Alaska Journal of Commerce: Alaska senators on spill bandwagon with new federal bills

Alaska's U.S. senators, Lisa Murkowski and Mark Begich, are jumping on the bandwagon for new federal oil spill legislation with proposals to push Alaska-related offshore proposals.

Murkowski planned to introduce a bill dealing with payments on spill liability claims and limits on industry liability. Included in that is a measure on revenue sharing of federal oil royalties with coastal states, including Alaska, and the establishment of regional citizens' advisory councils modeled on the councils established in Alaska after the 1989 Exxon Valdez spill.

Presumably the legislation would provide for an advisory council for Alaskan Arctic offshore exploration.

Murkowski's bill also restricts oil transportation in Arctic waters to pipelines rather than tankers to reduce the potential for spills.

Begich planned to propose his own bill dealing with liability and financial responsibility and also is proposing the regional citizens' advisory commissions, including for the Arctic.

His bill also proposing a beefed up program for research in oil spill prevention and response technology, and as well as infrastructure.

Murkowski said her bill would authorize the president to set liability on offshore oil and gas projects on a case-by-case basis at time of lease using a set of criteria, including a company's safety record and the depth and pressure of the reserve being developed.

Responsibility for claims in excess of an individual cap would be shared by all offshore operators in U.S. waters.

"There are areas where we know the risks of drilling for oil are higher and it's appropriate that operators in those areas have higher liability limits," Murkowski said. "My goal with this legislation is to ensure that we set an appropriate level of liability to protect our oceans and coastlines without damaging our ability to produce the resources our economy depends on."

To speed payment to those affected by the oil spill, Murkowski's bill would establish an administrative process – with an administrator named by the president and confirmed by the Senate – to approve compensation claims without requiring a prolonged court battle. It would also limit attorney fees related to the Gulf spill to 5 percent of compensation.

"There is real concern out there about the prompt payment of claims," Murkowski said. "People are looking for a level of assurance that they will be made whole. An independent administrator assures Gulf residents they're not up against Big Oil all alone."

 The bill would also increase the Oil Spill Liability Trust Fund to $10 billion by raising the fee paid by the oil industry to 21 cents for each barrel of oil produced in or imported to the United States. Increasing the total amount in the fund, which currently has a balance of $1.6 billion, would ensure funding is available to respond in case of future spills.

Under the bill, the U.S. Coast Guard would receive a substantial increase in research and development funding and authority to bring oil spill response technology into the 21st century.

The legislation also acknowledges the risks and impacts to coastal states that participate in oil and gas development off of their shores by directing 37.5 percent of the federal revenues to states and affected communities.

"States that host offshore drilling bear a greater share of the risks and therefore deserve a fair share of the economic benefits," Murkowski said.

Murkowski is the ranking minority member of the Senate Energy and Natural Resources Committee and is also a member of the Senate Appropriations Committee.

Begich said his bills would make oil and gas companies financially responsible for the cost of oil spills, including the current BP spill in the Gulf of Mexico. It also would expand scientific research, especially in the Arctic, and provide a steady source of federal funding for additional science and resources needed in the Far North to deal with oil and gas development.

"As the tragedy in the Gulf continues, it's clear we need to significantly increase our nation's ability to prevent and respond to oil spills," Begich said. "From the testimony in the Commerce Committee, it's sadly apparent the industry was caught flat-footed in their ability to respond to this disaster. My legislation takes a comprehensive approach to developing the best oil spill prevention and response capacity in the world. It clearly puts the financial responsibility where it belongs – on the oil companies."

Legislation Begich is finalizing includes holding BP financially responsible for the current Gulf of Mexico spill. The measure would require BP to deposit into an escrow account funds to cover the cost of cleaning up after the current Gulf spill and to compensate those harmed by it. Companies seeking to develop federal leases or federal contracts in the future also would be required to build an escrow fund.

Begich's proposal also would increase the financial liability for oil companies, from $75 million to $200 million. The bill distinguishes between shallow and deepwater wells (more than 500 feet) and would not cap liability for deepwater wells. The measure would also require payment of substantial liability bonds prior to drilling of both exploration and production wells.

The measure authorizes up to $50 million a year for Arctic oil spill prevention and response research by federal agencies in cooperation with state, local and private-sector research programs. It also expands the Oil Spill Liability Trust Fund to raise $75 million annually for oil spill prevention and response research, technology and infrastructure.

To pay for that, the bill proposes a 1 cent increase in the levy on domestically produced oil and 3 cents on foreign oil imported into and consumed in the U.S. Funds would be used by NOAA, the Coast Guard and states to ensure they have consistent funding to develop and maintain the science and operational capacity to prevent and quickly respond to oil spills.

The measure would authorize the creation of regional citizens advisory commissions in areas of offshore oil development modeled on the entities established in Alaska after the Exxon Valdez spill. The commissions would be funded by the oil industry.

Begich is a member of the senate's Commerce Committee, which deals with many offshore, technology and research issues.

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Source: Published June 18, 2010