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Vol. 15, No. 33 Week of August 15, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

What will Gulf spill yield in Washington?

House passes tough CLEAR Act, but Senate Democrats are forced to call a timeout on their own bill; lots of legislation pending

Wesley Loy

For Petroleum News

The Gulf of Mexico oil spill has spawned a great deal of proposed legislation in Washington, D.C., but what we’ll end up with remains as muddy as were the waters around BP’s runaway Macondo well.

Both wings of Congress have worked to craft sweeping legislation to address many aspects of the disaster and oil industry regulation.

So far, only one major bill has passed either body. On July 30, by a vote of 209-193, the Democrat-controlled House passed H.R. 3534, the Consolidated Land, Energy, and Aquatic Resources Act of 2010 — the CLEAR Act.

The 281-page bill cleared the House even before the investigation is complete into exactly what led to the April 20 explosion on the Transocean semisubmersible rig Deepwater Horizon, which was drilling the Macondo exploration well for BP about 41 miles offshore Louisiana. The rig ultimately sank, 11 workers died and oil gushed into the Gulf for weeks in what some have dubbed the nation’s worst environmental disaster.

The CLEAR Act now moves to the Senate, where leaders there recently tried to advance their own bill before giving up as lawmakers took their summer recess.

Senate Majority Leader Harry Reid, D-Nev., said Aug. 3 his bill, S. 3663, the Clean Energy Jobs and Oil Company Accountability Act of 2010, would have to wait until after members return in mid-September.

Reid cited lack of support from any Republicans, whose alternative proposal, S. 3643, “doesn’t even hold BP accountable for the enormous economic damages it’s caused to Gulf Coast communities. Their bill doesn’t create a single job, and it doesn’t do anything to end our addiction to oil.”

Sen. Lisa Murkowski of Alaska, the ranking Republican on the Senate Energy and Natural Resources Committee, countered Reid: “The truth is he saw the writing on the wall,” she said. “The Majority Leader didn’t pull his bill because of Republican opposition, he pulled it because his fellow Democrats were deserting him, planning to vote against it and supported the concepts of the Republican bill.”

CLEAR Act provisions

The House’s CLEAR Act actually combined parts of multiple bills related to the Gulf disaster, including one that caused considerable heartburn among some in Alaska — H.R. 5626, the Blowout Prevention Act of 2010, sponsored by Rep. Henry Waxman, D-Calif., chairman of the House Committee on Energy and Commerce.

The three members of the Alaska Oil and Gas Conservation Commission, which regulates drilling activity, sent a July 27 letter to the Alaska’s congressional delegation urging them to oppose H.R. 5626, saying it would subject state drilling regulation to federal oversight. The commissioners said it would be “ludicrous” to suggest the federal government can do a better job than the states of regulating oil and gas drilling, considering that federal regulatory lapses are suspected of playing a role in the Gulf disaster.

The CLEAR Act appears to retain language that could extend federal power over state drilling regulation. Section 205 of the bill says states “may submit” to the Interior secretary “a plan demonstrating that the State’s regulatory regime” for certain wells is up to standard, including wells in inshore waters. The act says this would apply to “offshore drilling operations that take place on lands that are landward of the outer Continental Shelf and seaward of the line of mean high tide, and that the Secretary determines, based on criteria established by rule, could, in the event of a blowout, lead to extensive and widespread harm to safety or the environment.”

Other provisions of the CLEAR Act include “removing the $75 million cap on economic damages to be paid by Big Oil to families and small businesses” after oil spills, a summary from House Speaker Nancy Pelosi’s office said. The bill also would reform what the Obama administration already has reformed — the agency formerly known as the Minerals Management Service. The bill also does away with certain royalty relief; orders myriad regulations on blowout preventers, well design and cementing; and includes certain protections for oil and gas industry employee whistleblowers.

Other bills pending

Dozens of bills were filed in the House following Deepwater Horizon, some of which are reflected in the CLEAR Act.

Among significant bills pending in the Senate:

• S. 3763, reintroduced by Sen. Mary Landrieu, D-La., on Aug. 5, would lift the deepwater drilling moratorium.

• S. 3514, the Guaranteed Oil Spill Compensation Act of 2010, sponsored by Sen. Mark Begich, D-Alaska, would require oil companies to “set aside adequate funding in an escrow account to address the damage and claims from a major catastrophic oil spill like the one in the Gulf of Mexico.”

Begich on Aug. 6 also released a draft oil spill liability bill and invited comment from industry, insurance companies and others.

“While most agree the current $75 million liability cap for economic damages is too low,” Begich said, simply eliminating the cap could discourage drilling.

“This bill strikes a balance between encouraging independent American producers with proven track records to continue to produce offshore oil and gas and holding all development companies liable for spills,” Begich said.

Under Begich’s concept draft, companies operating on the outer continental shelf, as a condition of leasing, would be required to carry insurance to a level determined by the Interior secretary through a public rulemaking process, subject to a minimum of $250 million, a press release from Begich’s office said. Beyond the $250 million of individual company liability, all OCS producers would collectively share liability for up to $20 billion in damages. Lessees would pay collectively for economic damages based on their level of production and the number of acres under lease.

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