With a line-up of Capitol Hill hearings scheduled this week on the explosion and massive oil spill in the Gulf of Mexico (GOM), some lawmakers are expected to hold the Interior Department’s feet to the fire for what they believe is the department’s role in the disaster.

The top Republican on a House subcommittee has raised questions about whether Interior “improperly awarded safety certifications to BP, Transocean and the Deepwater Horizon rig,” which exploded on April 20 and led to an oil spill that is quickly becoming one of the most significant environmental disasters in U.S. history (see related story). Transocean’s Deepwater Horizon rig was under contract to BP plc.

“Reports indicate that the Deepwater Horizon appears to have had a faulty ‘dead-man shut-off switch,’ which if functioning properly could have averted this massive spill,” wrote Rep. Darrell Issa of California, the ranking Republican on the Subcommittee of Oversight and Government Reform, in a letter to Interior Secretary Ken Salazar last Monday (see NGI, May 3).

“The malfunctioning ‘fail-safe’ device raises serious questions about any safety inspections or audits conducted by MMS [Interior’s Minerals Management Service] or third parties during the certification process. This, in turn, casts serious doubt upon any safety awards that MMS may have granted to BP and/or Transocean within the past year,” he said.

In addition, “news reports indicate that MMS may have sidelined regulatory efforts that would have brought the U.S. oil industry in line with prevailing industry safety standards, which mandate the use of remote-controlled acoustic shut-off valves. If true, MMS will need to explain why it chose to do so,” Issa said.

Acoustic shut-off valves are not required under U.S. drilling regulations, but they are required to be used in the United Kingdom, where BP is headquartered.

The subcommittee has called Lamar McKay, president of BP America Inc.; and Steven Newman, president of Transocean Ltd., to testify at a hearing on Tuesday, as well as David J. Lesar, president of Halliburton Co. Halliburton provided services to the rig, including cementing of the well.

And Sen. Bill Nelson (D-FL), a long-time opponent of offshore drilling, has asked Interior’s inspector general to launch an investigation into whether the oil and gas industry exerted influence over regulators between 2000 and 2004 over the selection of backup systems to prevent a blowout.

Deepwater drilling rigs have emergency shut-off valves called blowout prevention (BOP) devices. But the Deepwater Horizon rig didn’t have an acoustic backup switch to trigger the BOP device in the event of an accident, according to Nelson.

“In light of the recent events, I am asking you to review the process by which MMS reviewed and finalized…regulations relevant to blowout preventers and well controls,” Nelson wrote in a letter last Monday to Acting Inspector General Mary Kendall. “I ask that you determine in your investigation the extent to which the oil and natural gas industry exercised influence in the agency’s rulemaking process.”

In a related development, Democratic and Republican lawmakers last week introduced legislation that would raise the cap on an oil producer’s liability for economic damages from a spill to $10 billion from the current $75 million.

In addition to raising the liability cap to $10 billion one of the bills, sponsored by New Jersey Sens. Robert Menendez and Frank Lautenberg and Nelson, would eliminate the $1 billion per-incident cap on claims against the Oil Spill Liability Trust Fund and would allow community responders to access the fund for preparation and mitigation efforts up front, rather than waiting for reimbursement later; if damage claims exceed the existing balance ($1.6 billion) of the trust fund, claimants can collect from future revenues of the fund, with interest; and it would eliminate the $500 million cap on natural resources damages. The bill would be retroactive to April 15 of this year.

Senate Majority Leader Harry Reid (D-NV) was noncommittal on the bill’s future, CQ Today reported.

Alaska Sens. Lisa Murkowski and Mark Begich sponsored a bill (S. 3309) to expand the federal Oil Spill Liability Trust Fund to $10 billion by raising the fee the oil industry pays on each barrel to 9 cents/bbl. This would raise up to $612 million annually, Murkowski said. The measure also removes the “sunset” provisions in the law so the fund will always be accessible to those impacted by oil spills. Nothing in the bill would limit the liability of oil firms or other responsible parties, she said.

Murkowski said she expects additional and similar measures will be introduced by Gulf Coast senators in the coming days..

Menendez and Lautenberg are avowed opponents of drilling anywhere near the coast of their home state of New Jersey, while Nelson has fought tooth and nail to keep drilling away from Florida. The New Jersey senators are concerned with the Obama administration’s plan to allow a lease sale off the coast of Virginia in 2012 and its potential effects on the New Jersey shore (see NGI, April 5).

Virginia Gov. Bob McDonnell, a Republican, last Tuesday indicated that, while he was “deeply concerned about the environmental impact” of the oil to the shoreline and wildlife in the GOM, he still would pursue drilling off the coast of Virginia. “While no industry is perfectly safe, the technology in use in modern drilling efforts has an excellent track record. This accident should not stop us from pursuing an industry in offshore energy exploration in Virginia that has the potential to contribute so much to economic growth,” said McDonnell spokeswoman Taylor Thornley.

The lawmakers believe that BP can afford the higher liability limit, pointing out that the producer’s profits in the first quarter were $5.6 billion, up 133% from the first quarter of 2009. BP also is self-insured for such accidents.

The Oil Spill Liability Trust Fund was set up by Congress in 1986, but it was not financed until after the Exxon Valdez ran aground in Alaska in 1989. In exchange for the liability limits, the oil companies pay 8 cents/bbl that they produce in the U.S. or import.

Murkowski, the vice chair of the Senate Republican Conference, last Tuesday said the major focus of the massive GOM oil spill should be on “how [to] contain this devastation,” rather than on calling BP officials to Capitol Hill to “assign blame” for the disaster.

The Senate Energy and Natural Resources Committee — on which Murkowski is the ranking Republican — has scheduled a hearing Tuesday on the fire and explosion of the Deepwater Horizon rig.

The American Petroleum Institute (API) said the oil and natural gas industry has formed two task forces to address the short- and long-term issues related to offshore equipment and operating practices.

The offshore equipment task force will bring together equipment manufacturers, industry subsea equipment specialists and deepwater contracts, and will focus on the maintenance, response and testing of blowout-preventer equipment and remotely operated vehicles. Failure of the blowout preventer is suspected as the cause of the explosion on Transocean Ltd.’s Deepwater Horizon rig and subsequent spill.

The task forces will soon bring together experts to identify and further reduce risks of offshore operations, according to API. They also will work in conjunction with the teams that BP is presently assembling and help ensure that all response efforts are coordinated. And in the longer term the task forces will share lessons learned from the review of the Deepwater Horizon disaster and update API standards on an ongoing basis, the producer group said.

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