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Energy Bill Would End Oil Claims Cap

Source: WSJ


Posted on 28 Jul 2010

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A draft energy bill unveiled Tuesday would eliminate the cap on damage claims oil companies must pay for spills, and offer new federal subsidies for natural gas and electric vehicles. But the proposal by Senate Democrats faces an uphill fight.

Major industry groups, including the major oil industry lobby, and some Republicans quickly denounced the measure outlined by Senate Majority Leader Harry Reid (D., Nev.)

House Democrats have a separate package of energy proposals drafted in response to the Gulf disaster they say they will act on as early as this week. But with little time left on the legislative calendar before the November elections, it isn't clear how soon Congressional leaders can reconcile differences between the two proposals and get legislation to President Barack Obama.

Mr. Reid's draft bill would lift the current $75 million cap on economic damages paid to residents and small businesses by oil companies after oil spills. It would also provide various subsidies to encourage the production and purchase of natural-gas and electric vehicles. A new program would encourage homeowners to make energy efficiency upgrades.

The measure's estimated $15 billion cost would be financed by raising the per-barrel surcharge that oil companies contribute to the federal Oil Spill Liability Trust Fund. Mr. Reid's aides said the amount had not been worked out, though a summary of the draft legislation said the surcharge would be increased to 49 cents on a 42-gallon barrel, up from eight cents now.

The bill reflects a number of compromises Mr. Reid has brokered in recent days between the liberal and moderate wings of his party. In a concession to lawmakers from states heavily dependent on coal-fired electricity, the legislation does not include a mandate on electric power companies to raise their use of renewable electricity, despite lobbying by wind-energy companies and some Democratic senators.

It would, however, provide various incentives—such as rebates and loan guarantees—to encourage the purchase of vehicles that run on natural gas or electric batteries, part of a broader effort by Democrats to reduce U.S. reliance on oil.

"This bill doesn't address every issue of importance but this is a package the leadership believes has the best chance possible of getting out of the Senate and to the president for his signature," Mr. Reid's spokesman, Jim Manley, said.

The oil industry, through the American Petroleum Institute, said Tuesday the proposal would "kill American jobs, slow economic growth and cost billions in federal oil and natural gas revenues." The industry is particularly concerned that eliminating the cap on economic damages from oil spills could render offshore drilling uneconomic for all but the largest petroleum companies.

Some other trade groups and companies also are lobbying against any provisions in the bill that would increase demand for natural gas. The groups say they worry such incentives—along with potential new state and federal regulations on drilling for natural gas—could result in a supply crunch, causing higher electricity prices and the prompting the shift of domestic manufacturing jobs to foreign countries.


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