The Obama administration broke away from Senate Democrats on Tuesday when it echoed a Republican argument against raising liability claims on oil companies.
The intra-party dispute was on display during Interior Secretary Ken Salazar’s testimony on legislation to raise oil companies’ financial obligations after disasters like the one in the Gulf of Mexico.
Salazar told lawmakers that a drastic increase in liability could drive smaller oil-drilling companies out of business, echoing an argument Republicans have used.
Salazar’s position is in contrast with Senate Majority Leader Harry Reid’s (D-Nev.), who told reporters Tuesday that he wanted to lift the cap on economic damages above $10 billion.
The Obama administration wants Congress to raise the legal liability, but it has not provided a target figure.
Democrats blasted Salazar’s argument. In a move that seemed designed to ease Democratic worries on Capitol Hill, President Barack Obama put out a statement Tuesday evening, laying blame for stalled legislation with the Republicans.
“I am disappointed that an effort to ensure that oil companies pay fully for disasters they cause has stalled in the United States Senate on a partisan basis,” he said.
“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’s statement did not express support for the Democrats’ proposal or refute Salazar’s testimony.
BP, which leased the deepwater rig that exploded in the Gulf last month, earned $6.1 billion in profits in the first quarter of this year.
Corporate liability for oil spills is now capped at $75 million, less than the average profit BP earns in one day.
Sen. Robert Menendez (D-N.J.) asked Salazar about the proposal to raise the liability ceiling to $10 billion at an Energy and Natural Resources Committee hearing.
Salazar declined to endorse the $10 billion figure, saying lawmakers should avoid setting a cap that would harm smaller companies. He called for working with Congress to arrive at a number that “makes sense” and isn't “arbitrary.”
“It is important that we be thoughtful relative to that, what that cap will be, because you don’t want only the BPs of the world essentially to be the ones that are involved in these efforts, that there are companies of lesser economic robustness,” Salazar said.
“People will be held accountable,” Salazar said of the Gulf disaster. “We will work with you and other members of the Congress at getting to a number that makes sense and is not an arbitrary number.”
Sen. Bill Nelson (D-Fla.), who supports raising liability to $10 billion, blasted Salazar’s argument that it could drive smaller companies out of business.
“That’s ridiculous,” said Nelson. “A company, whatever damage it causes, ought to be responsible instead of the American taxpayer.”
Earlier in the day, Nelson warned that GOP opponents would try to push that line of rebuttal.
“For the life of me, I can’t understand someone objecting, as they are going to do, in raising an artificial limit of $75 million up to at least $10 billion,” Nelson said. “The argument you’re going to hear is they are going to say, ‘Oh, it shouldn’t be this, it ought to be tied to profit.’
“Is it really responsible public policy to say that because a company makes less money that it should be responsible for less damage?” Nelson said.
Sen. James Inhofe (Okla.), the ranking Republican on that panel, told Salazar that only the biggest multi-national and state-owned oil companies could afford the huge insurance bills to cover a $10 billion liability.
Salazar said the administration was taking this concern into consideration.
“The president has sent a request to the Congress to lift the amounts on the liability limitation,” Salazar said. “What that amount should be should take into consideration the kinds of facts that you are alluding to here, Sen. Inhofe.”
Inhofe was happy with the answer.
“He’s in agreement,” said Inhofe, who added that puts the administration at odds with Menendez and other Senate Democrats.
Reid told reporters on Tuesday that “$10 billion is too small.”
“I’m for no cap,” Reid said, noting estimates of damages from the Gulf spill reach $14 billion.
Inhofe and Sen. Lisa Murkowski (Alaska), the ranking Republican on the Energy and Natural Resources Committee, say the cap should be higher than $75 million but the issue needs more review.
“Certainly, we need to raise these limits,” said Inhofe. “Now, where should it be raised, I don’t know where the cap should be. And we’re going to have to find out as this thing moves along.”
Salazar has taken a similar position.
“Sounds like he’s trying to figure out what the cap should be; he said he’s into raising it but didn’t say what the amount was,” Menendez said of Salazar.
Menendez held back from criticizing Salazar but questioned the wisdom of lowering the liability level to protect smaller companies, a position the administration seems headed toward.
“Creating pressure to reduce the liability cap for independent operators but letting big guys off the hook wouldn’t make any sense at the end of the day,” Menendez said.