The Senate Democrat leadership's decision Tuesday to postpone action on the oil spill bill until after the August recess was a "good one," said the head of the American Petroleum Institute (API).

"The bill proposed by the Democratic leadership is not an effective or reasoned response to the spill. Instead it will cost American jobs, threaten our fragile economic recovery and jeopardize our energy security," said API President Jack Gerard.

"Among the legislation's shortcoming is the elimination of the [existing $75 million] cap on oil spill liability. Unlimited liability for spill damages would force most oil and natural gas companies out of the Gulf of Mexico because they would be unable to purchase insurance."

Rather Gerard believes a "workable oil spill liability program -- possibly including a mutual insurance element -- is achievable and would cover the cost of a large spill without shifting huge costs to taxpayers."

Some senators are working on a compromise proposal that would allow Gulf producers to share the risk. "Directionally that's better, but the devil's in the details," said an industry source.

Gerard also panned the bill for seeking to impose a new layer of federal regulation on hydraulic fracturing. "This technology is essential to developing America's vast reserves of shale gas, and states already do a good job regulating its use. Superfluous federal legislation would slow development of these vital domestic supplies of clean-burning energy."

In the end, "we strongly believe a bill is possible that could enhance offshore safety and ensure payment of damages from possible future accidents without discouraging job creation or domestic energy development. We stand ready to work with the Senate towards this goal," he said.

Senate Majority Leader Harry Reid (D-NV) pulled the plug on test votes for the competing Democratic and Republican oil spill bills, which were scheduled for Wednesday, saying more time was needed to consider them (see Daily GPI, Aug. 4). He blamed the Republicans for blocking Democrats from gaining the 60 votes needed to bring their bill to the floor for debate. Republicans pointed out that some Democrats -- Sens. Mary Landrieu of Louisiana and Mark Begich of Alaska, for instance -- also were opposed to the bill. Republicans also said Reid refused to give them a vote on their bill.

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