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Needed Reforms in Response to The Oil Spill

05/11/2010

With today’s Senate hearing including witnesses from the three companies involved in the Gulf of Mexico oil disaster BP, Transocean and Haliburton – it is important to focus on needed reforms going forward:

1. Your Spill, Your Bill: H.R.5214, the Big Oil Bailout Prevention Act (and its Senate companion S.3305), would increase the liability of a deepwater leaseholders responsible for an oil spill to $10 billion – up from the paltry $75 million under current law. This current law cap can be exceeded if caused by “gross negligence or willful misconduct” – standards that can take years to prove, delaying payments to victims. Importantly, this legislation would retroactively apply to this current disaster. It is important to note the difference between these bills and the one introduced by Sen. Lisa Murkowski (S.3309). Murkowski, who hails from the oil-producing state of Alaska, proposes increasing liability for spills to $10 billion – but rather than expose oil company executives and shareholders to that liability (as HR5214 does), S.3309 instead asks consumers to pony up the $10 billion by increasing the 8 cent-per-barrel tax on both domestically produced and imported oil to 9 cents.

2. Restructure the Regulator. The Minerals Management Service has structural schizophrenia: On one hand the agency must act as a cheerleader for oil drilling, as it’s responsible for delivering tons of cash to the treasury from lease sales and royalty collections. But on the other hand, MMS is asked to protect the environment and workers by being a tough independent enforcer of safety rules. This split-personality causes internal problems that are not necessarily the fault of the agency’s hardworking civil servants. One solution would be to spin off the agency’s environmental regs to the EPA, the workplace/rig safety rules to OSHA and let the agency retain its functions of overseeing lease sales and royalty collections.

3. Safety First. Regulations that would have required emergency backup blowout prevention (BOP) valves that could be controlled acoustically – as they do in Norway and Brazil – were swatted away by Big Oil. In March 2000, MMS released a safety alert that concluded that “the MMS considers a backup BOP actuation system to be an essential component of a deepwater drilling system and, therefore, expects [outer continental shelf] operators to have reliable back-up systems for actuating the BOP . . .” But MMS never adopted formal regs requiring such backup BOPs. Indeed, in March 2003, a consultant hired by MMS concluded that MANDATING such acoustic controls would be “very costly” – see page 40 of 86 of the .pdf. Oil companies should be required to spend the $500,000 that such acoustic BOPs cost. These deepwater operations ain’t your daddy’s oil well – operating in 5,000 feet of water and drilling down an additional 20,000+ feet, these wells are encountering enormous pressure and dangers, and safety regulations haven’t kept pace.

4. Hold Big Oil Accountable. Whether it’s ensuring that oil companies pay their fair share of royalties and taxes, or taking companies to task for routinely violating U.S. laws, if BP and its partners are found to have negligently caused this disaster, we can’t be satisfied with another financial slap on the wrist. We need to consider permanent sanctions – whether that’s denying oil companies access to lucrative leases, keeping them from securing federal contracts or revoking their corporate charters – all options need to be on the table to send a clear message to corporations that criminal misconduct will not be tolerated. 

5. Ban New Drilling. We should make permanent a ban on new offshore drilling, leasing and permitting  until a full investigation into the causes of the Gulf of Mexico disaster has been completed.

Tyson Slocum

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