$Stock*Shop*Charts*News*Option$

[Stock Lobster]

BL: Democrats Prepare Bill to Remove $75 Million Damages Limit for Oil Spills

By Lisa Lerer

June 3 (Bloomberg) -- U.S. House Democrats, responding to the Gulf of Mexico oil disaster, are preparing legislation to eliminate the $75 million cap on damages that large companies must pay over oil spills and tighten regulation of the industry, Democratic aides said.

The plan will be introduced after Congress returns next week from its Memorial Day recess, said the aides, who spoke on condition of anonymity because the proposal is still being revised.

The legislation would lengthen the 30-day review process for new drilling permits, require new environmental safeguards and increase congressional authority over the Minerals Management Service, the federal agency that oversees offshore drilling, the aides said. They said Democratic leaders haven’t decided whether the plan will be introduced as one legislative package or several bills.

BP Plc and federal officials have been unable to stop the flow of oil from the leaking well in the Gulf. The spill, which began in late April, has soiled about 140 miles of coastline, shut down a third of fishing areas in the region, halted new deep-water oil exploration in the Gulf and cost BP at least $1 billion.

The legislation would apply to BP and Transocean Ltd., which leased the well to BP.

Economic Losses

Under current law, oil companies must pay up to $75 million for economic losses caused to states, businesses and residents. There is no limit on the amount companies can be required to pay to clean up oil spills.

White House press secretary Robert Gibbs said the administration would ask Congress to eliminate the cap on economic damage payments.

“One of the things that we called for was the lifting of the economic liability cap to an unlimited level,” Gibbs told reporters June 1. “That’s where we feel comfortable, given the enormity of the disaster that we’re looking at.”

House Speaker Nancy Pelosi, a California Democrat, said last week Congress should consider eliminating the cap on economic damages caused by oil spills.

“There is a movement afoot in Congress for that,” Pelosi said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” on May 29. “Why have a cap?”

Republicans have blocked efforts to raise the cap to $10 billion.

‘Cumulative Effect’

“We also must consider the cumulative effect of the different levels of liability, which could be economically devastating,” said Republican Senator Lisa Murkowski of Alaska at a Senate Energy and Natural Resources Committee hearing on oil-spill liability issues last week. “Thousands of jobs, particularly along the Gulf coast, could be lost.”

Senator Mary Landrieu, a Democrat from Louisiana, also has argued that the additional costs could hurt smaller oil refiners operating offshore.

Oil companies oppose raising the liability cap, saying it would discourage domestic exploration and make independent oil and natural gas operations in the Gulf uninsurable.

Raising the cap, American Petroleum Institute President Jack Gerard said on May 13, “would limit Gulf operations to only the largest companies, forcing mid-size and smaller firms who cannot self-insure from the market.”

$150 Million Proposal

Republican Senators David Vitter of Louisiana and Jeff Sessions of Alabama have introduced a bill that would raise the cap to $150 million or an amount equal to the last four quarters of a company’s profits, whichever is greater.

Other proposals would increase the per-barrel tax paid by oil companies into the Oil Spill Liability Trust Fund, a federal fund established to ensure that there is money available to clean up spills. The House passed legislation last week increasing the fee to 34 cents a barrel from 8 cents.

The U.S. asked a federal judge in Houston on June 1 to reject a bid by Transocean to use a 159-year-old law to cap its liability at $27 million for environmental claims tied to the spill.

To contact the reporter on this story: Lisa Lerer in Washington at [e-mail]

Last Updated: June 3, 2010 13:03 EDT

http://www.bloomberg.com/apps/news?pid=20601087&sid=a4ym5T29jatE&pos=9