BP Says Drilling Overhaul Bill Threatens Oil Spill RecoverySep 3, 2010 | Parker Waichman LLP
BP says legislation that would bar the company from getting new offshore drilling permits could prevent it from fully paying for damages from the massive Gulf of Mexico oil spill. According to a report in The New York Times, a drilling overhaul bill passed by the House of Representatives last month includes an amendment that would bar any company from receiving permits to drill on the Outer Continental Shelf if more than 10 fatalities had occurred at its offshore or onshore facilities. The April 20 explosion aboard BP’s Deepwater Horizon rig killed 11 men.
According to the Times, the legislation would also bar permits if a company had been penalized with fines of $10 million or more under the Clean Air or Clean Water Acts within a seven-year period. BP is the only company that meets the criteria for a drilling permit ban under the proposed bill.
The company said that if the legislation were adopted, it would cripple its Gulf of Mexico operations, which the Times said generate $5 billion to $7 billion in profits annually. The Gulf accounts for 11 percent of BP’s global production.
BP insists its threat doesn’t mean it is backing away from its promise to set aside $20 billion for a compensation fund to pay damage claims. But officials from both state and federal governments and others are seeking additional funds beyond the company’s legal obligations, which is what BP says would be placed in jeopardy by drilling limits. This includes Gulf Coast restoration efforts that officials want the company to voluntarily support, the Times said.
“I am not going to make a direct linkage to the $20 billion, but our ability to fund these assets and the cash coming from these assets that are securing these funds would be lost” if the House bill were enacted by Congress, a BP spokesperson told the Times.
Daniel Weiss, Chief of Staff for Representative George Miller, Democrat of California and one of the authors of the amendment, dismissed BP’s threat. “BP has substantial assets, whether they develop them or sell them,” he told the Times. “If BP needs to sell assets to meet its financial obligations, that’s a decision they have to make.”
BP said today it has spent $8 billion so far in response to the oil spill. The company also said that about 28,400 personnel, more than 4,050 vessels and dozens of aircraft were still engaged in the response effort