WH proposes hiking BP’s liability for oil spill, raising industry fees for clean-up fund

Wednesday, May 12, 2010

WH wants increased industry liability in oil spill

WASHINGTON — The White House asked Congress Wednesday to raise limits on BP’s liability for the Gulf oil spill, approve new spending on everything from food stamps to seafood inspections and increase taxes on oil companies for an emergency cleanup fund.

Administration officials said they couldn’t forecast total costs from the cleanup of the massive spill and a multitude of economic damages to the Gulf region, but the changes they’re seeking in the legislative package unveiled Wednesday suggest a multibillion-dollar response.

The administration wants to increase from $1 billion to $1.5 billion the amount that could be spent from an emergency cleanup fund paid with industry fees, and raise a $75 million liability limit BP would bear for costs not directly connected to cleaning up the spill, such as lost wages and tourism.

BP PLC will pay as much as possible, administration officials told reporters on a conference call, although some of the new proposed spending — such as money for the Interior Department to conduct inspections for proposed offshore drilling leases — cannot be charged to BP.

Nonetheless, said White House energy adviser Carol Browner: “We take BP at their word. They say they intend to pay for all costs. And when we hear ‘all’ we take it to mean all.”

BP spokesmen did not immediately respond to messages seeking reaction but the company has said it will pay cleanup costs and legitimate claims. BP estimates it has already spent more than $350 million responding to the spill, trying to contain the leak and cleaning up the 4 million gallons of oil already in the Gulf. The price tag increases at least $10 million a day

A 1990 law passed in the wake of the Exxon Valdez spill in Alaska makes “responsible parties” — in this case BP — liable for cleanup costs from oil spills but limits to $75 million their exposure to other kinds of claims. The administration did not propose a new figure for the liability limit, saying they would work with lawmakers to find the appropriate amount. A number of Democrats have introduced legislation raising the limit to $10 billion.

The current $75 million liability limit is unchanged since passage of the 1990 Oil Pollution Act. The act provided for the limit to be periodically adjusted upward for inflation but that never happened; federal officials planned to revisit the figure in 2012, according to Coast Guard documents.

Browner said the White House believes the legislation unveiled Wednesday could apply retroactively. Democratic lawmakers have cited the Superfund program as an example of legislation enacted to clean up environmental hazards that existed prior to enactment.

Jeff Liebman, acting deputy director of the Office of Management and Budget, said the administration wants to pass the legislation in the next few weeks. Lawmakers are looking for a legislative vehicle to attach it to.

The White House proposal would also:

—Raise from 8 cents per barrel to 9 cents per barrel an excise tax paid by oil companies to finance an Oil Spill Liability Trust Fund, beginning this year. —Increase allowable per-incident expenditures from the fund to $1.5 billion, from $1 billion now. Already, the Coast Guard has tapped some $100 million from the fund, which started with $1.6 billion before the spill, although the administration hopes to make BP repay the money.

—Give $2 billion to the Food and Drug Administration to monitor seafood safety in the Gulf.

—Give $29 million to the Interior secretary for studies related to the safety of offshore drilling. The bill would also give the Minerals Management Service more time to review and approve oil and gas leasing plans. President Barack Obama, who has proposed a limited expansion of offshore drilling, has said no new leases will be allowed until Interior Secretary Ken Salazar completes a study of what new safety precautions are needed.

—Provide $15 million to out-of-work fishermen if a fisheries disaster is declared.

—Provide up to 26 weeks of benefits to self-employed workers and other workers ineligible for regular unemployment compensation in the Gulf.

—Make people affected by the spill eligible for food stamps.

The proposals add up to $118 million in new discretionary spending, Liebman said. That does not include the cost of the unemployment insurance or food stamps, which in all likelihood would dwarf the other spending.

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