Last week, representatives from the oil, seafood, and tourism industries as well as local politicians and residents of the Gulf organized a rally at the Cajundome in Lafayette, Louisiana, to call for an end the Obama Administration’s drilling moratorium.Even after a federal judge overturned the ban, ruling it was arbitrary and capricious, the Administration implemented another ban despite the Gulf’s demand to lift it. Finally, some politicians in Washington are starting to get it:
The House will vote Friday on a measure that would ease the Obama administration’s temporary ban on new deepwater drilling. The legislation, offered as an amendment to a bill that would overhaul the rules for offshore drilling, was added to the House schedule late Thursday after dozens of Democrats from oil-producing states threatened to oppose the overhaul.
The amendment by Louisiana Democrat Charlie Melancon and Mississippi Democrat Travis W. Childers would exempt drillers from the moratorium if they demonstrate compliance with new safety requirements issued by the Interior Department.
The problem, however, is that the House oil spill bill contains a number of problematic provisions, so lifting the ban as part of a bill that essentially makes offshore oil and gas operations more difficult solves nothing. At best, the Gulf coast and the nation would still be stuck with a de facto moratorium.
Even if Congress lifts the ban, passing legislation that completely lifts the liability cap and implements unnecessarily strict regulations would not just shut out smaller operating companies in the Gulf but could also force bigger operators to move elsewhere. An amendment to lift the drilling ban is good policy—but not when paired with an egregiously bad bill that has not been thought through.
Simply lifting the cap does not address the problems associated with the current system. The artificially low liability cap does not sufficiently align risk and behavior, and forcing all participants to contribute to the Oil Spill Liability Trust Fund socializes risk by spreading the costs across the entire industry.
Congress should develop a new approach that accurately assigns risk to all offshore operations (including exploratory drilling, production, and tanker movements), holds operators fully liable for their actions, and guards against frivolous lawsuits. This would consist of not only removing the liability cap and reforming the Oil Spill Liability trust fund but also:
- Creating a multi-tiered insurance and liability system that relies on private insurance to cover liability for normal operations and a voluntary insurance pool for liability exceeding $1 billion. Companies would have to demonstrate to federal regulators an ability to insure against the liability risk associated with their activities before engaging in offshore oil and gas operations.
- An industry-funded, independent organization to reduce the likelihood of spill events by setting and certifying safety standards at individual sites, collecting safety data, sharing best practices, and working with government regulators.
- An updated industry-funded preparedness and response capability to deal aggressivly and effectively with spill events by being pre-positioned and certifiable by the independent organization.
The Heritage Foundation has been pressing for the Administration to lift the offshore drilling ban, but the issue should be addressed separately, not as a part of a bill that is a compilation of premature responses to the spill and mandatory spending programs for funds that have nothing to do with the spill.