The House of Representatives Friday was poised to vote out its oil spill legislation, which imposes stiffer financial responsibilities and safety standards on offshore and onshore production and development, but the Senate was not expected to pass its slimmed-down oil spill bill before the August recess.
The House measure (HR 3534) combines stand-alone bills adopted by the House Energy and Commerce Committee, House Natural Resources Committee and House Transportation and Infrastructure Committee since the April 20 explosion and sinking of the Deepwater Horizon rig off the southern coast of Louisiana (see Daily GPI, July 28).
The bill, called the CLEAR Act, "directly responds" to the BP oil spill in the Gulf of Mexico, while also "looking forward," said House Natural Resources Chairman Nick Rahall (D-WV). However, Rep. Doc Hastings of Washington, the ranking Republican on the committee, countered that the legislation was "stuffed with page after page of provisions [that are] unrelated to the spill."
For example, the bill "imposes taxes and restrictions on onshore production," he said, and it requires a federal takeover of oil and natural gas permitting in state waters. Texas Railroad Commissioner Elizabeth A. Jones slammed Congress for trying to usurp states' authority over oil and natural gas exploration and production activities on private and state lands.
"I rise in strong opposition" to the measure, said Rep. Gene Green (D-TX) Friday. It "puts at risk the competitiveness of the Gulf of Mexico."
The most contentious provision in the 238-page House bill calls for the lifting of the existing $75 million cap to cover the liability for the BP oil spill and future spills. This drew the ire of Republicans, moderate Democrats and the oil and natural gas industry. "The Democratic leadership may not yet have full support for the bill's inclusion of unlimited liability. However, we expect the leadership to be able to corral enough votes to move the bill off the [House] floor," said analysts with FBR Capital Markets.
"Even if unlimited liability passes without amendment, we would remain confident that the provision will be moderated [in Senate or conference] before final legislation is sent to the president for signature," FBR added.
The House measure 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.
Jack Gerard, president of the American Petroleum Institute, last week complained that Congress was proscribing specifications for BOPs when the investigations into the rig explosion are still ongoing. He also objected to lifting the existing liability cap, saying it would boost insurance rates so high that only the oil and gas giants would be able to operate in the Gulf.
Reps. Charlie Melancon (D-LA) and Travis Childers (D-MS) offered an amendment to excuse drillers from the Gulf moratorium if they can show that they have complied with the new safety requirements issued by the Interior Department. Republicans sought to recommit the proposal back to committee, arguing that it would give the Interior secretary more authority "to keep the moratorium going."
The House late Friday passed a measure proposed by Rep. George Miller (D-CA), chairman of the House Education and Labor Committee, that offers "whistle-blower protection" for workers in the OCS as part of the legislation.
Producers immediately attacked the bill. Lawmakers "who [voted] for this bill will have a lot to explain when they leave Washington this weekend for the congressional August recess -- this bill risks thousands of jobs, jeopardizes billions in government revenues and increases our reliance on foreign oil," said the Independent Petroleum Association of America (IPAA).
The plans for the Senate oil spill bill were fluid. Democratic leaders were expected to bring it to the floor on Wednesday, but the bill was not expected to clear the chamber by the August recess.
"Reid does not have the 60 votes needed to pass his oil spill bill before Congress adjourns as planned [this] week. Right now the leading strategy is to file a procedural motion on Monday (Aug. 2) that would set up a key Wednesday test vote on beginning debate. Assuming that a broad compromise does not emerge by then, we expect the Senate bill to be set aside until after the September recess and the Senate to turn to the debate on Supreme Court nominee Elena Kagan. The leader could keep the Senate in session through the week of the ninth if he thought a bill would pass," but this is unlikely, FBR analysts said.
The Senate measure has some sticking points. Like the House bill, it would lift the existing $75 million liability cap for producers. Sen. Mary Landrieu (D-LA) is floating a compromise proposal that would allow Gulf producers to share the risk. Specifically, damages between $250 million and $10 billion would be covered by a mutual insurance fund to which all oil and gas producers would contribute, according to Roll Call. Anything above or below those dollar amounts would be covered by the company responsible for the spill.
Producers saw red last week when Senate Majority Leader Harry Reid (D-NV) included a provision requiring operators to disclose chemicals used in hydrofracing.
"It surprised quite a few people," said Lee Fuller, vice president of government relations for the IPAA and executive director of Energy In Depth. All the briefings on Capitol Hill indicated that there would be no hydrofracing language in the bill, he noted.
The industry thought it dodged a bullet when similar language, while adopted by the House Natural Resources Committee, was stripped out of the House oil spill measure.
The Reid measure would amend the Planning and Community Right-to-Know Act of 1986, and require oil and gas operators to disclose to states that issue permits the list of chemicals used in hydrofracing a well, within 30 days of completing a well. For those states that permit wells but do not require disclosure, the bill would require oil and gas operators to make the information publicly available online, not later than 30 days after the completion of a well. And the bill does not require the disclosure of proprietary information, except in the event of a medical emergency.
This provision pretty much conforms to existing practice, where operators report hydrofracing fluids to state regulators, and it appears to be less onerous than existing bills pending in the House and Senate, which seek to amend the Safe Drinking Water Act and require operators to report their hydrofracing chemicals to the Environmental Protection Act.
Some producers have recently pledged to publicly disclose the chemicals they use in hydrofracing; Range Resources Corp. (see Daily GPI, July 15) and EQT Corp. (see Daily GPI, July 30) are two such companies.
But producers are not mollified. "The entire universe of additives used in the fracturing process is known to regulators and the public, as is mandated as such under federal rules enforced by OSHA [Occupational Safety and Health Administration]," Fuller said.
"The problems with this provision [in the Reid bill] is that it has the potential to create a series of legal responsibilities that operators and even service companies might not be able to fulfill, especially under a scenario where folks are asked to post information that doesn't even belong to them," he said. "The amazing thing is this provision appears to be moving ahead even as EPA and Congress continue to study the issue. It raises the question of why they're doing the study in the first place if policymakers don't appear to be all that interested in learning anything from it."
In February the House Energy and Commerce Committee opened an inquiry into the potential health and environmental risks associated with hydrofracing of unconventional natural gas resources (see Daily GPI, Feb. 19). A month later, the EPA announced its plans to study the potential risks of a technique used to stimulate production of gas from wells drilled in gas shales -- known as hydrofracing -- on water quality and public health. Producers say they are confident that the study -- if conducted objectively -- will show hydrofracing to be safe (see Daily GPI, March 19).
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