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Wednesday, 4 August 2010

So long, new deepwater drilling regulations
By Shelley DuBois, reporter

FORTUNE -- Yesterday, Democrats in the Senate rejected taking up a new oil spill response bill because of a dispute over who foots the costs of future spill cleanups and more importantly, how much those parties -- largely oil and exploration companies -- will pay. The Senate is voting on the bill, vaguely titled "a bill to promote clean energy jobs and oil accountability, and for other purposes" in response to BP (BP)'s spill in the Gulf at the Macondo well.

Other parts of the over 400-page bill about energy in general and offshore drilling in particular include safety measures. Until some version of the bill passes, important issues with offshore drilling will remain caught in legislative limbo.

That's a problem. Oil companies have argued that they have stringent safety policies on offshore rigs, regardless of holes in the regulatory system. Many of them do. But this spill has highlighted the need for more efficient oversight.

This block will slow that. The Senate, according to Politico, is supposed to vote again next month, but there's no sign anything will change in that time to help the bill pass.

The major point of contention was the lifting of the liability cap. Generally, Democrats want to hold companies accountable for spill-related damage over $75 million(See editor's note.) Republicans think that the liability cap should stay, so that spills won't bankrupt oil companies.

Either way, the debate is holding up policy that should have been in place long before the spill.
Some examples of actions from the defunct bill that will now live in limbo:
  • SEC. 104. OIL AND HAZARDOUS SUBSTANCE RESPONSE PLANNING: This section mandates that the government must have a plan if another spill of this size happens again. The US has never had to deal with a spill of this magnitude, nor has it ever had to intervene at the level it has with the Gulf spill. As a result, it stumbled from strategy to strategy. A well thought-out and well described plan should help in future catastrophes 
  • 204. SCIENCE AND TECHNOLOGY ADVICE AND GUIDANCE. A non-government, non-industry group of science and technology experts would weigh in on whether the government's oil spill response plan is adequate.
  • SEC. 205. OIL POLLUTION RESEARCH AND DEVELOPMENT: This would allow the Department of the Interior to research ways to clean up oil spilled in the continental shelf and figure out how much damage this spill actually caused. There generally isn't good follow-up to spill damage once the slicks are gone. This would be a welcome change.
  • SEC. 626. CERTIFICATE OF INSPECTION REQUIREMENTS: Under this section, floating rigs would have to adhere to the highest safety requirements. The key part of this is regulating blowout preventers - the section demands that all rigs have one that works. Most rigs out there do. Still, given the blow out preventer problems with the Deepwater Horizon, it couldn't hurt to put this requirement more firmly on the books.
For any of these regulations to win passage, both political parties will have to agree about how much to charge companies that spill, with Republicans seeking to limit damages for future spills. Otherwise, other important parts of deepwater drilling regulation will be bereft of a much-needed update.

Editor's note: Due to an editing error the damage cap was reported as $75 billion. It is $75 million. To top of page
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