Cathy Landry | 202.682.8122 | landryc@api.org
WASHINGTON, May 13, 2010 — Congressional action to raise the limit on the oil spill liability trust fund by more than 10,000 percent could threaten the economic viability of all Gulf of Mexico operations, according to a statement by American Petroleum Institute President and CEO Jack Gerard:
“Precipitous changes to the Oil Spill Liability Trust Fund could undermine our nation’s economic and energy security by making oil and natural gas operations in the Gulf of Mexico uninsurable by all but the largest companies.
“Initial economic analysis shows raising the liability cap to $10 billion per incident would limit Gulf operations to only the largest companies, forcing mid-size and smaller firms who cannot self-insure from the market. Insurance industry equity is insufficient to provide such coverage, but even if insurance were available, the hypothetical premium increases could raise the total unit costs of exploration and production in the Gulf of Mexico by 25 percent, making many fields uneconomical to produce, which would threaten our nation’s energy security, reduce government revenues and cost thousands of American jobs.
“Existing law holds companies accountable for all the costs associated with cleaning up oil spills and up to $75 million in economic damages, though even that liability limit does not apply in instances of gross negligence, willful misconduct, or violation of applicable federal regulations. Injured parties can also pursue damages in state court, which are not limited by the federal liability cap.
“Any necessary changes in the trust fund should be determined after there is a clear sense of the resource needs arising from this incident and should be thoughtfully considered with an opportunity for all stakeholders to be heard.
“Congress should endeavor to preserve the trust fund’s viability without undermining the oil and natural gas industry’s ability to insure capital investments. Gulf of Mexico oil production accounts for 30 percent of U.S. crude oil production and represents a critical component of U.S. energy resources necessary to meet future demand.”
Updated: May 13, 2010