Raising oil spill liability limits is hot topic at House hearing

By Jonathan Tilove, The Times-Picayune

The thorny issue of raising oil spill liability limits rose at two congressional hearings Wednesday, with Rep. Jeff Landry, R-New Iberia, predicting that higher caps would “destroy the shallow-water drilling industry,” and an economist who studied the issue for the Oil Spill Commission testifying that the lower limit encouraged the industry to “underinvest in safety.”


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Rusty Costanza, The Times-Picayune The Helix Producer 1 was photographed in February in the Gulf of Mexico 112 miles south of Houma.

Helix Energy Solutions is part of an effort by 20 companies to have a system ready to deal with a crisis such as the BP oil spill in the Gulf of Mexico.

The Oil Pollution Act caps liability for damages from an offshore spill at $75 million per incident, a limit that BP waived in the aftermath of its Deepwater Horizon disaster last year. It’s not yet clear how much the deep-pocketed oil giant will end up paying for the massive spill.

The National Oil Spill Commission recommended that Congress significantly raise the liability cap, and Rep. Edward Markey, D-Mass., the top Democrat on the House Natural Resources Committee, who has authored legislation to implement many of the commission’s recommendations, goes even further in his bill, which would remove the cap altogether.

Otherwise, he said, the taxpayers are on the hook to make up the difference.

At a committee hearing on Republican bills to speed the pace of permitting and open new offshore areas to drilling, Markey pressed the liability issue in his questioning of Hank Danos, president of Danos and Curole Marine Contractors, an oilfield service company based in Larose, who had been called to testify about how the slowdown in drilling had led him to lay off 200 workers.

“Do you believe that a $75 million penalty for the kind of spill we saw is high enough, or should it be higher?” asked Markey, demanding an answer as Danos struggled to say that anything that increased costs wasn’t helpful.

When it came his turn to ask questions, Landry revisited the liability issue with Danos.

“Mr. Danos, you do a lot of work for shallow-water drilling contractors. Could you tell me if they remove the liability cap on the (Outer Continental) Shelf, the impact for those oil and gas contractors?” asked Landry, noting that most of those shallow-water companies are relatively small.

“My understanding is that if the liability cap was removed, that there would be more wells shut in and shut down, and less production in the Gulf of Mexico,” Danos said.

“So it would destroy the shallow water drilling industry,” Landry said. “Is that what it would do?”

“It could,” Danos said.

But at an afternoon hearing of the House Science Committee’s subcommittee on Energy and the Environment, Molly Macauley, research director for Resources for the Future, an independent research center, suggested that “limited liability and sometimes-ineffective regulatory oversight can lead people to naturally under invest in safety.”

Macauley studied that issue as part of her research for the Spill Commission into the industry’s development, or lack of development, of spill containment technology.

In the aftermath of the disaster, two groups — the Helix Well Containment Group and the Marine Well Containment Co. — have just completed development of new deepwater containment response systems that could respond in the event of loss of well control, and that have enabled the federal government to begin approving permits for new deepwater drilling.

Owen Kratz, president and CEO of Helix Energy Solutions Group, who also testified before the Science subcommittee, said he doesn’t agree with Macauley’s conclusion that the liability cap worked to discourage investment in the kind of expensive system his group had created.

He said the oil industry’s self-interest in avoiding a disaster like the Deepwater Horizon is so deep and plain, that “these companies don’t even think about the liability cap in keeping a spill from happening.”

On the contrary, Kratz said, “I can definitely see a high cap being a disincentive to innovation,” by simply driving business out of the Gulf of Mexico.

( Original Article )


Posted on April 8, 2011, in Natural Gas, Oil & Gas - offshore, Regulation, United States and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink. 2 Comments.

  1. Да уж сколько людей столько и мнений ! 🙂
    Good Website

  2. Hi everybody, I’m new here. Been lurking for a while and at long last decided to sign in and say Hello!

    Looking forward to participate in the discussions rather than just reading :p

    It was about time…

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