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Industry comes out firing against Dems' oil spill response plans
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07/27/10 11:42 AM ET
The oil industry's main trade association came out firing Tuesday
against Democratic oil spill response plans the industry argues would
kill jobs and hamper U.S. economic growth.
American Petroleum
Institute President and CEO Jack Gerard cited provisions that
retroactively lift liability limits for offshore oil and gas producers
and end deepwater royalty waivers as prime examples.
“We should
be focused on jobs and economic recovery,” Gerard said on a conference
call with reporters Tuesday. “We believe what comes out of the discussions on the oil spill should be directly related to the oil spill."
House Natural Resources Chairman Nick Rahall (D-W.Va.) defended the House package as protecting the offshore environment and workers.
API has not finished reviewing a House oil spill plan sent to the Rules Committee Monday and was still waiting for details of a Senate strategy being unveiled later Tuesday.
But Gerard pointed to a House provision that would retroactively lift liability caps for oil and gas companies — also expected to be in the Senate version, saying it would “effectively push out small and midsized producers” who are unable to afford insurance for offshore projects.
Gerard said one positive idea being floated is creating a mutual insurance program, where oil and gas producers share the financial responsibility for future spills.
Gerard criticized new House standards for blowout preventers — designed as a last-stop measure to stop a well from rupturing — that he says are being offered prematurely, before the causes of the Gulf spill are known.
“We’re going into surgery without a diagnosis,” he said. “This is the ultimate in malpractice.”
The failure of the blowout preventer on the BP-owned Macondo well is widely seen as the main cause for the spill.
House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) defended the new requirements, arguing congressional probes of the spill have yielded enough information to prescribe new blowout prevention and well design standards. He also noted that the congressional plans give regulators flexibility to update the requirements.
“Perhaps he [Gerard] would like to have no minimum requirements, but that would be a mistake,” Waxman said on the conference call.
Gerard is also troubled by House language that requires companies to give up royalty waivers on deepwater leases issued between 1996 and 2000 before they can acquire new leases. Leases issued in 1998 and 1999 mistakenly lacked provisions that ended royalty waivers — called “royalty relief” — when oil and gas prices exceed certain limits. In addition, due to an appeals court decision, royalty requirements for at least some deepwater leases sold in 1996, 1997 and 2000 are also not in effect. The House language, though, has raised constitutionality concerns.
The royalty waivers stem from a mid-1990s law aimed at giving oil companies incentive to undertake costly deepwater projects.
Beyond that, Gerard said it is extraneous to include the language in legislation aimed at addressing the Gulf spill. “We believe what comes out their discussions on the oil spill should be directly related to the oil spill,” Gerard said.
Rep. Ed Markey (D-Mass.) called the provision necessary to prevent forgone royalty payments that, according to Government Accountability Office estimates, could eventually total tens of billions of dollars. Markey said ensuring the payments would help reduce the deficit.
House and Senate plans might also seek to roll back billions in tax incentives for oil and gas companies, as well as more than quadruple the per-barrel tax companies pay into an oil spill liability trust fund.
Gerard said these, too, would hurt oil and gas development, jobs and economic growth.
“Why we would do that in the current environment … we’re not sure,” he said.
