Senate Majority Leader Harry Reid's (D-NV) decision last week to table consideration of competing Democratic and Republican energy/oil spill bills until the Senate returns in September came as no surprise, and in fact was a relief to the oil and natural gas industry.

"Neither bill [was] going to win the 60 votes that's needed to move forward," said Martin Edwards, legislative vice president for the Interstate Natural Gas Association of America. So it was a "pointless exercise" last week to hold a cloture vote.

Although Reid has formally punted the dueling bills until after the month-long recess, Edwards questioned whether the Senate will act then. "They may not do anything in September," he said, adding that the Senate has a lot on its plate when it returns -- spending bills, tax measures and funding for the wars in Iraq and Afghanistan.

"It's a sad day when you can't find a handful of Republicans to support a bill...that would hold BP accountable for the worst oil spill in history," Reid told reporters, according to Politico. "We tried jujitsu, we tried yoga, we tried everything we could to get Republicans to come along," he noted.

American Petroleum Institute President Jack Gerard called Reid's decision to postpone action on the oil spill bill a "good one." He noted that the Democratic leadership's bill, in its current form, "is not an effective or reasoned response to the spill."

The Independent Petroleum Association of America, which represents independent oil and gas producers, said it saw the delay as a "positive and important development," giving the oil and gas industry more time to fight contentious proposals and halting the anti-industry momentum that has been sweeping through Washington since the Gulf accident.

In an article in The Hill, Sen. Lisa Murkowski (R-AK) wrote "We've waited as the majority [Reid] counted votes for measures that had nothing to do with the spill. As time ran out before the recess, the majority shifted gears, went into a backroom and came out with a brand new [slimmed-down] bill. But with no time left for debate or amendments, the majority was forced to admit the obvious just a few days later: its bill faced bipartisan opposition and so it would be shelved."

More than 100 days have passed since the BP-leased Deepwater Horizon rig exploded and sank off the coast of southern Louisiana, she pointed out. "I had faith this disaster would bring us together to pass responsible legislation," Murkowski said.

This sentiment was echoed by the U.S. Chamber of Commerce. "In the wake of the Gulf oil spill, the American people expected Congress to act to ensure proper oversight of offshore exploration. Instead, what they got from House and Senate leadership was legislation that essentially shut down America's oil and gas industry," said Karen Harbert, president of the U.S. Chamber of Commerce's Institute for 21st Century Energy. Congress didn't halt drilling it the Gulf; rather it was the Obama administration in late May.

"It is not surprising then that ultimately the Senate proposal collapsed and the bill was pulled from consideration. Coupled with the administration's blanket moratorium on oil and gas production, it is clear that America is not getting the leadership it needs on energy," she said.

Passing a slimmed-down energy bill at first seemed like a sure bet for Democrats before leaving for the recess. But the odds of gaining the 60 votes to ward off a Republican filibuster became bleaker in the waning days.

Republicans and even some Democrats from oil states -- Sens. Mary Landrieu of Louisiana and Mark Begich of Alaska -- are opposed to the Democratic leadership's oil spill bill (S 3663), which would lift the existing $75 million cap on liability damages for oil spills and overhaul oversight of offshore regulation, require the disclosure of chemicals used in hydraulic fracturing (hydrofracing) and promote natural gas and plug-in electric drive vehicles, as well as provide $5 million in incentives for the Home Start energy efficiency program (see NGI, July 26). The U.S. Chamber attacked many of these proposals in a letter to the Senate last Tuesday.

Republicans and some Democrats, such as Landrieu and Begich, are concerned that an unlimited cap would prevent small and mid-sized producers from getting the insurance needed to operate offshore. Landrieu and Begich introduced separate bills late last week in which they seek to reach a compromise between two sides, neither of which are appealing to producers -- those who want unlimited liability and those who seek to raise the liability cap for an individual producer to $10 billion.

Landrieu's legislation would raise the initial liability cap for an individual producer to $250 million. Damages between $250 million and $10 billion would be covered by a mutual insurance fund that producers would pay into. However, for any damages exceeding $10 billion, the producer responsible for the oil spill would bear those costs.

Her measure is a stand-alone bill at this point, but it could be attached to whatever oil spill bill the Senate considers, said Landrieu spokesman Aaron Saunders.

Begich's proposal would require producers to carry insurance for at least $250 million in damages. Any damages between $250 million and $20 billion would be shared by operators paying into a mutual fund. The burden would fall to the responsible producer for any damages that exceed $20 billion.

Both Landrieu and Begich are avowed opponents of Sen Robert Menendez's (D-NJ) legislation, which would lift the liability cap for an individual offshore producer to $10 billion.

The Landrieu bill also states the Gulf moratorium "shall not apply to any application for a permit to drill submitted on or after the date of enactment of this [bill]" if Interior Secretary Ken Salazar finds that the applicant has complied with the "National Notice to Lessees and Operators" (NTL 2010 NO5, NO6), and has completed all required safety inspections.

Moreover, her measure would require Salazar to issue a permit within 30 days of determining that an applicant has fulfilled the requirements. And Landrieu, a staunch proponent of revenue sharing, proposes "accelerated revenue sharing" with Gulf-producing states to promote coastal restoration in the wake of the Deepwater Horizon rig explosion, which has spewed about 172 million gallons of oil into the Gulf of Mexico.

Sen. Byron Dorgan (D-ND) attacked a provision in the Senate spill bill that would require operators to disclose the chemicals used in the hydrofracing process to produce natural gas from shale plays. "We've been doing hydrofracing for 50 years" in the Bakken shale formation, which is located in Dorgan's home state of North Dakota, he said.

People are now worried about what hydrofracing is doing to the water tables, Dorgan said, but he noted that he's concerned with those who want to shut down hydrofracing.

The Democratic leadership slammed the Republicans' version of the spill bill, which would increase the $75 million liability cap (but not totally remove it), lift the Obama administration's moratorium for producers who comply with the Interior Department's new safety standards, and would advance revenue sharing between the federal government and coastal states who permit drilling off their shores.

The House passed its oil spill package (HR 3534) by 209-193 earlier this month (see NGI, Aug. 2). The measure includes a provision to lift the existing $75 million cap to cover the liability for the BP oil spill and future spills.

It also would bar an operator with a checkered safety record from obtaining leases/permits from the federal government. And it would dismantle the "dysfunctional" Minerals Management Service; set minimum requirements for blowout preventers (BOP); require third-party safety certification of BOPs, well designs and cementing programs; stiffen penalties for violators; and establish a new training academy for offshore inspectors.

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