golden eggs to help pay for the clean up! BP didn\'t do this on purpose and they stand to loose more than anyone. I question the ability of the man in charge of this one platform. There had to be some sort of warning that was missed.

May 27 2010 at 10:48 AM Report abuse -2 rate up rate down Reply

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