Senate Panel Moves to Lift Cap on Oil Spill Damages

(Adds comment by Senator Cardin in fourth paragraph. For more on the Gulf oil spill, see {SPILL }.)

By Kim Chipman

June 30 (Bloomberg) -- BP Plc would have unlimited financial liability for the Gulf of Mexico oil spill under a measure approved today by a Senate panel to scrap a $75 million limit under a 20-year-old law.

The amendment to the Oil Pollution Act of 1990 would force offshore oil drillers responsible for spills to pay “the full cost” of damages. The Senate Environment and Public Works Committee approved the measure by voice vote and sent it to the full Senate.

President Barack Obama supports raising the ceiling and has faulted Republicans for blocking efforts to make BP more fully liable for damages tied to the worst U.S. oil spill. BP Chief Executive Officer Tony Hayward has said he expects the liability limit to be increased. The legislation approved today replaced a proposal to boost the limit from $75 million to $10 billion.

“We aren’t sure $10 billion is enough,” Senator Ben Cardin, a Maryland Democrat and member of the committee, said in an interview.

Committee Chairman Barbara Boxer, a California Democrat, said Americans shouldn’t be forced to pick up the tab for damage caused by the BP oil spill that began April 20 when a drilling rig exploded.

“No taxpayer bailouts,” she said before the vote.

‘Legitimate Claims’

BP will honor all “legitimate” claims from those harmed, such as the region’s fishing and tourist industry, regardless of any cap, Hayward has said.

The company has been unable to stop the flow of oil from the leaking well in the Gulf. The gushing crude has soiled at least 140 miles of coastline and shut down as much as a third of fishing areas in the region.

Companies responsible for spills already face unlimited costs related to cleanup and for actions deemed to be in the category of “gross negligence.”

Previous Democratic efforts to lift the limit on liability were blocked by Republicans, who said a higher limit would make it financially prohibitive for independent producers to drill.

“Thousands of jobs, particularly along the Gulf Coast, could be lost,” Republican Senator Lisa Murkowski of Alaska said last month at a Senate Energy panel hearing.

Oil companies say increasing or eliminating the liability cap would discourage domestic exploration and make independent oil and natural gas operations in the Gulf uninsurable.

Smaller Firms

Raising the cap “would limit Gulf operations to only the largest companies, forcing mid-size and smaller firms who cannot self-insure from the market,” Jack Gerard, president of American Petroleum Institute, a Washington-based trade group, said on May 13.

Senator James Inhofe of Oklahoma, the senior Republican on the committee, sought unsuccessfully today to introduce an alternative giving U.S. presidents the power to set liability limits based on the circumstances of a particular offshore drilling facility, including insurance.

Senator David Vitter, a Louisiana Republican, failed in a bid to limit attorney’s fees to 5 percent for any claim recovered under the Oil Pollution Act.

The committee accepted a Vitter amendment requiring Kenneth Feinberg, who is overseeing a $20 billion fund for victims of the BP spill, to report to Congress twice a year on the status and payments from the fund.

The Senate committee also approved today a separate measure that would set up an office at the Interior Department to research oil-spill prevention and response and would authorize grants to universities to pursue related research.

--With assistance from Lisa Lerer in Washington. Editors: Steve Geimann, Larry Liebert

To contact the reporter on this story: Kim Chipman in Washington at kchipman@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net