WSJ: Smaller Oil Firms Might Exit Gulf, Browner Says


WASHINGTON—The White House’s top energy adviser acknowledged that smaller oil firms might no longer be able to drill in the Gulf of Mexico as a result of legislation moving through Congress that would eliminate the cap on their liability for oil spills.

“Maybe this is a sector where you really need large companies who can bring to bear the expertise and who have the wherewithal to cover the expense if something goes wrong,” Carol Browner, special adviser to President Barack Obama on energy and climate change, said in an interview. Eliminating the $75 million cap on liability for oil spills “will mean that you only have large companies in this sector,” she said.

On other topics, Ms. Browner said the Obama administration would be happy with a scaled-back energy bill this year “just to get started.” She said the administration is mindful of the effects of a deepwater-drilling moratorium and wants “to get people back to work,” but wants first to understand what caused the BP PLC oil spill in the Gulf of Mexico.

The administration has imposed a now-challenged moratorium on deepwater drilling while a presidential commission conducts a six-month investigation of the BP disaster. Oil companies have been pushing the Interior Department to lift the moratorium, saying that new safety regulations could allow drilling to resume.

“The small companies did nothing wrong —and you’re going to shut them down?” said Robert Dillon, a spokesman for Sen. Lisa Murkowski (R, Alaska.) “So the only thing you are going to have left are the big, national oil companies like China. Where are the free-market values in that?”

Ms. Browner said lifting the moratorium would depend on developing better spill-response plans and an understanding of the cause of the Deepwater Horizon explosion. “We’re keenly aware of the impact of the moratorium,” she said.

Discarding the liability cap is a potent issue on Capitol Hill as oil continues to leak into the Gulf. Small companies have warned that discarding limits would shut out all but the biggest companies from offshore drilling, partly because obtaining insurance would become impossible without liability limits.

BP has paid out more than $132 million in damage claims and has promised to honor all legitimate claims despite the statutory liability cap. Under pressure from the White House, the company also has promised to put $20 billion into a fund to compensate residents for economic losses.

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Bloomberg News

White House energy and climatechange adviser Carol Browner.
“There are still other damages to come—for example, natural-resource damages that BP will ultimately have to pay,” Ms. Browner said.

Oil is expected to continue leaking until at least mid-August, when the first of two relief wells is supposed to shut off the well.

Ms. Browner added that “we don’t want to see BP go out of business, because we’ve got lots of claims that need to be paid.”Senate Democratic leaders are planning to use a broader energy package as a vehicle to discard the liability cap. The package has stalled in the face of opposition from coal and manufacturing states to mandatory reductions in greenhouse-gas emissions.

Last year, the Obama administration called for economy-wide emissions reductions, but the White House has become willing to consider an approach that would limit emissions only from the utility sector, suggesting action on an energy bill may be possible this year.

“Something that gets us started is something we will take seriously,” Ms. Browner said. She suggested Mr. Obama wasn’t ready to give up on setting a cap on carbon-dioxide emissions. “He continues to believe that a cap on carbon is very, very important.”


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